Wednesday, April 16, 2014

Inferring Fossil-Fuel Subsidies from Patterns in Emission Intensities

OxCarre WP: I develop a unique database of international fossil-fuel subsidies by examining country specific
patterns in carbon emission-to-GDP ratios, known as emission-intensities. For most but not all countries, intensities tend to be hump-shaped with income. I construct a model of structural-transformation that generates this hump-shaped intensity and then show that deviations from this pattern must be driven by distortions to sectoral-productivity and/or fossil-fuel prices. Finally, I use the calibrated model to measure these distortions for 170 countries for 1980-2010. This methodology reveals that fossil-fuel price-distortions are large, increasing and often hidden. Furthermore, they are major contributors to higher carbon emissions and lower GDP.

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