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This paper examines pollution tax differentiation across industries in light of social equity concerns using theoretical and numerical general equilibrium analyses in an optimal tax framework. We characterize the drivers for non-uniform optimal taxes emanating from the interaction of household heterogeneity with social preferences. Quantitatively assessing the case of price-based CO2 emissions control in the U.S. economy, we find that optimal carbon taxes differ largely across industries, even when social inequality aversion is low. Our results are robust with respect to the stringency of the environmental target, non-optimal redistribution schemes, and parametric uncertainty in firms’ and households’ equilibrium tax responses.

This paper examines the effects of knowledge diffusion on growth and costs of climate policy. We develop a general equilibrium model with endogenous growth which represents knowledge diffusion between sectors and regions. Knowledge diffusion depends on accessibility and absorptive capacity which we estimate econometrically using patent and citation data. Knowledge diffusion leads to a “greening” of economies boosting productivity of “clean” carbon-extensive sectors. Knowledge diffusion lowers the costs of global climate policy by about 90% for emerging countries (China) and 20% for developed regions (Europe and USA), depending on the substitutability between different knowledge types.

Economics Working Paper Series, 16/229

This dissertation is composed of four essays on the role of energy and investment literacy in the domain of appliance choice and in explaining residential electricity demand among Swiss households. The dissertation also examines the role of information and the impact of decision support tools, such as education programs and online calculators, in adoption of new appliances. From a public policy perspective, one important avenue in reducing residential electricity consumption is to foster the adoption of energy-efficient lighting and household appliances. However, the identification of electrical appliances with the lowest lifetime cost is a challenging task – one that necessitates knowledge on a range of energy-related information (e.g., purchase price, electricity consumption and frequency of use of an appliance, current and future price of electricity) and cognitive abilities to correctly process all the information. The goal of this dissertation is to examine the decision-making process of boundedly rational consumers in the domain of appliance choice, to evaluate the role of information, support tools, and energy and investment literacy on the ability to identify an appliance with the lower lifetime cost, to estimate the electricity demand and the end-use efficiency in the use of electricity, and lastly, to study the determinants of the level of energy-related financial literacy among Swiss households.