Essays in Environmental Economics and Policy: Climate Change and Fuel Economy Policy

This book comprises two essays that study normative environmental policy and the purported side effects of (already enacted) environmental policies. In the first essay, we analyze the management of a stock pollutant in a simplified economy using optimal control. A numerical illustration for the case of global climate change shows that decision maker can delay the onset of a catastrophe by increasing abatement (by investing into green capital); and by improving the environmental performance of production technology. In the second essay, we analyze the alleged causality of this increased share by the introduction of fuel economy standards. We estimate the market demand for fuel economy of domestic cars and light trucks using a polynomial lag model. The main result of this essay is that the rising share of light trucks in the new domestic vehicle sales can be attributed to the increase in personal incomes during the 25 years considered, aided by the provision of laxer fuel economy standards for light trucks. Moreover, the fuel economy standards did increase the fuel efficiency of domestic vehicles.