Susanna Berkouwer, Business Economics and Public Policy, The Wharton School
Abstract: High-income regions like North America and Europe currently generate most of the world’s emissions. However, most high-income countries have in recent years passed national or sub-national legislation to lower emissions, such as carbon taxes, emissions trading schemes, and clean subsidies. Add to this that Africa’s population is expected to triple, and the result is that by 2050 Africa is expected to emit twice as much CO2 per year as North America or Europe.
A ubiquitous feature of low- and middle-income countries is the presence of substantial financial market frictions resulting from informality (complicating debt recovery), a lack of information-sharing institutions (such as FICO scores), and frictions in property rights that undermine the use of collateral.
This research seeks to understand how financial market frictions affect the efficacy of carbon offsets and other clean subsidies and pollution taxes. In the first project, we will conduct a field study with 2,000 households in East Africa who are currently using a wood or charcoal stove to quantify the impacts of adoption of an electric cookstove and to understand how different financial instruments affect purchase and usage of the appliance. This project is in collaboration with a company that has generated more than 4 million carbon offsets, creating opportunities for influence and scale. In the second project, we will use economic theory regarding subsidies and taxes in the presence of high interest rates to identify opportunities for more effective carbon offsets.