A0335
Title: Efficient semiparametric estimation of environmental and climate policy
Authors: Massimiliano Mazzanti - University of Ferrara (Italy) [presenting]
Abstract: The aim is to assess the impact of the price of carbon, which is linked to the European market of allowances, on carbon dioxide emissions. To do so, an econometric model is proposed that extends the environmental Kuznets curve (EKC) model in several directions. First, the price of carbon, which is the policy variable, is introduced in the model in a nonparametric fashion; Second, it is proposed to use interactive fixed effects approach to control for latent heterogeneities in both dimensions of panel data; Third, to allow for spatial dependence, spatially correlated errors are introduced. The extended EKC model poses various challenges for estimation. To cope with them, using a profile likelihood approach, a feasible generalized least squares estimator of the parameters of interest is proposed. Furthermore, the policy effects curve is also efficiently estimated. The asymptotic properties of the estimators are shown, and based on these outcomes, the policy effects are empirically evaluated. The approach yields significantly different and more meaningful results compared to those obtained using standard estimation techniques.
