Javier Flórez Mendoza (@pseud0safari.bsky.social)

Environmental Subsidies to Mitigate Net-Zero Transition Costs (Forthcoming Article) - Imperfect competition within the pollution abatement equipment sector may hinder the Paris Agreement’s goals. We show that carbon tax–funded environmental subsidies can stimulate firm entry, enhance competition, and lower abatement costs for businesses. Using a quantitative macro-climate model with an endogenous market structure for abatement equipment, we estimate that optimally allocating subsidies (60% to startups and 40% to existing companies) could enhance efficiency, generating annual global GDP savings of $2.5 to $3.1 trillion by 2060. https://www.aeaweb.org/articles?id=10.1257/mac.20240046&from=f