International carbon markets are an appealing and increasingly popular tool to regulate carbon emissions. By putting a price on carbon, carbon markets reshape incentives faced by firms and reduce the value of emissions. How effective are carbon markets? Observers have tended to infer their effectiveness from market prices. The general belief is that a carbon market needs a high price in order to reduce emissions. As a result, many observers remain skeptical of initiatives such as the European Union Emissions Trading System (EU ETS), whose price remained low (compared to the social cost of carbon). In this paper, we assess whether the EU ETS reduced C O 2 emissions despite low prices. We motivate our study by documenting that a carbon market can be effective if it is a credible institution that can plausibly become more stringent in the future. In such a case, firms might cut emissions even though market prices are low. In fact, low prices can be a signal that the demand for carbon permits weakens. Thus, low prices are compatible with successful carbon markets. To assess whether the EU ETS reduced carbon emissions even as permits were cheap, we estimate counterfactual carbon emissions using an original sectoral emissions dataset. We find that the EU ETS saved about 1.2 billion tons of C O 2 between 2008 and 2016 (3.8%) relative to a world without carbon markets, or almost half of what EU governments promised to reduce under their Kyoto Protocol commitments. Emission reductions in sectors covered under the EU ETS were higher.

Basic solar microgrids can significantly improve access to electricity in an affordable manner, but they generate few socioeconomic benefits.

Demand for renewable energy is booming. Scholars often attribute this success to feed-in tariffs (FITs), which mandate that energy utilities pay a premium to renewable electricity producers and guarantee grid access for them. Why have so many countries, including least-developed ones, adopted these policies? We hypothesize that democratic governments have political incentives to adopt the FIT because it improves environmental quality, promotes rural development, and distributes electricity generation profits from large utilities to independent producers. We analyze global data on FIT adoption, 1990–2012, and we find that the association between democratic regime type and FIT adoption overwhelms all other covariates. The effect is specific to the FIT and does not exist for renewable portfolio standards or public competitive bidding for renewable energy contracts. Consistent with theories of distributive politics, among democracies, institutional malapportionment in favor of rural political constituencies favors FIT adoption.