Cornell University DEEP-GREEN-RADAR Graduate Research Associate Saleh Zakerinia presented his structural econometric model of dynamic climate policy game at the Stanford Institute for Theoretical Economics (SITE) session on "New Thinking about Economic Challenges in the Design and Implementation of Programs to Stabilize the Climate", and at the Interdisciplinary Ph.D. Workshop in Sustainable Development (IPWSD) at Columbia University.
For his research, Saleh is using structural econometric modeling and machine learning to develop and estimate a structural econometric model of the dynamic game among countries making dynamic and strategic decisions regarding energy and environmental policy in the face of technological change. Climate change is a "tragedy of the commons" problem since greenhouse gas emissions from any one country contribute to the total stock of global greenhouse gasses in the earth’s atmosphere, which affects all countries. When a country decides to design a climate policy, in most cases, it considers its own benefits and costs and does not consider the benefits and costs to other countries. As a result, each country has an incentive to free ride on the climate policy of other countries.
Saleh is examining how economic factors, energy security concerns, technological development, and the energy and environmental policies of other countries impact a country’s energy and environmental policy. He is using the estimated parameters to simulate the effects of counterfactual scenarios, situations, and institutions on climate change policy, emissions, economic outcomes, and welfare.
There are several advantages to using a dynamic structural model to analyze strategic decisions regarding energy and environmental policy in the face of technological change. First, unlike reduced-form models, a dynamic structural econometric model explicitly models the dynamics of countries’ environmental decisions. Moreover, a structural econometric model of a dynamic game can capture the strategic nature of countries’ environmental decisions as well. Second, a structural model enables him to estimate the impact of each state variable on the expected payoffs from environmental decisions; he therefore estimates parameters that have direct economic interpretations. Third, his structural model captures the expected value of the value function of next period (i.e., the continuation value). He is able to estimate parameters in the payoffs from environmental decisions since his structural model can relate the continuation values to the payoffs from environmental decisions. Fourth, he can use the estimated parameters to simulate the effects of counterfactual scenarios, situations, and institutions on climate change policy, emissions, economic outcomes, and welfare.
Saleh has won several prestigious awards for his research, including the 2017 Northeast Agricultural and Resource Economics Association (NAREA) student conference scholarship, the 2015-2016 Pacific Gas and Electric Company (PG&E) ITS-Davis Corporate Affiliate Fellowship, and the 2016 National Center for Sustainable Transportation Dissertation Fellowship.
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