Evaluating Carbon Capture and Storage in a Climate Model with Directed Technical Change

Carbon capture and storage (CCS) is considered a critical technology needed to curb CO2 emissions and is envisioned by the International Energy Agency (IEA) as an integral part of least-cost greenhouse gas mitigation policy. In this paper, we assess the extent to which CCS and R&D in CCS technology are indeed part of a socially e cient solution to the problem of climate change. For this purpose, we extend the intertemporal model of climate and directed technical change developed by Acemoglu et al. (2012, American Economic Review, 102(1): 131{66) to include a sector responsible for CCS. Surprisingly, even for an optimistic cost estimate available for CCS (60/ton of CO2 avoided), we nd that it is not optimal to deploy CCS or devote resources to R&D in CCS technology either in the near or distant future. Indeed, it is only when the marginal cost of CCS is less than 12/ton that a scenario with an active CCS sector (including R&D) becomes optimal, though not in the near future

Fairness in Bankruptcy Situations: An Experimental Study.

The pari passu principle is the most prominent principle in the law of insolvency. We report from a lab experiment designed to study whether people find this principle a fair solution to the bankruptcy problem. The experimental design generates situations where participants work and accumulate claims in firms, some of which subsequently go bankrupt. Third-party arbitrators are randomly assigned to determine how the liquidation value of the bankrupt firms should be distributed between claimants. Our main finding is that there is a striking support for the pari passu principle of awarding claimants proportionally to their pre-insolvency claims. We estimate a random utility model that allows for the arbitrators to differ in what they consider a fair solution to the bankruptcy problem and find that about 85 percent of the participants endorse the proportional rule. We also find that a non-negligible fraction of the arbitrators follow the constrained equal losses rule, while there is almost no support in our experiment for the constrained equal awards rule or other fairness rules suggested in the normative literature. Finally, we show that the estimated random utility model nicely captures the observed arbitrator behavior, in terms of both the overall distribution of awards and the relationship between awards and claims