Asking important policy questions and giving rigorous answers: the journey of an environmental economist

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Asking important policy questions and giving rigorous answers: the journey of an environmental economist

How much do U.S. fossil fuel companies benefit from the absence of appropriate regulation? What is the most appropriate level of carbon taxation? Yale professor and YER advisor Dr. Matthew J. Kotchen sheds light on the impact of lenient government policies on the fossil fuel industry.

Kotchen, M.J. (2021). The producer benefits of implicit fossil fuel subsidies in the United States Proceedings of the National Academy of Sciences 118 1–7. 

Dr. Kotchen is a scholar of many experiences. As an undergraduate, he studied plant community ecology. As a master’s student in Maine, he estimated the social value of peregrine falcons. Now, as a professor of economics in Yale School of the Environment, he seeks to shed light on the implicit costs and benefits of environmental policies. Dr. Kotchen has also been actively involved in the policy sphere, working as Deputy Assistant Secretary for Energy and Environment at the Treasury Department. 

In many ways, these experiences paid off—especially in deciding which questions are worth answering. From the design of optimal climate policy to the costs of hidden fossil fuel subsidies, Dr. Kotchen’s research subjects are dotted with answers to important policy questions—questions such as: what is the appropriate price for a carbon tax? His papers have been published in many top-tier journals, often with significant policy impacts. “The diversity of experiences is always going to help, in terms of knowing what people are interested in.”  

On the one hand, carbon taxes—government-imposed fees on greenhouse gas polluters—can help fight climate change by making it expensive to pollute. On the other hand, setting the tax levels too high could lead to excessive costs for the society. How do we strike the balance between the two? Answering such questions is not an easy task, especially if one’s goal is to be as rigorous as possible. Filled with pages of extensive literature reviews, equations, and figures, Dr. Kotchen’s papers hint to a strong dedication to methodological rigor. “The strength of economics is that it’s so methodology-driven.” And underlying such academic rigor is a genuine curiosity for the subject matter: “What you try to do [in research] is to take on questions that you think are important (…) So no matter what you find, it’s interesting.” 

Dr. Kotchen’s 2021 article in the Proceedings of the National Academy of Sciences (PNAS) is an example of his approach. As the negative impact of fossil fuel consumption becomes clearer by the day, there has been growing recognition from economists that a government’s failure to account for such costs amounts to an implicit subsidy. Building on this theory, Dr. Kotchen analyzed how much of this subsidy benefits the fuel-producing companies. Threading together carefully designed assumptions and publicly available data, Dr. Kotchen found that such benefits do exist, and that they were sometimes even larger than the profits from the companies’ activities. The paper has been cited by the Biden administration as one of the rationales for a tax reform. “When you’re trying to write something that has an impact, that’s probably as good as it gets,” Dr. Kotchen says with a smile. 

While still committed to methodological rigor, Dr. Kotchen strives to be open-minded. Asked if he’s open to responses to his PNAS work, he responds with an affirmative: “If anybody wants to talk about it, then I’m happy to engage and say, ‘Well, what alternative assumptions would you make?’” The open-mindedness also extends to his outreach efforts: every year in Washington D.C., he puts together an environmental economics seminar that brings together policymakers and nongovernmental organizations to share relevant findings in the academia. 

Maintaining academic rigor, policy relevance, and an open-mindedness to criticisms all at the same time require constant care and effort. Asked if there were any experiences he would repeat, Dr. Kotchen responds: “Honestly, I’d like to go back and take the PhD courses in econometrics and economic theory. (…) Because I rely on those skills to answer my questions.” A continuous thirst for rigor, combined with an open-minded curiosity for important policy questions—this is what defined Dr. Kotchen’s two decades of research, and will most likely define his efforts in the future. 

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