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When a non-climate institution, policy, or regulation corrects a pre-existing market failure that would be exacerbated by climate change, it may also incidentally induce climate adaptation. This regulation-induced adaptation can have large positive welfare effects. We develop a tractable analytical framework of a corrective regulation where the market failure interacts with climate, highlighting the mechanism of regulation-induced adaptation: reductions in the climate-exacerbated effects of pre-existing market failures. We demonstrate this empirically for the US from 1980 to 2013, showing that ambient ozone concentrations increase with rising temperatures, but that such increase is attenuated in counties that are out of attainment with the Clean Air Act’s ozone standards. Adaptation in nonattainment counties reduced the impact of a 1 °C increase in climate normal temperature on ozone concentration by 0.64 parts per billion, or about one-third of the total impact. Over half of that effect was induced by the standard, implying a regulation-induced welfare benefit of $412–471 million per year by mid-century under current warming projections.

In my dissertation, I have studied the link between the Earth’s changing climate and air pollution. As we know, air pollution is an externality of any major industrial activity, day to day vehicle use, electricity generation etc. I establish the fact that rapidly changing temperature and rainfall patterns exacerbate the levels of multiple air pollutants, thus entailing larger social costs of the above mentioned activities. From a policy perspective, such estimates are crucial to reach the socially desirable level of emissions and technically, this exogenous causal link from climate change to pollutant formation can be used to get more precise estimates of the health consequences of air pollution. In the first chapter, I analyze the impact of climate change on particulate air pollution, which has the most sever health consequences. Using daily weather data, daily data on PM10 from 1990–2013 and daily data on PM2.5 from 1997–2013, I find the first causal estimates of the level of precipitation as well as the precipitation frequency on particulate matter concentrations in ambient air. Using my findings, I exploit exogenous rainfall variation in an instrumental variables approach to also estimate the effect of increases in ambient particulate matter on the number of infant deaths. My estimates suggest that a 1 µg/m3 decrease in ambient PM 10 concentrations would imply almost 27 fewer infant deaths per 100,000 live births. In my second chapter, we propose a novel approach to estimate adaptation to climate change based on a decomposition of meteorological variables into long-run trends and deviations from those trends (weather shocks). Our estimating equation simultaneously exploits weather variation to identify the impact of weather shocks, and climatic variation to identify the effect of longer-run observed changes. We then compare the short- and long-run effects to provide a measure of adaptation. We apply our methodology to study the impact of climate change on air quality and estimate the so-called climate penalty on ozone. We have three main findings. First, a temperature shock of 1 degree C increases ozone levels by 1.7 ppb on average. A change of similar magnitude in a 30-year moving average increases ozone concentration by 1.2 ppb. Second, we find evidence of adaptive behavior. For a change of 1 degree C in temperature, our measure of adaptation in terms of ozone concentration is 0.45 ppb. If adaptive responses are not taken into account, the climate penalty on ozone would be overestimated by approximately 17 percent. Third, adaptation in counties with levels of ozone above the EPA’s standards appears to be over 66 percent larger than adaptation in counties in “attainment”. This difference is what we call regulation-induced adaptation. The remainder is our measure of residual adaptation. In the final chapter, we present a theoretical model that looks at a federal air pollution regulation and tries to analyze the variablity in attainment and non attainment designations of counties. Since many areas in the United States have been in non-attainment for prolonged periods, we argue that it must be an optimal choice for the counties, driven by parameters among which climate change is a major one. We find that counties having mild enough climate can actually choose to be in non-attainment, even after paying the penalties imposed by the regulation.

This study conceptualizes and demonstrates empirically that existing non-climate policies can induce climate adaptation. Adaptation involves adjusting to or coping with climatic change with the goal of reducing our vulnerability to its harmful effects. We examine the impact of temperature on ambient ozone concentration in the United States from 1980-2013. Ozone is formed under warm temperatures, but regulated by the Clean Air Act. These air quality standards may act as a buffer against extreme increases in ambient ozone concentration. Indeed, adaptation in counties out of attainment with the standards is 107 percent larger than under attainment, implying substantial regulation-induced adaptation.

This study conceptualizes and demonstrates empirically that existing non-climate policies can induce climate adaptation. Adaptation involves adjusting to or coping with climatic change with the goal of reducing our vulnerability to its harmful effects. We examine the impact of temperature on ambient ozone concentration in the United States from 1980-2013. Ozone is formed under warm temperatures, but regulated by the Clean Air Act. These air quality standards may act as a buffer against extreme increases in ambient ozone concentration. Indeed, adaptation in counties out of attainment with the standards is 107 percent larger than under attainment, implying substantial regulation-induced adaptation.

We develop a unifying approach to estimating climate impacts and adaptation, and apply it to study the impact of climate change on local air pollution. Economic agents are usually constrained when responding to daily weather shocks, but may adjust to long-run climatic changes. By simultaneously exploiting variation in weather and climate, we identify both the short- and long-run impacts on economic outcomes, and measure adaptation directly as the difference between those responses. As a result, we identify adaptation without making extrapolations of weather responses over time or space, and overcome omitted variable bias concerns in prior approaches.

We develop a unifying approach to estimating climate impacts and adaptation, and apply it to study the impact of climate change on local air pollution. Economic agents are usually constrained when responding to daily weather shocks, but may adjust to long-run climatic changes. By exploiting simultaneously variation in weather and climatic changes, we identify both the short- and long-run impacts on economic outcomes, and measure adaptation directly as the difference between those responses. As a result, we identify adaptation without making extrapolations of weather responses over time or space, and overcome prior studies' biases in the estimates of climate adaptation.