Essays on Energy and Climate Change Economics

This work aims at shedding some light on two topics that will be more and more relevant in the next future. In the first part, we investigate whether the degree of energy dependency of countries influences their macroeconomic performance in terms of stability and growth over time, while, in the second part, we analyse the long-term macroeconomic effects of climate change on European industrial sectors. Specifically, we verify if the business cycle of countries with a similar degree of energy dependency shares some basic features - i.e. frequency, duration, and amplitude of recessions and recoveries -, and we analyse their synchronization with the energy price cycle. Furthermore, we study whether the impact on economic growth of energy price changes and energy price volatility changes differs depending on a country’s degree of energy dependency. We note that the duration and amplitude of both recessions and recoveries of countries with a significantly different degree of energy dependency are statistically different, but their business cycles are similarly synchronized with the energy price cycle. The business cycles of countries with a balanced profile of energy dependency have shorter and more moderate recessions with respect to the other countries, either energy exporter or importer countries. Moreover, they show shorter but stronger recoveries with respect to energy major and moderate importer countries. However, major and moderate energy exporter countries show more pronounced recoveries. We expand our analysis using a cross-sectionally augmented panel autoregressive distributed lag (CS-ARDL) approach and showing that energy price changes have negative effects on the economic growth of major energy importer countries and that major energy exporters benefit from increasing energy price, while being damaged by its volatility. Overall, we find that countries with a more balanced energy dependency seem to be not or less affected by energy price fluctuations and energy price volatility in the long-run. Moreover, the countries with a balanced degree of energy dependency have the lowest amplitude and the shortest duration of recessions, and their recoveries have a higher amplitude with respect to the ones of countries with a more energy dependent profile. In the second part of this work, we investigate the long-term macroeconomic effects of climate change on output and labour productivity of European industrial sectors, using a panel data set composed of the 281 European regions at NUTS 2 administration level from 1980 to 2017. Moreover, we analyse the main transmission channels through which climate change influences European economic activity, shedding some light on its impact on investments, employment and hours worked. Overall, we do not find evidence of adverse or favourable effects of climate change on European economic growth at aggregate level, although all sectors and regions are diversely influenced by temperature and precipitation variations from their historical norms. Furthermore, we study the climate change effects in more and less developed regions, finding that the two sub-samples are differently affected and that the overall impact on economic growth in less developed regions is not higher than in more developed ones. Finally, we notice that labour productivity is the main driver of climate change effects on growth and that agriculture, construction, and financial services sectors - the latter through the insurance industry - are the most affected sectors.