American Economic Review Vol. 116 No. 7 2026

A Welfare Analysis of Policies Impacting Climate Change

Robert W. Hahn¹; Nathaniel Hendren²; Robert Metcalfe³; Ben Sprung-Keyser⁴

¹ University of Oxford and Carnegie Mellon University (email: ) · ² Massachusetts Institute of Technology and Policy Impacts (email: ) · ³ Columbia University and NBER (email: ) · ⁴ Wharton School, University of Pennsylvania and Policy Impacts (email: )

Abstract

We study the welfare impacts of 96 climate-related tax and spending policies. We extend and apply the marginal value of public funds (MVPF) framework, most notably providing a new method for incorporating learning-by-doing spillovers. We find subsidies for the production of clean energy (such as wind production tax credits) have higher MVPFs than all other subsidies in our sample, including EV subsidies. Conservation nudges have large MVPFs when targeting regions with dirty grids. Fuel taxes and cap-and-trade policies are highly efficient means of raising revenue. We also construct traditional cost-per-ton estimates and compare and contrast the lessons they provide.

DOI

10.1257/aer.20250166

Volume

116

Issue

7

Pages

2368-2421

Language

en

Sources

openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓