Climate change is considered to be one of the most significant and complex challenges facing the world in the twenty-first century. As such, it is essential to increase the knowledge base regarding climate change and how best to address its impacts through efficient policies. This special issue, which is divided into two parts – published in the previous and current issues of Environment and Development Economics – is a selection of papers related to ‘The Economics of Climate Change and Sustainability’, the topic of an international workshop organized by the Economics Department of the University of Bologna in April 2018. The papers in this special issue cover a wide range of climate-change-related topics, including endogenous growth and overlapping generation models; climate-related financing and green bonds; demography; location decisions and technology diffusion; quantitative relationships and experimental approaches. They aim at providing new insights into the economics of climate change and help to identify new directions for future research.

This paper uses a continuous-time overlapping-generations model with endogenous growth and pollution accumulation over time to study the link between longevity and global warming. It is seen that increasing longevity accelerates climate change in a business-as-usual scenario without climate policy. If a binding emission target is set exogenously and implemented via a cap-and-trade system, the price of emission permits is increasing in longevity. Longevity has no effect on the optimal solution of the climate problem if perfect intergenerational transfers are feasible. If these transfers are absent, the impact of longevity is ambiguous.

The deployment of cleaner production technologies is supposed to be crucial to mitigate the effect of climate change. The diffusion of technology from developed to developing countries can be done through different channels. It can be a business decision such as firms' relocation, opening of a subsidiary or the adoption of technology by southern firms, or it may be decided at the government level. This paper investigates, in a two-country model (North and South), the relationship between the diffusion of mitigation technologies, firms' relocation and the environment. We assume that both countries implement a carbon tax and there are two kinds of production technology used: a relatively clean technology and a dirty one. This paper theoretically shows that the technology diffusion by technology adoption, public transfer or subsidiary creation induces a decrease in relocation, while technology diffusion via purchasing dirty southern firms may increase the number of relocated firms. The paper also demonstrates that technology diffusion may have perverse effects in the long run. Indeed, total emissions may increase with technology diffusion since southern firms become more competitive.

Using U.S. state-level data for the period 1973–1994, this study models the relationship between emissions, output and pollution abatement by defining an emissions function, in a manner that is consistent with the residual (emissions) generation mechanism and firms' optimizing behavior. It thus accounts for factors that were previously unaccounted for or addressed only individually. Applications using this comprehensive setting can offer more informed insights for policy-making, something that is particularly useful for developing countries that face the environmental degradation that comes together with the benefits of economic growth. Using nonparametric econometric techniques as well as threshold regression, the empirical results show that there is a positive nonlinear relationship between emissions and output, rejecting an inverted-U type of relationship between the two (the Environmental Kuznets Curve, or EKC). In the absence of abatement the relationship turns around, verifying the arguments in the literature that abatement is one of the driving forces for an EKC to emerge.

With the aid of a lab experiment, we explored how imperfect monitoring and punishment networks impacted appropriation, punishment and beliefs in a common pool resource appropriation dilemma. We studied the differences between the complete network (with perfect monitoring and punishment, in which everyone can observe and punish everyone else) and two ‘imperfect’ networks (that systematically reduce the number of subjects who could monitor and punish others): the directed and undirected circle networks. We found that free riders were punished in all treatments, but the network topology impacted the type of punishment: the undirected circle induced more severe punishment and prosocial punishment compared to the other two networks. Both imperfect networks were more efficient because the larger punishment capacity available in the complete network elicited higher punishment amount.