Marta Suárez-Varela

Two phenomena are increasingly reshaping the world economy. One is the growing and well-documented importance of climate transition policies that differ across countries. The other is the stark rise of geoeconomic fragmentation (GEF) concerns. While differences in climate transition policies are not new, they could amplify GEF, which is a new, growing risk. Conceptually, GEF is a policy-driven reversal of global economic integration, guided by strategic considerations such as national security, sovereignty, autonomy, or economic rivalry. It does not include reversals to global economic integration that are driven by autonomous change, such as shifts in technology, demographics or preferences, or policies motivated primarily by prudential or environmental concerns and labour or human rights. GEF propagates via all the channels through which countries engage with each other economically and politically to provide global public goods such as climate change mitigation. The steep rise in trade and investment restrictions points to coming headwinds which could be compounded by uncoordinated climate transition policies. Conversely, GEF could make transition policies more difficult as, together with their prerequisites – such as shared regulatory approaches, knowledge sharing and financial aid to less well-off countries – they hinge on effective cross-border coordination and collaboration. There is a considerable risk that GEF may hinder climate transition policies. The report is structured as follows. The first section sheds light on how climate policies may contribute to GEF. The second section analyses the extent to which GEF could hinder the green transition. The last section discusses gaps and avenues for further analytical and model-based work.

This paper analyzes the financial spillovers of shocks originating in China to emerging markets. Using a high-frequency identification strategy based on sign and narrative restrictions, we find that equity markets react strongly and persistently to Chinese macroeconomic shocks, while monetary policy shocks have limited or no spillovers. The impact is particularly strong in Latin American equity markets, with the likely channel being the effect of shocks in China on international commodity prices. These effects extend to various financial variables, such as sovereign and corporate spreads and exchange rates, suggesting that macroeconomic shocks in China may have implications for economic cycles and financial stability in emerging markets.

One of the forms of intervention in public services that lie beyond market forces is price control. While such regulation is justified by the need to achieve social goals, empirical evidence has shown that it is often used by politicians for electoral gain. This paper looks for evidence of opportunistic political behaviour in urban water pricing. Using data for 119 large Spanish cities covering the period 1998–2015, we find strong empirical evidence of the influence of the electoral cycle on water pricing insofar as price increases are significantly lower in the years immediately preceding municipal elections than in non-pre-election years. Furthermore, outsourcing water service provision does not mitigate the relationship between the electoral cycle and water pricing. This result could be explained by incomplete transfer of control rights when the urban water service is outsourced, which allows politicians to use their right to supervise water tariffs to their advantage.

In this paper we explore the existence of behavioral consistency between individuals’ pro-environmental attitudes and behaviors in related domains (cross-domain), distinguishing between the following two types of behaviors that the literature has identified as entailing different levels of sacrifice on the part of the individual: curtailment, i.e., implying the adoption of daily habits, and efficiency behaviors, i.e., installation of efficient devices. Using a dataset on bottled water demand from two cities in southern Spain, we find evidence of behavioral consistency between the undertaking of certain pro-environmental habits related to household water consumption and the decision to consume (or not) bottled water. These effects are found only when curtailment behaviors are considered, but not in relation to efficiency behaviors. Moreover, our results suggest that policies fostering pro-environmental habits could prove more successful than the ones promoting pro-environmental attitudes or awareness. These results have important implications for the design of environmental campaigns and rebate programs.

During the last few decades, numerous international organizations have emphasized the role of pricing policy as a tool to achieve objectives of efficiency, environmental sustainability, and cost-recovery in the management of water resources. Incorporating a certain level of price escalation within water tariffs by adopting increasing block rates is commonly advocated as a key element for controlling water demand and fulfilling these objectives. However, despite its widespread use, there exists no established procedure to measure the levels of price escalation embodied in water tariffs. We propose a measure of price escalation within water tariffs at the level of the water supply management unit (the municipality, in our study). In order to illustrate the usefulness of our measure, we analyse the evolution of price escalation in residential water tariffs between 2000 and 2014 in a sample of 952 Spanish municipalities and examine the factors influencing this evolution.