Environmental Policy Mitigates Temperature Shock Risks

Abstract

Cross-state and (within state-year) county-level comparisons indicate a negative relation between abnormal temperature and quality of life in the U.S. since 1990. This temperature-quality of life relation is less negative in states with more stringent environmental policies in place prior to our sample period. This attenuating effect of environmental policy is concentrated in periods when the U.S. is most collaborative in the international fight against climate change. Additional tests indicate significant differences in the temperature-income sensitivity between states that adopt more stringent environmental policies, prior to the adoption decision. Together, our findings suggest (1) current environmental policies are an avenue of adaption to a warming climate, and (2) the effectiveness of these policies are bolstered with a national commitment to fighting climate change.

Keywords: temperature shocks, climate change, quality of life, state regulations, environmental policy

JEL Classification: G24, G28, E24, H31, H74, J15, O15, R23