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on Environmental Economics |
| By: | Strand, Jon |
| Abstract: | This paper provides counterexamples to the idea that mitigation of greenhouse gases causing climate change, and adaptation to climate change, are always and everywhere substitutes. The author considers optimal policy for mitigating greenhouse gas emissions when climate damages follow a geometric Brownian motion process with positive drift, and the trajectory for damages can be down-shifted by adaptive activities, focusing on two main cases: 1) damages are reduced proportionately by adaptation for any given climate impact ("reactive adaptation"); and 2) the growth path for climate damages is down-shifted ("anticipatory adaptation"). In this model mitigation is a lumpy one-off decision. Policy to reduce damages for given emissions is continuous in case 1, but may be lumpy in case 2, and reduces both expectation and variance of damages. Lower expected damages promote mitigation, and reduced variance discourages it (as the option value of waiting is reduced). In case 1, the last effect may dominate. Mitigation then increases when damages are dampened: mitigation and adaptation are complements. In case 2, mitigation and adaptation are always substitutes. |
| Keywords: | Climate Change Economics,Adaptation to Climate Change,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Policy and Regulation |
| Date: | 2011–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5724&r=env |
| By: | Svetlana Maslyuk; Dinusha Dharmaratna |
| Abstract: | Emissions trading schemes (ETS) have been operational to control greenhouse gas emissions in European Union since 2005. Under the EU ETS, the governments of the Member States agree on national emission caps, allocate allowances to industrial operators, track and validate the actual emissions and retire allowances at the end of each year. ETS have been proposed to be introduced in New Zealand, Australia, Japan, US, Canada, Korea, India and two Chinese provinces in the near future. The main idea of the ETS is to create the market for pollution which will provide economic agents with incentives to reduce their emissions ( Stavins, et al., 2003). The design of ETS plays an important role in reducing greenhouse gas emissions and promoting environmental and economic sustainability. There are several designs of ETS including cap-and-trade, baseline-and-credit and hybrid, however, cap-and-trade scheme is the most popular among the proposed ETS. The purpose of this paper is to perform a comprehensive review of the existing and the proposed ETS focusing on design issues. Findings of this research will be useful for countries with existing and proposed ETS and for countries intending to adopt ETS in the future. |
| Keywords: | Emission Trading Scheme (ETS), Sustainability, Cap-and-trade, Baseline-and-credit, Hybrid |
| JEL: | Q54 Q58 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2011-15&r=env |
| By: | Fabio Fiorillo; Agnese Sacchi |
| Abstract: | We hereby propose a model to analyze the provision of environmental protection activities (United Nation 2005) with positive interregional externalities in order to verify - at least in theory - whether this kind of policy is better accomplished through centralized policymaking, which implies a coordinated solution among local representatives, or a decentralized system, whereby local authorities independently finance and implement their environmental protection policy. The research question concerns the identification of criteria on how to allocate powers and functions to environmental management at different tiers of government. Moreover, modelling interregional externalities as a mechanism contributing to lowering the cost of financing environmental policy in each region (production externality), we can assume that different environmental policies are allowed across regions. Given this general framework, considerations favouring either institutional setting in terms of individuals’ welfare seem to involve interaction among these key elements: the extent of the inter-jurisdictional spillovers, the size of local jurisdictions and the regional preferences for environmental protection policy. |
| Keywords: | Environmental protection activities; Environmental federalism; Externalities; Local government |
| JEL: | H71 H73 H23 Q58 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:rtr:wpaper:131&r=env |
| By: | Carfì, David; Schilirò, Daniele |
| Abstract: | The paper aims at providing a Game Theory model of coopetition which addresses the problem of the global Green Economy. The Green Economy is a theoretical model of sustainable development. This sustainable development model should lead to reduce emissions of greenhouse gases, determine the reduction of global pollution and the establishment of a sustainable and lasting global Green Economy, using mainly renewable resources. The paper applies the notion of coopetition, originally devised at microeconomic level, at a country level. The country has to decide whether it wants to collaborate with the rest of the world in getting an efficient Green Economy, even if the country is competing in the global scenario. The model provides a win-win solution, that shows the convenience for each country to participate actively to a program of sustainability and efficient resource allocation within a coopetitive framework. |
| Keywords: | coopetition; game theory; differentiable Pareto analysis; natural resources; green economy; macroeconomic and global interaction. |
| JEL: | Q50 B21 C78 C71 C7 F19 C72 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32035&r=env |
| By: | Christoph Bšhringer (Department of Economics, University of Oldenburg); Victoria Alexeeva-Talebi (Centre for European Economic Research, Mannheim) |
| Abstract: | Unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy-intensive and trade-exposed industries. Our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy-intensive and trade-exposed (EITE) branches. The sector-specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries. Beyond burden shifting between industries, differential emission pricing bears the risk for substantial excess cost in emission reduction as policy concedes (too) low carbon prices to EITE industries and thereby foregoes relatively cheap abatement options in these sectors. From the perspective of global cost-effectiveness we find that differential emission pricing of EITE industries hardly reduces emission leakage since the latter is driven through robust international energy market responses to emission constraints. As a consequence the scope for efficiency compared to uniform pricing is very limited. Only towards stringent emission reduction targets will a moderate price differentiation achieve sufficient gains from leakage reduction to offset the losses of diverging marginal abatement cost. |
| Keywords: | unilateral climate policy design, leakage, competitiveness |
| JEL: | D58 H21 H22 Q48 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:old:wpaper:338&r=env |
| By: | Copenhagen Economics |
| Abstract: | The study examines current national practices with respect to emissions allowances in the EU and the countries with similar cap-and-trade systems. It analyses potential distortions resulting from national practices and identifies the best solutions. It deals with issues such as the tax treatment of allowances allocated for free, that of allowances originated as Clean Development Mechanism or Joint Implementation, and the tax treatment of penalties for non-compliance. It also examines the feasibility of various policy solutions at EU level. |
| Keywords: | European Union, taxation, environmental tax, ETS |
| JEL: | H24 H25 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxstu:0035&r=env |
| By: | Petrakis, Emmanuel; Poyago-Theotoky, Joanna |
| Abstract: | In this paper we study a neglected aspect ofteclmology policy, namely the adverse impact it might have on the envirol1Il1ent through increased production when R&D expenditure leads to cost reduction. Although teclmology policy measures that encourage finns to reduce their production costs would usually reduce energy inputs and therefore generate less pollution per unit of output production, we explore here the case where with reorganisation of production output gene rally increases. So even if per unit of production pollution is less, total pollution generated by the increased production induced by the innovative efforts of films increases. In this context it is therefore necessary to address the issue of tying-in teclmology and environmental policy, which is the issue we raise in this paper. We show that, irrespective of whether teclmology policy takes the fonn of R&D subsidies or R&D cooperation, R&D would gene rally lead to increased pollution and thus have a negative impact on the environment. Policies that might be optimal in the absence of concem for the enviroJUllent ceas e to be so. We claim that not only is a comparison between policy instruments more delicate but the optimal R&D subsidy might be negative. FinalIy, we propose and evaluate a speeific poliey in the form of a targeted subsidy tied-in to abatement activities and show that it is welfare improving. |
| Keywords: | Technology policy; Process innovation; Pollution; R&D cooperation; R&D subsides; |
| URL: | http://d.repec.org/n?u=RePEc:ner:carlos:info:hdl:10016/6072&r=env |
| By: | Karen Pittel; Dirk Rübbelke |
| Abstract: | Besides costs and benefits, fairness aspects tend to influence negotiating parties’ willingness to join an international agreement on climate change mitigation. Fairness is largely considered to improve the prospects of success of international negotiations and hence measures raising fairness perception might – in turn – help to bring about effective cooperative international climate change mitigation. We consider the influences present international support of climate policy in developing countries exerts on fairness perception and how this again might affect international negotiations. In doing so, we distinguish between fairness perception which is based on historical experiences and perception which is based on conjectures about opponents’ intentions. By identifying beneficial components of current support schemes, lessons can be learnt for designing new schemes like the Green Climate Fund. |
| Keywords: | adaptation, chicken game, climate policy, fairness, international agreement mitigation, reciprocity, transfers |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:bcc:wpaper:2011-04&r=env |
| By: | Sven Voigtländer; Jan Goebel; Thomas Claßen; Michael Wurm; Ursula Berger; Achim Strunk; Hendrik Elbern |
| Abstract: | Background: In panel datasets information on environmental exposures is scarce. Thus, our goal was to probe the use of area-wide geographically referenced data for air pollution from an external data source in the analysis of physical health. Methods: The study population comprised SOEP respondents in 2004 merged with exposures for NO2, PM10 and O3 based on a multi-year reanalysis of the EURopean Air pollution Dispersion-Inverse Model (EURAD-IM). Apart from bivariate analyses with subjective air pollution we estimated cross-sectional multilevel regression models for physical health as assessed by the SF-12. Results: The variation of average exposure to NO2, PM10 and O3 was small with the interquartile range being less than 10µg/m3 for all pollutants. There was no correlation between subjective air pollution and average exposure to PM10 and O3, while there was a very small positive correlation between the first and NO2. Inclusion of objective air pollution in regression models did not improve the model fit. Conclusions: It is feasible to merge environmental exposures to a nationally representative panel study like the SOEP. However, in our study the spatial resolution of the specific air pollutants has been too little, yet. |
| Keywords: | SOEP, Geographically Referenced Data, Feasibility Study, Air Pollution, EURAD-IM, Physical Health |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp386&r=env |
| By: | Aurelie Slechten |
| Abstract: | I study the effects of intertemporal emission permits trading in a cap-and-trade scheme when firms' abatement investments have long-term effects. In a two-period general equilibrium model, firms make trading and investment decisions in each period to meet their caps. I compare equilibrium abatement levels and permit prices, with and without intertemporal trading. Intertemporal trading may reduce total abatement investments over the scheme. Without intertemporal trading, some investments in period 1 are entirely driven by second-period abatement needs; in this case, intertemporal trading may reduce investments in period 1 as some are substituted by intertemporal permit trading. Descriptive evidence from the EU Emissions Trading System (ETS) illustrates this potential effect. I also show that if the number of permits issued by the regulator is not equal to the socially optimal level of emissions, then banning intertemporal trading may reduce the social cost thanks to the long-term properties of investments. |
| Keywords: | cap-and-trade schemes; emission trading; abatements; investment; banking; borrowing |
| JEL: | Q50 Q58 D92 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/90863&r=env |
| By: | Stefan Borsky; Paul A. Raschky |
| Abstract: | This paper provides an empirical analysis of the role of intergovernmental relations on a country's effort to enforce the objectives of an international environmental agreement on an open access resource. Intergovernmental interaction allows signatory countries to observe compliance behavior of other signees and to punish non-compliance by applying biand multilateral sanctions. We use a cross-sectional dataset that contains country level information about compliance with the 1995 UN Code of Conduct for Responsible Fisheries. Our identification strategy combines a spatial autoregressive model with spatial autoregressive disturbances and an instrumental variable approach. We find a strong positive effect of other countries' compliance on the individual country's compliance score. These results suggest that repeated interactions among participants might not only play a role in enforcing the obligations of an agreement at the community level but also have an impact at the international level. (141 words) |
| Keywords: | International environmental agreements, open access resources, spatial econometrics |
| JEL: | C21 F53 Q22 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2011-05&r=env |
| By: | Giovanni Villani; Marta Biancardi |
| Abstract: | In this paper we study the formation and the stability of International Environmental Agreements (IEAs) in a pollution abatement model with a quadratic cost function. Countries play a two-stage game: in the first stage each country decides to join or not the coalition while, in the -second stage, the quantity of pollution abatement is chosen. To analyze the stability of coalition structures in a multiple coalition game, we use the notion of the Largest Consistent Set (LCS) which allows players to be farsighted.In an abstract context, Chwe (1994) developed the concept of farsighted stability: an outcome is stable and it is in the LCS if and only if deviations from it or potential further deviations are not unanimously preferred to the original outcome by the coalition considering the deviations. Applying this notion of stability in the IEA context we assume that, when a country or a sub-coalition contemplate exiting or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify what would be the resulting stable structures and the LCS, examining the indicator of countries’ environmental awareness proposed by the model. A particular analysis is proposed about the Grand Coalition. Moreover, we present a handy Maple algorithm to compare the cost functions and to determine direct dominance. |
| Keywords: | IEA; Farsightedness; Implementation. |
| JEL: | F50 C60 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ufg:qdsems:04-2011&r=env |
| By: | Kratzsch, Uwe; Sieg, Gernot; Stegemann, Ulrike |
| Abstract: | This paper analyzes greenhouse gas emissions that build up an atmospheric stock which depreciates over time. Weakly renegotiation-proof and subgame perfect equilibria in a game of international emission reduction exist if countries put a sufficiently high weight on future payoffs, even though there is a discontinuity in the required discount factor due to the integrity of the number of punishing countries. Treaties are easier to reach if the gas depreciates slowly. |
| Keywords: | global warming; international agreement; weak renegotiation-proofness |
| JEL: | H41 F53 Q54 |
| Date: | 2011–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31977&r=env |
| By: | François Destandau; Elsa Martin; Anne Rozan |
| Abstract: | The purpose of this paper is to analyze the implication of wetland construction for the cost-effective design of a pesticide charge. A model is developed in order to show that, for a given target, the introduction of wetland construction can reduce overall abatement costs and can lower the input charge asked to the farmers. This result remains true as long as the cost of constructing a wetland is not too high. A numerical illustration is carried out in order to simulate pesticide regulations in a wine catchment in North-East of France. |
| Keywords: | Water policy, constructed wetlands, agricultural pollution regulation |
| JEL: | Q25 Q58 K32 |
| Date: | 2011–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ceo:wpaper:31&r=env |
| By: | Akmal Abdul Manap; Othman Aman (Faculty of Technology Management and Technopreneurship, Universiti Teknikal Malaysia Melaka, Malaysia); Filda Rahmiati |
| Abstract: | This study investigates the level of awareness and determines tourism innovation impact to the quality of life (QOL) of residents. The main study aims that residents’ of tourism innovation impacts (economic, social, cultural, and environmental) affects their satisfaction of particular life domains. Accordingly, the study proposed three major hypotheses: (1) tourism innovation impacts affects their QOL (economy) in the community, (2) tourism innovation impacts affects their QOL impacts affects their QOL (social) in the community. The sample population consisting of residents residing in Melaka River was surveyed |
| Keywords: | tourism innovation, quality of life, sungai Melaka, tourism and local community |
| JEL: | M00 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cms:1icm11:2011-026_215&r=env |
| By: | Grégoire Garsous |
| Abstract: | This paper offers a comprehensive analytical framework about how technology dffusion mechanisms among countries influence climate change mitigation. Assuming that developed countries take the first step in greening their technologies, it is far from obvious that green technologies would spread from developed countries to developing countries. The main reason is that clean technologies in the developed world take time to become as productive as dirty technologies. As a result, during this catching-up period, developing countries keeps imitating the best available technology, namely the dirty one. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/90811&r=env |
| By: | Stéphane RIOU; Carl GAIGNE; Nelly EXBRAYAT (Centre d'Etudes et de Recherches sur le Développement International) |
| Abstract: | Nous analysons l'impact et les déterminants d'une taxe carbone globale dans une économie imparfaitement intégrée composée de pays de différente taille. A l'aide d'un modèle de commerce et de localisation, nous montrons tout d'abord que la concentration de firmes dans le pays disposant d'un avantage de taille de marché accroît les émissions totales de CO2. L'intro- duction d'une taxe carbone globale conduit alors à des délocalisations de fiÂ…rmes du grand pays vers le petit pays de sorte que même Â…fixée à un taux unique, une Â…fiscalité carbone ne serait pas neutre du point de vue de la géographie économique. Enfin, parce qu'elles conduisent à une réduction des émissions mondiales de CO2, ces relocalisations améliorent l'efficacité environnementale de la taxe carbone. |
| Keywords: | Taxe carbone globale, economie geographique |
| JEL: | Q28 F18 F15 F12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1274&r=env |
| By: | Nepal, Rabindra |
| Abstract: | Increasing the renewable energy share in national energy mix remains one of the major energy policy goals across many economies. This paper assesses the roles and potentials of renewable energy sources in less-developed economies while citing Nepal as an example. Renewable energy has a significant role to play in the electrification of rural areas in developing economies and contribute towards sustainable development. Realizing full potentials of renewable, however, requires addressing both the associated demand-side and supply–side constraints. Innovative subsidies and tax incentives, adequate entrepreneurial support, strengthening institutional arrangement and promoting local community-based organizations such as the cooperatives are the necessary factors in promoting the green technologies in countries like Nepal. International factors such as large scale investment and adequate technology transfer are equally crucial to create a rapid spread and increase affordability of decentralised renewable energy technologies in less-developed economies. |
| Keywords: | renewable; electrification; research and development |
| JEL: | Q42 Q01 O33 |
| Date: | 2011–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31878&r=env |
| By: | Das Gupta, Monica; Bongaarts, John; Cleland, John |
| Abstract: | There is a very large but scattered literature debating the economic implications of high fertility. This paper reviews the literature on three themes: (a) Does high fertility affect low-income countries'prospects for economic growth and poverty reduction? (b) Does population growth exacerbate pressure on natural resources? and (c) Are family planning programs effective at lowering fertility, and should they be publicly funded? The literature shows broad consensus that while policy and institutional settings are key in shaping the prospects of economic growth and poverty reduction, the rate of population growth also matters. Recent studies find that low dependency ratios (as fertility declines) create an opportunity for increasing productivity, savings and investment in future growth. They find that lower fertility is associated with better child health and schooling, and better health and greater labor-force participation for women. They also indicate that rapid population growth can constrain economic growth, especially in low-income countries with poor policy environments. Population growth also exacerbates pressure on environmental common property resources. Studies highlight the deep challenges to aligning divergent interests for managing these resources. However, part of the pressure on these resources can be mitigated by reducing the rate of population growth. Although family planning programs are only one policy lever to help reduce fertility, studies find them effective. Such programs might help especially in the Sub-Saharan African region, where high fertility and institutional constraints on economic growth combine to slow rises in living standards. |
| Keywords: | Population Policies,Environmental Economics&Policies,Achieving Shared Growth,Economic Theory&Research,Health Systems Development&Reform |
| Date: | 2011–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5719&r=env |
| By: | Salike, Nimesh |
| Abstract: | This paper looked into inter- relationships between Regional Integration Agreement (RIA) and Foreign Direct Investment (FDI) from theoretical point of view. It tried to figure out the conducts of FDI after the formation of RIA from intra- regional and inter- regional perspective. The theoretical framework was developed from the cross- section tabulation of motives and modes of FDI. It is identified that multinationals have two basic rationales for their motives of investment abroad: tariff- jumping and internalization. Further, they conduct their decision of FDI through two modes: vertical and horizontal FDI. To study the distribution of FDI in individual economy after RIA, the study of “Attractiveness matrix” was carried out. It suggested that the flow of FDI depends upon the consequences of “Environmental change” and “Locational advantage” of the host economies within the region. |
| Keywords: | Regional integration; Tariff- jumping; Internalization; Vertical FDI; Horizontal FDI; Environmental change; Locational advantage |
| JEL: | F15 F23 F21 |
| Date: | 2010–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31859&r=env |
| By: | Carfì, David; Trunfio, Alessandra |
| Abstract: | The paper aims at providing a non-linear Game Theory model of coopetition which addresses the problem of the global Green Economy. We apply the notion of coopetition at country level, instead of microeconomic firm level. The country has to decide whether it wants to collaborate with the rest of the world in getting an efficient Green Economy, even if the country is competing in the global scenario. Our non-linear model will provide different win-win solutions which are going to show the convenience for each country to participate actively to a program of sustainability and efficient resource allocation within a non-linear coopetitive framework. Our coopetitive model is non-linear with respect to each strategy of the game. |
| Keywords: | B21; C7; C71; C72; C78; F19; Q50 |
| JEL: | F4 C71 B22 C7 C72 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32036&r=env |
| By: | Robert Lanquar |
| Abstract: | For the last two decades, MED11 countries (Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestinian Autonomy, Syria, Tunisia and Turkey) have recorded the highest growth rate in inbound world tourism. In the same time, domestic tourism in these countries was growing very fast. MED 11 tourism performances have been astonishing in light of the security risks, natural disasters, oil prices rises and economic uncertainties of the region. The last financial crisis had no severe consequences on this development, which confirmed the resilience of tourism and the huge potential of the MED 11 countries in this sector. This trend was abruptly halted in early 2011 during the Arab Spring, but could resume when the situation stabilizes. This paper questions whether this trend will continue in the period up to 2030 and, for that, provides four different possible scenarios for the development of the tourism sector in MED11 for 2030: (i) reference scenario, (ii) common sustainable development scenario,(iii) polarized (regional) development scenario and (iv) failed development - decline and conflict – scenario. In all cases, international and domestic tourism arrivals will grow. However, security and adjustment to climate change remain the main factors that will strongly influence the development of the tourism sector in MED11 countries. |
| Keywords: | Mediterranean, domestic tourism, international tourism, security, climate change, tourism indicators, tourism's economic contribution, tourism competitiveness, tourism prospective, tourism scenarios |
| JEL: | D12 D60 E27 F47 H54 O53 O55 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:sec:cnrepo:0098&r=env |
| By: | Andersen, Thomas Barnebeck (Department of Business and Economics); Bentzen, Jeanet (Department of Economics); Dalgaard, Carl-Johan (Department of Economics); Selaya, Pablo (Department of Economics) |
| Abstract: | Empirically, a higher frequency of lightning strikes is associated with slower growth in labor productivity across the 48 contiguous US states after 1990; before 1990 there is no correlation between growth and lightning. Other climate variables (e.g., temperature, rainfall and tornadoes) do not conform to this pattern. A viable explanation is that lightning influences IT diffusion. By causing voltage spikes and dips, a higher frequency of ground strikes leads to damaged digital equipment and thus higher IT user costs. Accordingly, the flash density (strikes per square km per year) should adversely affect the speed of IT diffusion. We find that lightning indeed seems to have slowed IT diffusion, conditional on standard controls. Hence, an increasing macroeconomic sensitivity to lightning may be due to the increasing importance of digital technologies for the growth process. |
| Keywords: | Climate; IT diffusion; economic growth |
| JEL: | O33 O51 Q54 |
| Date: | 2010–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sdueko:2011_002&r=env |
| By: | Joaquim Bento de Souza Ferreira Filho; Mark Horridge |
| Abstract: | In this paper we analyze the Indirect Land Use Change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for Unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in an other use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located in the agricultural frontier. Results show that the ILUC effects of ethanol expansion are of the order of 0.14 hectare of new land coming from previously unused land for each new hectare of sugar cane. This value is higher than values found in the Brazilian literature. ILUC effects for pastures are around 0.47. Finally, regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion. |
| Keywords: | CGE, ethanol, biofuels, land use, Brazil |
| JEL: | C68 D58 E47 Q15 Q16 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-218&r=env |