New Economics Papers
on Agricultural Economics
Issue of 2007‒01‒23
eighteen papers chosen by

  1. Combining revealed and stated preference methods to assess the private value of agrobiodiversity in Hungarian home gardens By Birol, Ekin; Kontoleon, Andreas; Smale, Melinda
  2. A Policy Impact Evaluation Model For Scotland: Decoupling Single Farm Payments By Gelan, Ayele; Schwarz, Gerald
  3. Get a GRIP: Should Area Revenue Coverage Be Offered through the Farm Bill or as a Crop Insurance Program? By Paulson, Nicholas; Babcock, Bruce A.
  4. The Demand for Organic, Integrated-Agriculture, and Conventional Fresh Vegetables: A Censored Inverse Almost Ideal Demand System By Vasiliki Fourmouzi; Margarita Genius; Vangelis Tzouvelekas
  5. Ambiguity Aversion as a Predictor of Technology Choice: Experimental Evidence from Peru By Jim Engle-Warnick; Javier Escobal; Sonia Laszlo
  6. Migration, Risk and the Intra-Household Allocation of Labor in El Salvador By Timothy J. Halliday
  7. Governance and Water Management: Progress and Tools in Mediterranean Countries By Alessandra Sgobbi; Gregorio Fraviga
  8. Marginal Cost Versus Average Cost Pricing with Climatic Shocks in Senegal: A Dynamic Computable General Equilibrium Model Applied to Water By Anne Briand
  9. Buyer power and pass-through of large retailing groups in the Portuguese food sector By Jorge Rodrigues
  10. Cost Effectiveness in River Management: Evaluation of Integrated River Policy System in Tidal Ouse By Tao Wang
  11. The Internalization of Externalities in The Production of Electricity: Willingness to Pay for the Attributes of a Policy for Renewable Energy By Alberto Longo; Anil Markandya; Marta Petrucci
  12. Climate Change and Water Resources – An International Perspective By Marianne Keudel
  13. Renewable Resources, Pollution and Trade in a Small Open Economy By Horatiu A. Rus
  14. The Economic Impact of the South-North Water Transfer Project in China: A Computable General Equilibrium Analysis By Maria Berrittella; Katrin Rehdanz; Richard S.J. Tol
  15. Sustainable Development Policies in Europe By Pietro Caratti; Gabriella Lo Cascio
  16. Economy-Wide Estimates of the Implications of Climate Change: A Joint Analysis for Sea Level Rise and Tourism By Francesco Bosello; Andrea Bigano; Roberto Roson; Richard S.J. Tol
  17. A Modified Environmental Kuznets Curve for Sustainable Development Assessment Using Panel Data By Valeria Costantini; Chiara Martini
  18. Costs of alternative environmental policy instruments in the presence of industry compensation requirements By Bovenberg,Lans; Goulder,Lawrence H.; Jacobson,Mark R.

  1. By: Birol, Ekin; Kontoleon, Andreas; Smale, Melinda
    Abstract: " Hungarian home gardens are small-scale farms managed by farm households using traditional management practices and family labor. They generate private benefits for farmers by enhancing diet quality and providing food when costs of transacting in local markets are high. Home gardens also generate public benefits for society by supporting long-term productivity advances in agriculture. In this paper, we estimate the private value to farmers of agrobiodiversity in home gardens. Building on the approach presented in EPTD Discussion Paper 117 (2004), we combine a stated preference approach (a choice experiment model) and a revealed preference approach (a discrete-choice, farm household model). Both models are based on random utility theory. To combine the models, primary data were collected from the same 239 farm households in three regions of Hungary. Combining approaches leads to a more efficient and robust estimation of the private value of agrobiodiversity in home gardens. Findings can be used to identify those farming communities, which would benefit most from agri-environmental schemes that support agrobiodiversity maintenance, at least public cost." Authors' abstract
    Keywords: Home gardens, Small-scale farmers, Diet quality, Agricultural productivity, Agrobiodiversity, Household surveys, Private value, Choice experiment model, Farm household model, Revealed and stated preference methods,
    Date: 2006
  2. By: Gelan, Ayele; Schwarz, Gerald
    Abstract: The purpose of this paper is to assess the impacts of decoupling single farm payments in Scotland. It focuses on aggregate impacts on the agricultural products in domestic and external markets and the spill-over effect of this on the non-agricultural sector as well as an aggregate impact on the Scottish GDP. In order to capture system-wide impacts of the policy reform, a CGE model was formulated and implemented using a social accounting matrix constructed for Scotland. The simulation results suggest that the Scottish agricultural sector may encounter declines in output and factor us as a result of the policy reform. However, this critically depends on two factors: (a) the price effect of the policy reform on Scottish agricultural products relative to the EU average as well as the conditions of changes in world agricultural market prices; and (b) the extent to which customers would be sensitive to price effects of the policy reform. As far as the spill-over effect to the non-agricultural sector is concerned, decoupling of direct payments seems to have a positive spill-over effect. Similarly, the aggregate GDP effect is positive under all simulation scenarios. Critically, the simulation experiments indicate that policy shock may have a symmetrical outcome across the two sectors, with contractions in agriculture being accompanied by expansions in the non-agricultural sector, mainly because of factor market interactions between the two sectors.
    Keywords: Cap reform; single farm payments; spill-over effects; Scotland
    JEL: Q18 Q11 R00 Q10 H00
    Date: 2006
  3. By: Paulson, Nicholas; Babcock, Bruce A.
    Abstract: The successful expansion of the U.S. crop insurance program has not eliminated ad hoc disaster assistance. An alternative currently being explored by members of Congress and others in preparation of the 2007 farm bill is to simply remove the “ad hoc” part of disaster assistance programs by creating a standing program that would automatically funnel aid to hard-hit regions and crops. One form such a program could take can be found in the area yield and area revenue insurance programs currently offered by the U.S. crop insurance program. The Group Risk Plan (GRP) and Group Risk Income Protection (GRIP) programs automatically trigger payments when county yields or revenues, respectively, fall below a producer-elected coverage level. The per-acre taxpayer costs of offering GRIP in Indiana, Illinois, and Iowa for corn and soybeans through the crop insurance program are estimated. These results are used to determine the amount of area revenue coverage that could be offered to farmers as part of a standing farm bill disaster program. Approximately 55% of taxpayer support for GRIP flows to the crop insurance industry. A significant portion of this support comes in the form of net underwriting gains. The expected rate of return on money put at risk by private crop insurance companies under the current Standard Reinsurance Agreement is approximately 100%. Taking this industry support and adding in the taxpayer support for GRIP that flows to producers would fund a county target revenue program at the 93% coverage level.
    Keywords: area revenue insurance, commodity programs, crop insurance, Group Risk Income Protection.
    Date: 2007–01–16
  4. By: Vasiliki Fourmouzi (Department of Economics, University of Crete); Margarita Genius (Department of Economics, University of Crete, Greece); Vangelis Tzouvelekas (Department of Economics, University of Crete, Greece)
    Abstract: The Inverse Almost Ideal Demand System is employed for the empirical analysis of the demand for organic, integrated-agriculture, and conventional fresh vegetables, using a cross section data surveyed in Rethymno, Greece during the 2005-06 period. The demand system is estimated by employing the Amemiya-Tobin model by Wales and Woodland for the estimation of censored equation systems, which ensures that the adding-up restriction is satisfied for both the latent and the observed expenditure shares. The problem regarding the logarithm of quantities when zero purchases are reported, is resolved in a theoretically consistent way that allows full-sample estimation and yields unbiased parameter estimates. The empirical results suggest that integrated-agriculture fresh vegetables are luxury goods, whereas the cross-quantity uncompensated flexibilities indicate that consumers are not regular buyers of any of the three types of fresh vegetables. Both groups of consumers who currently buy integrated-agriculture vegetables and those who buy conventional vegetables can be easily induced to buy organic vegetables.
    Date: 2006–10–01
  5. By: Jim Engle-Warnick; Javier Escobal; Sonia Laszlo
    Abstract: The lack of adoption of new farming technologies despite known benefis is a well-documented phenomenon in development economics. In addition to a number of market constraints, risk aversion predominates the discussion of behavioral determinants of technology adoption. We hypothesize that ambiguity aversion may also be a determinant, since farmers may have less information about the distribution of yield outcomes from new technologies compared with traditional technologies. We test this hypothesis with a laboratory experiment in the field in which we measure risk and ambiguity preferences. We combine our experiment with a survey in which we collect information on farm decisions and identify market constraints. We find that ambiguity aversion does indeed predict actual technology choices on the farm. <P>Un phénomène bien documenté en économie du développement est le nombre peu élevé d’agriculteurs qui décident d’adopter de nouvelles technologies en agriculture, malgré leurs avantages connus. En plus des nombreuses contraintes imposées par le marché, l’aversion au risque prédomine la discussion sur les déterminants de l’adoption de nouvelles technologies. Nous émettons l’hypothèse que l’aversion à l’ambiguïté pourrait aussi être un déterminant puisqu’il est possible que les agriculteurs aient moins d’information sur la distribution du rendement des nouvelles technologies que sur celle des technologies traditionnelles. Nous testons la validité de cette hypothèse avec une expérience en laboratoire sur le terrain où nous mesurons les préférences vis-à-vis du risque et de l’ambiguïté. Nous combinons notre expérience à un sondage portant sur les décisions prises en matière d’agriculture et identifiant les contraintes du marché. Nous constatons qu’effectivement, l’aversion à l’ambiguïté dicte les choix technologiques réels relatifs à la ferme.
    Keywords: experimental economics, risk measurement instruments, risk preferences, rural development, technology choice, choix technologiques, développement rural, économie expérimentale, instruments de mesure du risque, préférences vis-à-vis du risque
    JEL: O33 O18 C91
    Date: 2007–01–01
  6. By: Timothy J. Halliday (Department of Economics, University of Hawaii at Manoa; John A. Burns School of Medicine)
    Abstract: We investigate how the gender composition of migrant flows and the intra-household allocation of labor are employed as risk-coping strategies in El Salvador. We show that agricultural productivity shocks primarily increased male migration to the US and, at the same time, increased the number of hours that the household devoted to agricultural activities. In contrast, damage sustained from the 2001 earthquakes exclusively stunted female migration. We argue that the reasons for this were that the earthquakes increased the demand for home production and that the costs of retaining women at home in the disaster's wake were lower than for men.
    Date: 2007–01–04
  7. By: Alessandra Sgobbi (Fondazione Eni Enrico Mattei); Gregorio Fraviga (Università Cattolica del Sacro Cuore di Milano)
    Abstract: This paper reviews the progress with respect to Integrated Water Resource Management (IWRM) in Mediterranean countries, as addressed within the activities of the Nostrum-Dss project, a Coordination Action funded by the 6th Framework Programme of the EC, with a particular emphasis on the current use of decision support tools (DSS). The IWRM paradigm is a comprehensive management framework, which integrates the different aspects of water resources – from the underlying ecological and physical aspects, to the socio-economic values and needs (horizontal integration); and calls for increasing decentralisation and privatisation of water services (vertical integration), and the devolution of planning authority, without however forgetting the need to ensure equitable access to water resources. Substantial progress has been made in the last decades in Nostrum-Dss Partner countries, although a disparity can still be seen between the Northern and Southern banks. New institutions have been established for implementing IWRM, existing institutions have been reformed, and decision making processes increasingly require public participation. Decentralisation of decision making, implementation and monitoring are also well underway, although improvements are still needed to ensure that the traditional power structures do not prevail. More efficient technologies and infrastructures are in place, especially for the production of high value goods or in agriculture. Finally, several DSS have been developed: yet, while operational/technical DSS instruments have been successfully employed, DSSs tools developed in a participatory way, or tackling more complex, political as well as environmental and economic problems are still de-linked from actual decision making processes. Laws and regulations for water management in most Mediterranean countries embrace and support the paradigms of IWRM – and EU framework directives have played an important role in fostering this shift from more traditional, vertical governance to new, horizontal governance based on soft laws. Yet, the implementation of such laws and regulations is often only partial – often because of the lack of a clear monitoring and enforcement strategy, but also because of governments’ financial and human resources constraints. Strong overlaps of roles and competences among different government institutions remain, hampering effective implementation of water management. The tendency to centralisation of decision making persists, and actors’ involvement is scanty. The shift towards the use of demand side policies as opposed to supply side policies is not yet completed: yet, supply side policies are very costly, as they are based on greater mobilisation of financial resources. Full cost recovery pricing is not practiced widely. This reluctance to introduce full cost recovery pricing in developing countries may be due to ethical and moral considerations, but in developed countries it is often associated with strong lobbying power of interest groups. This study was supported by funding under the Sixth Research Framework of the European Union within the project "Network on Governance, Science and Technology for Sustainable Water Resource Management in the Mediterranean- The role of Dss tools” (NOSTRUM-Dss, contract number INCO-CT-2004-509158).
    Keywords: Integrated Water Resources Management, Decision Support Systems, Environmental Governance
    JEL: Q01 Q25 Q28
    Date: 2006–12
  8. By: Anne Briand (University of Rouen)
    Abstract: The model simulates on a 20-year horizon, a first phase of increase in the water resource availability taking into account the supply policies by the Senegalese government and a second phase with hydrologic deficits due to demand evolution (demographic growth). The results show that marginal cost water pricing (with a subsidy ensuring the survival of the water production sector) makes it possible in the long term to absorb the shock of the resource shortage, GDP, investment and welfare increase. Unemployment drops and the sectors of rain rice, market gardening and drinking water distribution grow. In contrast, the current policy of average cost pricing of water leads the long-term economy in a recession with an agricultural production decrease, a strong degradation of welfare and a rise of unemployment. This result questions the basic tariff (average cost) on which block water pricing is based in Senegal.
    Keywords: Computable General Equilibrium Model, Dynamic, Imperfect Competition, Water, Pricing, Sub Saharan Africa
    JEL: C68 O13
    Date: 2006–11
  9. By: Jorge Rodrigues (Autoridade da Concorrência)
    Date: 2006–09
  10. By: Tao Wang (University of York)
    Abstract: The River Ouse forms a significant part of Humber river system, which drains about one fifth the land area of England and provides the largest fresh water source to the North Sea from UK. The river quality in the tidal river suffered from sag of dissolved oxygen (DO) during last few decades, deteriorated by the effluent discharges. The Environment Agency (EA) proposed to increase the water quality of Ouse by implementing more potent environmental policies. This paper explores the cost effectiveness of water management in the Tidal Ouse through various options by taking into account the variation of assimilative capacity of river water, both in static and dynamic scope of time. Reduction in both effluent discharges and water abstraction were considered along side with choice of effluent discharge location. Different instruments of environmental policy, the emission tax-subsidy (ETS) scheme and tradable pollution permits (TPP) systems were compared with the direct quantitative control approach. This paper at the last illustrated an empirical example to reach a particular water quality target in the tidal Ouse at the least cost, through a solution of constrained optimisation problem. The results suggested significant improvement in the water quality with less cost than current that will fail the target in low flow year.
    Keywords: Water Quality Management, Tradable Pollution Permits, Tax and Subsidy, Effluent Discharge, Water Abstraction, Dynamic Equilibrium, Integrated River Policy, Cost Effectiveness
    JEL: C31 C61 L51 R19
    Date: 2006–11
  11. By: Alberto Longo (Queen’s University Belfast and University of Bath); Anil Markandya (University of Bath and Fondazione Eni Enrico Mattei); Marta Petrucci (University of Bath)
    Abstract: This paper investigates the willingness to pay of a sample of residents of Bath, England, for a hypothetical program that promotes the production of renewable energy. Using choice experiments, we assess the preferences of respondents for a policy for the promotion of renewable energy that (i) contributes to the internalization of the external costs caused by fossil fuel technologies; (ii) affects the security of energy supply; (iii) has an impact on the employment in the energy sector; (iv) and leads to an increase in the electricity bill. Responses to the choice questions show that our respondents are in favour of a policy for renewable energy and that they attach a high value to a policy that brings private and public benefits in terms of climate change and energy security benefits. Our results therefore suggest that consumers are willing to pay a higher price for electricity in order to internalize the external costs in terms of energy security, climate change and air pollution caused by the production of electricity.
    Keywords: Non Market Valuation, Choice Experiments, Willingness to Pay, Renewable Energy, Energy Security, Greenhouse Gases Emissions
    JEL: Q42 Q48 Q51
    Date: 2006–11
  12. By: Marianne Keudel
    Abstract: Climate change and its consequences are the focus of many environmental policies in the European Union but also in other countries. Whereas in the US marketable instruments like permit trading have already been implemented since the 1980s, the EU first implemented permit trading for CO2 emissions in 2005. Climate change also influences the availability of water resources; water levels of rivers in the EU are assumed to decrease in the next decades. Decreasing water levels, in turn, heavily influence the quality of these water resources. In some countries the instrument of permit trading is also applied to the regulation of water resources (quantity and quality). This paper gives an overview of existing systems in order to show how such trading systems can create incentives for the efficient use of resources by means of pricing.
    Keywords: river basin management, water trading, water quality trading
    JEL: Q25 Q53
    Date: 2007–01
  13. By: Horatiu A. Rus (University of British Columbia)
    Abstract: Industrial pollution can have damaging effects on resource-based productive sectors. International trade creates opportunities for overexploitation of the open-access renewable resources but also for separating the sectors spatially. The paper shows that, depending on the relative damage inflicted by the two industries on the environment, it is possible that the production externality will persist and that specialization in the dirty good may not be the obvious choice from a welfare perspective. Also, the resource exporter does not necessarily have to lose from trade even when specializing incompletely, due to the partially offsetting external effects.
    Keywords: Renewable Resources, Pollution, Production Externalities, Environment, International Trade
    JEL: Q27 Q22 Q53
    Date: 2006–11
  14. By: Maria Berrittella (University of Palermo); Katrin Rehdanz (Hamburg University); Richard S.J. Tol (Economic and Social Research Institute)
    Abstract: Water resources are unevenly spread in China. Especially the basins of the Yellow, Hui and Hai rivers in the North are rather dry. To increase the supply of water in these basins, the South-to-North Water Transfer project (SNWT) was launched. Using a computable general equilibrium model this study estimates the impact of the project on the economy of China and the rest of the world. We contrast three alternative groups of scenarios. All are directly concerned with the South-to-North water transfer project to increase water supply. In the first group of scenarios additional supply implies productivity gains. We call it the “non-market” solution. The second group of scenarios is called “market solution”. The market price for water adjusts such that supply and demand are equated again. In the third group of simulations the economic implications of China’s capital investment in infrastructure for the water South-North water transfer project is analyzed. Finally, the investment is combined with the increased capacity of water. If an increase in water supply in China leads to an increase in productivity of their water-intensive goods and services (non-market solution) this would result in a huge positive welfare effect from increased production and export. The effect on China’s welfare would still be positive, if a market for water would exist (market solution), but the world as a whole would lose. The negative effect for the rest of the world is largely explained by a deterioration of its terms-of-trade. Well functioning water markets in China are unlikely to exist.
    Keywords: Computable General Equilibrium, South-North Water Transfer Project, Water Policy, Water Scarcity
    JEL: D58 R13 Q25 Q28
    Date: 2006–12
  15. By: Pietro Caratti (Fondazione Eni Enrico Mattei); Gabriella Lo Cascio (Fondazione Eni Enrico Mattei)
    Abstract: The objective of this paper is to investigate the actual situation in the shift towards the implementation of Sustainable Development Policies in Europe. The aim is to highlight the key role of the European Union in bringing about sustainable development within Europe and also on the wider global stage. It will show how the European Commission performs its commitment in reaching a sustainable regulation by issuing some documents and declarations. The paper frames the EU action into an international framework of strategies, agreements and policies on SD and, at the same time, provides an overview on experiences of SD strategy implementations at the national level, according to the commission pressing on MS to produce their own SD strategy and implement it. Indicators systems, issues of interest and fields of actions are compared: the analysis of these elements aims to highlight common scenarios of SD strategies that reveal the trends towards a more sustainable growth in the European Union.
    Keywords: Sustainable Development, Globalization, Environment Policy, Strategy for Sustainable Development, Good Governance, Participation
    JEL: Q01 Q5 Q56
    Date: 2006–12
  16. By: Francesco Bosello (Fondazione Eni Enrico Mattei and Ca’Foscari University of Venice); Andrea Bigano (Fondazione Eni Enrico Mattei and REF, Ricerche per l'Economia e la Finanza); Roberto Roson (Fondazione Eni Enrico Mattei and Ca’Foscari University of Venice); Richard S.J. Tol (Vrije Universiteit)
    Abstract: Climate change impacts on human life have well defined and different origins, nevertheless in the determination of their final effects, especially those involving social-economic responses, interactions among impacts are likely to play an important role. This paper is one of the first attempts to disentangle and highlight the role of these interactions. It focuses on the economic assessment of two specific climate change impacts: sea-level rise and changes in tourism flows. By using a CGE model the two impacts categories are first analyzed separately and then jointly. Comparing the results it is shown that, even though qualitatively joint effects follow the outcomes of the disjoint exercises, quantitatively impact interactions do play a significant role. Moreover it has been also possible to disentangle the relative contribution of each single impact category to the final result. In the case under scrutiny demand shocks induced by changes in tourism flows outweigh the supply side shock induced by the loss of coastal land.
    Keywords: Climate Change, Sea Level Rise, Tourism, Computable General Equilibrium Models
    JEL: C68 D58 Q25
    Date: 2006–11
  17. By: Valeria Costantini (University of Roma Tre); Chiara Martini (University of Roma Tre)
    Abstract: Sustainable development is a concept strictly connected with basic needs of the individuals. During the last years a number of empirical studies have tried to discover and quantify the causal relations between economic growth and environmental consumption and degradation. The most widely used empirical model is the so-called Environmental Kuznets Curve (EKC), nowadays applied to different polluting elements. Despite the huge diffusion of EKC studies, this model has been criticised for incompleteness of a sustainable development analysis. The aim of this paper is to build a Modified EKC (MEKC) in order to consider a wider concept of development rather than pure economic growth, including well-being aspects and sustainability of the development process. Using a macroeconomic measure of sustainability such as the World Bank’s Genuine Saving and a measure of well-being such as the United Nations’ Human Development Index, we build a model in order to analyse linkages between higher welfare levels and natural resources consumption, verifying the sustainability of human development. A panel analysis for three years (1990-1995-2000) for a wide range of countries (including developed and developing countries) has been applied in order to respond to criticisms related to conjunctural results linked to pure cross-section studies. Comparisons among alternative pollutants (i.e., CO2, NOX, and SOX) and GS are described, and the robustness of the MEKC clearly emerges. Furthermore, in order to respond to criticisms for the reduced form of the EKC, an Instrumental Variables model has been tested both on CO2 and GS, while a system of equations has been tested considering simultaneously a traditional EKC and a MEKC for a longer time period (1996-2004). Unit root tests for non-stationary series have been computed, showing that the IV model gives satisfactory results. An indicator for technological capabilities has been added at this stage, accounting for diffusion of technical progress and import technology as suggested by Archibugi and Coco (2004). Causal relations identified within a MEKC allow to identify correlation between human development and sustainable development, following the classic inverted U-shaped curve of the EKC. Nonetheless, comparing the turning points of the MEKC and EKC, respectively, it seems that using this alternative specification some useful policy implications apply. The threshold level of human development in the MEKC corresponds to an income per capita level lower than the threshold level for the EKC, confirming the possibility of “tunnelling through the curve” as suggested in Munasinghe (1999). Our results show that human development should be the first objective of international development policies, and an increase in human well-being is necessary to provide a sustainability path.
    Keywords: Environmental Kuznets Curve, Sustainable development, Human development, Genuine saving, Panel data
    JEL: O15 Q01 Q56
    Date: 2006–11
  18. By: Bovenberg,Lans; Goulder,Lawrence H.; Jacobson,Mark R. (Tilburg University, Center for Economic Research)
    Abstract: This paper explores how the costs of meeting given aggregate targets for pollution emissions change with the imposition of the requirement that key pollution-related industries be compensated for potential losses of profit from the pollution regulation. Using analytically and numerically solved equilibrium models, we compare the incidence and costs of emissions taxes, fuel (intermediate input) taxes, performance standards and mandated technologies in the absence and presence of this compensation requirement. Compensation is provided either through industry tax credits or industry-specific cuts in capital tax rates. We decompose the added costs from the compensation requirement into (1) an increase in "intrinsic abatement cost," reflecting a lowered efficiency of pollution abatement, and (2) a "lump-sum compensation cost" that captures the efficiency costs of financing the compensation. The compensation requirement affects these components differently, depending on the policy instrument involved and the required extent of pollution abatement. As a result, it can change the cost-rankings of the different instruments. In particular, when compensation is provided through tax credits, the lump-sum compensation cost is higher under the emissions tax than under the command-andcontrol policies (performance standards and mandated technologies) - a reflection of the higher compensation requirements under the emissions tax. When the required pollution reduction is modest, imposing the compensation requirement causes the emissions tax to lose its status as the least costly instrument and to become more costly than command and control policies. In contrast, when required abatement is extensive, the emissions tax again becomes the most-cost effective instrument because of its advantages in terms of lower intrinsic abatement cost.
    Keywords: environmental instrument choice;pollution control;compensation requirements; emissions abatement costs
    JEL: Q58 H23 H21
    Date: 2006

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