nep-env New Economics Papers
on Environmental Economics
Issue of 2005‒02‒13
fifteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Trade Standards and the Political Economy of Genetically Modified Food By Anderson, Kym; Damania, Richard; Jackson, Lee Ann
  2. Designing Democracies for Sustainability By Gersbach, Hans; Kleinschmidt, Tobias
  3. Political Institutions, Environmental Policy and Growth By Marsiliani, Laura; Renström, Thomas I
  4. Demographic Transition Environmental Concern and the Kuznets Curve By J., AZNAR-MARQUEZ; Jose-Ramon, RUIZ-TAMARIT
  5. Non Catastrophic Endogenous Growth with Pollution and Abatment By J., AZNAR-MARQUEZ; José Ramon, RUIZ-TAMARIT
  6. Regulating Between National Fears and Global Disciplines: Agricultural Biotechnology in the EU By Gregory Shaffer; Mark Pollack
  7. Strategic Interaction and Externalities: FD-games and pollution. By Reinoud Joosten
  8. Water allocation policies for the Dong Nai River Basin in Vietnam By Ringler, Claudia; Vu Huy, Nguyen
  9. Participation of local people in water management By Heyd, Helene; Neef, Andreas
  10. Alleviating Environmental Degradation in the Asia-Pacific Region: International cooperation and the role of issue-linkage By Raghbendra Jha
  11. "It pays to be green" - a premature conclusion? By Kjetil Telle, Iulie Aslaksen and Terje Synnestvedt
  12. Environmental risk and the precautionary principle. “Late lessons from early warnings” applied to genetically modified plants By Iulie Aslaksen, Bent Natvig and Inger Nordal
  13. Are Mercury Advisories Effective? Information, Education, and Fish Consumption By Jay P. Shimshack; Michael B. Ward; Timothy K.M. Beatty
  14. EU Polluting Emissions: an empirical analysis By F. Álvarez; M. Contestabile; C. Gómez; G. Marrero; L. Puch
  15. Global and local indeterminacy and optimal environmental public policies in an economy with public abatement activities. By Rafaela Mª Pérez Sánchez; Jesús Ruiz Andújar

  1. By: Anderson, Kym; Damania, Richard; Jackson, Lee Ann
    Abstract: A common-agency lobbying model is developed to help understand why North America and the European Union have adopted such different policies towards genetically modified food. Our results show that when firms (in this case farmers) lobby policy-makers to influence standards and consumers and environmentalists care about the choice of standard, it is possible that increased competition from abroad can lead to strategic incentives to raise standards, not just lower them as shown in earlier models. This theoretical proposition is supported by numerical results from a global general equilibrium model of GM adoption in America without and with an EU moratorium.
    Keywords: GMOs; Political Economy; Regulation of Standards; Trade Policy
    JEL: F13 O33 O38 Q17 Q18
    Date: 2004–08
  2. By: Gersbach, Hans; Kleinschmidt, Tobias
    Abstract: Democratic processes may not take the welfare of future generations sufficiently into account and thus may not achieve sustainability. We show that the dual democratic mechanism – rejection/support rewards (RSRs) for politicians and elections – can achieve sustainability. RSRs stipulate that incumbents who are not re-elected, but obtain the majority support among young voters receive a particular monetary or non-monetary reward. Such rejection/support rewards induce politicians to undertake long-term beneficial policies, but may invite excessive reward-seeking. We identify optimal RSRs under different informational circumstances.
    Keywords: democracy; elections; incentive contracts; Q56; rejection/support rewards; sustainability
    JEL: D72 D82 H55
    Date: 2004–09
  3. By: Marsiliani, Laura; Renström, Thomas I
    Abstract: We analyse the impact of micro-founded political institutions on environmental policy and economic growth. We model an overlapping-generations economy, where individuals differ in preferences over the environment (as well as in age). Labour taxation and capital taxation is used to finance a public good and a public production factor, period by period. The underlying political institution is a parliament. Party entry, parliamentary composition, coalition formation, and bargaining are endogenous. The benchmark is when all decisions are taken in parliament. We compare this constitution with an independent regulator, elected in parliament. The regulatory regime causes lower pollution, but production inefficiency.
    Keywords: bargaining; comparative politics; endogenous growth; environmental policy; overlapping generations; taxation; voting
    JEL: D62 D72 E20 E62 H20 H55 O41 Q58
    Date: 2004–10
    Abstract: In an endogenous growth model with pollution and abatement we characterize the socially optimal solution. We find that the rate of growth depends negatively on the weight of environmental care in utility and positively on the population growth rate. We also find a trade-off between growth and environmental quality beyond which an environmental Kuznets curve is derived in the long term. This one emerges from the implications of the demographic transition for the rate of population growth, and the accompanying variation in the willingness to pay for environmental quality as the economy develops.
    Keywords: Optimal Growth; Environment; Population Growth; Preferences
    JEL: C61 C62 O41 Q5
    Date: 2005–01–10
    Abstract: When there are pollution externalities the competitive equilibrium is not Pareto-optimal nor environmentally sustainable even if abatment activities are endogenously decided. In this paper we introduce the possibility of an ecological catastrophe like the one predicted by the global climate change, imposing the constraint of an upper-limit to the pollutants stock. We characterize this socially optimal soclution and study conditions for the sustainability of the balanced growth path. We find a trade-off between environmental quality and growth. The rate of growth depends negatively on the weight of environmental care in the utility function and positively on the population growth rate. We show that the emissions reduction recommended in the Kioto protocol is an appropriate policy to avoid the ecological catastrophe and ensure global efficiency and positive long-run growth.
    Keywords: Environment; Externalities; Optimal Growth, Ecological Catastrophe; Sustainability
    JEL: C61 C62 O41 Q5
    Date: 2005–01–18
  6. By: Gregory Shaffer; Mark Pollack
    Abstract: In this paper, we develop three interrelated arguments about the nature of GMO regulation and the challenges that it poses to the European Union (EU). First, we highlight the inherently multi-sectoral nature of GMO regulation, which links together the internal market with industrial policy, research and technological development, environmental policy, food safety, agriculture, and international trade. As a multi-sectoral issue, the regulation of GMOs raises the challenge of coordinating policymaking horizontally among a large number of public and private actors with diverse perspectives about the aims and the content of EU regulation. Second, we emphasize the multi-level nature of the process, which involves overlapping and sometimes conflicting regulations promulgated at the national, supranational/EU, and international levels. As such, EU policy has faced sharp political and legal challenges both from below (in the form of national revolts against the licensing of individual GM foods and crops) and from above (in the form of challenges from other countries within the World Trade Organization, or WTO). Third, the regulation of GM foods and crops is an instance of a broader category of “risk regulation,” in which government actors are called upon to adopt regulations about the acceptable degree of risk posed to society by products or industrial processes. Such decisions about risk regulation – including the regulation of GMOs – not only mobilize diverse interest groups, they also raise fundamental normative questions about the degree of risk judged to be acceptable to society, as well as about the roles of science and politics in the regulation of risk under uncertainty. As such, risk regulation raises fundamental questions of the legitimacy of decision-making at different levels of government, and, in particular, for our case, at the supranational level of EU institutions.
    Date: 2004–12–12
  7. By: Reinoud Joosten
    Abstract: To analyze strategic interaction which may induce externalities, we designed Bathroom Games with frequency-dependent stage payoffs. Two people regularly use a bathroom, before leaving they can either clean up the mess made, or not. Cleaning up involves an effort, so this option always gives a lower immediate utility than not cleaning up. The immediate utility of using the bathroom depends on its condition: the cleaner it is, the higher the utility. The pollution at a certain point in time depends on how often the players did not clean up in the past. Furthermore, as the bathroom's condition deteriorates, cleaning up becomes more burdensome, leading to increasing disutilities. We follow the analysis of repeated games and find that if the agents are sufficiently patient, individually-rational rewards can be supported by (subgame perfect) equilibria involving threats. In almost every such equilibrium, the bathroom is cleaned up regularly.
    JEL: C72 C73
  8. By: Ringler, Claudia; Vu Huy, Nguyen
    Abstract: Recent water sector reforms, increased scarcity and vulnerability of existing water resources, combined with declining public funding available for large-scale infrastructure investment in the sector have led to an increased awareness by the Government of Vietnam for the need to analyze water resource allocation and use in an integrated fashion, at the basin scale, and from an economic efficiency perspective. This paper presents the development, application, and results from an integrated economic-hydrologic river basin model for the Dong Nai River Basin in southern Vietnam that attempts to address these issues. The model framework takes into account the sectoral structure of water users (agriculture, industry, hydropower, households, and the environment), the location of water-using regions, and the institutions for water allocation in the basin. Water benefit functions are developed for the major water uses subject to physical, system control, and policy constraints. Based on this modeling framework, policies that can affect water allocation and use at the basin level, including both basin-specific and general macroeconomic policies, are analyzed.
    Keywords: River basin model ,water allocation policy ,integrated assessment ,Vietnam ,Dong Nai basin ,
    Date: 2004
  9. By: Heyd, Helene; Neef, Andreas
    Abstract: "In the early 1990s, Thailand launched an ambitious program of decentralized governance, conferring greater responsibilities upon sub-district administrations and providing fiscal opportunities for local development planning. This process was reinforced by Thailand's new Constitution of 1997, which explicitly assures individuals, communities and local authorities the right to participate in the management of natural resources. Drawing on a study of water management in the Mae Sa watershed, northern Thailand, this study analyzes to what extent the constitutional right for participation has been put into practice. To this end, a stakeholder analysis was conducted in the watershed, with a focus on the local people's interests and strategies in water management and the transformation of participatory policies through government agencies at the local level. Government line departments were categorized into development- and conservation-oriented agencies. While government officers stressed the importance of stakeholder inclusion and cooperation with the local people, there is a sharp contrast between the official rhetoric and the reality on the ground. The analysis reveals that government officers, particularly in the conservation-oriented agencies, are not disposed to devolve power to lower levels due to the fear of losing their traditional mandate and persistent stereotypes about local communities' incompetence to manage water resources in a sustainable way. On their part, villagers do not perceive a tangible change in the implementation of water policies and retain a widely negative image of government officers. In conclusion, the participation of local people in development activities and in the conservation and management of natural resources seems to be currently at the stage of passive or, at best, consultative participation. In order to deal with the severely increasing water problems in northern Thailand, decision-makers have to recognize the value of participation and promote a change of government officers' attitude towards local people through training programs and incentives. Communities and individuals need to be made aware of their constitutional rights and potentials for cooperating with government agencies and participating in their projects." Authors' Abstract
    Keywords: Water Management ,Governance ,stakeholders ,Community participation ,devolution ,
    Date: 2004
  10. By: Raghbendra Jha
    Abstract: This paper argues that the most important environmental challenge within the Asia-Pacific region is that of uninternalised externalities. While developed countries have put in place mechanisms of governance and regulatory structures that internalise most of their domestic environmental external effects the same cannot be said of domestic environmental external effects of developing countries and transnational environmental external effects, although these are some of the most pressing environmental problems facing the countries in the region. Whereas developing countries are paying a high price for uninternalised domestic externalities they and the developed countries have an important stake in finding internalisation solutions to transnational environmental externalities. The paper argues that absence of linkage among these issues and other outcomes of keen interest to developing countries (viz. trade negotiations and the possibility of side payments) has made progress in this area impossible. Hence there is a case for institutional innovation to facilitate Coasian deal-making among these countries through issue linkage.
    Keywords: Length (pages): 45
    Date: 2004–12
  11. By: Kjetil Telle, Iulie Aslaksen and Terje Synnestvedt (Statistics Norway)
    Abstract: It has been claimed that good environmental performance can improve firms’ economic performance. However, because of e.g. data limitations, the methods applied in most previous quantitative empirical studies of the relationship between environmental and economic performance of firms suffer from several shortcomings. We discuss these shortcomings and conclude that previously applied methods are unsatisfactory as support for a conclusion that it pays for firms to be green. Then we illustrate the effects of these shortcomings by performing several regression analyses of the relationship between environmental and economic performance using a panel data set of Norwegian plants. A simple correlation analysis confirms the positive association between our measures of environmental and economic performance. The result prevails when we control for firm characteristics like e.g. size or sub-industry in a pooled regression. However, the result could still be biased by omitted unobserved variables like management or technology. When we control for unobserved plant specific characteristics in a panel regression, the effect is no longer statistically significant. Hence, greener plants perform economically better, but the analysis provides no support for the claim that it is because they are greener. These empirical findings further indicate that a conclusion that it pays to be green is premature.
    Keywords: Economic performance; environmental performance; environmental regulations; pays to be green
    JEL: Q25 Q28 K23
    Date: 2004–11
  12. By: Iulie Aslaksen, Bent Natvig and Inger Nordal (Statistics Norway)
    Abstract: The environmental risk associated with genetically modified organisms (GMO) implies that new approaches to risk assessment, risk management and risk communication are needed. In this paper we discuss the role of the precautionary principle in policy responses to GMO risk. We first discuss application of the criteria in the European Environment Agency report “Late lessons from early warnings: The precautionary principle 1896-2000” to environmental GMO risk, with focus on crop plants. Moreover, we discuss Bayesian analysis in the context of improving the informational basis for decision making under uncertainty. Finally, environmental uncertainties are intertwined with economic uncertainties. Providing incentives for improved risk assessment, risk management and risk communication is crucial for enhancing social and environmental responsibility and thereby facilitate implementation of precautionary approaches. We discuss ethical screening of companies as an example of how such incentives can be provided.
    Keywords: Environmental risk; precautionary principle; Bayesian analysis; genetically modified organisms.
    JEL: D81 Q20 Q50
    Date: 2004–12
  13. By: Jay P. Shimshack; Michael B. Ward; Timothy K.M. Beatty
    Abstract: This paper examines responses to a national FDA advisory urging at-risk individuals to limit store-bought fish consumption due to the dangers of methyl-mercury. We address this issue using parametric and nonparametric methods, including recently developed tests of stochastic dominance. Both education and newspaper readership were important determinants of consumption response, suggesting that information acquisition and assimilation are key factors for risk avoidance. While the advisory was effective for some groups, we do not find a response among the relatively large group of at-risk households which met neither the education nor readership criteria.
    JEL: D12 I18 Q53
  14. By: F. Álvarez (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales.); M. Contestabile (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales.); C. Gómez (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales.); G. Marrero (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales.); L. Puch (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales.)
    Abstract: We provide an empirical study of the evolution of emissions of some specific air pollutants on a panel of EU member states from 1990 to 2000, and we relate observed patterns to macroeconomic performance. The ratio pollution emission to GDP, so-called emission intensity, has decreased over the period considered in most EU member states. However, a non-parametric analysis reveals that the relative positions of different countries in terms of GDP growth and reduction of emissions have remained basically unchanged. More specifically, remarkable di?erences can be detected between the richest and the poorest EU members notwithstanding. Also, more dispersion in emissions levels can be found in those countries with lower per capita GDP.
    Date: 2004
  15. By: Rafaela Mª Pérez Sánchez (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales. Dpto. Fundamentos Análisis Económico I.); Jesús Ruiz Andújar (Universidad Complutense de Madrid. Facultad de CC. Económicas y Empresariales. Dpto. Fundamentos Análisis Económico II.)
    Abstract: We study the dynamic properties of an endogenous growth model with pollution in which the government can control the pollution through distorting taxes on the pollutant firms and through public abatement activities. First, we characterize the conditions for indeterminacy of equilibria when the government is benevolent and chooses its tax policy by taking into account the decentralized competitive equilibrium. Under this second best setup we show that two balanced growth paths can be found (one with a low level of pollution and the other with a high level) both of which can be locally indeterminate. Therefore, under indeterminacy, the optimal public policies do not guarantee that the economy will converge towards the steady state characterized by a low level of pollution and neither guarantee that the economy will display, along the transition, low levels of pollution. Second, we show that the central planner solution might also display indeterminacy; in particular, two Pigouvian taxes can be found.
    Date: 2004

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