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on Environmental Economics |
| By: | George Economides; Apostolis Philippopoulos |
| Abstract: | This paper studies the properties of second-best optimal policy in a standard general equilibrium model of growth augmented with renewable natural resources. The government chooses its policy instruments (the income tax rate and the allocation of collected tax revenues between public investment and environmental policy) to solve a Ramsey-type policy problem. The main result is that, the more the citizens care about the environment, the more growth-enhancing policies the government finds it optimal to choose in the long run. This is because when citizens care about the environment, this requires tax revenues for environmental policy and can be only achieved by large tax bases and high growth. Thus, only growing economies can afford to care about the environment. This is the case even if pollution occurs as a by-product of output produced. |
| Keywords: | second-best policy, natural resources, economic growth |
| JEL: | H23 O13 Q20 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1433&r=env |
| By: | Denise L. Mauzerall; Babar Sultan; Namsoug Kim; David Bradford |
| Abstract: | We present a proof-of-concept analysis of the measurement of the health damage of ozone (O3) produced from nitrogen oxides (NOx = NO + NO2) emitted by individual large point sources in the eastern United States. We use a regional atmospheric model of the eastern United States, the Comprehensive Air Quality Model with eXtensions (CAMx), to quantify the variable impact that a fixed quantity of NOx emitted from individual sources can have on the downwind concentration of surface O3, depending on temperature and local biogenic hydrocarbon emissions. We also examine the dependence of resulting ozone-related health damages on the size of the exposed population. The investigation is relevant to the increasingly widely used "cap and trade" approach to NOx regulation, which presumes that shifts of emissions over time and space, holding the total fixed over the course of the summer O3 season, will have minimal effect on the environmental outcome. By contrast, we show that a shift of a unit of NOx emissions from one place or time to another could result in large changes in resulting health effects due to ozone formation and exposure. We indicate how the type of modeling carried out here might be used to attach externality-correcting prices to emissions. Charging emitters fees that are commensurate with the damage caused by their NOx emissions would create an incentive for emitters to reduce emissions at times and in locations where they cause the largest damage. |
| Keywords: | surface ozone, NOx emissions, point sources, health impacts, mortality, morbidity, cap-and-trade |
| JEL: | H10 Q50 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1442&r=env |
| By: | Ankarhem, Mattias (Department of Economics, Umeå University) |
| Abstract: | In this paper, we estimate the dynamic effects on the forest sector of an increased demand for biofuels. This is done by developing a partial adjustment model of the forest sector that enables short, intermediate, and long run price elasticities to be estimated. It is relevant to study the effects of increased demand for biofuels as the Swedish government has committed to an energy policy that is likely to further increase the use of renewable resources in the Swedish energy system. Four subsectors are included in the model: the forest owners, who supply sawtimber, pulpwood and forest fuels; the sawmills which demand sawtimber; the pulp and paper industry which demands pulpwood; and the energy industry which demands forest fuels. The results show that the short run elasticities are fairly consistent with earlier studies and that sluggish adjustment in the capital stock is important in determining the short and intermediate run responses. Simulation shows that an increase in the demand for forest fuels has a positive effect on the equilibrium price of all the three types of wood, and a negative effect on the equilibrium quantities of sawtimber and pulpwood. |
| Keywords: | Forest economics; Price elasticities; Long run; Energy sector |
| JEL: | L73 L78 Q41 Q42 |
| Date: | 2005–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0658&r=env |
| By: | Ankarhem, Mattias (Department of Economics, Umeå University) |
| Abstract: | In this note, we estimate time series of shadow prices for Swedish emissions of CO2, SO2 , and VOC for the period 1918 - 1994. The shadow prices are in the second step related to income to explain the environmental Kuznets curves previously found for Swedish data on the three emissions. A Shephard distance function approach is used to estimate a structural model of the industry’s production process in order to calculate the opportunity costs of a reduction in the emissions. We conclude that the times series of the shadow prices obtained using this approach do not show support for EKCs for Swedish industry |
| Keywords: | Emissions; Historical time series; Distance function |
| JEL: | O11 O13 Q51 Q53 Q56 |
| Date: | 2005–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0659&r=env |
| By: | Ankarhem, Mattias (Department of Economics, Umeå University) |
| Abstract: | In this paper, we calculate time series of shadow prices for Swedish emissions of CO2, SO2, and VOC for the period 1918 - 1994. Newly constructed historical emission time series enable studying a single country’s emission paths through increasing levels of economic activity. The shadow prices are, in the next step, related to income to explain the environmental Kuznets curves (EKC) previously found in Swedish data for these three emissions. A directional distance function approach is used to estimate the production process for Swedish industry thus enabling the opportunity costs of a reduction in these emissions to be calculated. We attribute the annual changes in the shadow prices to the main causal factors by decomposing them into a technological effect and a substitution effect. We conclude that the time series of the shadow prices show support for EKCs for Swedish industry |
| Keywords: | Emissions; Historical time series; Decomposition; Directional distance function |
| JEL: | O11 O13 Q51 Q53 Q56 |
| Date: | 2005–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0660&r=env |
| By: | Ankarhem, Mattias (Department of Economics, Umeå University) |
| Abstract: | This thesis consists of four papers: two of them deal with the effects on the forest sector of an increase in the demand for forest fuels, and two of them concern the relation between economic growth and pollution. <p>Paper [I] is a first, preliminary study of the potential effects on the Swedish forest sector of a continuing rise in the use of forest resources as a fuel in energy generation. Sweden has made a commitment that the energy system should be sustainable, i.e., it should be based on renewable resources. However, an increasing use of the forest resources as an energy input could have effects outside the energy sector. We consider this in a static model by estimating a system of demand and supply equations for the four main actors on the Swedish roundwood market; forestry, sawmills, pulpmills and the energy sector. We then calculate the industries' short run supply and demand elasticities. <p>Paper [II], is a development of the former paper. In this paper, we estimate the dynamic effects on the forest sector of an increased demand for forest fuels. This is done by developing a partial adjustment model of the forest sector that enables short, intermediate, and long run price elasticities to be estimated. It is relevant to study the effects of increased demand for forest fuels as the Swedish government has committed to an energy policy that is likely to further increase the use of renewable resources in the Swedish energy system. Four subsectors are included in the model: forestry, sawmills, pulpmills and the energy industry. The results show that the short run elasticities are fairly consistent with earlier studies and that sluggish adjustment in the capital stock is important in determining the intermediate and long run responses. Simulation shows that an increase in the demand for forest fuels has a positive effect on the equilibrium price of all three types of wood, and a negative effect on the equilibrium quantities of sawtimber and pulpwood. <p>In paper [III] a Shephard distance function approach is used to estimate time series of shadow prices for Swedish emissions of CO2, SO2, and VOC for the period 1918 - 1994. The shadow prices are in a next step regressed on GDP per capita. The objective of the study is closely linked to hypothesis of environmental Kuznets curves. We conclude that the time series of the shadow prices from this approach can not be used to explain the EKCs found for Swedish emissions.<p> In paper [IV], we calculate time series of shadow prices for Swedish emissions of CO2, SO2, and VOC for the period 1918 - 1994. The shadow prices are in a next step related to income, to explain the EKCs previously found for Swedish data on the three emissions. Newly constructed historical emission time series enable studying a single country's emission paths through increasing levels of economic activity. A directional distance function approach is used to estimate the industry's production process in order to calculate the opportunity costs of a reduction in the emissions. The time series of the shadow prices show support for EKCs for the Swedish industry. |
| Keywords: | Forest sector; Forest fuels; Dynamic factor demand; Adjustment costs; Economic growth; Pollution; Environmental Kuznets curve; Shadow price; Distance function |
| JEL: | L73 L78 O11 O13 Q41 Q42 Q51 Q53 Q56 |
| Date: | 2005–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0661&r=env |
| By: | Marcelo Caffera (Universidad de Montevideo); Juan Dubra (Universidad de Montevideo) |
| Abstract: | We study the problem of a regulator who must control the emissions of a given pollutant from a series of industries when the firms' abatement costs are unknown. We develop a mechanism in which the regulator asks firms to report their abatement costs and implements the most stringent emissions standard consistent with the firms' declarations. He also inspects one of the firms in each industry which declared the cost structure consistent with the least stringent emissions standard and with an arbitrarily small probability, he discovers whether the report was true or not. The firm is punished with an arbitrarily small fine if and only if its report was false. This mechanism is simple, is implementable in practice, its unique equilibrium is truth telling by firms, it implements the first best pollution standards and shares some features of the regulatory processes actually observed in reality. |
| Keywords: | Emissions Standards, Command and Control, Undominated Nash Implementation |
| JEL: | D78 D82 Q20 |
| Date: | 2005–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpmi:0504008&r=env |