nep-env New Economics Papers
on Environmental Economics
Issue of 2005‒08‒13
twelve papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Globalization, Cross-Border Pollution and Welfare By Panos Hatzipanayotou; Sajal Lahiri; Michael S. Michael
  2. Tradable Emission Permits in a Federal System By Harrie A. A Verbon; Cees A. Withagen
  3. Optimal Pest Control in Agriculture By Thomas Christiaans; Thomas Eichner; Rüdiger Pethig
  4. Non-C02 greenhouse gases; all gases count. By Gerard Verweij; Willemien Kets
  5. Carbon Capture and Sequestration: How Much Does this Uncertain Option Affect Near-Term Policy Choices? By Valentina Bosetti; Laurent Gilotte
  6. How Substitutable is Natural Capital? By Anil Markandya; S. Pedroso
  7. Joint ventures, pollution abd environmental policy By Indrani Roy Chowdhury
  8. Estimating the Recreation Value of Ecosystems by Using a Travel Cost Method Approach By Isabel Mendes; Isabel Proença
  9. Natural Disasters and Adaptive Capacity By Jeff Dayton-Johnson
  10. Towards Sustainable Development: The Role of Social Protection By Marco Mira d'Ercole; Andrea Salvini
  11. The Willingness to Pay for Preventing Environmental Damage By Benno Torgler; Maria A. Garcia-Valiñas
  12. Environmental Regulation and Economic Growth under Education Externalities By Paul Makdissi; Quentin Wodon

  1. By: Panos Hatzipanayotou; Sajal Lahiri; Michael S. Michael
    Abstract: We construct a two-good general equilibrium model of international trade for two small open economies where pollution from production is transmitted across borders. Governments in both countries impose emission taxes non-cooperatively. Within this framework, we examine the effect of trade liberalization and of changes in the perception of cross-border pollution on Nash emission taxes, emission levels, and welfare.
    Keywords: cross-border pollution, emission taxes, terms of trade, globalization, welfare
    JEL: H23 Q28
    Date: 2005
  2. By: Harrie A. A Verbon; Cees A. Withagen
    Abstract: A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness of the system, under different institutional arrangements, through the initial allocation of permits.
    Keywords: tradable permits, trade bans, fiscal federalism
    JEL: H21 H23 Q00
    Date: 2005
  3. By: Thomas Christiaans; Thomas Eichner; Rüdiger Pethig
    Abstract: Based on economic methodology we model an ecosystem with two species in predator-prey relationship: mice feed on grain and grain feeds on a resource. With optimizing behaviour of individual organisms a short-run ecosystem equilibrium is defined and characterized that depends on the farmer’s use of fertilizer and on the mice population which, in turn, is affected by pesticides. In that way, a microfounded agricultural production function is derived. Linking a sequence of short-run ecosystem equilibria yields the growth function of the mice population which is thus derived rather than assumed. In each period the farmer harvests all grain in excess of some given amount of seed. If she maximizes her present-value profits, optimal farming is shown to depend on the prices of pesticide and grain. It is either optimal to use no pesticide or a moderate amount of pesticide or to apply a chattering control. Pest eradication is never optimal. On the other hand, if the farmer takes into account steady state mice populations only, it may be optimal to eradicate mice or to use no or a moderate amount of pesticide depending on prices as well as on the shape of the grain production function which is determined by micro parameters of grain reproduction.
    Keywords: pesticides, agriculture, predator-prey, chattering pest control
    JEL: Q24 Q57
    Date: 2005
  4. By: Gerard Verweij; Willemien Kets
    Abstract: Under the Kyoto Protocol, a group of countries commit themselves to reduce the emissions of greenhouse gases to some 5% below the 1990 level. Countries can decide to spread their reduction commitment over several gases to lower compliance costs. Employing a multi-gas strategy can offer considerable efficiency gains because of the widely diverging marginal abatement cost for the different emission sources. In this Discussion Paper, the analysis of climate policy for the most important greenhouse gas, carbon dioxide, is extended with two other important greenhouse gases, methane and nitrous oxide. The multi-region and multi-sector Applied General Equilibrium model WorldScan has been used as an instrument for addressing this issue. The approach presented is consistent with the bottom-up information on reduction possibilities for those non-CO2 greenhouse gases while it allows for general equilibrium effects and intergas interactions. Including non-CO2 greenhouse gases into the analysis has important sectoral impacts while the regional effects are limited. A considerable part of the burden on gas, coal and oil products will be shifted to the agricultural sectors. Reductions of non-CO2 gases could be especially important for countries like China and India.
    Keywords: Climate policy; non-CO2 gases; Applied General Equilibrium Model
    JEL: Q56 H23 F18
  5. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Laurent Gilotte (CIRED)
    Abstract: One of the main issues in the climate policy agenda, the timing of abatement efforts, hinges on the uncertainties of climate change risks and technological evolution. We use a stochastic optimization framework and jointly explore these two features. First, we embed in the model future potential large-scale availability of Carbon Capture and Storage (CCS) technologies. While non-CCS mitigation that reduces fossil energy use is modelled as exerting inertia on the economic system, mainly due to the durability of the capital in energy systems and to technology lock-in and lock-out phenomena, the implementation of CCS technologies is modelled as implying less resilience of the system to changes in policy directions. Second, climate uncertainty is related in the model to the atmospheric temperature response to an increase in GHGs concentration. Performing different simulation experiments, we find that the environmental target, derived from a cost-benefit analysis, should be more ambitious when CCS is included in the picture. Moreover, the possible future availability of CCS is not a reason to significantly reduce near-term optimal abatement efforts. Finally, the availability of better information on the climate cycle is in general more valuable than better information on the CCS technological option.
    Keywords: Climate change, Uncertainty, Sequestration, Cost-benefit analysis
    JEL: D62 D63 H23 Q29
    Date: 2005–06
  6. By: Anil Markandya (Fondazione Eni Enrico Mattei, World Bank and University of Bath); S. Pedroso (World Bank)
    Abstract: One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources such as land and energy resources. A nested CES production function is used to allow flexibility in the estimated elasticities of substitution. Also, with this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship with income generation. No statistically significant relationship between income and any of the institutional indicators was found.
    Keywords: Wealth accounting, Natural resources, Nested CES production function
    JEL: O47 Q24 Q32
    Date: 2005–06
  7. By: Indrani Roy Chowdhury (National Institute of Public Finance and Policy)
    Abstract: We examine the impact of abatement taxes on the pollution level in a duopoly framework with endogenous market structure. We demonstrate that an increase in abatement taxes could trigger a regime-switch from joint ventures to Cournot competition, causing the pollution level to increase. Moreover, abatement taxes can implement the first best outcome if and only if the industry is not too polluting. In case it is, the second best level of taxes may or may not equal the optimal tax under either joint venture, or Cournot competition.
    Keywords: Joint ventures, pollution, abatement tax, endogenous market structure
    JEL: H23 L13
    Date: 2005–05
  8. By: Isabel Mendes; Isabel Proença
    Abstract: Recreation is one of the ecosystem’s secondary values of a well conserved natural ecosystem, associated with the direct use individuals make of these natural assets. In this paper we define and estimate the total economic recreation value to visitors of a particular natural area, a national park. An on-site individual observation Travel Cost Model, Count Data distributions, and a version of hyperbolic discounting framework distribution were used to estimate a measure for the present recreation use of the site and the total discounted recreation value for a 50 years period. The empirical estimates of the average representative visitor’s present equivalent surplus willingness to pay, based on the impact assumption of closure or loss of access to the park were 123 € per day per visit, and 593 € per each average five days length visit, per visitor. These values suggest that recreation use of nature has a higher value than certain economic activities in the area.
    Keywords: Recreation Use Value; Ecosystem; Estimation; Travel Cost Method; Welfare Measures; Count Data Models.
    JEL: C3 D1 D4 Q2
  9. By: Jeff Dayton-Johnson
    Abstract: <P>Natural disasters (droughts, earthquakes, epidemics, floods, wind storms) damage wellbeing, both in their immediate and long-term aftermath, and because the insecurity of exposure to disasters is in itself harmful to risk-averse people. As such, mitigating and coping with the risk of natural disasters is a pressing issue for economic development. This paper provides a conceptual framework for understanding natural disasters. Disasters, which imply tragic human costs, are distinguished from hazards, which are events like earthquakes or flooding: hazards only translate into disasters when societies are vulnerable to them. Consequently international development policy can play a role in reducing the costs of disasters by addressing vulnerability. A review of two recent disasters — the Turkish earthquakes of 1999, and Hurricane Mitch in 1998 — illustrates the importance of precarious urbanisation and environmental degradation for increased vulnerability to natural hazards. These cases ...</P> <P>Les catastrophes naturelles (sécheresses, tremblements de terre, épidémies, inondations, ouragans) sont nuisibles au bien-être, tant par leurs retombées immédiates et de long terme que par la nuisance provoquée par l’insécurité qui leur est associée chez les individus adverses au risque. Ainsi, la gestion des effets des catastrophes naturelles, de même que celle du risque de leur déclanchement, sont des questions urgentes pour le développement économique. Ce document fournit un cadre conceptuel pour mieux comprendre les catastrophes naturelles. Celles-ci impliquent des coûts humains tragiques et se distinguent des situations à risque, qui sont des événements tels que les tremblements de terre ou les inondations : les situations à risqué ne deviennent des catastrophes que lorsque les sociétés leur sont vulnérables. Par conséquent, les politiques publiques internationales pour le développement peuvent contribuer à réduire leur coût en visant sur la vulnérabilité. Un examen de deux ...</P>
    Date: 2004–08
  10. By: Marco Mira d'Ercole; Andrea Salvini
    Abstract: <P><OL><LI>Three main elements characterise the notion of sustainable development: first, a broad view of human well-being, in which environmental and social elements are important as well as economic ones; second, the view that many of the effects of today's decisions will last over time, thereby affecting the well-being of future generations; third, the view that many of today's problems have their roots in actions and policies in other fields, whose unintended consequences may not be coherent with society's broader priorities and aspirations.</LI> <LI>While particularly relevant in the environment field, Chapter 1 argues that these notions also permeate analysis of a large range of social concerns. This is so in particular because of their intergenerational dimension. Social problems affecting individuals in a given phase of their life-course often influence their opportunities at a later phase, as well as those of their offspring. Most social programmes also represent a form of intergenerational ...</LI></OL></P> <P><OL><LI>Trois éléments principaux caractérisent la notion de développement durable : d’abord, une vision large du bien-être humain, suivant laquelle les aspects sociaux et environnementaux sont importants, au même titre que les aspects économiques; en second lieu, l’idée qu’une bonne part des conséquences des décisions prises aujourd’hui auront un effet durable et affecteront donc le bien-être des générations futures; troisièmement la prise en compte du fait qu’un grand nombre de problèmes actuels ont pour origine des actions et des politiques concernant d’autres domaines et dont les conséquences non voulues peuvent ne pas être cohérentes avec les priorités et les aspirations plus larges de la société.</LI> <LI>Tout en concernant particulièrement le domaine de l’environnement, le chapitre 1 montre que ces idées s’appliquent également à l’analyse de nombreuses questions sociales. Cela tient en particulier à leur dimension inter-générationnelle. Les problèmes sociaux qui touchent les individus ...</LI></OL></P>
    JEL: I3
    Date: 2003–08–19
  11. By: Benno Torgler; Maria A. Garcia-Valiñas
    Abstract: Since the 70s, an increasing number of studies investigating environmental preferences have been made. However, papers related to a country and its regions or its development over time are still largely lacking, although it is a promising line to search empirically for factors that have been strongly neglected in previous studies. This paper therefore aims at reducing such shortcomings, and analyzes the willingness to pay (WTP) in Spain and its regions for the periods 1990, 1995 and 1999/2000, with data from the World Values Surveys and the European Values Surveys. The results indicate strong regional differences and strong differences between the first and the second half of the 90s. This paper also shows the relevance of strongly neglected variables such as political interest and social capital.
    Keywords: Environment; Willingness to Pay; Regional and Time Preferences; Political Interest; Social Capital
    JEL: Q26 R22 Z13 I21
    Date: 2005–07
  12. By: Paul Makdissi (Département d'économique, Université de Sherbrooke); Quentin Wodon (AFTPM, World Bank)
    Abstract: Using an extension of Lucas' model of endogenous growth with education externality, we show that an environmental tax may increase growth. This is because the tax makes physical capital accumulation less attractive, thereby correcting for the underinvestment by agents in human capital.
    Keywords: Regulation, Environment, Growth, Human Capital
    JEL: O11 O13 Q28
    Date: 2004

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