nep-env New Economics Papers
on Environmental Economics
Issue of 2006‒02‒19
nineteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. The Economic Value of Marine Recreational Fishing: Analysis of the MRFSS 1998 Pacific Add-on By Timothy C. Haab; Robert L. Hicks; John C. Whitehead
  2. Climate change policy and its effect on market power in the gas market By David Newbery
  3. Benefit-Cost Analysis of FEMA Hazard Mitigation Grants By Adam Rose; Keith Porter; Nicole Dash; Jawhar Bouabid; Charles Huyck; John C. Whitehead; Douglass Shaw; Ronald T. Eguchi; Craig Taylor; Thomas R. McLane; L. Thomas Tobin; Philip T. Ganderton; David Godschalk; Anne S. Kiremidjian; Kathleen; Carol Taylor West
  4. New Electricity Technologies for a Sustainable Future By Tooraj Jamasb; William J. Nuttall; Michael G. Pollitt
  5. Electricity Network Scenarios for Great Britain in 2050 By Ian Elders; Graham Ault; Stuart Galloway; James McDonald; Jonathan Köhler; Matthew Leach; Efterpi Lampaditou
  6. Does Commuting Change the ranking of environmental instruments? By Saveyn Bert
  7. Are NIMBY's commuters? By Saveyn Bert
  8. Tourism Specialization and Sustainability: A Long-Run Policy Analysis By Fabio Cerina
  9. Determinants of Environmental Innovation – New Evidence from German Panel Data Sources By Jens Horbach
  10. The Timing of National Greenhouse Gas Emission Reductions in the Presence of Other Environmental Policies By Rob B. Dellink; Marjan W. Hofkes
  11. Distributional Impacts of Energy-Efficiency Certificates Vs. Taxes and Standards By Philippe Quirion
  12. Stabilisation Targets, Technical Change and the Macroeconomic Costs of Climate Change Control By Valentina Bosetti; Carlo Carraro; Marzio Galeotti
  13. Examining the Factors Influencing Environmental Innovations By Massimiliano Mazzanti; Roberto Zoboli
  14. On the Robustness of Robustness Checks of the Environmental Kuznets Curve By Marzio Galeotti; Matteo Manera; Alessandro Lanza
  15. When is it Optimal to Exhaust a Resource in a Finite Time? By Y. Hossein Farzin; Ken-Ichi Akao
  16. Non-pecuniary Value of Employment and Natural Resource Extinction By Y. Hossein Farzin; Ken-Ichi Akao
  17. The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random Fluctuations in Weather By Michael Greenstone; Olivier Deschenes
  18. Divergence in State-Level Per Capita Carbon Dioxide Emissions By Aldy, Joseph

  1. By: Timothy C. Haab; Robert L. Hicks; John C. Whitehead
    Abstract: Marine Recreational Fishing Statistics Survey (MRFSS) economic add-on data has been collected since 1994. The data are comprised of two geographically identical datasets for the Southeast region (1997, 2000), five identical datasets for the Northeast region (1994, 1996, 1997, 1999, 2000), and one dataset for the Pacific region (1998). Measures of the economic value of fishing sites and harvest have been derived from demand models estimated with data from the Northeast and the Southeast regions. In this paper we present a demand model estimated for the Pacific region (i.e., west coast). For consistency, the model is based on the 1994 and 1997 studies. Measures of the economic value of fishing sites and harvest are developed. We demonstrate how the model can be used for fisheries management decisions.
    Date: 2006
  2. By: David Newbery
    Abstract: The European Emissions Trading Scheme (ETS) limits CO2 emissions from covered sectors, especially electricity until December 2007, after which a new set of Allowances will be issued. The paper demonstrates that the impact of controlling the quantity rather than the price of carbon is to reduce the elasticity of demand for gas, amplifying the market power of gas suppliers, and also amplifying the impact of gas price increases on the price of electricity. A rough estimate using just British data suggests that this could increase gas market power by 50%.
    Keywords: Climate change, emissions trading, market power, gas, quotas vs taxes
    JEL: Q54 Q58 L94
    Date: 2006–02
  3. By: Adam Rose; Keith Porter; Nicole Dash; Jawhar Bouabid; Charles Huyck; John C. Whitehead; Douglass Shaw; Ronald T. Eguchi; Craig Taylor; Thomas R. McLane; L. Thomas Tobin; Philip T. Ganderton; David Godschalk; Anne S. Kiremidjian; Kathleen; Carol Taylor West
    Abstract: Mitigation ameliorates the impact of natural hazards on communities by reducing loss of life and injury, property and environmental damage, and social and economic disruption. The potential to reduce these losses brings many benefits, but every mitigation activity has a cost that must be considered in our world of limited resources. In principle benefit-cost analysis (BCA) can be used to assess a mitigation activity’s expected net benefits (discounted future benefits less discounted costs), but in practice this often proves difficult. This paper reports on a study that refined BCA methodologies and applied them to a national statistical sample of FEMA mitigation activities over a ten-year period for earthquake, flood, and wind hazards. The results indicate that the overall benefit-cost ratio for FEMA mitigation grants is about 4 to 1, though the ratio varies according to hazard and mitigation type.
    Date: 2006
  4. By: Tooraj Jamasb; William J. Nuttall; Michael G. Pollitt
    Abstract: There is a growing concern over our reliance on conventional electricity sources and their long-term environmental, climate change, and security of supply implications, and much hope is vested in the ability of future technological progress to tackle these issues. However, informed academic analysis and policy debates on the future of electricity systems must be based on the current state, and prospects of, technological options. This paper is the introductory chapter in the forthcoming book Future Electricity Technologies and Systems. The book comprises contributions from leading experts in their respective technology areas. The chapters present state of the art and likely progress paths of conventional and new electricity generation, networks, storage, and end-use technologies. In this paper we review the growth trend in electricity demand and carbon emissions. We then present a concise overview of the chapters. Finally, we discuss the main contextual factors that influence long-term technological progress.
    Keywords: Energy technology, electricity, sustainable development, environment
    JEL: Q42 Q55 Q56
    Date: 2006–02
  5. By: Ian Elders; Graham Ault; Stuart Galloway; James McDonald; Jonathan Köhler; Matthew Leach; Efterpi Lampaditou
    Abstract: The next fifty years are likely to see great developments in the technologies deployed in electricity systems, with consequent changes in the structure and operation of power networks. This paper, which forms a chapter in the forthcoming book Future Electricity T echnologies and Systems, develops and presents six possible future electricity industry scenarios for Great Britain, focussed on the year 2050. The paper draws upon discussions of important technologies presented by expert authors in other chapters of the book to consider the impact of different combinations of key influences on the nature of the power system in 2050. For each scenario there is a discussion of the effects of the key parameters, with a description and pictorial illustration. Summary tables identify the role of the technologies presented in other chapters of the book, and list important figures of interest, such as the capacity and energy production of renewable generation technologies.
    Keywords: Energy technology, electricity, sustainable development, environment
    JEL: Q42 Q55 Q56
    Date: 2006–02
  6. By: Saveyn Bert (K.U.Leuven-Center for Economic Studies)
    Abstract: This paper studies the income effects of environmental policy in jurisdictions with a common labor market and a heterogeneous population (workers and polluters). A jurisdiction unilaterally improves its local environmental quality, using a subsidy, an environmental tax or command-and-control. In a closed economy, workers and polluters have some kind of a "natural ranking" of instruments for a given environmental objective. We find that commuting across jurisdictions may upset this "natural ranking" of environmental instruments. Further, we see that this inter-jurisdictional commuting exports pollution and the costs of environmental policy, possibly causing strategic behavior.
    Keywords: Environmental Instrument Choice, Commuting, Interest Groups
    JEL: Q52 R23
    Date: 2006–02
  7. By: Saveyn Bert (K.U.Leuven-Center for Economic Studies)
    Abstract: This paper considers a metropolitan area where residents can commute between several jurisdictions. These residents show NIMBY behavior (Not-In-My-Backyard). They try to preserve their living quality by pushing the polluting economic activity to the neighboring jurisdictions and keep their labor income as commuters. This induces a race-to-the-top among jurisdictions. Fiercer competition due to a higher number of jurisdictions intensifies this race-to-the-top; whereas commuting costs, pollution taxes, payroll taxes and bigger jurisdictions increase the incentive for more pollution.
    Keywords: Commuting, NIMBY, interjurisdictional competition, environmental federalism
    JEL: H Q R
    Date: 2006–02
  8. By: Fabio Cerina (CRENoS and University of Cagliari)
    Abstract: This study focuses on the dynamic evolution of a small open economy specialized in tourism based on natural resources when tourist services are supplied to foreign tourists who are crowding-averse and give positive value to the environmental quality. We analyse the steady-state properties and run several policy exercises in two versions of our model: in the first, private agents’ income is spent entirely on consumption while, in the second, agents are allowed to invest part of their income in pollution abatement technology (PAT) which artificially increases the rate of regeneration of the environmental asset. A unique locally saddle point equilibrium is found in both versions and for both the market and the centralized solution. Our main findings are that: 1) a corrective income tax raises steady state utility in both versions but is capable of leading the economy in its first-best dynamic path only when agents cannot invest in the PAT; 2) when the PAT is available to the government but not to agents, an income tax which finances abatement expenditures may increase steady state utility with respect to the market solution when the natural regeneration rate of the environment and the degree of crowding-aversion are both low enough; 3) when PAT is available, the market chooses to devote a higher fraction of income to abatement than the central planner but in both cases this fraction is positive only if the natural rate of regeneration is not too large; 4) when PAT is available an income pollution tax does not affect the dynamic path of the market economy.
    Keywords: Tourism specialization, Sustainability, Environmental quality, Crowding, Pollution abatement
    JEL: L83 O41 Q26 Q56
    Date: 2006–01
  9. By: Jens Horbach (University of Applied Sciences Anhalt)
    Abstract: In most cases, empirical analyses of environmental innovations based on firm-level data relied on survey data for one point in time. These surveys, especially designed for the analysis of environmental innovations, are useful because they allow for the inclusion of many explanatory variables such as different policy instruments or the influence of stake-holders and pressure groups. On the other hand, it is not possible to address the dynamic character of the environmental innovation process. This paper uses two German panel data bases, the establishment panel of the Institute for Employment Research (IAB) and the Mannheim Innovation Panel (MIP) of the Centre for European Economic Research (ZEW), to explore the determinants of environmental innovations. These data bases were not specifically collected to analyze environmental issues, but they contain questions that allow the identification of environmental innovations. We use discrete choice models for each of the data bases to analyze hypotheses derived from the theoretical (environmental) innovation literature. The econometric estimations show that the improvement of the technological capabilities (“knowledge capital”) by R&D or further education measures triggers environmental innovations – this result is confirmed by both data bases and both methods to measure environmental innovation. The hypothesis that “Innovation breeds innovation” is confirmed by the analysis of the MIP data. General and environmental innovative firms in the past are more likely to innovate in the present. Environmental regulation, environmental management tools and general organizational changes and improvements trigger environmental innovation, a result that has also been postulated by the famous Porter-hypothesis. Environmental management tools especially help to detect cost-savings (specifically material and energy savings). Following our econometric results, cost-savings are an important driving force of environmental innovation.
    Keywords: Environmental innovation, Panel data analysis, Discrete choice models
    JEL: Q55 O33 O38 C25
    Date: 2006–01
  10. By: Rob B. Dellink (Wageningen University); Marjan W. Hofkes (Vrije Universiteit)
    Abstract: This paper shows in an empirical context that substantial cost reductions can be achieved in the implementation of Dutch national climate policy by (i) targeting the policy at the stock of greenhouse gases, thus allowing polluters flexibility in their timing of emission reductions; and (ii) integrating climate policy with other policies, thereby optimising the restructuring of the economy needed to achieve environmental policy targets. A dynamic applied general equilibrium model with bottom-up information on abatement techniques is used to show that the optimal timing of GHG emission reductions tends to follow the timing for the other environmental themes with an additional emphasis on emission reductions in the later periods. The optimal mix of technical measures and economic restructuring as source of emission reductions is affected by the strictness of environmental policy targets for all themes and hence can only be derived from an integrated analysis of these policies.
    Keywords: Economic growth, Applied general equilibrium model, Climate change, Environmental policy
    JEL: D58 H23 O41 Q28
    Date: 2006–01
  11. By: Philippe Quirion (CIRED)
    Abstract: Energy efficiency commitments, often associated with tradable energy efficiency certificates, dubbed "white certificates", were recently implemented in the United Kingdom and Italy and will soon start in France. Energy suppliers have to fund a given quantity of energy efficiency measures, or to buy "white certificates" from other suppliers who exceed their target. We develop a partial equilibrium model to compare white certificates to other policy instruments for energy efficiency, i.e., taxes and standards. Our conclusions are: First, if white certificates are chosen, each supplier's target should be set as a percentage of the energy they sell during the commitment period rather than in absolute terms, e.g. based on past variables. Indeed the latter solution decreases sharply energy suppliers' profit since they cannot pass the cost of certificate generation on to consumers. Such a system thus risks generating a fierce opposition from these industries. Furthermore, setting individual targets independently of the evolution of market shares seems unfair. At last, this system risks creating a large rebound effect, i.e., a large increase in energy services consumption. Second, compared to taxes and standards, white certificates (with targets in percentage of energy sold) seem particularly interesting to reach a certain level of energy savings while limiting distributional effects, thus to limit oppositions to its implementation. Furthermore, they generate less rebound effect than standards and seem more able than taxes to mobilise a part of the no regret potential. However if targets are too weak there is a real risk that white certificates systems fund mostly business-as-usual energy efficiency activities, thus having little impact while delaying the implementation of other policy instruments.
    Keywords: White certificate, Energy efficiency certificate, Energy savings, Energy efficiency, Standard, Tax, Rebound effect, No-regret potential
    JEL: Q38 Q48 Q58
    Date: 2006–01
  12. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Carlo Carraro (Università Ca’ Foscari di Venezia and Fondazione Eni Enrico Mattei); Marzio Galeotti (Università di Milano and Fondazione Eni Enrico Mattei)
    Abstract: The issue of greenhouse gas (GHG) stabilization stands on three critical open questions. Namely, what are the impacts deriving from different levels of climate change and their distribution. What are the levels at which GHG concentration should be stabilized in order to avoid unacceptable impacts. And, finally, what are the costs and what are the instruments available to reach such stabilization targets. In the present paper, we address the latter question, in the specific attempt of shedding some light on the debated role of technological progress in lowering the costs of GHG stabilization. In particular, we use an optimal growth climate-economy model, where technical change is endogenously driven by learning by researching and learning by doing. In the model, when an ambitious stabilization target has to be reached, some additional technological innovation and diffusion is induced. The magnitude of this induced effect substantially affects the costs of stabilizing greenhouse gasses and may even make a well-designed climate policy a win-win strategy. A sensitivity analysis on the model crucial parameters is performed to account for structural and parametric uncertainties on learning effects, on the relationship between knowledge accumulation and the energy and carbon intensity of the economic system, and on the crowding out of investments in the energy sector R&D with respect to other research fields.
    Keywords: Climate policy, Environmental modelling, Integrated assessment, Technical change
    JEL: H0 H2 H3
    Date: 2006–01
  13. By: Massimiliano Mazzanti (University of Ferrara); Roberto Zoboli (CERIS-CNR)
    Abstract: Technological innovation is a key factor for achieving a better environmental performance of firms and the economy as a whole, to the extent that it helps to increase the material/energy efficiency of production processes and to reduce emission/effluents associated to outputs. Environmental innovation may spur from exogenous driving forces, like policy intervention, and/or from endogenous factors associated to firm market and management strategies. Despite the crucial importance of research in this field, empirical evidence at firm microeconomic level, for various reasons, is still scarce. Microeconomic-based analysis is needed in order to assess what forces are lying behind environmental innovation at the level of the firm, where innovative practices emerge and are adopted. The paper exploits information deriving from two surveys conducted on a sample of manufacturing firms in Emilia Romagna region -Northern Italy- in 2002 and 2004, located in a district-intense local production system. New evidence is provided by testing a set of hypotheses, concerning the influence of: (i) firm structural variables; (ii) environmental R&D; (iii) environmental policy pressure and regulatory costs; (iv) past firm performances; (v) networking activities, (vi) other non-environmental techno-organizational innovations and (vii) quality/nature of industrial relations. We estimate input and output-based environmental innovation reduced form specifications in order to test the set of hypotheses. The applied investigation shows that environmental innovation drivers, both at input and output level, are found within exogenous factors and endogenous elements concerning the firm and its activities/strategies within and outside its natural boundaries. In the present case study, the usual structural characteristics of the firm and performances appear to matter less than R&D, induced costs, networking, organisational flatness and innovative oriented industrial relations. Environmental Policies and environmental voluntary auditing schemes exert some relevant direct and indirect effects on innovation, although evidence is mixed and further research is particularly needed. Although this new empirical evidence is focussing on a specific industrial territory, we provide food for discussion on firm environmental innovation strategies, and research suggestions for further empirical work.
    Keywords: Environmental innovation, Environmental R&D, Manufacturing sector, Local system, Environmental policy, Networking
    JEL: C21 L60 O13 O30 Q20 Q58
    Date: 2006–01
  14. By: Marzio Galeotti (Fondazione Eni Enrico Mattei); Matteo Manera (University of Milan-Bicocca and Fondazione Eni Enrico Mattei); Alessandro Lanza (Eni S.p.A. and Fondazione Eni Enrico Mattei)
    Abstract: Since its first inception in the debate on the relationship between environment and growth in 1992, the Environmental Kuznets Curve has been subject to continuous and intense scrutiny. The literature can be roughly divided in two historical phases. Initially, after the seminal contributions, additional work aimed to extend the investigation to new pollutants and to verify the existence of an inverted-U shape as well as assessing the value of the turning point. The following phase focused instead on the robustness of the empirical relationship, particularly with respect to the omission of relevant explanatory variables other than GDP, alternative datasets, functional forms, and grouping of the countries examined. The most recent line of investigation criticizes the Environmental Kuznets Curve on more fundamental grounds, in that it stresses the lack of sufficient statistical testing of the empirical relationship and questions the very existence of the notion of Environmental Kuznets Curve. Attention is drawn in particular on the stationarity properties of the series involved – per capita emissions or concentrations and per capita GDP – and, in case of unit roots, on the cointegration property that must be present for the Environmental Kuznets Curve to be a well-defined concept. Only at that point can the researcher ask whether the long-run relationship exhibits an inverted-U pattern. On the basis of panel integration and cointegration tests for sulphur, Stern (2002, 2003) and Perman and Stern (1999, 2003) have presented evidence and forcefully stated that the Environmental Kuznets Curve does not exist. In this paper we ask whether similar strong conclusions can be arrived at when carrying out tests of fractional panel integration and cointegration. As an example we use the controversial case of carbon dioxide emissions. The results show that more EKCs come back into life relative to traditional integration/cointegration tests. However, we confirm that the EKC remains a fragile concept.
    Keywords: Environment, Growth, CO2 Emissions, Panel data, Fractional integration, Panel cointegration tests
    JEL: O13 Q30 Q32 C12 C23
    Date: 2006–02
  15. By: Y. Hossein Farzin (University of California); Ken-Ichi Akao (Waseda University)
    Abstract: Exhaustion of a natural resource stock may be a rational choice for an individual and/or a community, even if a sustainable use for the resource is feasible and the resource users are farsighted and well informed on the ecosystem. We identify conditions under which it is optimal not to sustain resource use. These conditions concern the discounting of future benefits, instability of social system or ecosystem, nonconvexity of natural growth function, socio-psychological value of employment, and strategic interaction among resource users. The identification of these conditions can help design policies to prevent unsustainable patterns of resource use.
    Keywords: Renewable resource management, Sustainability, Finite-time exhaustion, Optimal path, Policy implications
    JEL: Q20
    Date: 2006–02
  16. By: Y. Hossein Farzin (University of California); Ken-Ichi Akao (Waseda University)
    Abstract: We assume that people value employment not only to earn income to satisfy their consumption needs but also as a means of community/social involvement that provides socio-psychological (non-pecuniary) benefits. We show that the latter incentive can encourage full employment harvesting resources and explain why poor resource-based communities may exhaust a natural resource in a finite time even if there is a sustainable path of resource consumption available. We show that communities could sustain their natural resources by using outside-the-community employment and economic diversification, but, to be effective, such policies must ensure that the outside wage rate and the initial capital stock are above certain minimum levels, which will be higher the longer these policies are delayed.
    Keywords: Non-pecuniary effects, Employment value, Resource extinction, Sustainability
    JEL: E24 O12 O13 Q28
    Date: 2006–02
  17. By: Michael Greenstone (MIT); Olivier Deschenes (University of California)
    Abstract: This paper measures the economic impact of climate change on US agricultural land by estimating the effect of the presumably random year-to-year variation in temperature and precipitation on agricultural profits. Using long-run climate change predictions from the Hadley 2 Model, the preferred estimates indicate that climate change will lead to a $1.1 billion (2002$) or 3.4% increase in annual profits. The 95% confidence interval ranges from -$1.8 billion to $4.0 billion and the impact is robust to a wide variety of specification checks, so large negative or positive effects are unlikely. There is considerable heterogeneity in the effect across the country with California’s predicted impact equal to -$2.4 billion (or nearly 50% of state agricultural profits). Further, the analysis indicates that the predicted increases in temperature and precipitation will have virtually no effect on yields among the most important crops. These crop yield findings suggest that the small effect on profits is not due to short-run price increases. The paper also implements the hedonic approach that is predominant in the previous literature. We conclude that this approach may be unreliable, because it produces estimates of the effect of climate change that are very sensitive to seemingly minor decisions about the appropriate control variables, sample and weighting. Overall, the findings contradict the popular view that climate change will have substantial negative welfare consequences for the US agricultural sector.
    Keywords: Cost of climate change, Hedonics, Agricultural profits, Agricultural production, Crop yields
    JEL: Q50 Q12 Q54 Q51
    Date: 2006–01
  18. By: Aldy, Joseph (Resources For the Future)
    Abstract: Decisionmakers considering policies to mitigate climate change will benefit from information about current and future distributions of carbon dioxide (CO2) emissions. Examining the emissions dynamics of advanced economies that have experienced income convergence could provide insights about how distributions of country-level emissions may evolve over time if country-level incomes eventually undergo some convergence. This paper addresses the question of whether income convergence is sufficient for per capita CO2 emissions convergence by focusing on a set of advanced economies, the U.S. states. I undertake a variety of cross-sectional and stochastic convergence tests with two novel measures of 1960–1999 state-level CO2 emissions per capita—production (pre-electricity trade) CO2 and consumption (post-electricity trade) CO2—and with income per capita. Although incomes continue to converge, I find stark divergence in production CO2 per capita and no evidence of convergence for consumption CO2 per capita. Forecasts of future distributions show little convergence in emissions.
    Keywords: Markov chain transition matrix, sigma convergence, stochastic convergence, emissions distributions
    JEL: O40 Q54 Q56
  19. By: Alistair Ulph (University of Manchester); Santiago J. Rubio (Universitat de València)
    Abstract: In Barrett's (1994) paper on transboundary pollution abatement is shown that if the signatories of an international environmental agreement act in a Stackelberg fashion, then, depending on parameter values, a self-enforcing IEA can have any number of signatories between two and the grand coalition. Barrett obtains this result using numerical simulations and also ignoring the fact that emissions must be non-negative. Recent attempts to use analytical approaches and to explicitly recognize the non-negativity constraints have suggested that the number of signatories of a stable IEA may be very small. The way such papers have dealt with non-negativity constraints is to restrict parameter values to ensure interior solutions for emissions. We argue that a more appropriate approach is to use Kuhn-Tucker conditions to derive the equilibrium of the emissions game. When this is done we show, analytically, that the key results from Barrett's paper go through. Finally, we explain why his main conclusion is correct although his analysis can implicitly imply negative emissions.
    Keywords: international externalities, self-enforcing environmental agreements, Stackelberg equilibrium, non-negative emissions constraints
    JEL: C72 D62 F02 Q20
    Date: 2004–06

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