nep-env New Economics Papers
on Environmental Economics
Issue of 2006‒03‒18
fifteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Environmental policy competition and differential tax treatment; a case for tighter coordination? By Richard Nahuis; Paul Tang
  2. How Effective are Emission Taxes in an Open Economy? By Jota Ishikawa; Tomohiro Kuroda
  3. Financial resources for the environment: the unsuccessful attempt to create a private financing intermediary for brownfield redevelopment projects By Keith Welkes
  4. Swedish Industry and Kyoto An Assessment of the Effects of the European CO2 Emission Permit Trading System By Brännlund, Runar; Lundgren, Tommy
  5. Ratification quotas in international agreements By Kohnz, Simon
  6. Economic modeling approaches for wildlife and species conservation By Anders Skonhoft
  7. Vulnerability and Natural Disasters in Fiji, Papua New Guinea, Vanuatu and the Kyrgyz Republic By Raghbendra Jha
  8. Economic, Demographic and Political Determinants of Pollution Reassessed: A Sensitivity Analysis By Martin Gassebner; Michael Lamla; Jan-Egbert Sturm
  9. Relief for the Environment? The Importance of an Increasingly Unimportant Industrial Sector By Martin Gassebner; Noel Gaston; Michael Lamla
  10. The Impact of International Organizations on the Environment: An Empirical Analysis By Axel Dreher; Magdalena Ramada-Sarasola
  11. Ascribing Societal Benefit to Environmental Observations of the Earth from Space: The Multi-angle Imaging Spectroradiometer (MISR) By Macauley, Molly K.
  12. Do People Vote with Their Feet? An Empirical Test of Environmental Gentrification By Banzhaf, H. Spencer; Walsh, Randy
  13. Air Emissions of Ammonia and Methane from Livestock Operations: Valuation and Policy Options By Shih, Jhih-Shyang; Burtraw, Dallas; Palmer, Karen L.; Siikamäki, Juha V.
  14. Communautarist networks in African rainforests By Jean-Marc Roda; Nsitou Mabiala
  15. Salinity in Water Markets: An ExperimentalInvestigation of the Sunraysia Salinity Levy, Victoria By C. Duke; L. Gangadharan

  1. By: Richard Nahuis; Paul Tang
    Abstract: The Kyoto Protocol binds the level of greenhouse gas emissions in participating countries. It does not, however, dictate how the countries are to achieve this level. The economic costs of reaching emission targets are generally evaluated to be low. For example, evaluations with applied general-equilibrium models estimate the costs to be in the range of 0.2% to 0.5% of GDP, when international trade in emissions rights among governments is allowed for. We argue that important costs are overlooked since governments have an incentive to choose highly distorting tax schemes. <P> This paper shows that governments generally choose different energy tax rates for households and for internationally operating firms as the result of tax competition or pollution competition: in the first case, governments try to undercut other governments to attract firms to their country, whereas in the second, they try to push dirty industries across the border. In both cases, the incentive for firms and households to use or save energy is different at the margin. Both cases call for coordination of climate change policies that goes beyond a binding ceiling on greenhouse gas emissions and international trade in permit rights among governments alone.
    Keywords: energy taxes; tax competition; climate change policies
    JEL: H23 Q48 Q58
    Date: 2005–10
  2. By: Jota Ishikawa; Tomohiro Kuroda
    Abstract: This paper compares emission taxes with other taxes from the viewpoint of emission reduction in an open economy. Using a simple monopoly model, we show that emission taxes may not be very effective to protect environment because of the spillover effects between markets stemming from non-constant marginal costs and transboundary externalities. Other taxes such as production taxes and tariffs are more effective under certain conditions. Thus, an easy application of emission taxes should be discreet in the open economy framework.
    Date: 2006–03
  3. By: Keith Welkes
    Abstract: This paper analyzes an unsuccessful attempt to establish a financing intermediary for the development of environmentally contaminated property (commonly known as brownfields) in Pennsylvania. The proposed intermediary was entitled Financial Resources for the Environment
    Keywords: Brownfields
    Date: 2005
  4. By: Brännlund, Runar (Department of Forest Economics, Swedish University of Agricultural Sciences); Lundgren, Tommy (Department of Forest Economics, Swedish University of Agricultural Sciences)
    Abstract: We assess the effects on Swedish industry input and output demands of different climate policy scenarios connected to energy policy induced by the Kyoto protocol. A unique data set containing firm level data on outputs and inputs during the years 1991 – 2001 is used to estimate a factor demand model, which is then simulated for different policy scenarios. Sector specific estimation suggests that the proposed quadratic profit function specification exhibit properties and robustness that are consistent with economic <p> theory; that is, all own-price elasticities are negative and all output elasticities are positive. Furthermore, the elasticities show that the input demands are, in most cases, relatively inelastic. Simulation of the model for 6 different policy scenarios reveal that the effects on Swedish base industry of a EU level <p> permit trade system is dependent on (i) removal or no removal of current CO2 tax, (ii) the established price of permits, and (iii) what will happen to the electricity price. Our analysis show that changes in electricity price may be more important than the price of permits for some sectors.
    Keywords: CO2-emissions; factor demand; fossil fuels; tradable permit market
    JEL: Q58
    Date: 2006–03–03
  5. By: Kohnz, Simon
    Abstract: This paper analyses the role of ratification quotas in multilateral agreements over emission reduction. The higher is the quota, the lower is the level of emissions in case the agreement comes into force, but the higher is also the risk of failure. In a setting with incomplete information, two country types and a binary contribution to the provision, I examine the differences between simultaneous and sequential ratification. When the benefits from emission of both types are smaller than the social costs, the outcome in the simultaneous case is essentially identical to the sequential case. The optimal quota is 100% and achieves the first best. With the high type's benefits exceeding the social costs, I find that the optimal quota is as small as possible, if ratification is simultaneous. In the sequential ratification case, I cannot determine the optimal quota. However, I find that the aggregate expected surplus decreases with respect to the simultaneous case.
    JEL: H41 D71
    Date: 2005–09
  6. By: Anders Skonhoft (Department of Economics, Norwegian University of Science and Technology, Norway)
    Abstract: This paper presents modeling approaches for wildlife and species conservation with a special emphasis on large mammals in a developing country setting. In such countries there are frequently conflicts over land use and species conservation, and institutions for managing conflicts are often weak or even lacking. In addition, most of the world species and biodiversity are found in developing countries. Two main issues are discussed. First, we study a situation where the wildlife is valuable, but is considered a pest by the local people living close to the wildlife. Second, we consider models with a discrepancy between management geography and biological geography, and where the species flows between a conservation area with no harvesting and a neighboring area with harvesting and possible habitat degradation.
    Date: 2006–02–28
  7. By: Raghbendra Jha
    Abstract: This paper analyses vulnerability in Fiji, the Kyrgyz republic, Papua New Guinea and Vanuatu. In incorporating measures of vulnerability there is no major departure from the perspective of MDG 1 Analyses of vulnerability, like that in the present paper, emphasize the fact that the debates around poverty-growth elasticities are premised on the assumption of a state of world without any risks and uncertainties. In the real world in which the poor actually live they are subject to risks - both general and idiosyncratic - which affect their welfare. Thus poverty should not be viewed in static terms but within a framework that allows for changing states of the world. Nor should the possibility of reaching MDG1 be viewed simply as a matter of extrapolating from existing poverty levels using such computed growth poverty elasticities. Such a strategy runs the risk of becoming a statistical artefact with little relevance to the welfare of the poor. This paper begins by briefly surveying the empirical literature on vulnerability. It makes a distinction between vulnerability measures based on household level data and measures based on aggregate data. Since household level data are not available for these countries this paper provides measures of vulnerability and quantifies certainty equivalent consumption growth for these countries over the recent past. It then projects from computed growth rates of consumption and their corresponding certainty equivalent magnitudes to understand some implications of such vulnerability for reaching the poverty related MDG (MDG1). It is discovered that certainty equivalent consumption growth is much lower than average real per capita consumption growth indeed, in some cases, it is negative. This performance is linked to the incidence of aggregate shocks in these economies - particularly in the 1990s. Based on these trends it is concluded that real consumption per capita by 2015 would be lower in all four countries than what is required to attain MDG1.
    Keywords: Vulnerability, Certainty Equivalent Consumption, MDG1
    JEL: D18 D63 D80 D91 I32
    Date: 2006
  8. By: Martin Gassebner (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland); Michael Lamla (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland); Jan-Egbert Sturm (Swiss Institute for Business Cycle Research (KOF), Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: Recent literature proposes many variables as significant determinants of pollution. This paper gives an overview of this literature and asks which of these factors have an empirically robust impact on water and air pollution, i.e. do not depend upon the conditioning information set. For this, we apply Extreme Bound Analysis (EBA) on a panel of 208 countries covering the period 1960–2001. We find supportive evidence on the existence of the environmental Kuznets curve. Furthermore, mainly demographic variables and variables capturing the economic structure of a country contribute in explaining air and water pollution.
    Keywords: pollution; environment; sensitivity analysis; environmental Kuznets curve
    JEL: C52 F18 L60 O13 Q53
    Date: 2006–02
  9. By: Martin Gassebner (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland); Noel Gaston (School of Business, Bond University, Gold Coast, Queensland, Australia); Michael Lamla (Department of Management, Technology and Economics, ETH Zurich (Swiss Federal Institute of Technology), Switzerland)
    Abstract: Deindustrialisation, stagnant real incomes of production workers and increasing inequality are latter-day features of many economies. It’s common to assume that such developments pressure policy-makers to relax environmental standards. However, when heavily polluting industries become less important economically, their political importance also tends to diminish. Consequently, a regulator may increase the stringency of environmental policies. Like some other studies, we find that declining industrial employment translates into stricter environmental standards. In contrast to previous studies, but consistent with our argument, we find that greater income inequality is associated with policies that promote a cleaner environment.
    Keywords: Environmental regulations; deindustrialisation; income inequality; extreme bounds analysis.
    JEL: Q58 P16 J31 C23
    Date: 2006–03
  10. By: Axel Dreher (Department of Management, Technology, and Economics, Swiss Federal Institute of Technology Zurich (ETH)); Magdalena Ramada-Sarasola (University of Konstanz, Department of Economics)
    Abstract: When analyzing the impact of international organizations on the environment, two main issues arise. First, we have to quantify the participation of the organizations on countries they deal with. Second, the environmental impact of this involvement has to be measured. This paper attempts to do this. We employ panel data to empirically analyze whether and to what extent the presence of IMF, World Bank, regional Multilateral Development Banks, WTO and Global Environmental Facilities has an impact on environmental governance and outcomes. Our results for a large number of countries and years show that the international organizations affect the environment directly via their impact on CO2 emissions. Projects financed by World Bank, ADB, UNDP, and membership in the WTO increase emissions, while IADB projects reduce emissions. EBRD and UNEP do not significantly affect CO2 emissions, while the AfDB increases emissions after 1985 only. Taking the indirect impact through trade liberalization into account, however, the WTO reduces emissions, while the IADB increases emissions. There is some evidence that the international organizations investigated here also influence SO2 emissions, water pollution, and round wood production; environmental governance is not affected.
    Keywords: International Organizations, Environment, Governance, IMF, World Bank, WTO, Trade Liberalization
    JEL: Q53 Q56 F34 F35
    Date: 2006–02
  11. By: Macauley, Molly K. (Resources for the Future)
    Abstract: At the request of managers at the National Aeronautics and Space Administration, this paper describes frameworks for and illustrates societal benefits associated with Earth observations from an experimental satellite known as the Multiangle Imaging SpectroRadiometer (MISR). MISR is a unique camera that images Earth’s atmosphere and other characteristics simultaneously from nine angles. This multiangle perspective enhances our ability to measure and monitor dimensions of climate, weather, air quality, natural hazards, and the biosphere. “Societal benefit” in this paper generally refers to practical applications of data and data products beyond their intrinsic science merit. The paper has two objectives: to demonstrate how several societal benefit frameworks work, and to highlight some of these benefits in the case of MISR. Such consideration of practical benefits is timely, as their realization is becoming a prominent objective of future space remote sensing activities. At least four groups of experts recommend that societal benefit serve as a heavily weighted criterion for prioritizing Earth science research opportunities. The National Academy of Sciences’ forthcoming decadal survey for U.S. Earth science applications from space, the U.S. Climate Change Research Program, the framework for the international Global Earth Observing System of Systems (GEOSS), and the new world water program of the World Meteorological Organization (WMO) all argue that societal benefit should be a determining factor in selecting the next Earth-observing spacecraft missions and instruments. If these recommendations are implemented, the frameworks and illustrations below may prove useful in guiding benefit descriptions in future space-derived Earth observation programs.
    Keywords: societal benefits, resource and environmental management, earth observations, earth science
    JEL: O32 O38 Q28
    Date: 2006–03–08
  12. By: Banzhaf, H. Spencer (Resources for the Future); Walsh, Randy
    Abstract: Tiebout’s (1956) suggestion that people “vote with their feet” to find the community that provides their optimal bundle of taxes and public goods has played a central role in the theory of local public finance over the past 50 years. Given the central importance of Tiebout’s insights, there have been surprisingly few direct tests of his premise. In this paper, we use a Tiebout equilibrium model to derive testable hypotheses about changes in local community demographics. The model clearly predicts increased population density in neighborhoods that experience an exogenous increase in public goods but yields only tentative predictions about the effect on neighborhood composition. To test these hypotheses, we use a difference-in-difference model to identify the effect of initial pollution levels and changes in local pollution on population and demographic composition. Our results provide strong empirical support for the notion that households “vote with their feet” in response to changes in environmental quality. This result has two implications. First, and most broadly, it provides direct empirical support for the assumptions underlying the Tiebout model. Second, in our particular application, the potential for what we call “environmental gentrification” has important implications both for the analysis of environmental equity and for the design of environmental policies aimed at benefiting the less-advantaged elements of society.
    Keywords: Tiebout, gentrification, air quality
    JEL: J6 Q5 R2
    Date: 2006–03–08
  13. By: Shih, Jhih-Shyang (Resources for the Future); Burtraw, Dallas (Resources for the Future); Palmer, Karen L. (Resources for the Future); Siikamäki, Juha V. (Resources for the Future)
    Abstract: The animal husbandry industry is a major emitter of methane, which is an important greenhouse gas. The industry is also a major emitter of ammonia, which is a precursor of fine particulate matter—arguably, the number-one environment-related public health threat facing the nation. We present an integrated process model of the engineering economics of technologies to reduce methane and ammonia emissions at dairy operations in California. Three policy options are explored: greenhouse gas offset credits for methane control, particulate matter offset credits for ammonia control, and expanded net metering policies to provide revenue for the sale of electricity generated from captured methane gas. Individually, any of these policies appears to be sufficient to provide the economic incentive for farm operators to reduce emissions. We report on initial steps to fully develop the integrated process model that will provide guidance for policymakers.
    Keywords: methane, ammonia, carbon dioxide, greenhouse gases, climate change, offset, particulate matter, net metering, environmental policy, CAFO, manure management, biodigester, electricity, global warming, cost-benefit, incentive approach
    JEL: Q2 Q4 Q53
    Date: 2006–03–14
  14. By: Jean-Marc Roda; Nsitou Mabiala
    Abstract: Since the 1970s world trade in unprocessed wood or preprocessed wood reached a stable level between 150 and 200 million m3, while, since 1985, world consumption varies between 3.2 and 3.4 billion m3 annually1. Thus, woodwork networks seem to be caught between two worlds with virtually independent structures, on the one hand, in developed countries, and, on the other hand, in developing countries. However, this apparent period of stabilization was undoubtedly a period of development, preparing the implementation of new organizations of production, whose forerunners emerge since the mid-1990s. The determining criteria are the ability to react and the rigorous response to demand. The very flexible strategies of supply and the mobility of capital are organized by companies on a global scale, which casts doubts on forest policies.
    JEL: L73
    Date: 2004–05
  15. By: C. Duke; L. Gangadharan
    Abstract: Irrigation can have a significant negative impact on the environment. Irrigation impacts contribute a significant portion to the estimated forty six million dollar cost per annum of salinity in the Murray River, Australia. Policies available to regulators include externality taxes and levies. In 2002 the Victorian Government introduced a system of salinity levies in the irrigation regions of Sunraysia, northern Victoria. These levies differ from typical taxes because they also introduce trade barriers between certain locations. These trade barriers may increase the cost of reducing salinity. We use experiments to compare the salinity levy with trade barriers to an alternative salinity tax which removes the trade barriers and replaces them with a ‘large’ tax relative to other geographic zones. Our results show that the salinity tax reduces the cost of salinity interception by the government by twenty five percent as compared to the salinity levy. We observe water prices do not increase when regulation is introduced, this may be because the introduction of taxes and levies encourages buyers to act more aggressively preventing sellers from extracting surplus on trades. Further, the introduction of regulation does not increase variability in average outcomes for these markets.
    Keywords: Externality Taxes, Experiments, Double Auction, Environmental Policy, Salinity.
    JEL: Q25 Q28 C90
    Date: 2005

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