nep-env New Economics Papers
on Environmental Economics
Issue of 2006‒04‒22
33 papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Free Trade with Hazardous Products? The Emergence of Transnational Governance with Eroding State Government By Christian Joerges
  2. Le droit à l'eau, un droit international? By Pierre-Marie Dupuy
  3. Les émanations engagent-elles la responsabilité des Etats? Etude de droit international des investissements By Pierre-Marie Dupuy
  4. The Cultural Mind: Environmental Decision Making and Cultural Modeling Within and Across Populations By Scott Atran; Douglas Medin; Norbert Ross
  5. Future expansion of agriculture and pasture acts to<br />amplify atmospheric CO2 levels in response to fossil<br />fuel and land-use change emissions By Vincent Gitz; Philippe Ciais
  6. The Economics of a Lost Deal : Kyoto - The Hague - Marrakesh By Jean-Charles Hourcade; Frédéric Ghersi
  7. Marché international du carbone<br />et double-dividende : antinomie ou synergie ? By Frédéric Ghersi; Jean-Charles Hourcade; Philippe Quirion
  8. Co-operation and Unilateral Commitment in<br />the Presence of Global Environmental<br />Problems By Jean-Christophe Pereau; Tarik Tazdait
  9. Who benefits from the US withdrawal of the Kyoto Protocol? An application of the MMEA method to measure power By Vincent Merlin; Rahhal Lahrach; Jérôme Le Tensorer
  10. Swedish Industry and Kyoto – An Assessment of the Effects of the European CO2 Emission Permit Trading System By Brännlund, Runar; Lundgren, Tommy
  11. Environmental Policy and Optimal Taxation in a Decentralized Economic Federation By Aronsson, Thomas; Jonsson, Thomas; Sjögren, Tomas
  12. The value of preserving the four large predators in Sweden: Regional differences considered By Broberg, Thomas; Brännlund, Runar
  13. Water Quality Trading: Theoretical and Practical Approaches By Marianne Keudel
  14. Synergies entre les échanges de services environnementaux et les échanges de biens environnementaux By Ronald Steenblik; Dominique Drouet; George Stubbs
  15. The Impact of Monitoring Equipmenton Air Quality Management Capacity in Developing Countries By Jim Hight; Grant Kirkpatrick
  16. The design of post-Kyoto climate schemes: an introductory analytical assessment. A future for Kyoto? By Roger Guesnerie
  17. Cooperation, Stability and Self-Enforcement in International Environmental Agreements: A Conceptual Discussion By Parkash CHANDER; Henry TULKENS
  18. Unit Roots, Polynomial Transformations and the Environmental Kuznets Curve By Gang Liu, Terje Skjerpen, Anders Rygh Swensen and Kjetil Telle
  19. A causality analysis on GDP and air emissions in Norway By Gang Liu
  20. Strategic Climate Policy in Small, Open Economies By Mads Greaker and Knut Einar Rosendahl
  21. Risk Management Instruments for Water Reallocations By Chad E. Hart
  22. Economic and Environmental Co-benefits of Carbon Sequestration in Agricultural Soils: Retiring Agricultural Land in the Upper Mississippi River Basin By Hongli Feng; Lyubov A. Kurkalova; Catherine L. Kling; Philip W. Gassman
  23. Dynamics of Carbon Sequestration and Alternative Carbon Accounting, with an Application to the Upper Mississippi River Basin, The By Hongli Feng
  24. Carbon Sequestration in Agricultural Soils: Discounting for Uncertainty By Lyubov A. Kurkalova
  25. Designation of Co-benefits and Its Implication for Policy: Water Quality versus Carbon Sequestration in Agricultural Soils, The By Silvia Secchi; Manoj Jha; Lyubov A. Kurkalova; Hongli Feng; Philip W. Gassman; Catherine L. Kling
  26. Consequences of Co-benefits for the Efficient Design of Carbon Sequestration Programs, The By Hongli Feng; Catherine L. Kling
  27. Conservation Reserve Program in the Presence of a Working Land Alternative: Implications for Environmental Quality, Program Participation, and Income Transfer, The By Hongli Feng; Catherine L. Kling; Lyubov A. Kurkalova; Silvia Secchi; Philip W. Gassman
  28. Production and Abatement Distortions under Noisy Green Taxes By Hongli Feng; David A. Hennessy
  29. US, China and the economics of climate negotiations By Carlo Carraro; Barbara Buchner
  30. Regional and sub-global climate blocs. A game-theoretic perspective on bottom-up climate regimes By Carlo Carraro; Barbara Buchner
  31. The dynamics of carbon and energy intensity in a model of endogenous technical change By Carlo Carraro; Valentina Bosetti; Marzio Galeotti
  32. Economic and Environmental Effectiveness of a Technology-based Climate Protocol By Carlo Carraro; Barbara Buchner
  33. Climate Change and Extreme Events: an Assessment of Economic Implications By Roberto Roson; Alvaro Calzadilla; Francesco Pauli

  1. By: Christian Joerges
    Abstract: The historical evolution of free trade has been accompanied by a plethora of debates, concerning both its positive effects and social costs. During the last decade, the subject of these disputes has markedly changed. The main objective of the General Agreement on Tariffs and Trade (GATT) concluded 1947, was initially the reduction of tariffs introduced by states to protect their national economy. In this respect, the agreement has been markedly successful. Since the early 1970s, however, non-tariff barriers to free trade have moved to the centre of attention. This change of focus was fostered by more intensified domestic regulation especially in the fields of health and safety, consumer and environmental protection. These concerns are of such domestic significance that they cannot simply be abandoned for the sake of free trade; however, it also is common opinion that regulations in these areas cannot be accepted, if they merely mask protectionist interests. In 1994, the international trade system adapted to this situation by transforming the GATT into the World Trade Organization (WTO). The most important reforms included an overhaul of its procedures of dispute settlement and the conclusion of special agreements concerning non-tariff barriers to free trade such as the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) and the Agreement on Technical Barriers to Trade (TBT). These agreements aim at the balancing of their main economic objective, free trade, with domestic regulatory concerns of WTO members. This bundle of regulations has certainly furthered the emergence of transnational ‘governance arrangements’. Such new forms of ‘transnational governance’ have lent renewed importance to ‘old’ legal issues: How can new forms of transnational governance be qualified legally? What can be said about their (social) acceptance and (normative) legitimacy? Can this form of governance be ‘constitutionalized’ in such a way that law can defend or even regain its function as guarantor of and yardstick for legitimate governing?
    Date: 2006–03–01
  2. By: Pierre-Marie Dupuy
    Abstract: A growing number of international instruments tend to define in human rights terms a right to water possessed by each individual. How to define this right? Is it already admitted in positive international law and how to compare it with the classical customary rules of public international law governing, among others, the use of natural resources?
    Date: 2006–03–01
  3. By: Pierre-Marie Dupuy
    Abstract: When having established a contract with a foreign private investor, State 'emanations' endowed with their own legal personality are able to be involved in international arbitral proceedings. This raises in particular the issue of how to define and identify such emanations of a sovereign State and whether the purported breaches by these entities of that State's international legal obligations in the field of investments are to be attributed to the State or to themselves. Although there is currently a growing application of public international law rules and criteria in particular by ICSID Tribunals, some diversity remains in the answers given by different tribunals, may it be within the ICSID, the NAFTA or other systems of arbitration. This may be explained by the specificities of each case, both factual and legal; but it may also raise at times the issue of whether all arbitrators apply the same rules in the same way.
    Date: 2006–03–01
  4. By: Scott Atran (IJN - Institut Jean-Nicod - - CNRS : UMR8129 - Ecole des Hautes Etudes en Sciences Sociales;Ecole Normale Supérieure de Paris); Douglas Medin; Norbert Ross
    Abstract: This paper describes a cross-cultural research project on the relation between how people conceptualize nature (their mental models) and how they act in it. Mental models of nature differ dramatically among and within populations living in the same area and engaged in more or less the same activities. This has novel implications for environmental decision making and management, including dealing with commons problems. Our research also offers a distinct perspective on models of culture, and a unified approach to the study of culture and cognition. We argue that cultural transmission and formation does not consist primarily in shared rules or norms, but in complex distributions of causally-connected representations across minds in interaction with the environment. The cultural stability and diversity of these representations often derives from rich, biologically-prepared mental mechanisms that limit variation to readily transmissible psychological forms. This framework addresses a series of methodological issues, such as the limitations of conceiving culture to be a well-defined system or bounded entity, an independent variable, or an internalized component of minds.
    Date: 2005–01–25
  5. By: Vincent Gitz (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Philippe Ciais (LSCE - Laboratoire des sciences du climat et de l'environnement - - [CNRS : UMR1572][CEA] - [] - [])
    Abstract: Abstract. The expansion of crop and pastures to the detriment of forests results into an increase in atmospheric CO2. A first obvious cause is the loss of forest biomass and soil carbon during and after conversion. A second, generally ignored cause, is the reduction of the residence time of carbon when for example forests or grasslands are converted to cultivated land. This decreases the sink capacity of the global terrestrial biosphere, and thereby may amplify the atmospheric CO2 rise due to fossil and land-use carbon release. For the IPCC-A2 future scenario, characterized by high fossil and high land-use emissions, we show that the land-use amplifier effect adds 61 ppm extra CO2 in the atmosphere by 2100 as compared to former treatment of land-use processes in carbon models. Investigating the individual contribution of each of the 6 land-use transitions (forest - crop, forest - pasture, grassland -crop) to the amplifier effect indicates that the clearing of forest and grasslands to arable lands explains most of the CO2 amplification. The amplification effect is 50% higher than in a previous analysis by the same authors which did not consider neither the deforestation to pastures nor the ploughing of grasslands. Such an amplification<br />effect is further examined in sensitivity tests where the net primary productivity is considered independant of atmospheric CO2. We also show that land-use changes which have already occurred in the recent past have a strong inertia at releasing<br />CO2, and will contribute to about 1/3 of the amplification effect by 2100. These results suggest that there is an additionnal atmospheric benefit of preserving pristine ecosystems with high turnover times.
    Keywords: land use; atmospheric CO2; fossil fuel
    Date: 2006–03–31
  6. By: Jean-Charles Hourcade (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Frédéric Ghersi (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées])
    Abstract: This paper examines prospects for compromise between competing perspectives on four key climate change issues: costs, level of domestic action, nvironmental integrity, and developing world involvement. It focuses on the policy issues stemming from the uncertainty about abatement costs. Based on extensive simulations of a model integration tool, SAP12 (Stochastic Assessment of Climate Policies, 12 models), the analysis considers options for fine-tuning the Kyoto Protocol, such as concrete ceilings or levies on carbon imports; "environmental restoration payments" to be made on excess emissions; and credits for equestration activities in Annex B countries. It demonstrates that the restoration payment (implemented through a safety valve) emerges as a superior means of addressing the cost uncertainty issue. The paper concludes that had this approach been taken at the COP6 climate negotiations, there would have been substantial room for compromise on payments of $35 to $100 per ton of carbon. Examining the Marrakech climate accord, it derives some lessons for attempts at completing Kyoto's unfinished business or at moving on to a new framework.
    Keywords: climate negotiations; 2010 carbon markets; uncertainty about abatement costs
    Date: 2006–03–30
  7. By: Frédéric Ghersi (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Jean-Charles Hourcade (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Philippe Quirion (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées])
    Abstract: Le propos de cet article est de vérifier dans quelle mesure l'existence d'un marché international de permis d'émission de gaz à effet de serre (GES) influe-t'elle sur les possibilités nationales de double dividende (environnemental et économique) par transfert de charge fiscale de l'emploi vers les émissions de GES.<br />Les combinaisons proposées de systèmes nationaux de permis et de taxes - étudiées à l'aide d'un modèle d'équilibre général calculable IMACLIM appliqué à l'économie française - sont mises au point en tenant particulièrement compte de l'économie politique de la discussion, soit de leur acceptabilité et de leur crédibilité dans un cadre réel. <br />On montre en définitive qu'un scénario combinant une taxe-carbone appliquée à l'ensemble de l'économie hors industries grandes consommatrices d'énergie, et l'accès à un marché international du carbone pour ces dernières, est à même de conserver l'essentiel du double dividende d'une taxe sur le carbone sans exemptions, tout en étant politiquement plus acceptable
    Keywords: permis d'émission de gaz à effet de serre; marché; double dividence; modèle IMACLIM
    Date: 2006–03–31
  8. By: Jean-Christophe Pereau (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Tarik Tazdait (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées])
    Abstract: This paper focuses on the link between group co-operation and unilateral commitment of some countries in the presence of global environmental problems. We show that in case of a failure of negotiation, some countries can decide to commit unilaterally and reduce their emissions. we call this behaviour precautionary commitment.<br />Absence of international agreement does not mean global defection from the environmental issue. we also show that the emergence of a non-co-ordinated global co-operation can result from a strategic action<br />from the members of the coalition. The insiders of the coalition create an incentive for the non-members to reduce without co-ordinating their emissions.
    Keywords: global environmental problems; coalition; unilateral<br />commitment; precautionary commitment.
    Date: 2006–03–31
  9. By: Vincent Merlin (CREM - Centre de Recherche en Economie et Management - - [CNRS : UMR6211] - [Université Rennes I][Université de Caen] - []); Rahhal Lahrach; Jérôme Le Tensorer
    Abstract: Since 1992, the international community is trying to arrive at a multilateral agreement on the reduction of emissions for greenhouse gases. A collective decision mechanism was adopted in 1997: An agreement is ratified if and only if it is approved by a coalition gathering more than 55 countries. Moreover, the ratifying industrialized countries - included in the Annex I of the Kyoto Protocol - must represent a total weight corresponding to at least 55% of the total CO2 emissions of the countries of the Annex I, taking the year 1990 as a reference point.<br /><br />One way to study the theoretical power distribution induced by this voting procedure is to compute the Banzhaf index for each country. Firstly, the results of the computation show that the power distribution is largely heterogeneous and benefits to the United-States. Secondly, we analyze the modifications generated by the European coalition scenario in order to prove that the European strategy to act as a single block counterbalanced the US leadership. Finally, we conclude that Japan and Russia benefited from the United States withdrawal in term of a priori decisional power.
    Keywords: Power indices, environment, Kyoto Protocol, empirical game theory
    Date: 2006–04–12
  10. By: Brännlund, Runar (Department of Economics, Umeå University); Lundgren, Tommy (Department of Forest Economics)
    Abstract: We assess the effects on Swedish industry input and output demands of different climate policy scenarios <p> connected to energy policy induced by the Kyoto protocol. A unique data set containing firm level data <p> on outputs and inputs during the years 1991 – 2001 is used to estimate a factor demand model, which is <p> then simulated for different policy scenarios. Sector specific estimation suggests that the proposed <p> 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, <p> the elasticities show that the input demands are, in most cases, relatively inelastic. Simulation of the <p> 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 <p> price of permits, and (iii) what will happen to the electricity price. Our analysis show that changes in <p> 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: D21 L70 Q52
    Date: 2005–12–05
  11. By: Aronsson, Thomas (Department of Economics, Umeå University); Jonsson, Thomas (Department of Economics, Umeå University); Sjögren, Tomas (Department of Economics, Umeå University)
    Abstract: This paper deals with environmental policy in an economic federation, where each national government faces a mixed tax problem. We assume that the federal government sets emission targets, which are implemented at the national level. We also assume that the economic federation is decentralized, meaning that the national governments are first movers vis-a-vis the federal government. Our results show that each country uses it policy instruments, at least in part, to influence the emission target. This has several implications; first, the commodity taxes do not satisfy the so called additivity property often emphasized in earlier literature and, second, it provides an argument for using distortionary labor income taxation.
    Keywords: Income and commodity taxation; economic federation; environmental policy
    JEL: D62 H21 H70
    Date: 2006–01–13
  12. By: Broberg, Thomas (Department of Economics, Umeå University); Brännlund, Runar (Department of Economics, Umeå University)
    Abstract: This paper contributes with an applied policy analysis of the predator preservation <p> policy in Sweden. We estimate the social benefits from preserving the four large <p> predators in Sweden by applying a contingent valuation approach. The vehicle we use <p> to fulfil our objectives is data from a survey that were mailed out in the spring of 2004. <p> We find that the Swedish population is divided in half concerning their support for the <p> predator policy package and that the overall mean WTP for preserving the four large <p> predators in Sweden is approximately SEK 290. We also find that the WTP differ <p> substantially between different regions in Sweden. Respondents in Stockholm have the <p> highest WTP whereas the lowest WTP is found for respondents living in Wolfterritories. <p> Finally we find that our measure of the social value is sensitive with respect <p> to response-uncertainty. When the respondents are allowed to be uncertain about their <p> valuation they state a higher value. The main conclusion is that the social-value of <p> preserving the four large predators in Sweden may be negative since the stated benefits <p> seem to be rather small.
    Keywords: Contingent valuation; WTP; endangered species
    JEL: Q22 Q26 Q28
    Date: 2006–02–10
  13. By: Marianne Keudel
    Abstract: Permit trading as an instrument to control air pollution has already been implemented in several countries, so in Europe since 2005. Could this instrument, however, also be adequately used for water pollution control of river basins in form of a water quality trading? Specific characteristics of rivers, pollutants and pollution sources strongly influence the design of such an instrument. This paper reviews theoretical and practical approaches on water quality trading. It is surprising that these approaches have never been linked by the literature. To fill this gap, this paper gives a first idea, how different water quality trading approaches (in theory and practice) can be made comparable.
    Keywords: water quality trading, water pollution control, river basin management
    JEL: Q53 Q25
    Date: 2006–03
  14. By: Ronald Steenblik; Dominique Drouet; George Stubbs
    Abstract: Le présent document traite de la question des synergies entre les échanges de services environnementaux et les échanges de biens environnementaux. Il fait partie d'une série d'études de l'OCDE analysant diverses questions en rapport avec le paragraphe 31(iii) du Programme de Doha pour le développement adopté en 2001 par l'Organisation mondiale du commerce, qui demande que des négociations soient engagées à l'OMC sur « la réduction ou, selon qu'il sera approprié, l'élimination des obstacles tarifaires et non tarifaires visant les biens et services environnementaux. » Aux fins de la présente étude, la définition des services environnementaux englobe les services de gestion des eaux usées, les services de gestion des déchets solides, les services d'assainissement et services analogues et les autres services environnementaux. Les services liés au captage, à l'épuration et à la distribution de l’eau sont aussi examinés dans ce document. Après avoir décrit la nature de chaque service environnemental, l'étude définit les grandes catégories de biens utilisés dans la prestation de ces services, et note que pour certains biens, ce sont les services environnementaux qui stimulent la croissance des marchés. L'analyse s'appuie ensuite sur des études de cas réels ayant trait à des exportations interentreprises de services environnementaux, principalement en provenance de pays de l'OCDE à destination de pays en développement, pour donner un aperçu général des types de biens environnementaux utilisés par les prestataires de services, et de la façon dont ces derniers se procurent ces biens. Les données qualitatives présentées dans les études de cas montrent que bon nombre des biens environnementaux figurant sur les listes de l'APEC ou de l'OCDE sont utilisés dans la prestation de services environnementaux. C'est notamment le cas des articles permettant de contenir, transporter, traiter et filtrer des liquides, ainsi que des instruments de surveillance et de mesure. Nombre de ces biens sont obtenus auprès de fournisseurs locaux, soit d'emblée, soit après que la demande locale des services associés s'est développée. Les avantages sont nombreux pour les entreprises qui s'adressent à des prestataires de services environnementaux, car elles peuvent ainsi se concentrer sur leurs activités de base, et faire supporter à d'autres entreprises une partie de la charge que représente le respect des réglementations environnementales. Des emplois sont également créés au niveau local. Pour les économies en développement, la conclusion générale de cette étude est que les avantages potentiels d'une libéralisation simultanée des échanges de services environnementaux et des échanges de biensenvironnementaux sont probablement beaucoup plus grands que ceux de la libéralisation d'un seul de ces types d'échanges.
    Keywords: pays en développement, biens environnementaux, services environnementaux, échanges
    JEL: F14 F18 O33 Q56
    Date: 2005–12–05
  15. By: Jim Hight; Grant Kirkpatrick
    Abstract: Reflecting the desire for cleaner air, many developing countries have enacted clean air laws similar to those of developed nations, although to date most of these laws have been poorly enforced. A key starting point to better enforcement is obtaining comprehensive and reliable air-quality monitoring data. This report explores the impacts of air quality monitoring programmes implemented over the last decade in five developing countries: Morocco, the Philippines, Malaysia, Indonesia, and India. These case studies also examine the role of procurement of specialised equipment, usually imported, associated with the various air quality monitoring programmes.
    Keywords: trade, developing countries, environmental goods, air quality
    Date: 2006–04–04
  16. By: Roger Guesnerie
    Abstract: The paper starts from a proposition of institutional design for climate policies made previously by David Bradford and labelled GPGP (Global Public good Purchase). The scheme is compared with other possible post- Kyoto schemes that are, or not, "Kyoto compatible". The comparison puts the emphasis on the participation issue, (free riding, ratchet effect), and on the desirable flexibility of the schemes. It argues that the incidence of climate policies on the final price of fossil fuels is a key and difficult issue which has not received, untill now, the amount of required attention.
    Date: 2006
  17. By: Parkash CHANDER (Department of Economics, National University of Singapore); Henry TULKENS (CORE, Université Catholique de Louvain, Louvain-la-Neuve, Belgium)
    Abstract: In essence, any international environmental agreement (IEA) implies cooperation of a form or another. The paper seeks for logical foundations of this. It first deals with how the need for cooperation derives from the public good aspect of the externalities involved, as well as with where the source of cooperation lies in cooperative game theory. In either case, the quest for efficiency is claimed to be at the root of cooperation. Next, cooperation is considered from the point of view of stability. After recalling the two competing concepts of stability in use in the IEA literature, new insights on the nature of the gamma core in general are given as well as of the Chander-Tulkens solution within the gamma core. Free riding is also evaluated in relation with the alternative forms of stability under scrutiny. Finally, it is asked whether with the often mentioned virtue of “self enforcement” any conceptual gain is achieved, different from what is meant by efficiency and stability. A skeptical answer is offered, as a reply to Barrett’s (2003) attempt at giving the notion a specific content.
  18. By: Gang Liu, Terje Skjerpen, Anders Rygh Swensen and Kjetil Telle (Statistics Norway)
    Abstract: Time-series regressions including non-linear transformations of an integrated variable are not uncommon in various fields of economics. In particular, within the Environmental Kuznets Curve (EKC) literature, where the effect on the environment of income levels is investigated, it is standard procedure to include a third order polynomial in the income variable. When the income variable is an I(1)-variable and this variable is also included nonlinearly in the regression relation, the properties of the estimators and standard inferential procedures are unknown. Surprisingly, such problems have received rather limited attention in applied work, and appear disregarded in the EKC literature. We investigate the properties of the estimators of long-run parameters using Monte-Carlo simulations. We find that the mean of the ordinary least squares estimates are very similar to the true values and that standard testing procedures based on normality behave rather well.
    Keywords: Emissions; Environmental Kuznets Curve; Unit Roots; Monte Carlo Simulations
    JEL: C15 C16 C22 C32 O13
    Date: 2006–01
  19. By: Gang Liu (Statistics Norway)
    Abstract: This paper conducts Granger-causality tests on real per capita GDP and four types of air emissions (CO2, CO, SO2 and NOx) by using Norwegian data covering the period 1973-2003. The test results indicate that only unidirectional causal relationships exist between GDP and air emissions. For CO2 and CO, we find long run causal relationships running from GDP to emissions, whereas for SO2 and NOx, only the short run causal relationships are found from emissions to GDP. Therefore, as far as the four types of air emissions in Norway are concerned, the presumption, employed in the conventional EKC analyses that the causal relationship between emissions and GDP is unidirectional from the latter to the former, may be retained for CO2 and CO only. For SO2 and NOx, however, it is rejected.
    Keywords: causality analysis; stationarity; cointegration; air emissions; economic growth
    JEL: C32 Q53 Q56
    Date: 2006–02
  20. By: Mads Greaker and Knut Einar Rosendahl (Statistics Norway)
    Abstract: According to environmental interests groups governments should use their climate policy strategically in order to provide for a faster introduction of new, cleaner technologies. Strategic use of climate policy could also induce the development of a successful upstream abatement technology industry like the Danish windmill industry. Interestingly, this latter question has not been analyzed theoretically before. Our point of departure is a three-stage game between a government in a small country with a climate restriction, and a limited number of firms supplying carbon abatement technology. The government moves first, and may use its climate policy strategically to influence the behavior of the upstream technology firms. An especially stringent climate policy towards the polluting downstream sector may then in fact be well founded. It will increase the competition between the technology suppliers, and lead to lower domestic abatement costs. However, to our surprise, a strict environmental policy is not a particularly good industrial policy with respect to developing new successful export sectors.
    Keywords: Strategic climate policy; Abatement technology; Small; open economies
    JEL: O32 Q2 Q25
  21. By: Chad E. Hart (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: Federal and state governments are searching for programs and/or policies to deal with the risks linked with uncertainty in water supplies and demands. Within the United States, competition among agricultural, urban, and environmental concerns for water is increasing. Drought conditions and water use restrictions have, at times, limited water supplies for these varied uses. The federal government stands in a unique position as both a major supplier and demander of water. As such, the federal government has put forward several programs for water conservation, information, and usage. One area in which the federal government has not made significant progress is the issue of risk management and compensation for water reallocations. When natural forces or government policies trigger water use restrictions, the restricted water users may or may not be compensated by current programs. This paper explores how current policies may or may not cover agricultural losses due to water use restrictions and outlines several government policy proposals and market-based methods to mitigate the risks from water restrictions. Given the diversity of the agents involved and the watersheds covered, it is likely that no one program will be the "best" program to address the issue. The "best" program for a given combination of agents in a watershed will depend upon the types of agents and the possible uses of the water.
    Keywords: government policy, reallocation, risk management, water rights.
    Date: 2005–02
  22. By: Hongli Feng (Center for Agricultural and Rural Development (CARD)); Lyubov A. Kurkalova; Catherine L. Kling (Center for Agricultural and Rural Development (CARD)); Philip W. Gassman (Center for Agricultural and Rural Development (CARD))
    Abstract: This study investigates the carbon sequestration potential and co-benefits from policies aimed at retiring agricultural land in the Upper Mississippi River Basin, a large, heavily agricultural area. We extend the empirical measurement of co-benefits from the previous focus on environmental benefits to include economic transfers. These transfers have often been mentioned as a co-benefit, but little empirical work measuring the potential magnitude of these transfers has previously been undertaken. We compare and contrast five targeting schemes, each based on maximizing different physical environmental measures, including carbon sequestration, soil erosion, nitrogen runoff, nitrogen leaching, as well as the area enrolled in the program. In each case, the other environmental benefits and economic transfers are computed. We find that the geographic distribution of co-benefits (including economic transfers) varies significantly with the benefit targeted, implying that policy design related to targeting can have very important implications for both environmental conditions and income distributions in sub-regions.
    Keywords: carbon sequestration, co-benefits, co-effects, economic transfers, environmental benefits targeting, Upper Mississippi River Basin.
    Date: 2005–02
  23. By: Hongli Feng (Center for Agricultural and Rural Development (CARD))
    Abstract: Carbon sequestration is a temporal process in which carbon is continuously being stored/released over time. Different methods of carbon accounting can be used to account for this temporal nature, including annual average carbon, annualized carbon, and ton-year carbon. In this paper, starting by exposing the underlying connections among these methods, we examine how the comparisons of sequestration projects are affected by these methods and the major factors affecting them. We explore the empirical implications for carbon sequestration policies by applying these accounting methods to the Upper Mississippi River Basin, a large and important agriculture area in the United States. We find that the differences are significant in terms of the location of land that might be chosen and the distribution of carbon sequestration over the area, although the total amount of carbon sequestered does not differ considerably across programs that use different accounting methods or different values of the major factors.
    Keywords: annual average carbon, annualized carbon, carbon sequestration, ton-year carbon.
    Date: 2005–03
  24. By: Lyubov A. Kurkalova
    Abstract: The study presents a conceptual model of an aggregator who selectively pays farmers for altering farming practices in exchange for carbon offsets that the change in practices generates. Under the assumption that the offsets are stochastic and that the aggregator maximizes the sum of the offsets from the purchase that he/she can rightfully claim with a specified level of confidence subject to a budget constraint, we investigate the optimal discounting of expected carbon offsets. We use the model to estimate empirically the optimal discounting levels and costs for a hypothetical carbon purchasing project in the Upper Iowa River Basin.
    Keywords: carbon sequestration in agricultural soils, offset discounting, uncertainty.
    Date: 2005–03
  25. By: Silvia Secchi (Center for Agricultural and Rural Development (CARD)); Manoj Jha (Center for Agricultural and Rural Development (CARD)); Lyubov A. Kurkalova; Hongli Feng (Center for Agricultural and Rural Development (CARD)); Philip W. Gassman (Center for Agricultural and Rural Development (CARD)); Catherine L. Kling (Center for Agricultural and Rural Development (CARD))
    Abstract: This study investigates the implications of treating different environmental benefits as the primary target of policy design. We focus on two scenarios, estimating for both of them in-stream sediment, nutrient loadings, and carbon sequestration. In the first, we assess the impact of a program designed to improve water quality in Iowa on carbon sequestration, and in the second, we calculate the water quality impact of a program aimed at maximizing carbon sequestration. In both cases, the policy instrument is the retirement of land from agricultural production. Our results, limited to the state of Iowa, and to the case of set-aside for water quality or carbon sequestration purposes, indicate that the amount of co-benefits depends on what indicators are used to measure water quality. In general, this study shows that improving "water quality" in the sense of reducing nutrient or sediment loadings is too vague. Even if it is taken to refer to in-stream nutrients, because the responses of nitrogen and phosphorus to conservation efforts are not well correlated, this terminology may not provide much guidance.
    Keywords: carbon sequestration, co-benefits, environmental benefits targeting, Iowa, land set-aside, water quality.
    Date: 2005–03
  26. By: Hongli Feng (Center for Agricultural and Rural Development (CARD)); Catherine L. Kling (Center for Agricultural and Rural Development (CARD))
    Abstract: In this paper, we study the social efficiency of private carbon markets that include trading in agricultural soil carbon sequestration when there are significant co-benefits (positive environmental externalities) associated with the practices that sequester carbon. Likewise, we investigate the efficiency of government-run conservation programs that are designed to promote a broad array of environmental attributes (both carbon sequestration and its co-benefits) for the supply of carbon. Finally, policy design and efficiency issues associated with the potential interplay between a private carbon market and a government conservation program are studied. Empirical analyses for an area that represents a significant potential source of carbon sequestration and its associated co-benefits illustrate the magnitude and complexity of these issues in real-world policy design.
    Keywords: average ranking of benefits, carbon markets, carbon sequestration, co-benefits, conservation programs, the Upper Mississippi River Basin.
    Date: 2005–03
  27. By: Hongli Feng (Center for Agricultural and Rural Development (CARD)); Catherine L. Kling (Center for Agricultural and Rural Development (CARD)); Lyubov A. Kurkalova; Silvia Secchi (Center for Agricultural and Rural Development (CARD)); Philip W. Gassman (Center for Agricultural and Rural Development (CARD))
    Abstract: The United States has invested large sums of resources in multiple conservation programs for agriculture over the past century. In this paper we focus on the impacts of program interactions. Specifically, using an integrated economic and bio-physical modeling framework, we consider the impacts of the presence of working land programs on a land retirement for an important agricultural region—the Upper Mississippi River Basin (UMRB). Compared to a land retirement only program, we find that the presence of a working land program for conservation tillage results in significantly lower predicted signups for land retirement at a given rental rate. We also find that the presence of both a large working land and land retirement program can result in more environmental benefits and income transfers than a land retirement only program can achieve.
    Keywords: Conservation Reserve Program, conservation tillage, environmental quality, income transfer, working land programs.
    Date: 2005–08
  28. By: Hongli Feng (Center for Agricultural and Rural Development (CARD)); David A. Hennessy (Center for Agricultural and Rural Development (CARD))
    Abstract: Pigouvian taxes are typically imposed in situations where there is imperfect knowledge on the extent of damage caused by a producing firm. A regulator imposing imperfectly informed Pigouvian taxes may cause the firms that should (should not) produce to shut down (produce). In this paper we use a Bayesian information framework to identify optimal signal-conditioned taxes in the presence of such losses. The tax system involves reducing (increasing) taxes on firms identified as causing high (low) damage. Unfortunately, when an abatement decision has to be made, the tax system that minimizes production distortions also dampens the incentive to abate. In the absence of wrong-firm concerns, a regulator can solve the problem by not adjusting taxes for signal noise. When wrong-firm losses are a concern, the regulator has to trade off losses from distorted production incentives with losses from distorted abatement incentives. The most appropriate policy may involve a combination of instruments.
    Keywords: conditioning; heterogeneity; informativeness; Pigouvian tax; signaling
    JEL: D62 H20
    Date: 2005–10
  29. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Barbara Buchner (Fondazione Eni Enrico Mattei)
    Abstract: Despite the entry into force of the Kyoto Protocol, the US decision not to comply with its Kyoto commitments seems to drastically undermine the effectiveness of the Protocol in controlling GHG emissions. Therefore, it is important to explore whether there are economic incentives that might help the US to modify its current decision and move to a more environmentally effective climate policy. For example, can an increased participation of developing countries induce the US to effectively participate in the effort to reduce GHG emissions? Is a single emission trading market the appropriate policy framework to increase the signatories of the Kyoto Protocol? This paper addresses the above questions by analysing whether the participation of China in the cooperative effort to control GHG emissions can provide adequate incentives for the US to re-join the Kyoto process and eventually ratify the Kyoto Protocol. This paper analyses three different climate regimes in which China could be involved and assesses the economic incentives for the major world countries and regions to participate in these three regimes. The main conclusion is that the participation of the US in a climate regime is not likely, at least in the short run. The US is more likely to adopt unilateral policies than to join the present Kyoto coalition (even when it includes China). However, a two bloc regime would become the most preferred option if both China and the US, for some political or environmental reasons, decide to cooperate on GHG emission control. If the US decides to cooperate, the climate regime that provides the highest economic incentives to the cooperating countries is the one in which China and the US cooperate bilaterally, with the Annex B-US countries remaining within the Kyoto framework.
    Keywords: Agreements, Climate, Incentives, Negotiations, Policy
    JEL: C72 H23 Q25 Q28
    Date: 2006
  30. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Barbara Buchner
    Abstract: controlling GHG emissions without the involvement of countries such as China, India, the United States, Aust rali a, and possibly other developing countries. This highlights an unambiguous weakness of the Kyoto Protocol, where the aforementioned countries either have no binding emission targets or have decided not to comply with their targets . Therefore, when discussing possible post-Kyoto scenarios, it is crucial to priori tise part icipation incentives for all countries, especially those without explicit or with insufficient abatement targets. This paper offers a bottom-up game-theoretic perspective on participation incentives. Rather than focusing on issue linkage, t ransfers or burden sharing as tools to enhance the incentives to par t icipate in a climate agreement, thi s paper aims at exploring whether a di fferent policy approach could lead more count ries to adopt ef fective climate cont rol policies. This policy approach is explicitly bottom-up, namely i t gives each country the freedom to sign agreements and deals, bilateral ly or multila terally, with other countries, without being constrained by any globa l protocol or convention. This study provides a game-theoretic assessment of this policy approach and then evaluates empirically the possible endogenous emergence of single or multi ple climate coalitions. Welfare and technological consequences of different mul tiple bloc climate regimes will be assessed and their overall environmental effectiveness will be discussed.
    Keywords: Agreements, Climate, Incentives, Negotiations, Policy
    JEL: C72 H23 Q25 Q28
    Date: 2006
  31. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Valentina Bosetti (Fondazione Eni Enrico Mattei); Marzio Galeotti (Fondazione Eni Enrico Mattei)
    Abstract: T In recent years, a large number of papers have explored different attempts to endogenise technical change in climate models. This recent literature has emphasized that four factors – two inputs and two outputs – should play a major role when modelling technical change in climate models. The two inputs are R&D investments and Learning by Doing, the two outputs are energy-saving and fuel switching. Indeed, R&D investments and Learning by Doing are the main drivers of a climatefriendly technical change that eventually affect both energy intensity and fuel-mix. In this paper, we present and discuss an extension of the FEEM-RICE model in which these four factors are explicitly accounted for. In our new specification of endogenous technical change, an index of energy technical change depends on both Learning by Researching and Learning by Doing. This index enters the equations defining energy intensity (i.e. the amount of carbon energy required to produce one unit of output) and carbon intensity (i.e. the level of carbonization of primarily used fuels). This new specification is embodied in the RICE 99 integrated assessment climate model and then used to generate a baseline scenario and to analyze the relationship between climate policy and technical change. Sensitivity analysis is performed on different key parameters of the energy module in order to obtain crucial insights into the relative importance of the main channels through which technological changes affects the impact of human activities on climate.
    Keywords: Climate Policy, Environmental Modelling, Integrated Assessment, Technical Change
    JEL: H0 H2 H3
    Date: 2006
  32. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Barbara Buchner (Fondazione Eni Enrico Mattei)
    Abstract: The present stalemate in climate negotiations between the US and the other Annex I countries has led policy analysts and economists to explore the possible emergence of alternative climate regimes that may be applied after 2012. This paper explores the idea of replacing international cooperation on greenhouse gas emission control with international cooperation on climate-related technological innovation and diffusion. This idea – recently proposed among others by Barrett (2001) and Benedick (2001) – is based on the insight that incentives to free ride are much smaller in the case of technological cooperation than in the case of cooperation on emission control. This paper provides a first applied game theory analysis of a technology-based climate protocol by assessing: (i) the selfenforcingness (namely, the absence of incentives to free ride) of the coalition that would form when countries negotiate on climate-related technological cooperation; (ii) the environmental effectiveness of a technology-based climate protocol. The analysis is carried out by using a model in which endogenous and induced technical change are explicitly modelled. The results of our analysis partly support Barrett’s and Benedick’s conjecture. On the one hand, a self-enforcing agreement is more likely to emerge when countries cooperate on environmental technological innovation and diffusion than when they cooperate on emission abatement. However, technological cooperation – without any commitment to emission control – may not lead to a sufficient abatement of greenhouse gas concentrations.
    Keywords: Agreements, Climate, Incentives, Negotiations, Policy
    JEL: C72 H23 Q25 Q28
    Date: 2006
  33. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Alvaro Calzadilla (University of Hamburg); Francesco Pauli (University of Padua)
    Abstract: We use a general equilibrium model of the world economy, and a regional economic growth model, to assess the economic implications of vulnerability from extreme meteorological events, induced by the climate change. In particular, we first consider the impact of climate change on ENSO and NAO oceanic oscillations and, subsequently, the implied variation on regional expected damages. We found that expected damages from extreme events are increasing in the United States, Europe and Russia, and decreasing in energy exporting countries. Two economic implications are taken into account: (1) short-term impacts, due to changes in the demand structure, generated by higher/lower precautionary saving, and (2) variations in regional economic growth paths. We found that indirect stort-term effects(variations in savings due to higher or lower likelihood of natural disasters) can have an impact on regional economies, whose order of magnitude is comparable to the one of direct damages. On the other hand, we highlight that higher vulnerability from extreme events translates into higher volatility in the economic growth path, and vice versa.
    Keywords: Climate Change, Extreme Events, Computable General Equilibrium Models, Precautionary Savings, Economic Growth
    JEL: D58 D91 Q54
    Date: 2006

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