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on Environmental Economics |
| By: | Wiepke Wissema |
| Abstract: | This paper describes the construction of the Irish Social Accounting Matrix for the year 1998. Treatment of taxation, margins and import data is described in detail. The SAM is disaggregated to create seven separate energy industries and commodities using various data sources. Emissions data are made consistent with the SAM and are disaggregated by commodity and industry or agent. |
| Keywords: | Social Accounting Matrix, Integrated Economic and Environmental Accounts |
| Date: | 2006–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp170&r=env |
| By: | Orley Ashenfelter; Karl Storchmann |
| Abstract: | In this paper we provide a simple, credible method for assessing the effects of climate change on the quality of agricultural land and then apply this method using a rich set of data on the vineyards of the Mosel Valley in Germany. The basic idea is to use a simple model of solar radiation to measure the amount of energy collected by a vineyard, and then to establish the econometric relation between energy and vineyard quality. Coupling this hedonic function with the elementary physics of heat and energy permits a straightforward calculation of the impact of any climate change on vineyard quality (and prices). We show that the variability in vineyard quality in this region is due primarily to the extent to which each vineyard is able to capture radiant solar energy, so that these data provide a particularly credible “experiment” for identifying and measuring the appropriate hedonic equation. Our empirical results indicate that the vineyards of the Mosel Valley will increase in value under a scenario of global warming, and perhaps by a considerable amount. Vineyard and grape prices increase more than proportionally with greater ripeness, so that we estimate a 3°C increase in temperature would more than double the value of this vineyard area, while a 1°C increase would increase prices by about 20 percent. |
| JEL: | C2 Q5 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12380&r=env |
| By: | Noriko Yasuyuki Sugiyama (Graduate School of Economics, Osaka University) |
| Abstract: | This paper investigates the relation between an export processing zone and a pollution quota in a small country. The model suppose that the pollution target is implemented with a marketable permit system, and the government sets the quota to maximize domestic welfare. Then we show that, if an increase in real income reduces marginal external damage, the pollution quota is relieved by the formation of an export processing zone. However, if the marginal damage is augmented with an increase in the income, the optimal quota might be strengthened by the formation of the zone. |
| Keywords: | export processing zone, international trade, environmental policy, pollution |
| JEL: | F18 O24 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0622&r=env |
| By: | A. Batabyal |
| Abstract: | In recent times, ecologists and economists have drawn attention to the fact ecological and economic systems are jointly determined. Once this is recognized, it seems rather obvious that ecological-economic systems ought to be studied as one system. However, because this recognition has been very recent, a number of important issues in ecological economics remain poorly understood. Consequently, the purpose of this paper is to identify and discuss five of these outstanding issues. |
| Keywords: | Ecological-economic system, keystone species, natural capital, optimal management, persistence, resilience, substitutability |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-01&r=env |
| By: | A. Batabyal |
| Abstract: | I describe the theoretical and empirical contributions that rigorous economic analysis can make in improving our understanding of the causes of and the solutions to a variety of international environmental problems. I do this by analyzing and summarizing the intellectual contributions of fourteen papers about the design and the implementation of international environmental agreements (IEAs). |
| Keywords: | Economic theory, game theory, international environmental agreement |
| JEL: | Q20 F42 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-02&r=env |
| By: | A. Batabyal |
| Abstract: | Increased public awareness of resource management issues and new attitudes toward resource conservation have led to great interest in the subject of the apposite use and management of natural and environmental resources in the American west. This paper analyzes this subject from an interdisciplinary ecological-economic perspective. The paper first identifies and then discusses four salient issues concerning the study of the west’s ecological-economic systems that remain inadequately understood. Next, the paper proposes a research agenda that will enable us to shed light on some key questions concerning the functioning, health, and management of the west’s ecological-economic systems. |
| Keywords: | American West, ecological-economic system, interdisciplinary research agenda |
| JEL: | Q20 C61 D81 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-13&r=env |
| By: | A. Batabyal |
| Abstract: | We use the theory of continuous-time Markov chains (CTMCs) to analyze hitherto unstudied questions about jointly determined ecological-economic systems. Two specific questions are examined. First, on the methodological front, we show how the theory of CTMCs can be used to effectively model dynamic and stochastic ecological-economic systems. Then, given recent concern about the sustainability of desirable states and lock-in into undesirable states, we partition the state space of our stylized ecological-economic system into good and bad states, and demonstrate the formal relationship between these two sets of states. Second, we discuss a way of looking at the task of managing ecological-economic systems that captures this formal link between the good and the bad states, and has other desirable properties. |
| Keywords: | Ecological-economic system, Markov process, optimal management |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-19&r=env |
| By: | A. Batabyal; H. Beladi; D. Lee |
| Abstract: | We first review the literature pertaining to the protection of the modern sector in developing countries (DCs). We then discuss the nexuses between protection, economic dualism, and optimal environmental policy in DCs. Next, in the theoretical part of the paper, we construct a dynamic model of the environmental policy formulation process in a stylized DC in which there is a balance of trade deficit, and a tariff that protects the modern—also the import competing and the polluting—sector. The employment and output effects of three different pollution taxes are analyzed. These taxes incorporate different assumptions about the DC government’s ability to commit to its announced course of action. The taxes are characterized, the dependence of these taxes on the extant tariff is studied, and the conditions which call for an activist policy, irrespective of the length of time to which the government can commit to its announced policy, are specified. Our analysis shows that the dynamic inconsistency of some optimal programs and the existence of the tariff can—either singly or collectively—prevent the DC government from attaining its employment and environmental goals. |
| Keywords: | Commitment, developing country, environmental policy, tariff, trade deficit |
| JEL: | O20 Q20 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-24&r=env |
| By: | A. Batabyal |
| Abstract: | We analyze two questions concerning the conservation of biodiversity in a dynamic and stochastic framework. First, given the link between natural habitats and biodiversity, when should a social planner stop the habitat conversion process? Second, what is the nexus between a social planner’s optimal conservation policy (OCP) and the length of this individual’s planning horizon? We obtain the following two results. First, the OCP calls for the social planner to wait a while, i.e., not act upon receipt of the first fraction of all utility packets. The social planner should then stop the habitat conversion process upon receipt of the first candidate packet. The probability that the use of this OCP will result in the conversion process being halted at the optimal point is Second, because the proportion of time for which it is optimal to wait before acting is fixed, longer planning horizons result in the conservation of relatively larger stocks of biodiversity. |
| Keywords: | Biodiversity, information, natural habitat, optimal stopping |
| JEL: | Q28 D81 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-26&r=env |
| By: | D. Lee; A. Batabyal |
| Abstract: | We analyze a dynamic model of environmental policy in a stylized developing country (DC) with a dual economy. This DC’s economy is distorted because the government subsidizes the exports of the non-polluting sector of the economy. We analyze the employment and output effects of three different pollution taxes. These taxes incorporate alternate assumptions about the DC government’s ability to commit to its announced course of action. We describe the taxes, we examine the dependence of these taxes on the extant distortion, and we stipulate the conditions that call for an activist policy, irrespective of the length of time to which the government can commit to its announced policy. Inter alia, our analysis shows why some DC governments may not be serious about environmental protection. |
| Keywords: | commitment, developing country, environmental policy, export subsidy |
| JEL: | O20 Q20 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-29&r=env |
| By: | A. Batabyal; H. Beladi; D. Lee |
| Abstract: | We first review the literature pertaining to the protection of the modern sector in developing countries (DCs). We then discuss the nexuses between protection, economic dualism, and optimal environmental policy in DCs. Next, in the theoretical part of the paper, we construct a dynamic model of the environmental policy formulation process in a stylized DC in which there is a balance of trade deficit, and a tariff that protects the modern—also the import competing and the polluting—sector. The employment and output effects of three different pollution taxes are analyzed. These taxes incorporate different assumptions about the DC government’s ability to commit to its announced course of action. The taxes are characterized, the dependence of these taxes on the extant tariff is studied, and the conditions that call for an activist policy, irrespective of the length of time to which the government can commit to its announced policy, are specified. Our analysis shows that the dynamic inconsistence of some optimal programs and the existence of the tariff can—either singly or collectively—prevent the DC government from attaining its employment and environmental goals. |
| Keywords: | commitment, developing country, environmental policy, tariff, trade deficit |
| JEL: | O20 Q20 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2000-30&r=env |
| By: | Urs Steiner Brandt (Department of Environmental and Business Economics, University of Southern Denmark); Frank Jensen (Institute of Local Government Studies, Denmark); Lars Gårn Hansen (Institute of Local Government Studies, Denmark); Niels Vestergaard (Department of Environmental and Business Economics, University of Southern Denmark) |
| Abstract: | Real life implies that public procurement contracting of renewable resources results in repeated interaction between a principal and the agents. The present paper analyses ratchet effects in contracting of renewable resources and how the presence of a resource constraint alters the “standard” ratchet effect result. We use a linear reward scheme to influence the incentives of the agents. It is shown that for some renewable resources we might end up both with more or with less pooling in the first-period compared to a situation without a resource constraint. The reason is that the resource constraint implies a smaller performance de-pendent bonus, which reduces the first-period cost from concealing information but at the same time the resource constraint may also imply that second-period benefits from this concealment for the efficient agent are reduced. In situations with high likelihood of first-period pooling, the appropriateness of applying lin-ear incentive schemes can be questioned. |
| Keywords: | Political support function, political economy, environmental regula-tion, lobbyism, rent-seeking, taxation, auction, grandfathering, emission trad-ing, European Union, interest groups, industry, consumers, environmentalists |
| JEL: | Q28 H2 H4 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:sdk:wpaper:58&r=env |
| By: | Juan-Pablo Montero |
| Abstract: | I study the advantages of pollution permit markets over traditional standard regulations when the regulator has incomplete information on firms’ emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firm’s abatement technology but neither its emissions nor its output, there are cases in which standards can lead to lower emissions and, hence, welfare dominate permits. If permits are optimally combined with standards, in many cases this hybrid policy converges to the permits-alone policy but (almost) never to the standards-alone policy. |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0414&r=env |
| By: | A. Denny Ellerman; Juan-Pablo Montero |
| Abstract: | This paper provides an empirical evaluation of the efficiency of allowance banking (i.e., abating more in early periods in order to abate less in later periods) in the nationwide market for sulfur dioxide (SO2) emission allowances that was created by the U.S. Acid Rain Program. We develop a model of efficient banking, select appropriate parameter values, and evaluate the efficiency of observed temporal pattern of abatement based on aggregate data from the first eight years of the Acid Rain Program. Contrary to the general opinion that banking in this program has been excessive, we find that it has been reasonably efficient. We also show that this optimal banking program is robust to the errors in expectation that characterized the early years of this program; however, this property is due to design features that are unique to the U.S. Acid Rain Program. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0505&r=env |
| By: | Olivier Deschenes; Michael Greenstone |
| Abstract: | We thank the late David Bradford for initiating a conversation that motivated this paper. Our admiration for David’s brilliance as an economist was only exceeded by our admiration for him as a human being. We are grateful for the especially valuable criticisms from David Card and two anonymous referees. Hoyt Bleakley, Tim Conley, Tony Fisher, Michael Hanemann, Enrico Moretti, Marc Nerlove, and Wolfram Schlenker provided insightful comments. We are also grateful for comments from seminar participants at Maryland, Princeton, Yale, the NBER Environmental Economics Summer Institute, and the “Conference on Spatial and Social Interactions in Economics” at the University of California-Santa Barbara. Anand Dash, Elizabeth Greenwood, Barrett Kirwan, Nick Nagle, and William Young, provided outstanding research assistance. We are indebted to Shawn Bucholtz at the United States Department of Agriculture for generously generating weather data for this analysis from the Parameterelevation Regressions on Independent Slopes Model. Finally, we acknowledge The Vegetation/Ecosystem Modeling and Analysis Project and the Atmosphere Section, National Center for Atmospheric Research for access to the Transient Climate database, which we used to obtain regional climate change predictions. Greenstone acknowledges generous funding from the American Bar Foundation. |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0601&r=env |
| By: | Juan-Pablo Montero |
| Abstract: | Efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators (e.g., cost of pollution abatement). Different mechanisms have been proposed for inducing firms to reveal their private information but for reasons I discuss in the paper, I find these mechanisms of limited use. I propose a much simpler mechanism that implements the first-best for any number of firms: a uniform price sealed-bid auction of an endogenous number of (transferable) licenses with a fraction of the auction revenues given back to firms. Paybacks, which decrease with the number of firms, are such that truth-telling is a dominant strategy regardless of whether firms behave non-cooperatively or collusively. |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0608&r=env |
| By: | Stephen Ryan |
| Abstract: | The typical cost analysis of an environmental regulation consists of an engineering estimate of the compliance costs. In industries where fixed costs are an important determinant of market structure this static analysis ignores the dynamic effects of the regulation on entry, investment, and market power. I evaluate the welfare costs of the 1990 Amendments to the Clean Air Act on the US Portland cement industry, accounting for these effects through a dynamic model of oligopoly in the tradition of Ericson and Pakes (1995). Using a recently developed two-step estimator, I recover the entire cost structure of the industry, including the distribution of sunk entry costs and adjustment costs of investment. I find that the Amendments have significantly increased the sunk cost of entry. I solve for the Markov perfect Nash equilibrium (MPNE) of the model and simulate the welfare effects of the Amendments. A static analysis misses the welfare penalty on consumers, and obtains the wrong sign on the welfare effects on incumbent firms. |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0510&r=env |
| By: | Matti Liski; Juan-Pablo Montero |
| Abstract: | We consider a market for storable pollution permits in which a large agent and a fringe of small agents gradually consume a stock of permits until they reach a long-run emissions limit. The subgame-perfect equilibrium exhibits no market power unless the large agent’s share of the initial stock of permits exceeds a critical level. We then apply our theoretical results to a global market for carbon dioxide emissions and the existing US market for sulfur dioxide emissions. We characterize competitive permit allocation profiles for the carbon market and find no evidence of market power in the sulfur market. |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0516&r=env |
| By: | Joshua Linn |
| Abstract: | Recent environmental regulations have used market incentives to reduce compliance costs and improve efficiency. In most cases, the Environmental Protection Agency (EPA) selects an emissions cap using the predicted costs of reducing pollution. The EPA and other economists have used a "bottom-up" approach to predict the costs of such regulations, which forecast how every affected firm will respond. It is uncertain whether firms rely on the same predictions in making their compliance decisions. This paper uses stock prices to compare the predictions of the bottom-up studies with those of the affected firms. I focus on a recent tradable permit program, the Nitrogen Oxides Budget Trading Program (NBP). Started in 2004, the NBP requires electric generators in the Midwest and East to reduce their emissions or purchase permits from other firms. I compare utilities’ stock prices with the prices that would have occurred in the absence of the new regulation. I make this comparison by exploiting variation in the location of generators owned by utilities; the control group consists of utilities without any generators in the NBP. I estimate that investors expected the program to reduce profits by about $2 billion per year (2000 dollars). Investors expected the NBP to primarily affect coal generators, which have larger baseline emission rates than other fossil fuel generators. These results agree with previous studies that used the bottom-up approach. |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:mee:wpaper:0611&r=env |