nep-env New Economics Papers
on Environmental Economics
Issue of 2007‒08‒27
sixteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Carbon Sequestration in Forest Ecosystems as a Strategy for Mitigating Climate Change By G. Cornelis van Kooten; Susanna Laaksonen-Craig; Yichuan Wang
  3. Economics of Forest Ecosystem Carbon Sinks: A Review By G. Cornelis van Kooten; Brent Sohngen
  4. Industry Compensation and the Costs of Alternative Environmental Policy Instruments By A. Lans Bovenberg; Lawrence H. Goulder; Mark R. Jacobsen
  5. Issues of Dual Use and Reviewing Product Coverage of Environmental Goods By Joy A. Kim
  6. Wind Integration into Various Generation Mixtures By Jesse Maddaloni; Andrew Rowe; G. Cornelis van Kooten
  7. How might climate change affect economic growth in developing countries ? a review of the growth literature with a climate lens By Shalizi, Zmarak; Lecocq, Franck
  8. Modelling Organic Farming at Sector Level. An Application to the Reformed CAP in Austria By Erwin Schmid; Franz Sinabell
  9. Social Values of Biodiversity Conservation for the Endangered Loggerhead Turtle and Monk Seal By Pamela Kaval; Mavra Stithou; Riccardo Scarpa
  10. Environment, Directed Technical Change and Economic Policy By GRIMAUD, André; ROUGÉ, Luc
  11. A Development Curse: Formal vs. Informal Activities in Resource-Dependent Economies By Elissaios Papyrakis
  12. Bubbles in Prices of Exhaustible Resources By Boyan Jovanovic
  13. Economic evidence of willingness to pay for the National Animal Identification System (NAIS) in the U.S. By Resende-Filho, Moises; Buhr, Brian
  14. From Ecological Footprint to Ecological Rent: An Economic Indicator for Resource Constraints By Kurt Kratena
  15. Linking Forests and Economic Well-being: A Four Quadrant Approach By Sen Wang; C. Tyler DesRoches; Lili Sun; Brad Stennes; Bill Wilson; G. Cornelis van Kooten
  16. Profit Sharing Between Governments and Multinationals in Natural Resource Extraction: Evidence From a Firm-Level Panel By Margaret S. McMillan; Andrew R. Waxman

  1. By: G. Cornelis van Kooten; Susanna Laaksonen-Craig; Yichuan Wang
    Abstract: Under Kyoto, forestry activities can be used to create CO2 offset credits, which are earned by storing carbon in forest ecosystems and wood products. CO2 emissions could also be mitigated by delaying deforestation, which accounts for one-quarter of anthropogenic CO2 emissions. Non-permanent carbon offsets from forest activities are difficult to compare with each other and with mitigation strategies because they differ in how long they prevent CO2 from entering the atmosphere. We expand in comprehensive fashion on earlier work comparing carbon mitigation activities according to how long they lower atmospheric CO2 levels. The duration problem is modeled and meta-regression analysis with 1047 observations from 68 studies is used to determine whether duration leads to inconclusive results between uptake costs and carbon sequestration. Regression results are used to estimate potential costs of carbon uptake via forestry activities for various scenarios. It turns out that forestry activities are competitive with emissions reduction in tropical and, perhaps, boreal regions, but certainly not in Europe.
    Keywords: climate change, carbon offset credits from forestry activities, meta-regression analysis
    JEL: Q54 R15 Q23 Q27
    Date: 2007–07
  2. By: Gary W. Yohe; Richard S.J. Tol (Economic and Social Research Institute, Dublin, Ireland)
    Abstract: We discuss the implication of Weitzman's Dismal Theorem for climate policy and climate research.
    Keywords: climate change, uncertainty
    JEL: Q54
    Date: 2007–08
  3. By: G. Cornelis van Kooten; Brent Sohngen
    Abstract: Carbon terrestrial sinks are seen as a low-cost alternative to fuel switching and reduced fossil fuel use for lowering atmospheric CO2. In this study, we review issues related to the use of terrestrial forestry activities to create CO2 offset credits. To gain a deeper understanding of the confusing empirical studies of forest projects to create carbon credits under Kyoto, we employ meta-regression analysis to analyze conditions under which forest activities generate CO2-emission reduction offsets at competitive ‘prices’. In particular, we examine 68 studies of the costs of creating carbon offsets using forestry. Baseline estimates of costs of sequestering carbon are some US$3–$280 per tCO2, indicating that the costs of creating CO2-emission offset credits through forestry activities vary wildly. Intensive plantations in the tropics could potentially yield positive benefits to society, but in Europe similar projects could cost as much as $195/tCO2. Indeed, Europe is the highest cost region, with costs in the range of $50-$280 per tCO2. This might explain why Europe has generally opposed biological sinks as a substitute for emissions reductions, while countries rush to finance forestry sector CDM projects. In Canada and the U.S., carbon sequestration costs range from a low of about $2 to nearly $80 per tCO2. One conclusion is obvious: some forestry projects to sequester carbon are worthwhile undertaking, but certainly not all.
    Keywords: climate change, Kyoto Protocol, meta-regression analysis, carbon-uptake costs, forest sinks
    JEL: Q2 Q25 H43 C19
    Date: 2007–04
  4. By: A. Lans Bovenberg; Lawrence H. Goulder; Mark R. Jacobsen
    Abstract: This paper explores how the costs of meeting given aggregate targets for pollution emissions change with the imposition of the requirement that key pollution-related industries be compensated for potential losses of profit from the pollution regulation. Using analytically and numerically solved equilibrium models, we compare the incidence and economy-wide costs of emissions taxes, fuel (intermediate input) taxes, performance standards and mandated technologies in the absence and presence of this compensation requirement. Compensation is provided either through lump-sum industry tax credits or industry-specific cuts in capital tax rates. We decompose the added costs from the compensation requirement into (1) an increase in "intrinsic abatement cost," reflecting a lowered efficiency of pollution abatement, and (2) a "lump-sum compensation cost" that captures the efficiency costs of financing the compensation. The compensation requirement affects these components differently and thus can alter the cost-rankings of policies. When compensation is provided through tax credits, the lump-sum compensation cost is higher under the emissions tax than under performance standards and mandated technologies -- a reflection of the emission tax's higher compensation requirements. If in this setting the required pollution reduction is modest, imposing the compensation requirement causes the emissions tax to become more costly than command and control policies. In contrast, if required abatement is extensive, the emissions tax emerges as the most cost-effective policy because its relatively low intrinsic abatement costs assume greater importance.
    JEL: H21 H23 Q58
    Date: 2007–08
  5. By: Joy A. Kim
    Abstract: Importing "environmental" goods which are also used for other than environmental purposes and ensuring that they represent the most appropriate technology for a particular environmental problem are key concerns to be addressed in the approaches currently being discussed under paragraph 31(iii) of the Doha Agenda. By drawing lessons from experiences with WTO sectoral agreements such as the Agreements on Information Technology (ITA), Trade in Pharmaceutical Products and Trade in Civil Aircraft as well as relevant national schemes, this paper explores possible options to address these two issues.
    Keywords: WTO, environmental goods
    Date: 2007–03–29
  6. By: Jesse Maddaloni; Andrew Rowe; G. Cornelis van Kooten
    Abstract: A load balance model is used to quantify the economic and environmental effects of integrating wind power into three typical generation mixtures. System operating costs over a specified period are minimized by controlling the operating schedule of existing power generating facilities for a range of wind penetrations. Unlike other studies, variable generator efficiencies, and thus variable fuel costs, are taken into account, as are the ramping constraints on thermal generators. Results indicate that system operating cost will increase by 15% to 110% (pending generation mixture) at a wind penetration of 100% of peak demand. Results also show that some mixtures will exhibit cost reductions on the order of 13% for moderate wind penetrations and high wind farm capacity factors. System emissions also decrease by 13% to 32% (depending on generation mixture) at a wind penetration of 100%. This leads to emission abatement costs in the range of $65 per tonne-CO2e for coal dominated mixtures, but $450 per tonne-CO2e for hydro dominated mixtures. For natural gas dominated mixtures, the introduction of wind power may well be beneficial overall.
    Keywords: Wind power integration, generation mixtures, emissions cost
    JEL: Q40 Q42 Q50
    Date: 2007–07
  7. By: Shalizi, Zmarak; Lecocq, Franck
    Abstract: This paper reviews the empirical and theoretical literature on economic growth to examine how the four components of the climate change bill, namely mitigation, proactive (ex ante) adaptation, reactive (ex post) adaptation, and ultimate damages of climate change affect growth, especially in developing countries. The authors consider successively t he Cass-Koopmans growth model and three major strands of the subsequent literature on growth: with multiple sectors, with rigidities, and with increasing returns. The paper finds that although the growth literature rarely addresses climate change per se, some issues discussed in the growth literature are directly relevant for climate change analysis. Notably, destruction of production factors, or decrease in factor productivity may strongly affect long-run equilibrium growth even in one-sector neoclassical growth models; climatic shocks have had large impacts on growth in developing countries because of rigidities; and the introducing increasing returns has a major impact on growth dynamics, in particular through induced technical change, poverty traps, or lock-ins. Among the most important gaps identified in the literature are lack of understanding of the channels by which shocks affect economic growth, lack of understanding of lock-ins, heavy reliance of numerical models assessing climate policies on neoclassical-type growth frameworks, and frequent use of an inappropriate " without climate change " counterfactual.
    Keywords: Economic Growth,Economic Theory & Research,Climate Change,Pro-Poor Growth and Inequality,Population Policies
    Date: 2007–08–01
  8. By: Erwin Schmid; Franz Sinabell (WIFO)
    Abstract: Organic farming practices have environmental benefits compared to conventional ones. Their adoption is the result of a complex interaction of intrinsic attitudes of farmers, their profit expectations and farm policy incentives. We use an agricultural sector model and develop an extended version of the Positive Mathematical Programming (PMP) method to differentiate organic farming from other management practices. Austria is chosen for the case study because 8 percent of its farmland are managed organically, and detailed data on alternative management practices are available. The results suggest that the agricultural policy reforms made organic farming more attractive for farmers.
    Keywords: Organic farming, Common Agricultural Policy, Program for Rural Development, Agricultural Sector Modelling
    Date: 2007–02–19
  9. By: Pamela Kaval (University of Waikato); Mavra Stithou (University of Stirling); Riccardo Scarpa (University of Waikato)
    Abstract: The Mediterranean monk seal (Monachus monachus) and the loggerhead turtle (Caretta caretta) are two species on the priority list for conservation in Greece due to their dwindling populations worldwide. Hence the issue of estimating willingness to pay for their conservation is germane to any protection initiative. Zakynthos Island in Greece has created a marine park for the conservation of such species. We report the results of a survey of visitors and residents of this island who were asked about making one-time donations in the form of either a tax for residents or a plane landing fee for tourists. We find that all people were willing to pay to protect these species; however, residents were willing to pay more than tourists. We then tested whether there was a sequence or ordering effect if the seal questions came before the turtles as well as if the turtle questions came before the seals. Such effect was found when turtle questions were presented first, but not when seal questions were presented first. Due to the extensive interest, it is recommended that an increase in the airplane landing fee to Zakynthos could be used to contribute towards funds for loggerhead turtle and monk seal protection.
    Keywords: biodiversity conservation; Zakynthos; contingent valuation; ordering effect; Monk seal; Loggerhead turtle.
    JEL: Q2 Q34
    Date: 2006–08–20
  10. By: GRIMAUD, André; ROUGÉ, Luc
    Date: 2007–07
  11. By: Elissaios Papyrakis
    Abstract: In most resource-driven developing economies, a mineral-based formal sector and an informal resource sector (such as charcoal production) constitute the main economic activities, from which local dwellers derive their livelihoods. The paper examines the coexistence of formal and informal resource sectors in resource-dependent economies, whose production depend on an exhaustible (e.g. minerals) and a renewable resource stock (e.g. forest) respectively. We examine the implications of declining mineral stocks on public revenues, labour movements between sectors, and economic growth in an attempt to elucidate the poor economic performance of most mineral-dependent countries. Decreasing mineral stocks induce a relocation of labour towards informal production, and deprive local authorities from public revenues collected within the formal economy. This constrains the ability to improve infrastructure and welfare over time and simultaneously imposes pressure on the local environment through deforestation.
    Keywords: Mining, Growth, Environment
    JEL: O11 O13 Q32
    Date: 2007–06
  12. By: Boyan Jovanovic
    Abstract: Aside from the equilibrium that Hotelling (1931) displayed, his model of non-renewable resources also contains a continuum of bubble equilibria. In all the equilibria the price of the resource rises at the rate of interest. In a bubble equilibrium, however, the consumption of the resource peters out, and a positive fraction of the original stock continues to trade forever. And that may well be happening in the market for high-end Bordeaux wines.
    JEL: E44 G12
    Date: 2007–08
  13. By: Resende-Filho, Moises; Buhr, Brian
    Abstract: This article investigates the willingness to pay for the National Animal Identification System (NAIS) in the US. We assume that with the NAIS in place, consumers’ concerns about Bovine Spongiform Encephalopathy (BSE) or mad cow disease will be reduced and by inference consumers will be willing to pay for the NAIS. To estimate this level of willingness to pay a generalized almost ideal demand system including beef, pork and poultry is estimated, including indexes of perception of BSE based on news coverage of BSE in the U.S. We found that while news indexes of BSE were not individually significant, that they were jointly significant in test of preferred models. Using the preferred model, we constructed three scenarios on the basis of hypothesized impacts of the NAIS on consumers' food safety concerns about meat. Our conclusion is that the impact of BSE on consumer demand for meat was in itself sufficient to cover previously estimated costs of implementing the NAIS. However, it does so at the expense of pork and poultry which lose consumption relative to beef if the NAIS reduces consumers concerns as assumed. Other disease and pathogen potential would be expected to further enhance its value.
    Keywords: Animal Identification System; Food Safety; System of Demand Equations; Meat Industry; USA
    JEL: Q18 Q11 Q13
    Date: 2006–09–01
  14. By: Kurt Kratena (WIFO)
    Abstract: This paper takes as a starting point a combination of an (monetary) input-output model with a national Ecological Footprint account for Germany in the spirit of Wiedmann et al. (2006). Footprint as well as Biocapacity is dealt with at the industry level. Gross output of each industry and final demand for each industry can then be split up into a share that is reconcilable with Biocapacity and another share that corresponds to Biocapacity overshooting. The Ecological Footprint concept is extended in this study by introducing the additional biophysically productive land necessary for sustaining the given level of economic activity. It is assumed that each industry had to rent the corresponding areas and to apply a given technology in order to make this additional land biophysically productive. That results in a new technology for each industry leading to an increase in costs and prices. The new price level is directly linked to the share of output that corresponds to Biocapacity overshooting. Economic indicators can be derived by measuring the income difference brought about by the price increase. This difference corresponds to a Ricardian rent which is due to resource constraints on output growth.
    Keywords: input-output models, Ecological Footprint, Ricardian rent
    Date: 2007–05–29
  15. By: Sen Wang; C. Tyler DesRoches; Lili Sun; Brad Stennes; Bill Wilson; G. Cornelis van Kooten
    Abstract: This paper has three main objectives: (1) to investigate whether the four-quadrant approach introduced by Maini (2003) reveals a useful typology for grouping countries by GDP and forest cover per capita, (2) to determine if the framework can enhance our understanding of the relationship between forest cover and GDP per capita, and (3) to investigate why countries in the four-quadrant world occupy different quadrants, and to determine the principal factors affecting country-movement across and within the individual quadrants. The examination reveals that countries can be classified into four broad categories, and that GDP and forest cover per capita have a low but consistent level of negative association. After regressing economic, institutional, social capital and other variables on a country’s occupancy and movement in the four-quadrant world, the results suggest that countries in each quadrant share different characteristics and that factors underlying country-movement varies according to the quadrant being observed. Overall, countries with less corruption and higher education are likely to experience increases in both forest cover and GDP per capita, while countries exporting a significant proportion of forest products have a reduced probability of increasing both variables.
    Keywords: Economic well-being, forest cover, institutions, corruption, education
    JEL: G00 I20 Q23
    Date: 2007–03
  16. By: Margaret S. McMillan; Andrew R. Waxman
    Abstract: The "fairness" of negotiations between countries and resource extracting firms is subject to many accusations and counter-accusations and may be argued, in many instances, to impact the subsequent economic benefit to a host country from extraction. This paper examines the role of host country governance on the share of government take from extraction revenue. We attempt to disentangle a number of competing hypotheses regarding the relationship between governance and government take using panel data for US resource extracting multinational corporations (MNCs) operating abroad from the Bureau of Economic Analysis of the US Department of Commerce over 1982-1999. Using fixed effects regression, we find a statistically significant positive impact of institutional quality on government take. The nature of this relationship -- whether this represents the result of a "corruption premium" paid by US MNCs or the exploitation of poor governance in negotiating government take -- is not completely clear. The evidence presented does, however, indicate that potential forms of bargaining power other than institutional quality (e.g., outside options to the deal) do increase government take, indicating that bargaining power may nonetheless be an important factor.
    JEL: F23
    Date: 2007–08

This nep-env issue is ©2007 by Francisco S.Ramos. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.