nep-env New Economics Papers
on Environmental Economics
Issue of 2007‒09‒24
fourteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Estimating Environmental Benefits of Natural Hazard Mitigation with Benefit Transfer: Results from a Benefit-Cost Analysis of FEMA Hazard Mitigation Grants By John C. Whitehead; Adam Z. Rose
  2. Atmospheric stabilization of CO2 emissions : near-term reductions and intensity-based targets By Timilsina, Govinda R.
  3. Des billets verts pour des entreprises agricoles vertes? By Paul Lanoie; Daniel Llerena
  4. The fundamentals of the future international emissions trading system By Loreta Stankeviciute; A. Kitous; Patrick Criqui
  5. Environmental Innovation, War of Attrition and Investment Grants By Cesare Dosi; Michele Moretto
  6. Estimating global climate change impacts on hydropower projects : applications in India, Sri Lanka and Vietnam By IIMI, Atsushi
  7. Bankruptcy Risk and the Performance of Tradable Permit Markets By John K. Stranlund; Wei Zhang
  8. Uncertainty, Learning and Ambiguity in Economic Models on Climate Policy: Some Classical Results and New Directions By LANGE Andreas; TREICH Nicolas
  9. Cropping in Arid-Area Greenhouse By Girja Sharan
  10. The Environmental Performance of Firms: The Role of Foreign Ownership, Training, and Experience By Matthew A Cole; Robert R J Elliott; Eric Strobl
  11. Characterisation of biodiversity in improved rubber agroforests in West-Kalimantan, Indonesia. Real and Potential uses for spontaneous plants By S. Diaz-Novellon; E. Penot; M. Arnaud
  12. Water Reuse in Brazilian Manufacturing Firms By José Féres; Arnaud Reynaud; Alban Thomas
  13. Politique climatique et politique commerciale : <br />le projet français de taxe CO2 aux frontières de l’Europe By Michel Damian; Mehdi Abbas
  14. Managing uncertainty: Hierarchies, Markets and "Networks" in the Russian Timber Industry. 1991-1998 By Lehmbruch, Barbara

  1. By: John C. Whitehead; Adam Z. Rose
    Abstract: This paper summarizes methods, data, and results associated with the first major attempt to evaluate the environmental benefits of FEMA natural hazards mitigation grants. The study relied heavily on the refinement of benefit transfer methods. Categories of benefits include water quality for recreational and commercial fishing, drinking water, outdoor recreation, hazardous waste, wetlands and aesthetic, health and safety benefits. Environmental and historic benefits proved to be a very minor proportion of the total benefits in dollar terms. Only a very small percentage of earthquake and wind-related hazards yielded environmental benefits, while a sizeable percentage of flood hazard grants did so. We also discuss the prospects that environmental benefits might have been much greater had data been available to analyze more environmental impacts. Key Words: Natural Hazard Mitigation, Environmental Benefits
    Date: 2007
  2. By: Timilsina, Govinda R.
    Abstract: This study analyzes CO2 emissions reduction targets for various countries and geopolitical regions by the year 2030 in order to stabilize atmospheric concentrations of CO2 at the level of 450 ppm (550 ppm including non CO2 greenhouse gases). It also determines CO2 intensity cuts that would be needed in those countries and regions if the emission reductions were achieved through intensity-based targets while assuming no effect on forecasted economic growth. Considering that the stabilization of CO2 concentrations at 450 ppm requires the global trend of CO2 emissions to reverse before 2030, this study develops two scenarios: reversing the global CO2 trend in (i) 2020 and (ii) 2025. The study shows that global CO2 emissions would be 42 percent above the 1990 level in 2030 if the increasing trend of global CO2 emissions is reversed by 2020. If reversing the trend is delayed by 5 years, the 2030 global CO2 emissions would be 52 percent higher than the 1990 level. The study also finds that to achieve these targets while maintaining assumed economic growth, the global average CO2 intensity would require a 68 percent drop from the 1990 level or a 60 percent drop from the 2004 level by 2030.
    Keywords: Climate Change,Transport and Environment,Environment and Energy Efficiency,Energy Production and Transportation,Energy and Environment
    Date: 2007–09–01
  3. By: Paul Lanoie; Daniel Llerena
    Abstract: The conventional wisdom about environmental protection is that it comes at an additional cost on farmers imposed by the government, which may erode their global competitiveness. However, during the last decade, this paradigm has been challenged by a number of analysts. In particular, Porter (Porter, 1991; Porter and van der Linde, 1995) argues that pollution is often associated with a waste of resources (material, energy, etc.), and that more stringent environmental policies can stimulate innovations that may compensate for the costs of complying with these policies. In fact, there are many ways through which improving the environmental performance of a farm can lead to a better economic or financial performance, and not necessarily to an increase in cost. To be systematic, it is important to look at both sides of the balance sheet. Following the framework developed by Reinhardt (2000), Lankoski (2000, 2006), and Lanoie and Ambec (2007), we can argue, first, that a better environmental performance can lead to an increase in revenues through the following channels: i) a better access to certain markets; ii) the possibility to differentiate products and iii) the possibility to sell pollution-control technology. Second, a better environmental performance can lead to cost reductions in the following categories: iv) regulatory cost; v) cost of material, energy and services; vi) cost of capital, and vii) cost of labour. In this article, we want to evaluate how this framework is relevant for the agricultural sector. In other words, for each of the seven channels identified above [i) to vii)], we want to see how it can be applied to the agricultural sector, while presenting concrete illustrations under the form of short case studies. Although other authors have discussed the profitability of different new agro-environmental practices; to our knowledge, nobody has done it in such a systematic way as that presented here. Moreover, the concrete examples from France and Quebec that we present may inspire farmers who are still debating as to, whether or not, they should “green” their activities. We conclude that there are many opportunities to improve at the same time the environmental and the financial performance in the agricultural sector, but maybe less than in other sectors. <P>Il est de coutume d'associer à la protection de l'environnement l'idée que l'intervention des pouvoirs publics représente uniquement des coûts supplémentaires pour les agriculteurs. Cependant, depuis quelques années, ce paradigme est remis en cause par de nombreuses études. Par exemple, Porter et van der Linde (Porter, 1991; Porter and van der Linde, 1995) considèrent que la pollution est souvent associée à une sous utilisation des ressources (matière première, énergie, etc.) et que l'existence de politiques environnementales plus strictes peut stimuler l'innovation et, par là même, aboutir à une compensation des coûts supportés par les entreprises régulées. En réalité, il existe de multiples canaux par lesquels une amélioration de la performance environnementale des exploitations agricoles peut aboutir à de meilleures performances économiques, ou en tout cas pas nécessairement à un accroissement des coûts d'exploitation. Pour être systématique, il faut examiner les impacts de la performance environnementale non seulement en termes de revenus additionnels, mais également en termes de réduction des coûts. En suivant le cadre d'analyse proposé par Reinhardt (2000), Lankoski (2000, 2006) et Lanoie et Ambec (2007), nous pouvons tout d'abord constater qu'une amélioration des performances environnementales peut induire un accroissement des recettes via trois canaux : i) l'accès à de nouveaux marchés ; ii) la possibilité de différencier les produits et iii) la possibilité de vendre des technologies environnementales. Par ailleurs, une meilleure performance environnementale peut également se traduire par une réduction des coûts dans les catégories suivantes : iv) coûts réglementaires; v) coûts des matières premières, des intrants et de l’énergie; vi) coût du capital et vii) coût du travail. L'objectif de cet article est d'appliquer ce cadre d'analyse au secteur agricole. Plus précisément, à l'aide d'illustration et d'études de cas, nous analysons pour chacun des sept points présentés ci-dessus les relations qui peuvent exister entre la performance environnementale des exploitations agricoles et leur performance économique. Si certains auteurs ont déjà étudié la rentabilité de différentes mesures ou techniques agro-environnementales, il n'existe pas à notre connaissance d'études systématiques. De plus, les exemples concrets d'expériences menées en France et au Québec montrent que la question de l'impact des pratiques environnementales sur la rentabilité des entreprises reste d'actualité, et que les approches proposées peuvent être une source d’inspiration pour les agriculteurs en réflexion quant à leur décision d’investir ou non en matière de protection de l'environnement.
    Keywords: Environmental policy, innovation, Porter hypothesis, pollution from agriculture, optimization, capital markets, biofood., Politiques environnementales, innovation, hypothèse de Porter, pollution agricole, optimisation, marché des capitaux, produits bio.
    Date: 2007–09–01
  4. By: Loreta Stankeviciute (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II]); A. Kitous (Enerdata - [Enerdata]); Patrick Criqui (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: The study aims to examine the efficiency aspects of the international carbon market, with a focus on economic impacts on the European energy system, by analyzing the sectoral Marginal Abatements Cost Curves (MACC) and the trading under different global carbon market configurations in 2010 and in 2020. To produce a consistent and realistic assessment we employ sources such as: second NAPs under ETS, GHG National Inventories, EIA data and POLES world energy model to constitute the sectoral base year and 2010, 2020 emission levels in different countries and regions. We then use the market analysis tool ASPEN, which enables to derive supply and demand from sectoral MACCs produced with POLES model, and to evaluate the economic impacts on the carbon market participants. The paper shows in particular that in compliance with 2020 emission reduction targets, the benefits of an extended carbon market gain importance since more than 50% of the reduction target is achieved by ETS sectors and especially electricity sector. Furthermore, the new flexibility margins provided by a longer time-period for the adjustment of investments in new generation capacities compensates for the increasing pressure towards stronger emission reductions
    Keywords: emission trading ; international carbon market ; CO2 price
    Date: 2007–09–14
  5. By: Cesare Dosi (Università di Padova); Michele Moretto (Università di Padova)
    Abstract: The paper analyses the timing of spontaneous environmental innovation when second-mover advantages, arising from the expectation of declining investment costs, increase the option value of waiting created by investment irreversibility and uncertainty about private payoffs. We then focus on the design of public subsidies aimed at bridging the gap between the spontaneous time of technological change and the socially desirable one. Under network externalities and incomplete information about firms’ switching costs, auctioning investment grants appears to be a cost-effective way of accelerating pollution abatement, in that it allows targeting grants instead of subsidizing the entire industry indiscriminately
    Keywords: Environmental innovation, Investment irreversibility, Network externalities, Investment grants, Second-price auction.
    JEL: Q28
    Date: 2007–09
  6. By: IIMI, Atsushi
    Abstract: The world is faced with considerable risk and uncertainty about climate c hange. Particular attention has been paid increasingly to hydropower generation in recent years because it is renewable energy. However, hydropower is among the most vulnerable industries to changes in global and regional climate. This paper aims to examine the possibility of applying a simple vector autoregressive model to forecast future hydrological series and evaluate the resulting impact on hydropower projects. Three projects are considered - in India, Sri Lanka, and Vietnam. The results are still tentative in terms of both methodology and implications; but the analysis shows that the calibrated dynamic forecasts of hydrological series are much different from the conventional reference points in the 90 percent dependable year. The paper also finds that hydrological discharges tend to increase with rainfall and decrease with temperature. The rainy season would likely have higher water levels, but in the lean season water resources would become even more limited. The amount of energy generated would be affected to a certain extent, but the project viability may not change so much. Comparing the three cases, it is suggested that having larger installed capacity and some storage capacity might be useful to accommodate future hydrological series and seasonality. A broader assessment will be called for at the project preparation stage.
    Keywords: Climate Change,Hydro Power,Energy Production and Transportation,Water and Energy,Global Environment Facility
    Date: 2007–09–01
  7. By: John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); Wei Zhang (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: We study the impact of bankruptcy risk on markets for tradable environmental and natural resource permits. We find that firms that risk bankruptcy demand more permits than if they were financially secure. Consequently, bankruptcy risk in a competitive market for tradable property rights causes an inefficient distribution of individual choices among regulated firms. Moreover, the equilibrium distribution of permits is not independent of the initial distribution of permits. In fact, the inefficiency that is associated with bankruptcy risk is mitigated if financially insecure firms are given a larger share of the initial allocation of permits.
    Keywords: bankruptcy, tradable permits, permit markets
    JEL: L51 Q28 Q58
    Date: 2007–09
  8. By: LANGE Andreas; TREICH Nicolas (LERNA, TSE)
    Date: 2007–08
  9. By: Girja Sharan
    Abstract: In hot, arid regions, yields are usually low and unstable. Greenhouse technology can stabilize and improve yields. But its adoption is impeded by the requirement of large amounts of water for cooling. Evaporative cooling is the most common method. Arid Area Greenhouse (AAG) is being developed for hot arid regions, particularly to reduce or eliminate the water needed for cooling. To achieve this, AAG employs earth-tube-heat-exchanger (ETHE) and static vents for environmental control. A prototype was installed in 2002 in an arid region, at village Kothara (ƒÚ 23¢X 14 N, ƒÜ 68¢X 45 E, at 21 m a.s.l.) for study. The single span saw-tooth greenhouse is 20 X 6 X 3.5 m. The ETHE is buried 3m deep directly below and coupled to it in closed-loop mode. ETHE is made of a bundle of eight mild steel pipes arranged in two tiers. Each pipe is 23 m long and 20 cm diameter. ETHE provides 20 air changes per hour. Initial cost of ETHE (material, fabrication, transport and installation) was $ 5000, nearly equal to that of greenhouse excluding instrumentation. There are three continuous closable vents - two along the base of long sides and one along the ridge. A retractable shading cover is provided over the roof. The aim was to determine (a) the extent to which ETHE and natural ventilation meet the need for environmental control and the associated costs (b) the extent to which productivity is increased, cropping season extended. By summer of 2007 five rounds of cropping have been done. ETHE was able to heat the greenhouse easily from 9¢XC to 22-23¢XC in half hour in the cold winter nights. Static ventilation along with shading was effective for day time control till February keeping the temperature about 34¢XC inside. Subsequently, ETHE was operated. It limited the greenhouse temperature to 36-37¢XC with top shaded and crop inside. If grid supply is steady it is operated for five-six hours in the day. House is closed in May-June. Yield of tomato has been close to 2 times that of the open-fields in the province. Water used was 44% of that used in open-field. The water used was mostly for plants, only a small part was for supplementary cooling using foggers. ETHE and static vents hold promise as environmental control device for greenhouses in hot arid regions. There is need to reduce installation cost by substituting plastic pipes for metal. It is also necessary to develop a more easily scalable design than the present one.
    Keywords: greenhouse, earth-tube-heat-exchanger
    Date: 2007–09–11
  10. By: Matthew A Cole; Robert R J Elliott; Eric Strobl
    Abstract: In this paper we extend the debate on the environmental implications of foreign direct investment in developing countries by examining a new mechanism through which foreign influence can affect the environmental performance of firms. We focus on the extent to which key workers who have had previous training or experience in a foreign owned firm transfer and utilise their knowledge gained to the benefit of the local environment. To this end we use detailed firm-level data on manufacturing firms in Ghana. Our econometric results sugggest that the foreign training of a firm's decision maker does reduce fuel use, particularly so in foreign owned firms. Foreign ownership per se does not influence fuel use or total energy use but is found to increase electricity use, perhaps the cleanest form of energy used by Ghanaian firms.
    Keywords: Environment, Spillovers, FOreign Direct Investment
    JEL: Q56 Q52 F21 F23
    Date: 2007–08
  11. By: S. Diaz-Novellon (CNEARC - Centre national de recherche en agronomie des régions chaudes - [SUPAGRO IRC]); E. Penot (UMR 85 - Innovation - [CIRAD : UMR85] - [CNEARC]); M. Arnaud (UMR 85 - Innovation - [CIRAD : UMR85] - [CNEARC])
    Abstract: Since the introduction of rubber at the turn of the 20th century smallholders have developed an original complex agroforestry system called jungle rubber in which non selected young rubber trees (seedlings) are managed extensively alongside secondary forest re-growth. The issue of improving smallholder rubber productivity at affordable capital investments and levels of inputs while maintaining the environmental benefits of jungle rubber has been addressed by the Smallholder Rubber Agroforestry Project (SRAP: a joint project run by ICRAF, GAPKINDO and CIRAD). In 1995-1996, 27 trials (with a total of 100 plots) were set up in three provinces in Indonesia to assess the possibility of associating clonal rubber with agroforestry practices under smallholder conditions (Penot, 1997). Two RAS types were selected for this study: RAS n° 1 and n° 3. RAS n° 1 is basically improved jungle rubber using clonal planting material (see a description of RAS types in annexe 1). The rubber trees are in competition with spontaneous vegetation in the inter-row but results show that there are no negative consequences for rubber growth during the immature period. RAS n° 3 was designed for areas infested by Imperata cylindrica, with the establishment of shrubby leguminous cover crops and fast-growing tree species in the inter-rows with the aim of shading out weeds. The other type, RAS n° 2, is based on intercropping clonal rubber with various annual and perennial crops, including fruit and timber trees (Penot et al, 1994). In all cases, RAS have a planting density of 550 clonal rubber trees/ha and a variable number of associated fruit, timber or fast growing shade trees (from 92 to 256/ha). In addition to the RAS experimental plots, “RAS sendiri” (or “endogenous RAS”) are rubber agroforests improved by farmers without outside assistance. The district of Sanggau in the province of West Kalimantan was identified by SRAP as representative of traditional jungle-rubber-based local farming systems that have developed over the last 90 years. The district of Sanggau is located in the central area of the Kapuas river basin, between 1° N and 0°6’ S and 09°8’ W and 11°33’ E. The district covers 18 302 km2, i.e. 13 % of the province. The trial plots described in this study are located in the villages of Embaong, Engkayu, Kopar, and Trimulia (the last being in the transmigration area). Most soils in the province of West-Kalimantan are acrisoils associated with ferralitic soils. Such soils have relatively good physical characteristics but poor chemical value and become acid. Rubber is widely grown in this area as it can grow in poor soils. The landscape is dominated by logged-over forest, secondary forest and a mosaic of jungle rubber and fallow with secondary forest re-growth. Large scale logging activities took place from 1950s to the 1980s at the expense of primary forest. At present, forested areas are located in hilly or remote areas and are very limited in extent. Oil palm and Acacia mangium plantations developed exponentially in the 1990s increasing the conversion of degraded forest areas into Estates that cultivate perennial crops. The main objective of this study is to assess existing plant biodiversity in RAS systems compared to that of jungle rubber. The second objective is to review the current uses of certain plants and their market potential.
    Date: 2007–09–17
  12. By: José Féres; Arnaud Reynaud; Alban Thomas
    Abstract: This paper examines the factors influencing water reuse in manufacturing firms and analyzes whether the structure of intake water demand differs between firms that adopt water reuse practices and those which do not. To this purpose, we estimate a two-stage econometric model based on a sample of 447 industrial facilities located in the Paraíba do Sul river basin. The first stage applies a probit model for the water reuse decision and the second stage employs an endogenous switching regression to estimate the intake water demand equations. Results suggest that water charges may act as an effective mechanism in inducing firms to undertake water reuse investments and reducing intake water demand. Estimates of the water demand price elasticities indicate that plants reusing water are more sensitive to water price increases than plants without access to reuse technologies.
    Date: 2007–01
  13. By: Michel Damian (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II]); Mehdi Abbas (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - [CNRS : FRE2664] - [Université Pierre Mendès-France - Grenoble II])
    Abstract: L’article analyse la faisabilité de la taxe carbone aux frontières de l’Europe proposée par le Gouvernement français. L’objectif est d’éviter les distorsions de concurrence à l’encontre des industries européennes qui subissent le coût du Protocole de Kyoto et d’inciter les grands concurrents de l’Europe à rejoindre celui-ci. Les positions jusque-là exprimées divergent principalement sur la compatibilité d’une telle taxe avec les règles de l’OMC. Sans présager de l’issue d’une action devant son Organe de règlement des différends, l’article considère que le problème se situe moins dans la faisabilité technique ou les règles du commerce multilatéral que dans la détermination collective à diminuer drastiquement les émissions de gaz à effet de serre. Le projet français est donc un test des volontés politiques en matière de politique climatique après l’échéance du Protocole de Kyoto en 2012. L’article analyse les grandes orientations des prochaines négociations.
    Date: 2007–09–19
  14. By: Lehmbruch, Barbara (BOFIT)
    Abstract: The paper investigates institutional development in the Russian forestry sector after 1991. As it argues, while there has been a great degree of decentralization, original market-oriented reform blueprints for the industry were only partially implemented. The reasons for this can be found largely in the failure of weak state institutions to standardize and universalize transactions. Attempts to restore top-down, Moscow-centered branch administration in the form of a state committee have equally failed. The paper asks how best to describe the highly personalistic transactional landscape that has emerged from the failure of hierarchies and markets. It argues that there is little evidence of “clan”-style “directors’ networks” based on direct personal trust. Rather, economic actors prefer a two-pronged strategy of dealing with environmental uncertainty: While attempting to minimize environmental exposure by establishing forms of vertical integration, they also they hedge their exposure by maintaining multiple, often loose outside affiliations. This, it is argued, applies to both the horizontal, business-to-business level and to vertical clientelistic relations with state actors.
    Keywords: Russia; timber industry; organizations
    Date: 2007–09–14

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