nep-env New Economics Papers
on Environmental Economics
Issue of 2008‒03‒15
eighteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Policies to Reduce Emissions from Deforestation and Degradation (REDD) in Tropical Forests: An Examination of the Issues Facing the Incorporation of REDD into Market-Based Climate Policies By Myers, Erin C.
  2. Managing increasing environmental risks through agro-biodiversity and agri-environmental policies By Stefan Baumgärtner; Martin F. Quaas
  3. Innovation and Diffusion of Environmental Technology: Industrial NOx Abatement in Sweden under Refunded Emission Payments By Last Name, First Name
  5. Carbon Credits for Avoided Deforestation By Sedjo, Roger A.; Sohngen, Brent
  6. Environmental accounting and reporting With special reference to India By Pramanik, Alok Kumar; Shil, Nikhil Chandra; Das, Bhagaban
  7. Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change By Searchinger, Timothy; Heimlich, Ralph; Houghton, R. A.; Dong, Fengxia; Elobeid, Amani; Fabiosa, Jacinto F.; Tokgoz, Simla; Hayes, Dermot J.; Yu, Tun-Hsiang (Edward)
  8. Using ex post data to estimate the hurdle rate of abatement investments - an application to sulfur emissions from the Swedish pulp and paper industry and energy sector By Åsa Löfgren; Katrin Millock; Céline Nauges
  9. U.S. Climate Policy Developments By Toshi Arimura; Dallas Burtraw; Alan J. Krupnick; Karen L. Palmer
  10. Ecological Economics of Water in China: Towards A Strategy for Sustainable Development By Khan, Haider; Liu, Yibei
  11. The Impact of Climate Change on the Balanced-Growth-Equivalent: An Application of FUND By David Anthoff; Richard S. J. Tol
  12. An empirical examination of repeated auctions for biodiversity conservation contracts By Markus Groth
  13. Behaviours of Conservation Organizations and their Environmental Implications. Analysis based on New (and not so new) Institutional Economics By Clem Tisdell
  14. What Drives Participation in State Voluntary Cleanup Programs? Evidence from Oregon By Blackman, Allen; Lyon, Thomas P.; Wernstedt, Kris; Darley, Sarah
  15. Labor Supply and Growth Effects of Environmental Policy under Technological Risk By Christiane Clemens; Karen Pittel
  16. China’s New Development Strategy: Environment and Energy Security By Khan, Haider
  17. Ex-vessel Pricing and IFQs: A Strategic Approach By Fell, Harrison
  18. Impuestos y Protección Medioambiental: Un Análisis de las Preferencias Individuales a nivel Europeo By María A. García-Valiñas; Benno Torgler

  1. By: Myers, Erin C. (Resources for the Future)
    Abstract: Deforestation and forest degradation account for 20 percent of annual total greenhouse gas (GHG) emissions. The vast majority of these forestry emissions come from deforestation in developing countries. Currently, there is significant dialogue at the international level about how to integrate reducing emissions from deforestation and degradation (REDD) into the existing climate change regime through market-based incentives. This paper examines the issues that arise when trying to create an economically and environmentally robust market-based REDD policy. The paper begins with an overview of the role of forests in climate change, and is followed by an examination of design elements that will affect the integrity of a REDD policy, including issues of scope, monitoring, baselines, leakage, stakeholder interests, permanence and liability, and the potential impact of REDD credits on the carbon market. The paper closes with an overview of the issues facing developing countries that would host REDD activities.
    Keywords: avoided deforestation, RED, REDD, reducing emissions from deforestation and degradation, climate change, market-based policy mechanisms, land use, land-use change and forestry, UNFCCC, Kyoto, emissions, CO2, GHG
    JEL: Q00 Q23 Q54 Q57
    Date: 2007–12–01
  2. By: Stefan Baumgärtner (Centre for Sustainability, Leuphana University of Lüneburg); Martin F. Quaas (Department of Ecological Modelling, UFZ-Centre for Environmental Research Leipzig-Halle)
    Abstract: Agro-biodiversity can provide natural insurance to risk-averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public-good ecosystem services such as e.g. CO2 storage. We analyze the choice of agro-biodiversity by risk-averse farmers who have access to financial insurance, and study the implications for agri-environmental policy design when on-farm agro-biodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on-farm agro-biodiversity, the level of agro-biodiversity in the laissez-faire equilibrium remains ineciently low. We show how either one of two agri-environmental policy instruments can cure this risk-related market failure: an ex-ante Pigouvian subsidy on on-farm agro-biodiversity and an ex-post compensation payment for the actual provision of public environmental benefits. In the absence of regulation, welfare may increase rather than decrease with increasing environmental risk, if the agroecosystems is characterized by a high natural insurance function, low costs and large external benefits of agro-biodiversity.
    Keywords: agro-biodiversity, ecosystem services, agri-environmental policy, insurance, risk-aversion, uncertainty
    JEL: Q1 Q57 H23 D62
    Date: 2008–03
  3. By: Last Name, First Name (Resources for the Future)
    Abstract: In this paper we study the process of technical change in the case of pollution abatement from large stationary sources that have been regulated by a very forceful refunded emission payment policy. Thanks to the high costs of emitting nitrogen oxides (NOx), considerable progress has been made in lowering aggregate emissions. This paper seeks to disaggregate average industry improvements to study how much of it is due to innovation (improvement of best practice through investments as well as learning by doing) and how much is due to the spread and adoption of technology. We find both factors very important. Innovation has been rapid: the best firms have cut emissions on the order of 70 percent. Nevertheless, reductions have been even more rapid for the majority of firms, such that the disparity in emission coefficients has also been reduced significantly as the median firms have caught up with best practice.
    Keywords: nitrogen oxides, NOx, R&D, innovation, technology diffusion, environmental policy instrument, technical change
    JEL: Q55 Q53 L51
    Date: 2008–02–27
  4. By: Ed Balsdon (Department of Economics, San Diego State University)
    Abstract: It is frequently asserted in the environment/development literature that severe poverty causes the neglect of worthwhile investments, resulting in deforestation and other resource degradation. While microeconomic theory does suggest a relationship between poverty and the evaluation of investments, the environmental impact is not so simple. This paper develops a dynamic theory of “shifting cultivation,” with special attention to an environmental impact variable: the length of time a given field is cultivated before a shift to the next. The model indicates that poverty reduction will lead in some ways to accelerated extraction of a natural resource, but also to a longer extraction period. The results therefore provide support for claims of an indirect environmental benefit from the primary goal of alleviating rural poverty. The impact of discount rates, prices, and other parameters are also explored.
    Date: 2007–05
  5. By: Sedjo, Roger A. (Resources for the Future); Sohngen, Brent
    Abstract: Several important issues need to be addressed to make avoided deforestation (AD) a feasible option for climate change policy. Traditional questions associated with land-based sequestration options have largely been discussed in terms of project-based approaches to carbon sequestration. For country-level commitments these concepts remain important, but we argue in this paper that they can and should be addressed differently. In order to address AD, it is useful to begin by outlining the international climate control regimes under which AD could be included as an option. Two general alternatives are discussed - an arrangement that is a linear extension of the current Kyoto Protocol but that involves more countries with specific emission reduction targets, and an alternative expanded arrangement that requires that essentially all countries have greenhouse gas emission targets. We consider how AD would fit into these two general types of international agreements and address questions related to baselines, additionality, permanence, and leakage. We conclude that the key issues related to including deforestation in either of these arrangements revolve around measuring, monitoring (e.g., additionality), and the development of efficient incentives by countries to alter their land-use regimes.
    Keywords: avoided deforestation, carbon, sequestration, credits, climate, warming
    JEL: Q00 Q23 Q54 Q57
    Date: 2007–10–31
  6. By: Pramanik, Alok Kumar; Shil, Nikhil Chandra; Das, Bhagaban
    Abstract: In recent years, environmental pollution becomes so acute and the stakeholders’ awareness to the issue becomes so serious that environmental accounting has become a strong branch of accounting. Still, attention towards the style and recognition of environmental accounting is not a generalized one. Legal authorities, standard setting bodies and other regulators cannot come to a consensus regarding the conceptual framework of environmental accounting and its disclosure. Thus, such disclosure is not mandatory rather voluntary that has no specific style or format. With the passage of time, more guidelines are coming in customized format that may lead us to reach a common format for recognizing environment related data and disclosure thereof through financial statements. Still, such disclosure is guided by the social responsibility and commitment on the part of the entities that work as strong agents for polluting the environment. In this paper, the theoretical foundation of environmental accounting and reporting is discussed with special reference to India. More emphasis is given on environmental accounting and awareness for that as this is supposed to be the need of today.
    Keywords: Environmental Accounting, Environmental Accounting and Reporting, Green Accounts.
    JEL: Q56
    Date: 2007–12–31
  7. By: Searchinger, Timothy; Heimlich, Ralph; Houghton, R. A.; Dong, Fengxia; Elobeid, Amani; Fabiosa, Jacinto F.; Tokgoz, Simla; Hayes, Dermot J.; Yu, Tun-Hsiang (Edward)
    Abstract: Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%. This result raises concerns about large biofuel mandates and highlights the value of using waste products.
    Date: 2008–03–13
  8. By: Åsa Löfgren (Göteborg University - Department of Economics); Katrin Millock (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I); Céline Nauges (LERNA-INRA - Toulouse School of Economics)
    Abstract: We propose a method for estimating hurdle rates for firms' investments in pollution abatement technology, using ex post data. The method is based on a structural option value model where the future price of polluting fuel is the major source of uncertainty facing the firm. The econometric procedure is illustrated using a panel of firms from the Swedish pulp and paper industry, and the energy and heating sector from 2000 to 2003. The results indicate a hurdle rate of investment of 2.9 in the pulp and paper industry and 3.4 in the energy and heating sector.
    Keywords: Option value, fuel price uncertainty, investment decision, pollution abatement, panel data, pulp and paper industry, energy and heating sector.
    Date: 2008–03
  9. By: Toshi Arimura (Resources for the Future); Dallas Burtraw; Alan J. Krupnick; Karen L. Palmer
    Abstract: This paper outlines recent developments in U.S. climate policies. Although the United States does not participate in the Kyoto Mechanism, a number of climate policies are being implemented at state level as well as at the federal level. First, we report and compare the federal cap and trade proposals in the 110th Congress. Then, the paper illustrates the current situations of state level climate policies, such as the Regional Greenhouse Gas Initiative in the northeastern states or AB32 in California. We analyze these proposals from the viewpoint of technology policies and impacts on international markets. It is found that technology policies play important roles in the cap and trade proposals and that there is a great expectation for carbon capture and sequestration (CCS) technology. In terms of the impacts on international markets, several federal proposals as well as regional programs permit trading in international markets. As emission targets become more stringent in the future, U.S. GHG emitters are more likely to interact with these markets. Thus, despite the lack of U.S. participation in the Kyoto Protocol, U.S. markets will be linked to foreign markets, at least, in an indirect way.
    Keywords: United States, climate policy, cap and trade, the Kyoto mechanism, technology policy
    JEL: K32 Q48 Q54 Q58
    Date: 2007–10–31
  10. By: Khan, Haider; Liu, Yibei
    Abstract: The main purpose of this paper is to analyze one important part of the emerging environmental problems in China--- water pollution. The importance of water for any nation is obvious. In case of China it acquires particular salience because of China’s industrial needs as well as human needs. Particularly significant is the rapid deterioration of the water quality and development of water shortages. Unless effective policy interventions are made quickly, this can develop into a major ecological disaster. We present arguments for taking the water resources problem in China seriously. The continuing and rapid deterioration of water quality poses grave health and other types of environmental threats. If these threats are not addressed in a timely manner, the situation will deteriorate even faster. The Chinese 11th five year plan acknowledges many of these problems. The analysis in this paper is consistent with the stated objective of addressing ecological issues via a new development strategy. We consider the institutional and policy-making issues carefully. The complexities of the water resource administration system in China are challenging. Coordination among WMR, SEPA, MOC, MOA, SFA, MoC, MOH and many other branches of the government will tax even the most sophisticated administrative apparatus. Clearly some simplification and streamlining is called for. At the same time, decentralization--- with proper incentives and monitoring mechanisms--- that gives more resources at the local level to fund defensive measures can improve performance on the ground. In the age of globalization, at least a significant part of China’s environmental problems stem from FDI-led production for export markets. Many enterprises have lax environmental management practices. This, of course, applies to many domestic SOEs as well. In all these cases, both market incentives such as effluent fees and better regulations with proper enforcement are needed. Regional and International cooperation and sharing of responsibilities are necessary parts of an overall policy package.
    Keywords: Ecological Economics; Water Pollution; Economic Growth; Development Strategy; China; Coase Theorem; Externalities
    JEL: O25 O13 O32 O33 O21
    Date: 2008
  11. By: David Anthoff (International Max Planck Research School on Earth System Modelling, Hamburg, Germany, Research Unit Sustainability and Global Change, Hamburg University and Centre for Marine and Atmospheric Science, Hamburg, Germany); Richard S. J. Tol (Economic and Social Research Institute (ESRI))
    Abstract: The Stern Review added balanced growth equivalences (BGE) to the economic climate change research agenda. We first propose rigorous definitions of the BGE for multiple regions and under uncertainty. We show that the change in the BGE is independent of the assumed scenario of per capita income. For comparable welfare economic assumptions as the Stern Review, we calculate lower changes in BGE between a business as usual scenario and one without climate impacts with the model FUND than the Stern Review found with the model PAGE. We find that optimal mitigation policies give even lower changes in BGE and argue that those policy choices should be the focus of the research effort rather than total damage estimates. Sensitivity analyses show that the Stern Review chose parameters that imply high impact estimates. However, for regionally disaggregated welfare functions, we find changes in BGE that are orders of magnitude higher than the results from the Stern Review, both for total damage as for optimal policy analysis. With regional disaggregation and high risk aversion, fat tails and with that very high welfare losses emerge.
    Keywords: Impacts of climate change, balanced growth equivalent, Stern Review
    Date: 2008–03
  12. By: Markus Groth (Centre for Sustainability Management, Leuphana University of Lüneburg)
    Abstract: The European Union’s Council Regulation on support for rural development by the European Agricultural Fund for Rural Development has introduced auctioning as a new instrument for granting agri-environmental payments and awarding conservation contracts for the recent multi-annual budgetary plan. This paper therefore deals with the conception and results of two case study auctions for conservation contracts. Results of two field experiments show much differentiated bid prices in the model-region and budgetary cost-effectiveness gains of up to 21% in the first auction and up to 36% in the repeated auction. Besides these promising results, some critical aspects as well as lessons to be learned will also be discussed in this paper to improve the design and performance of upcoming conservation auctions.
    Keywords: agri-environmental policy, discriminatory-price auction, multi-unit auction, ecological services, plant biodiversity, experimental economics
    JEL: C93 D44 H41 Q24 Q28 Q57 R52
    Date: 2008–03–04
  13. By: Clem Tisdell (School of Economics, The University of Queensland, Brisbane 4072, Australia)
    Abstract: This article draws mostly (but not entirely) on new institutional economics to consider the likely behaviours of non-government conservation organizations and the implications of these behaviours for biodiversity conservation. It considers how institutional factors may result in behaviour of conservation NGOs diverging from their objectives, including their support for biodiversity conservation; examines aspects of rent capture and conservation alliances; specifies social factors that may restrict the diversity of species supported by NGOs for conservation; considers bounded rationality in relation to the operation of conservation NGOs; and using game theory, shows how competition between NGOs for funding can result in economic inefficiencies and narrow the diversity of species supported for conservation. It also considers generally how the social role of conservation NGOs might be assessed.
    Keywords: Australia, biodiversity conservation, bounded rationality, civil society, Common Agricultural Policy, European Union, Landcare, mixed goods, new institutional economics, New Zealand, NGO's, principal-and-agent problem, political acceptability
    JEL: Q00 Q2 Q5 Q57 Z13
    Date: 2007–12
  14. By: Blackman, Allen (Resources for the Future); Lyon, Thomas P.; Wernstedt, Kris; Darley, Sarah
    Abstract: Virtually all U.S. states have now created voluntary cleanup programs (VCPs) offering liability relief and other incentives for responsible parties to remediate contaminated sites. We use a duration model to analyze participation in Oregon’s program. In contrast to previous VCP research, we find that this program attracts sites with significant contamination, not just relatively clean ones. Furthermore, we find that regulatory pressure—in particular, the public listing of contaminated sites—drives participation. These findings imply Oregon has been able to spur voluntary remediation via public disclosure, a result that comports with key themes in the literature on voluntary environmental regulation.
    Keywords: environment, hazardous waste, brownfields, contaminated property, duration analysis, Oregon
    JEL: Q53 Q58 C41
    Date: 2008–02–25
  15. By: Christiane Clemens (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Karen Pittel (ETH Zürich)
    Abstract: This paper analyzes the effects of technological risk on long–run growth when labor supply is elastic and production gives rise to a pollution externality. For the social planner as well as for the market economy we show that the randomness of production as well as the endogeneity of labor supply matter with respect to the equilibrium solution. The direction in which changes in the model parameters as well as changes of policy instruments influence labor supply and growth depends crucially on the volatility of output.
    Keywords: stochastic growth, pollution, abatement, elastic labor supply
    JEL: Q5 O4 D8 D9
    Date: 2008–03
  16. By: Khan, Haider
    Abstract: This paper analyzes China's development strategy by focusing on both global and regional approaches to solving problems of energy security and ecological imbalance by addressing specifically the problems of China’s energy security. PRC’s growing energy dependence has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies(NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future . Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate regional cooperation institutions can lead to the way out of the current dilemma for China. Fortunately, such a model of POLIS which is distributionally and ecologically sensitive can be built for China and applied strategically to lead towards a sustainable development trajectory. However, time is of the essence. Given the path dependence of development unless strategic disengagement from the existing path followed by a strategic engagement with the alternative strategy is begun within the next five years, it may well be too late. The stakes are indeed very high. A more detailed strategy paper based on the key ideas from the alternative strategy outlined here with concrete quantitative scenarios and feasibility studies along the lines of models sketched in the appendix ( and other, more detailed models) will go some distance towards giving the appropriate analytical foundations for the policy makers. The preliminary results confirm the predictions regarding fossil fuel-based energy shortage and lead towards a serious consideration of alternative energy sources. Achieving the twin goals of energy security and ecological balance are challenging but not impossible for China. Serious policy research can be used effectively if there is the political will to do so. The goal of regional cooperation is also achievable if patient negotiations in good faith can start in earnest. In particular, cooperation with other Asian economies, particularly Japan, Indonesia, Viet Nam and India will be crucial.This paper has sketched out the complexities of cooperation and conflict between China and Japan. Future work will address the problems of Regional cooperation for China in the East, South and South Asian context as well as in the context of Africa and Latin America.
    Keywords: China; Development Strategy; Energy; Environment; POLIS; Innovation System; Regional Cooperation
    JEL: Q32 D62 C68 O53 O13
    Date: 2008
  17. By: Fell, Harrison (Resources for the Future)
    Abstract: In this paper, intraseasonal fishing is modeled as a differential game between fishermen in a total allowable catch–regulated fishery with and without individual fishing quotas (IFQs). Heterogeneous harvest values are included by incorporating time-specific harvest costs and a stock effect into fishermen’s profit functions. I also allow for strategic interaction among fishermen via ex-vessel price dynamics. The equilibrium harvest strategies of the differential games are solved numerically through the use of a genetic algorithm. I demonstrate how different harvesting sector environments lead to varying degrees of ex-vessel price increases when IFQs are implemented. The primary result shows that possible margins for competition among fishermen, beyond competition for a greater share of the total allowable catch, can still exist under IFQ management and may be substantial enough to be able to prevent sizeable rent transfers from the processing sector to the harvesting sector.
    Keywords: individual fishing quotas, property rights, differential games, genetic algorithm
    JEL: Q22 C73 C61
    Date: 2008–02–01
  18. By: María A. García-Valiñas; Benno Torgler
    Abstract: El presente trabajo tiene como finalidad analizar las preferencias que los individuos muestran respecto a la protección del medioambiente, mediante la aceptación de incrementos impositivos que permitan a los diferentes Estados obtener ingresos a fin de implementar políticas de preservación del entorno natural. Para ello, se ha planteado la aplicación de modelos probit a una muestra representativa de individuos pertenecientes a diferentes países europeos durante la década de los 90, procedente de las bases de datos World Values Survey y European Values Survey. Los resultados ponen de manifiesto la influencia de factores heterogéneos, tales como la educación, la renta, las actitudes políticas o el capital social, identificando de esta manera los grupos sociales con mayor predisposición a contribuir económicamente a la conservación del entorno natural.
    Keywords: protección medioambiental, impuestos, capital social
    JEL: Q26 R22 Z13 I21
    Date: 2008–02

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