nep-env New Economics Papers
on Environmental Economics
Issue of 2008‒04‒15
eighteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Environmental policy in dynamic models with pollution by consumers: The greening and blackening of preferences By Barthel, Jens
  2. Instrument Choice in Environmental Policy By Parry, Ian W.H.; Goulder, Lawrence H.
  3. Promoting Biofuels: Implications for Developing Countries By Jörg Peters; Sascha Thielmann
  4. The Economics of Biofuels By Brännlund, Runar; Kriström, Bengt; Lundgren, Tommy; Marklund, Per-Olov
  5. Environmental policy in dynamic models with pollution by consumers: The impact of exogenous shocks and dozy politicians By Barthel, Jens
  6. Controlling the Cost of Controlling the Climate: The Irish Government's Climate Change Strategy By Colm McCarthy; Sue Scott
  7. Timing of innovation policies when carbon emissions are restricted: an applied general equilibrium analysis By Tom-Reiel Heggedal and Karl Jacobsen
  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. Regulating Greenhouse Gases: Emissions Intensity Limits, A Hybrid Policy, and Offsets By Elizabeth Anne Wilman
  10. Estimation of substitution elasticities for CGE models By Azusa OKAGAWA; Kanemi BAN
  11. The impact of innovation activities on employment in the environmental sector : empirical results for Germany at the firm level By Horbach, Jens
  12. Germany's Solar Cell Promotion: Dark Clouds on the Horizon By Manuel Frondel; Nolan Ritter; Christoph M. Schmidt
  13. Climate Economics: A Meta-Review and Some Suggestions By Geoffrey Heal
  14. Individual fishing quotas in the eastern Gulf of Mexico grouper fishery: fleet restructuring, effort reduction and cost savings By Weninger, Quinn
  15. An Empirical Analysis of Institutional Barriers to European Hydrogen Rd&D Cooperation By JAVIER CARRILLO; PABLO DEL RIO
  16. The Efficiency of Direct Public Involvement in Environmental Policymaking: An Experimental Test By Christopher Bruce; Jeremy Clark
  17. The Shrimp Export Boom and Small-Scale Fishermen in Myanmar By Okamoto, Ikuko
  18. Adapting the Romanian rural economy to the European agricultural policy from the perspective of sustainable development By Burja , Camelia; Burja, Vasile

  1. By: Barthel, Jens
    Abstract: The paper discusses questions resulting from a study of the interaction of a change of preferences and environmental policy. In a model with pollution as a side effect of consumption environmental policy is introduced in the form of a consumption tax with or without a subsidy on eco-friendly investments. In simulations we observe the dynamic behavior of models before and after sudden changes of exogenous variables. These shocks are jumps in the preference structure of individuals towards more environmental-friendly or consumption-friendly attitudes. Additionally we examine the effect of a lagged reaction of the policy agents.
    Keywords: Environmental Policy Instruments;Preference Change
    JEL: C61 H23 Q58
    Date: 2007–10–23
  2. By: Parry, Ian W.H. (Resources for the Future); Goulder, Lawrence H.
    Abstract: We examine the extent to which various environmental policy instruments meet major evaluation criteria, including cost-effectiveness, distributional equity, minimization of risk in the presence of uncertainty, and political feasibility. Instruments considered include emissions taxes, tradable emissions allowances, subsidies for emissions reductions, performance standards, technology mandates, and research and development subsidies. Several themes emerge. First, no single instrument is clearly superior along all the criteria. Second, significant trade-offs arise in the choice of instrument; for example, assuring a reasonable degree of distributional equity often will require a sacrifice of cost-effectiveness. Third, it is possible and sometimes desirable to design hybrid instruments that combine features of various instruments in their “pure” form. Fourth, for many pollution problems, more than one market failure may be involved, which may justify (on efficiency grounds, at least) employing more than one instrument. Finally, potential overlaps and undesirable interactions among environmental policy instruments are sometimes a matter of concern.
    Keywords: emissions control instruments, cost-effectiveness, distributional burden, induced innovation
    JEL: Q58 H23 Q54
    Date: 2008–04–01
  3. By: Jörg Peters; Sascha Thielmann
    Abstract: Interest in biofuels is growing worldwide as concerns about the security of energy supply and climate change are moving into the focus of policy makers. With the exception of bioethanol from Brazil, however, production costs of biofuels are typically much higher than those of fossil fuels.As a result,promotion measures such as tax exemptions or blending quotas are indispensable for ascertaining substantial biofuel demand.With particular focus on developing countries, this paper discusses the economic justification of biofuel promotion instruments and investigates their implications. Based on data from India and Tanzania, we find that substantial biofuel usage induces significant financial costs. Furthermore, acreage availability is a binding natural limitation that could also lead to conflicts with food production.Yet, if carefully implemented under the appropriate conditions, biofuel programs might present opportunities for certain developing countries.
    Keywords: Renewable energy, environmental policy, government policy, economic development
    JEL: O38 Q42 Q56
    Date: 2008–01
  4. By: Brännlund, Runar (Department of Economics, Umeå University); Kriström, Bengt (Department of Forest Economics); Lundgren, Tommy (Umeå School of Business); Marklund, Per-Olov (Department of Economics, Umeå University)
    Abstract: Biofuels are increasingly being regarded as an energy source with potential to address problems in several areas, such as those found in the areas of climate change, environmental degradation, energy supply and energy security. We take a look at biofuels through the lens of modern resource economics and begin our survey by asking the question: Why biofuels? We delimit ourselves to biofuels for transportation (e.g. ethanol and biodiesel). We then review some of the literature in the field and put forward a framework for analysis drawn mainly from the green accounting literature. The literature review indicates that the effects of policies promoting conversion from fossil fuels to biofuels are not necessarily welfare improving. Our theoretical framework provided sheds some light on why this might be the case. We propose policies that not only penalize emissions of CO2 from all sources, but also stimulate biomass growth. We end by identifying issues for further research.
    Keywords: Biofuels; ethanol; green accounting; energy demand
    JEL: Q42 Q54
    Date: 2008–03–31
  5. By: Barthel, Jens
    Abstract: The paper discusses questions resulting from a study of the interaction of exogenous shocks and environmental policy. In a model with pollution as a side effect of consumption environmental policy is introduced in the form of a consumption tax with or without a subsidy on eco-friendly investments. In simulations we observe the dynamic behavior of models before and after sudden changes of exogenous variables. These shocks are jumps in productivity or a sudden depreciation of capital. Additionally we examine the effect of a simultaneous appearance of both types of shocks. Furthermore we investigate the consequences of a lagged reaction of the policy agents.
    Keywords: Environmental Policy Instruments;Exogenous Shocks
    JEL: C61 H23 Q58
    Date: 2007–07–17
  6. By: Colm McCarthy (University College Dublin); Sue Scott (Economic and Social Research Institute (ESRI))
    Keywords: climate change
    Date: 2008–03
  7. By: Tom-Reiel Heggedal and Karl Jacobsen (Statistics Norway)
    Abstract: This paper studies the timing of subsidies for environmental research and development (R&D) and how innovation policy is influenced by the costs of emissions. We use a dynamic computable general equilibrium (CGE) model with both general R&D and specific environmental R&D. We find two results that are important when subsidizing environmental R&D in order to target inefficiencies in the research markets. Firstly, the welfare gain from subsidies is larger when the costs of emissions are higher. This is because a high carbon tax increases the social (efficient) investment in environmental R&D, in excess of the private investment in R&D. Secondly, the welfare gain is greater when there is a falling time profile of the rate of subsidies for environmental R&D, rather than a constant or increasing profile. The reason is that the innovation externalities are larger in early periods.
    Keywords: Applied general equilibrium; endogenous growth; research and development; carbon emissions.
    JEL: E62 H31 O38 Q55
    Date: 2008–04
  8. By: Åsa Löfgren (Göteborg University - Department of Economics); Katrin Millock (Centre d'Economie de la Sorbonne et Paris School of Economics); 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.
    JEL: C33 D81 O33 Q48 Q53
    Date: 2008–03
  9. By: Elizabeth Anne Wilman
    Abstract: Emissions intensity caps, which have gained popularity for regulating greenhouse gas emissions, limit emissions as a proportion of output. The objective is to index allowed emissions to output, avoiding a higher than expected marginal abatement cost when output is expanding. In aggregate, it is possible to set an emissions intensity cap and translate it into an absolute cap for the purpose of emissions trading. However, individual intensity limits are also used, and are part of some emission trading programs. Without the restrictive assumption that output is unresponsive to changes in price or cost, it is not possible to set individual intensity limits that will achieve economic efficiency. This inefficiency also compromises the welfare gains achievable through true cost saving abatement options, such as cheap offsets. A hybrid price-quantity regulation can better promote economic efficiency, while preserving the political appeal of a permit system with gratis initial allocation. It can also avoid a high marginal abatement cost without conceding the gains achievable through cheaper abatement technologies. Nevertheless, individual intensity caps can be part of a piecemeal approach to economic efficiency. If conditionally efficient intensity caps are already in place, the transition to a hybrid system is relatively straightforward.
    JEL: Q52 Q58 D61
    Date: 2008–01–13
  10. By: Azusa OKAGAWA (Graduate School of Economics, Osaka University); Kanemi BAN (Graduate School of Economics, Osaka University)
    Abstract: Many studies of climate policy are based on computable general equilibrium (CGE) modeling. The simulation results and conclusions reached by these models depend on the size of the parameters specified. In particular, the substitution elasticities between production factors have a major influence. Therefore, in order to obtain reliable simulation results we should employ empirical evidence gathered on the substitution elasticities. Unfortunately, in many instances, the lack of econometric analysis means we must specify these key parameters based on existing work or borrow them from prominent modeling exercises. In this study, we estimate nested constant elasticity of substitution (CES) production functions using panel data for OECD countries to help improve the reliability of CGE models for climate policy. Our results show higher values for substitution elasticities closely related to energy inputs for energy-intensive industries and lower values for other industries compared to the conventional values often used in existing models. With the new parameters estimated, we find that conventional parameters could overestimate the necessary carbon price by 44%, and obtain evidence of different distributions of CO2 emission reduction costs across industries.
    Keywords: Substitution elasticities, CGE modeling, Climate policy
    JEL: D58 Q43 Q54
    Date: 2008–04
  11. By: Horbach, Jens
    Abstract: "The paper explores employment effects of environmental product innovations at the firm level. The empirical analysis is based on the establishment panel of the Institute for Employment Research (Nuremberg). A descriptive analysis shows that more than 50% of the firms in the environmental sector developed new products or improved existing products or services. The most dynamic environmental fields were analytics, consulting, measurement technology, waste disposal and recycling. A firm specialised in environmental research and development seems to have the best employment perspectives in the short and in the long run. Our econometric analysis had to address a simultaneity problem because the decision of a firm on the realisation of innovations and on the enlargement or reduction of employment is mutually dependant. Therefore, we apply a bivariate probit model that allows estimating the two variables simultaneously. The econometric results show that the influence of environmental innovation activities on the employment development is significantly positive. Furthermore, the quantitative importance of the new products with regard to the whole turnover of the firm is also important for employment growth. Within the bivariate probit model, the determinants of environmental innovation activities are also explored. They may be interpreted as indirect influences on the employment development of the firm. The results show that the improvement of the innovative capacities by R&D and further education measures and the existence of a high qualified human capital are significantly important for the development of new products in the environmental sector. A good strategy to improve the innovativeness of a firm seems to be a diversification of environmental product lines offered by the firm." (author's abstract, IAB-Doku) ((en))
    Keywords: Produktinnovation, Beschäftigungseffekte, Umweltschutzindustrie, IAB-Betriebspanel, Umweltforschung, Technik, Umweltverträglichkeit, Umwelttechnik, Recycling, Forschungsaufwand, Forschung und Entwicklung, Abfallbeseitigung, Umweltberatung, Innovationsfähigkeit
    JEL: Q52 Q55 J49 C25
    Date: 2008–03–27
  12. By: Manuel Frondel; Nolan Ritter; Christoph M. Schmidt
    Abstract: This article demonstrates that the large feed-in tariffs currently guaranteed for solar electricity in Germany constitute a subsidization regime that, if extended to 2020, threatens to reach a level comparable to that of German hard coal production, a notoriously outstanding example of misguided political intervention. Yet, as a consequence of the coexistence of the German Renewable Energy Sources Act (EEG) and theEUEmissions Trading Scheme (ETS), the increased use of renewable energy technologies does not imply any additional emission reductions beyond those already achieved by ETS alone. Similarly disappointing is the net employment balance, which is likely to be negative if one takes into account the opportunity cost of this form of solar photovoltaic support. Along the lines of the International Energy Agency (IEA 2007:77), we therefore recommend the immediate and drastic reduction of the magnitude of the feed-in tariffs granted for solar-based electricity. Ultimately, producing electricity on this basis is among the most expensive greenhouse gas abatement options.
    Keywords: Energy policy, energy security, learning effects
    JEL: Q28 Q42 Q48
    Date: 2008–03
  13. By: Geoffrey Heal
    Abstract: What have we learned from the outpouring of literature as a result of the Stern Review of the Economics of Climate Change? A lot. We have explored the model space and the parameter space much more thoroughly, though there are still unexplored regions. While there are aspects of the Stern Review's analysis with which we can disagree, it seems fair to say that it has catalyzed a fundamental rethinking of the economic case for action on climate change. We are now in a position to give some conditions that are sufficient to provide a case for strong action on climate change, but need more work before we have a fully satisfactory account of the relevant economics. In particular we need to understand better how climate change affects natural capital - the natural environment and the ecosystems comprising it - and how these affect human welfare.
    JEL: D8 D9 Q01
    Date: 2008–04
  14. By: Weninger, Quinn
    Abstract: This paper estimates a structural model of multiple-species harvesting costs in the eastern Gulf of Mexico reef fish fishery. The model is used predict fleet size, vessel level harvesting activity and fleet-wide revenues and costs that are expected under a proposed individual fishing quota (IFQ) management program for grouper species. Results suggest significant fleet downsizing, scale economies and pure efficiency gains will arise under IFQs. Overall IFQs appear to be an attractive alternative to the current controlled access management program in the fishery.
    Keywords: Individual fishing quotas, targeting costs, scale and technical efficiency, fleet restructuring.
    JEL: Q2
    Date: 2008–03–28
  15. By: JAVIER CARRILLO (Instituto de Empresa); PABLO DEL RIO (Instituto de Empresa)
    Abstract: The paper applies and elaborates environmental and evolutionary theorising in the context of international research, development and demonstration (RD&D) cooperation. The theoretical framework of analysis lays particular emphasis on identifying and overcoming institutional barriers to international cooperation for the RD&D that contributes to radical and environmentally friendly systemic changes. The paper can be characterised as empirically based theory-building as it elaborates the conceptual framework and attests its validity with the interview findings and empirically based literature reviews. The empirical analysis is based on the HY-CO Era-Net interview results of government officers o
    Date: 2007–10
  16. By: Christopher Bruce; Jeremy Clark
    Abstract: We use laboratory experiments to test whether a number of axiomatic models of bargaining can predict the behavior of the parties to environmental decision making. In recognition of the multi-dimensional aspect of most public land use conflicts, we ask pairs of subjects to negotiate over two goods, without the possibility of cash side payments. We thus provide one of the first experimental tests of a prediction associated with the Edgeworth Box: that parties with an initial endowment that is Pareto inefficient will make trades until they reach a Pareto efficient allocation. We further test whether parties in particular reach the Nash bargain when it coincides with or conflicts with outcomes that maximise the parties’ joint payoffs and with outcomes at which the parties’ receive equal payoffs. Finally, the effect of providing parties with full or partial information regarding payoffs is also examined.
    JEL: C90 D74 H44 Q58
    Date: 2008–01–19
  17. By: Okamoto, Ikuko
    Abstract: This paper examines the impact of the recent shrimp export boom in Myanmar on the economic state of small-scale fishermen. Results indicate that there has been an active increase in shrimp fishing stimulated by expanding export demand. With this, the income of shrimp fishermen has increased dramatically in the past 10 years. However, future prospects appear gloomy due to the possibility of over exploitation of shrimp resources.
    Keywords: Fishery, Resources, Export, Myanmar, Marine products
    JEL: N5 Q2
    Date: 2008–03
  18. By: Burja , Camelia; Burja, Vasile
    Abstract: One of the major objectives of the Common Agricultural Policy is the sustainable development of the agricultural sector and of the rural area. Romania, as a country recent integrated in the European Union, has to pass an adapting process to the CAP, in order to achieve sustainable farming development. The analysis presented in the paper refers to the actual development stage of the sustainable agriculture in Romania and demonstrates the important efforts made on this line, also the very necessary actions for implementing the sustainable development strategy of the rural economy. Realizing this objective is a real chance for Romanian agriculture in order to increase the competitiveness on the EU market, valorizing in this manner its agricultural potential.
    Keywords: rural economy; sustainable development; European agricultural policy; efficiency; farming strategy
    JEL: O11 Q1 O1 Q0 O13 Q01 Q18
    Date: 2008–03–29

This nep-env issue is ©2008 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.