nep-env New Economics Papers
on Environmental Economics
Issue of 2008‒08‒14
sixteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Climate change, environmental taxes and the future of tourist destinations of beach and sun By Cirer-Costa, Joan Carles
  2. Greenhouse Gas Emission Mitigation and Emission Intensities in Agriculture By Uwe A. Schneider; Pete Smith
  3. Foreign direct investment and environmental taxes By Roberto A. De Santis; Frank Stähler
  4. Carbon Emissions and Economic Growth: Homogeneous Causality in Heterogeneous Panels By David J. Maddison; Katrin Rehdanz
  5. Growth and convergence in a model with renewable and nonrenewable resources By Manh Hung Nguyen; Phu Nguyen Van
  6. Structural changes in the Philippine pig industry and their environmental implications: By Catelo, Ma. Angeles O.; Narrod, Clare A.; Tiongco, Marites
  7. Sustainable growth: The extraction-saving relationship By Bazhanov, Andrei
  8. Optimal resource extraction contracts under threat of expropriation By Eduardo Engel; Ronald Fischer
  9. A Health Production Function for Sub-Saharan Africa (SSA). By Bichaka Fayissa; Paulos Gutema
  10. Sustainable growth: Compatibility between criterion and the initial state By Bazhanov, Andrei
  11. How big a problem is noise pollution? A brief happiness analysis by a perturbable economist By Weinhold, Diana
  12. A Tradable Permit System in an Intertemporal Economy: A General Equilibrium Approach By Kenichi Akao; Shunsuke Managi
  13. A cost-efficient site-selection model for European wetland restorati By Christine Schleupner; Uwe A. Schneider
  14. Evaluation of European wetland restoration potentials by considering economic costs under different policy options By Christine Schleupner; Uwe A. Schneider
  15. Adoption of a Cleaner Technology by a Monopoly Under Incomplete Information By Ben Youssef, Slim
  16. Cooperativeness and Impatience in the Tragedy of the Commons By Fehr, Ernst; Leibbrandt, Andreas

  1. By: Cirer-Costa, Joan Carles
    Abstract: This paper proposes that in the near future –from now to 2020– the prices of aviation fuels shall undergo dramatic increases due to the fact that energy will become more expensive on global level and, most of all, due to the severe imposition of tax burden provoked by the necessity of lowering the impact of air transport over climate change. From this starting point the increase of costs it is estimated that they will bring along two destinations such as sun and beach, for this reason Ibiza and Punta Cana. The paper also shows sufficient material to evaluate the impact of the increase of aviation fuel over other destinations such as the Canary Islands, Cancun and the Seychelles. The project incorporates features as the future technological evolution of commercial aviation and the incidence of the new tax philosophy already tested by the European Union concerning this mean of transport.
    Keywords: Climate change, tourism, aviation, environmental taxes, fuel prices
    JEL: Q01
    Date: 2008–05
  2. By: Uwe A. Schneider; Pete Smith (Research unit Sustainability and Global Change)
    Abstract: Energy efficiency and greenhouse gas emissions are closely linked. This paper reviews agricultural options to reduce energy intensities and their impacts, discusses important accounting issues related to system boundaries, land scarcity, and measurement units, and compares agricultural energy intensities and improvement potentials on an international level. Agricultural development in the past decades, while increasing yields, led to lower average energy efficiencies between the sixties and mid eighties. In the last two decades, energy intensities in developed countries increased, however, with little impact on greenhouse gas emissions. Efficiency differences across countries suggest a maximum improvement potential of 500 million tons of CO2 annually.
    Keywords: Energy intensity, Agriculture, Greenhouse gas emissions, Mitigation potential, Fertilizer efficiency
    JEL: Q54
    Date: 2008–07
  3. By: Roberto A. De Santis (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Frank Stähler (Corresponding author: Department of Economics, University of Otago, PO Box 56, Dunedin, New Zealand.)
    Abstract: This paper studies the effect of foreign direct investment (FDI) on environmental policy stringency in a two-country model with trade costs, where FDI could be unilateral and bilateral and both governments address local pollution through environmental taxes. We show that FDI does not give rise to ecological dumping because the host country has an incentive to shift rents away from the source country towards the host country. Environmental policy strategies and welfare effects are studied under the assumption that parameter values support FDI to be profitable. JEL Classification: F12, F18, F23.
    Keywords: Foreign direct investment, environmental taxes, multinational enterprises, plant location.
    Date: 2008–07
  4. By: David J. Maddison; Katrin Rehdanz (Institute for World Economics)
    Abstract: This paper introduces the concept of homogeneous non-causality in heterogeneous panels. This concept is used to examine a panel of data for evidence of a causal relationship between GDP and carbon emissions. The technique is compared to the standard test for homogeneous non-causality in homogeneous panels and heterogeneous non-causality in heterogeneous panels. In North America, Asia and Oceania the homogeneous non-causality hypothesis that CO2 emissions does not Granger cause GDP cannot be rejected if heterogeneity is allowed for in the data-generating process. In North America the homogeneous non-causality hypothesis that GDP does not cause CO2 emissions cannot be rejected either.
    Keywords: Energy; Carbon Emissions; Granger Causality; Heterogeneous Panels
    JEL: Q54
    Date: 2008–07
  5. By: Manh Hung Nguyen (Toulouse School of Economics, LERNA-INRA); Phu Nguyen Van (THEMA-CNRS, Cergy-Pontoise University)
    Abstract: This paper analyzes the transitional dynamics in a model of economic growth with endogenous technological change and two alternative sources of energy: renewable and non-renewable resources. The conditions for the existence and saddle point property of the steady state are given. Finally, we present the estimation results on the data consisting of R&D energy, non-renewable energy consumption and renewable energy consumption.
    Keywords: Optimal growth, existence of equilibrium, transitional dynamics, energy, renewable resources, nonrenewable resources
    JEL: D51 E13
    Date: 2008–07
  6. By: Catelo, Ma. Angeles O.; Narrod, Clare A.; Tiongco, Marites
    Abstract: "Pig production in the Philippines has intensified in the urban and peri-urban areas in response to a radical structural change in the pig industry and a growing demand for pork products. Alongside this rapid growth is the emergence of societal concern about the increasing negative environmental externalities that the industry produces, particularly those related to the disposal of waste and dead animals. Pig producers are said to benefit from negative externalities when they do not bear the full social costs of their business enterprise. Non-internalization of such externalities occurs when pig producers receive payment for their output while not investing in pollution abatement or not making compensatory payments to surrounding communities affected by their production processes. In some cases, producers are able to recycle all nutrients from swine production on-farm through various cropping mechanisms. In other cases, pig production is so large that there is no land to properly dispose of such by-products without some environmental mitigation effort. Failure to implement any sort of measure will most likely lead to an environmental externality. To determine whether a farmer has the ability to utilize all manure produced on-farm, we use a mass balance calculation approach in this paper. Results for the mass balance calculations suggest that, in general, smaller farms generate less excess nutrients per hectare than larger farms. This is because most small-scale pig farms are mixed systems where some croplands are available for nutrient assimilation. Large commercial farms tend to be “pure land-intensive” systems. We used a Tobit regression analysis to determine the factors affecting environmental mitigation expenditures of pig farms. Results of the regression showed that smaller farms tend to respond to opportunities to make use of manure as fertilizer on their own farms and crops. For large farms, no single factor significantly influenced mitigation costs. An interpretation of why this is so or what this result implies apparently cannot be achieved without ambiguity. Thus, we do not attempt to do so and we leave the matter for further investigation. With respect to the effects of production arrangement on environmental capture, the factors that significantly influenced mitigation costs varied between independent and contract farms. Only the operation of croplands mattered for independent producers. For contract farms, lands that are classified as agricultural carried the expected positive coefficient sign. Further, farmers in the industrial pig sector, which is concentrated in peri-urban areas favored by market access or feed availability, may consider being located as close as possible to cropland that they can use to dispose of the wastes in pig production. Policy options include zoning, mandatory nutrient management plans, licensing or limiting the number of animals raised per production unit, and contractual agreements between livestock producers and crop farmers. The effectiveness of such regulations will depend largely on the degree to which they are enforced and whether they are accompanied by a well-developed system of education and extension with focus on proper manure management systems and dead animal disposal." from Author's Abstract
    Keywords: Environmental mitigation, Mass balance, Structural changes, Pig production, Water quality,
    Date: 2008
  7. By: Bazhanov, Andrei
    Abstract: The paper presents two new results for the Dasgupta-Heal-Solow-Stiglitz model with an essential nonrenewable resource: (1) the pattern of resource extraction can be more important for sustainable growth than the pattern of saving when the Hotelling Rule modifier is not small enough; (2) the qualitative behavior of the long-run per capita consumption can be examined along any smooth enough path of extraction using the "sustainability functional" introduced in the paper.
    Keywords: sustainable growth; modified Hotelling Rule; sustainability number; Hubbert curve consumption
    JEL: Q32 O47 O38 O13
    Date: 2008–08–08
  8. By: Eduardo Engel; Ronald Fischer
    Abstract: The government contracts with a foreign firm to extract a natural resource that requires an upfront investment and which faces price uncertainty. In states where profits are high, there is a likelihood of expropriation, which generates a social cost that increases with the expropriated value. In this environment, the planner’s optimal contract avoids states with high probability of expropriation. The contract can be implemented via a competitive auction with reasonable informational requirements. The bidding variable is a cap on the present value of discounted revenues, and the firm with the lowest bid wins the contract. The basic framework is extended to incorporate government subsidies, unenforceable investment effort and political moral hazard, and the general thrust of the results described above is preserved. JEL classification: Q33, Q34, Q38, H21, H25.
    Date: 2008
  9. By: Bichaka Fayissa; Paulos Gutema
    Abstract: The paper estimates a health production function for Sub-Saharan Africa based on the Grossman (1972) theoretical model that treats social, economic, and environmental factors as inputs of the production system. In estimating this function, socioeconomic and environmental factors such as income per capita, illiteracy rate, food availability, ratio of health expenditure to GDP, urbanization rate, and carbon dioxide emission per worker are specified as determinants of health status, proxied by life expectancy at birth. The parameters of the function are estimated by a method of one-way and two-way panel data analyses. The results obtained from two-way random effect model suggest that an increase in income per capita, a decrease in illiteracy rate, an increase in food availability are well associated with improvement in life expectancy at birth. Overall results suggest that a health policy, which may focus on the provision of health, services, family planning programs, and emergency aids to the exclusion of other socioeconomic aspects may do little in efforts directed toward improving the current health status of the region.
    Keywords: Sub-Saharan Africa, Health expenditure, Production function, Medical care, Panel data.
    JEL: I12 I18
    Date: 2008–08
  10. By: Bazhanov, Andrei
    Abstract: There is a large body of research devoted to our understanding of sustainable growth in resource based economies. Some of this research is inapplicable to the real economy. This is a result of inconsistency between the commonly used criteria and the initial state of the real economy. The inconsistency can lead to either inferior, unsustainable, or nonexistent optimal paths of consumption per capita if the criterion is not linked to the initial state. We demonstrate this in a model of the Dasgupta-Heal-Solow-Stiglitz variety with the constant consumption per capita as a benchmark criterion. Our results show that the inconsistency in this case can imply Pareto inferior paths of consumption per capita.
    Keywords: essential nonrenewable resource; sustainable extraction; criterion inconsistency; Hartwick Rule
    JEL: Q32 Q38 O13
    Date: 2008–08–08
  11. By: Weinhold, Diana
    Abstract: We approach the question of the costs of everyday residential noise pollution by examining a series of ‘happiness regressions.’ Following standard approaches, we use a range of socio-economic data to explain respondents’ declared level of life satisfaction, and then add perceived noise pollution into the analysis. In the process we replicate the observed patterns from other studies of this type. We find noise to exert a negative and highly significant effect on happiness, approximately of the same order of magnitude as being disabled. Using some rough and ready calculations, we find the monetary equivalent costs of noise pollution to be on the order of €170 per month per household.
    Keywords: happiness; hedonic regression; noise pollution
    JEL: Q51 R21
    Date: 2008–08–06
  12. By: Kenichi Akao (School of Social Sciences, Waseda University, and Institute of Economic Research, Kyoto University); Shunsuke Managi (Faculty of Business Administration, Yokohama National University)
    Abstract: The creation of an artificial market through a tradable permit system as a remedy against market failure is gaining popularity among analysts and policymakers. We show that in an intertemporal competitive economy, a tradable permit system may not achieve efficiency without setting appropriate permit interest rates (rewards for holding permits), and to find them, we must know in advance the path of efficient permit prices, which is difficult or impossible to obtain. We deal with this problem in two ways. First, we seek a special case in which the permit interest rates are given by a simple rule. Second, we propose a mechanism by which the permit interest rates are generated endogenously. The determinacy of an equilibrium under a tradable permit system is also examined.
    Keywords: Auction; artificial market, tradable permit system, general equilibrium, permit interest rate, permit bank, indeterminacy
    JEL: H23 K32 Q58
    Date: 2008–08
  13. By: Christine Schleupner; Uwe A. Schneider (Research unit Sustainability and Global Change)
    Date: 2008–07
  14. By: Christine Schleupner; Uwe A. Schneider (Research unit Sustainability and Global Change)
    Date: 2008–07
  15. By: Ben Youssef, Slim
    Abstract: We consider a model consisting of a monopolistic firm producing a certain good with pollution. This firm can adopt a cleaner technology within a finite time by incurring an investment cost decreasing exponentially with the adoption date. At each period of time, the firm is regulated by an emission tax which induces the socially optimal pollution and production levels, and a lump sum tax on profit. The firm is induced to adopt the cleaner technology at the socially optimal date by an appropriate innovation subsidy. In the incomplete information context, the firm has private information concerning the cost of acquiring the new technology. By an appropriate contract consisting of an adoption date and a R&D subsidy depending on the value of the innovation cost parameter announced by the firm, the regulator can induce the latter to reveal the true value of its private information in compensation of a socially costly intertemporal informational rent. However, the socially optimal adoption date of incomplete information is delayed with respect to the complete information one.
    Keywords: cleaner technology; adoption date; incomplete information
    JEL: H57 D62 D82 O32
    Date: 2008–06
  16. By: Fehr, Ernst (University of Zurich); Leibbrandt, Andreas (University of Zurich)
    Abstract: This paper examines the role of other-regarding and time preferences for cooperation in the field. We study the preferences of fishermen whose main, and often only, source of income stems from using a common pool resource (CPR). The exploitation of a CPR involves a negative interpersonal and inter-temporal externality because individuals who exploit the CPR reduce the current and the future yield for both others and themselves. Accordingly, economic theory predicts that more cooperative and more patient individuals should be less likely to exploit the CPR. Our data supports this prediction because fishermen who exhibit a higher propensity for cooperation in a laboratory public goods experiment, and those who show more patience in a laboratory time preference experiment, exploit the fishing grounds less in their daily lives. Moreover, because the laboratory public goods game exhibits no inter-temporal spillovers, measured time preferences should not predict cooperative behavior in the laboratory. This prediction is also borne out by our data. Thus, laboratory preference measures are useful to capture important dimensions of field behavior.
    Keywords: cooperation, common pool resource, experiments, generalizability, methodology
    JEL: B4 C9 D8 O1
    Date: 2008–08

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.