nep-env New Economics Papers
on Environmental Economics
Issue of 2008‒08‒21
24 papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Climate Trading - The Clean Development Mechanism and Africa By Sanja Lutzeyer
  2. Compensation for Electricity Consumers Under a U.S. CO2 Emissions Cap By Paul, Anthony; Burtraw, Dallas; Palmer, Karen
  3. Issues in Designing U.S. Climate Change Policy By Aldy, Joseph E.; Pizer, William A.
  4. Do environmental regulations reduce greenhouse gas emissions? A study on Canadian industries By Sedigh, Golnaz
  5. A Tax-Based Approach to Slowing Global Climate Change By Aldy, Joseph E.; Ley, Eduardo; Parry, Ian W.H.
  6. Evaluating Voluntary Climate Programs in the United States By Pizer, William A.; Morgenstern, Richard; Shih, Jhih-Shyang
  7. On the political economy of environmental survival versus collapse. Clarifying the work done by Tinbergen & Hueting vis-à-vis Weitzman, Nordhaus and Stern By Colignatus, Thomas
  8. Managing Costs in a U.S. Greenhouse Gas Trading Program: A Workshop Summary By Tatsutani, Marika; Pizer, William A.
  9. Biofuels and the Food Price Crisis: A Survey of the Issues By Kimberly Elliott
  10. The efficiency of the green taxes as instruments for Environmental protection By Dracea, Raluca; Cristea, Mirela; Ciupeanu, Daniela
  11. Calculating CARMA: Global Estimation of CO2 Emissions from the Power Sector By David Wheeler; Kevin Ummel
  12. A Dynamic Analysis of Human Welfare in a Warming Planet By Humberto Llavador; John E. Roemer; Joaquim Silvestre
  13. Green, Brown, and Now White Certificates - Are Three One Too Many? : A Micromodel of Market Interaction By Georg Meran; Nadine Wittmann
  14. Distributional Effects of Environmental and Energy Policy: An Introduction By Don Fullerton
  15. Regulation with Budget Constraints Can Dominate Regulation by Price and by Quantity By Linda Cohen; Amihai Glazer
  16. Controlling the Cost of Controlling the Climate - The Irish Government’s Climate Change Strategy By Colm McCarthy; Sue Scott
  17. Responding to Public and Private Politics: Corporate Disclosure of Climate Change Strategies By Erin Marie Reid; Michael W. Toffel
  18. The Greenness of Cities: Carbon Dioxide Emissions and Urban Development By Edward L. Glaeser; Matthew E. Kahn
  19. Economic Analysis of a Japanese Air Pollution Regulation: An Optimal Retirement Problem under Vehicle Type Regulation in the NOx–Particulate Matter Law By Iwata, Kazuyuki; Arimura, Toshi
  20. The interdependencies between food and biofuel production in European agriculture - an application of EUFASOM By P. Michael Link; C. Ivie Ramos; Uwe A. Schneider; Erwin Schmid; J. Balkovic; R. Skalsky
  21. Optimal taxation of a monopolistic extractor: are subsidies necessary? By Julien Daubanes
  22. Comparing Price and Non-price Approaches to Urban Water Conservation By Olmstead, Sheila M.; Stavins, Robert N.
  23. The Efficient Use of Multiple Sources of a Nonrenewable Resource under Supply Cost Uncertainty By GAUDET, Gérard; LASSERRE, Pierre
  24. Household willingness to pay for organic products By Rachel Griffith; Lars Nesheim

  1. By: Sanja Lutzeyer (Department of Economics, University of Stellenbosch and North Carolina State University)
    Abstract: Global warming is today, without a doubt, one of the biggest international issues. Whilst no country will go completely unscathed by future consequences of climate change, the impacts thereof – in terms of loss of life as well as the relative effects on economies – are expected to be felt most severely in developing countries, specifically Africa. Nevertheless, the development of the Clean Development Mechanism (CDM) under the global environmental treaty – the Kyoto Protocol – has brought with it the potential of socially and environmentally sustainable industrial and energy development in Africa. This paper examines the carbon trading system resulting from the Kyoto protocol, and investigates the implications of the associated Clean Development Mechanism for Africa. Although the carbon market is still in its formative stages, the benefits of this research are plentiful. Not only is such research critical for raising awareness, but also ensures that African countries get a foothold in this nascent market. It is found that while producing carbon credits, CDM projects also have the potential to bring numerous benefits – such as sustainable development, transfer of skills and technology, improved adaptive capabilities, as well as access to new markets – to African host countries. If changes are implemented as suggested, the CDM has the potential to bring billions of dollars to Africa – a feat invaluable to the social and environmental development of the continent.
    Keywords: Clean Development Mechanism, CDM, Africa, Climate Change, Emissions Trading, Policy, Carbon Credits, Carbon Markets
    JEL: Q54 Q56 Q59
    Date: 2008
  2. By: Paul, Anthony (Resources for the Future); Burtraw, Dallas (Resources for the Future); Palmer, Karen (Resources for the Future)
    Abstract: Policies to cap emissions of carbon dioxide (CO2) in the U.S. economy could pose significant costs on the electricity sector, which contributes roughly 40 percent of total CO2 emissions in the U.S. Using a detailed simulation model of the electricity sector, we evaluate alternative ways that emission allowances can be allocated. Most previous emissions trading programs have allocated the major portion of allowances for free to incumbent firms. In the electricity sector this approach would lead to changes in electricity price that vary by region primarily based primarily on whether prices are market-based or determined by cost-of-service regulation. Allocation to customers, which could be achieved by allocation to local distribution companies (retail utilities) would recover symmetry in the effect of free allocation and lead to signficiantly lower overall electricity prices. However, this form of compensation comes with an efficiency cost that will increase the overall cost of climate policy.
    Keywords: emissions trading, allowance allocations, electricity, air pollution, auction, grandfathering, cost-effectiveness, greenhouse gases, climate change, global warming, carbon dioxide, asset value, compensation
    JEL: Q2 Q25 Q4 L94
    Date: 2008–07–16
  3. By: Aldy, Joseph E. (Resources for the Future); Pizer, William A.
    Abstract: Over the coming decades, the cost of U.S. climate change policy likely will be comparable to the total cost of all existing environmental regulation—perhaps 1–2 percent of national income. In order to avoid higher costs, policy efforts should create incentives for firms and individuals to pursue the cheapest climate change mitigation options over time, among all sectors, across national borders, and in the face of significant uncertainty. Well-designed national greenhouse gas mitigation policies can serve as the foundation for global efforts and as an example for emerging and developing countries. We present six key policy design issues that will determine the costs, cost-effectiveness, and distributional impacts of domestic climate policy: program scope, cost containment, offsets, revenues and allowance allocation, competitiveness, and R&D policy. We synthesize the literature on these design features, review the implications for the ongoing policy debate, and identify outstanding research questions that can inform policy development.
    Keywords: cap-and-trade, carbon tax, cost containment, competitiveness
    JEL: Q48 Q54 Q58
    Date: 2008–06–23
  4. By: Sedigh, Golnaz
    Abstract: This paper uses the Canadian industrial macro-level data from CANSIM to investigate the effect of formal and informal regulations on pollution intensity. Proxies for formal and informal regulation variables are defined as in Cole et al., 2005. The econometrics model is a panel with 23 manufacturing industries over 10 years, from 1994 to 2003. Manufacturing industries are chosen because they are the most pollutant industries. It is found that formal and informal regulations have significant effects on decreasing the direct and indirect greenhouse gas emissions in Canadian industries. Provinces with younger populations have stricter informal regulation on pollution density, because younger populations care more about the future quality of the environment. Also, provinces with a higher rate of unemployment have less formal regulation on pollution density; for those provinces, providing employment for citizens is more important than providing a healthy environment. Wealthier provinces with a low employment rate face less pressure from society and can spend more money on the environment; therefore, they have lower pollution density. Furthermore, industries with large average firm size can decrease emissions more than other industries. The cost of controlling the emissions decreases with firm size because of economies of scale.
    Keywords: Keywords: Canadian manufacturing industries; Air pollution; Environmental regulations
    JEL: Q28 O13 Q21 L60
    Date: 2008–05
  5. By: Aldy, Joseph E.; Ley, Eduardo; Parry, Ian W.H. (Resources for the Future)
    Abstract: In this paper, we discuss the design of carbon dioxide (CO2) taxes at the domestic and international level and the choice of taxes versus a cap-and-trade system. A strong case can be made for taxes on uncertainty, fiscal, and distributional grounds, though this critically hinges on policy specifics and how revenues are used. The efficient near-term tax is at least $5–$20 per ton of CO2 and the tax should be imposed upstream with incentives for downstream sequestration and abatement of other greenhouse gases. At the international level, a key challenge is the possibility that emissions taxes might be undermined through offsetting changes in other energy policies.
    Keywords: Global climate change, CO2 tax, cap-and-trade, policy design
    JEL: Q54 Q58 H23
    Date: 2008–07–15
  6. By: Pizer, William A.; Morgenstern, Richard (Resources for the Future); Shih, Jhih-Shyang (Resources for the Future)
    Abstract: Despite the growing importance of voluntary programs as tools for environmental management, they have been subject to quite limited evaluation. Program evaluation in the absence of randomized experiments is difficult because the decision to participate may not be random and, in particular, may be correlated with the outcomes. The present study is designed to overcome these problems by gauging he environmental effectiveness of two voluntary climate change programs—the U.S. Environmental Protection Agency’s Climate Wise program and the U.S. Department of Energy’s Voluntary Reporting of Greenhouse Gases Program, or 1605(b)—with particular attention to the participation decision and how various assumptions affect estimates of program outcomes. For both programs, the analysis focuses on manufacturing firms and uses confidential census data to create a comparison group and to measure outcomes (expenditures on fuel and electricity). Overall, we find that that the effects from Climate Wise and 1605(b) on fuel and electricity expenditures are no more than 10 percent and probably less than 5 percent. Virtually no evidence suggests a statistically significant effect of either Climate Wise or 1605(b) on fuel costs. Some evidence suggests that participation in Climate Wise led to a slight (3–5 percent) increase in electricity costs that vanished after two years. Stronger evidence suggests that participation in 1605(b) led to a slight (4–8 percent) decrease in electricity costs that persisted for at least three years. Classification-JEL: Q2, Q4
    Keywords: voluntary, regulation, energy, climate change
    Date: 2008–07–01
  7. By: Colignatus, Thomas
    Abstract: The Stern Review (2006) on the economics of climate change presented a cost estimate of perhaps even 20% of national income and subsequently was criticized by Weitzman and Nordhaus and others in a discussion that centered on the use of the calculus of variations and the choice of the proper rate of discount. The Tinbergen & Hueting (1991) approach deals with the wider environmental collapse, is not formulated in the form of the calculus of variations, and arrives at a sustainable level of national income of about 50% of national income. The Tinbergen & Hueting (TH) approach appears to be neglected by Weitzman, Nordhaus and Stern (WNS) but appears to be better grounded in economic theory, mathematically richer and empirically more relevant. This paper clarifies the misunderstandings and omissions in the work by WNS on environmental economics.
    Keywords: Social welfare; national income; sustainable national income; economic growth; sustainable economic growth; sustainability; environment
    JEL: E01 Q01 A11
    Date: 2008–08–13
  8. By: Tatsutani, Marika; Pizer, William A.
    Abstract: Cost containment has emerged as a major point of contention in the current congressional debate about designing a cap-and-trade program to limit future U.S. greenhouse gas (GHG) emissions. This paper reviews basic concepts and policy options for cost management, drawing on a March 2008 workshop sponsored by Resources for the Future (RFF), the National Commission on Energy Policy, and Duke University’s Nicholas Institute for Environmental Policy Solutions. The different sources and temporal dimensions of cost uncertainty are explored, along with possible mechanisms for addressing short- and long-term cost concerns, including banking and borrowing, emissions offsets, a price cap (or safety valve), quantity-limited allowance reserve, and the concept of an oversight entity for GHG allowance markets modeled on the Federal Reserve. Recognizing that the inherent trade-off between environmental certainty and cost certainty has no perfect solution, the paper nonetheless concludes that numerous options exist for striking a reasonable and politically viable balance between these two objectives. In the effort to forge consensus around a particular set of options, it will be important for policymakers to strive to fit the remedy to the problem they are trying to solve and to preserve the underlying integrity of the overall program in terms of its long-term ability to sustain meaningful market incentives for low-carbon technologies.
    Keywords: cost containment, greenhouse gases, cap-and-trade, safety valve, allowance reserve, uncertainty, banking and borrowing, offsets, price volatility, carbon Fed
    Date: 2008–07–01
  9. By: Kimberly Elliott
    Abstract: While the precise contribution of biofuels to surging food prices is difficult to know, policies promoting production of the current generation of biofuels are not achieving their stated objectives of increased energy independence or reduced greenhouse gas emissions. Reaching the congressionally mandated goal of blending 15 billion gallons of renewable fuels in gasoline by 2015 would consume roughly 40 percent of the corn crop (based on recent production levels) while replacing just 7 percent of current gasoline consumption. Moreover, while it has long been known that the net energy and greenhouse gas emission benefits of corn-based ethanol are relatively small because its production is energy-intensive, recent scientific studies suggest that the current generation of biofuels, including biodiesel made from palm oil, soybeans, and rapeseed, as well as corn-based ethanol, actually add to greenhouse gas emissions relative to petroleum-based fuels when land use changes are taken into account. That is, greenhouse gases are released when forests are cut down or grasslands cleared to plant biofuels, or food is planted on new acreage to replace crops diverted to fuel elsewhere. In sum, the food crisis adds urgency to the need to change these policies but does not change the basic fact that there is little justification for the current set of policies.
    Keywords: food crisis, ethanol, biofuels, greenhouse gas emissions
    Date: 2008–08
  10. By: Dracea, Raluca; Cristea, Mirela; Ciupeanu, Daniela
    Abstract: This paper focused on the green taxes, great actuality issue in the contemporary world. As research method, the paper is based on economical theory of externalities, their presence making the company to take decisions with different social effects. Starting from social cost and private cost of human activity, it is a debate regarding the internalization of external costs by applying the corrective taxes. The purpose of this paper it is the establishing of an optimal tax level which has as effect the decreasing of the overall cost of a negative externality (for example, the pollution) through controlling the external effects. Deriving from the analysis it has been disclosed that ideally the environmental taxes should be introduced over externalities source, meaning that taxes should report directly over emissions or environment services.
    Keywords: green taxes; pigouvian taxes; negative externalities; internalization of the polluting costs
    JEL: H23
    Date: 2008
  11. By: David Wheeler; Kevin Ummel
    Abstract: This paper provides a detailed description and assessment of CARMA (Carbon Monitoring for Action), a database that reports CO2 emissions from the power sector. We built CARMA to assist the millions of concerned global citizens who can act to reduce carbon emissions once they have timely, accurate information about emissions sources. CARMA also lays the groundwork for the global monitoring system that will be necessary to ensure the credibility of any post-Kyoto carbon emissions limitation agreement. CARMA focuses on the power sector because it is the largest carbon dioxide emitter (26% of the global total), and because power plants are much better-documented than many sources of carbon emissions. The CARMA database and website put anyone with web access a few keystrokes away from detailed knowledge about power plants and the companies that own and operate them. CARMA includes many aggregation tools, so it can be used for local, regional, national and international comparisons. The database also offers complete information about power plants and companies that do not emit carbon because they use non-fossil energy sources (nuclear, hydro, solar, wind, biofuels, geothermal, etc.). In this paper, we provide a description of CARMA’s methodology, an assessment of its strengths and weaknesses, and some tests of its accuracy across countries and at different geographical scales. While CARMA performs well in these tests, we recognize that it is far from perfect. We therefore extend the following invitation to any power plant or company that disputes our estimates: Provide us with better data, verified by an appropriate third party, and we will incorporate them in CARMA.
    Keywords: global warming, climate change, emissions, energy
    Date: 2008–05
  12. By: Humberto Llavador (Universitat Pompeu Fabra); John E. Roemer (Yale University); Joaquim Silvestre (University of California, Davis)
    Abstract: Anthropogenic greenhouse gas (GHG) emissions have caused atmospheric concentrations with no precedents in the last half a million years, inducing serious uncertainties about future climates and their effects on human welfare. Recent climate science supports the view that the climate stabilization will require very low GHG emissions in the future. We ask: Is a path of low emissions compatible with sustainable levels of human welfare? With steady growth in human quality of life? Addressing these questions requires both defining welfare criteria and empirically estimating the possible paths of the economy. We specify and calibrate a dynamic model with four intertemporal links: education, physical capital, knowledge and the environment. In line with Nordhaus (2008a) and with the Stern Review (2007), we assume that GHG emissions allow increased production, while a higher stock of atmospheric carbon decreases production. Our index of human welfare, which we call quality of life (QuoL), emphasizes education, knowledge, and the environment, affected by greenhouse gas emissions, in addition to consumption and leisure. Thus, we avoid a Consumptionist Fallacy –- that welfare depends only on commodity consumption and perhaps leisure. We reject discounted utilitarianism as a normative criterion, and consider two alternatives. The first is an intergenerational maximin criterion, which maximizes the quality of life of the first generation subject to maintaining at least that level for all successive generations. The second is human development optimization, that seeks the maximization of the QuoL of the first generation subject to achieving a given, constant rate of growth in all subsequent generations. Hence, our analysis focuses on a human notion of sustainability, as opposed to the conventional "green" sustainability, limited to keeping the quality of the environment constant. Because our dynamic optimization programs defy explicit analytical solutions, our approach has been computational. As a benchmark, we consider a simple model with physical and human capital, for which we prove a turnpike theorem. We then devise a computational algorithm inspired by the turnpike property to construct feasible, although not necessarily optimal, paths in the more complex and realistic model. Our analysis indicates that, with GHG emission paths entailing very low emissions in the future, positive rates of growth in QuoL are possible while the first generation experiences a QuoL higher than the historical reference level. We also observe a tradeoff between the quality of life of the first generation and the rate of growth in the quality of life. Yet Generation 1's sacrifice for the sake of a higher growth rate appears to be small. The paths that we compute involve investments in knowledge at noticeably higher levels than in the past.
    Keywords: Quality of life, Climate change, Education, Maximin, Growth
    JEL: D63 O40 O41 Q50 Q54 Q56
    Date: 2008–08
  13. By: Georg Meran; Nadine Wittmann
    Abstract: Our paper deals with modeling the effects of introducing a market-based tool for improving end-users' efficiency in an energy market which is already regulated through a cap-and-trade system for green house gas emissions and a quota system meant to improve competitiveness of energy produced using renewable resources. Our results show that the regulation of energy demand achieves its underlying objects of energy savings and energy efficiency solely at the expense of other goals such as the environmental efficiency of energy production. In our model, the implementation of a market for White Certificates (WCTS) causes energy producers' investment in abatement to decrease along with the price for Brown Certificates and the amount of renewable energy demanded. Once we turn to the currently more empirically relevant case of integrating end-users only partially into WCTS, the unregulated group compensates in parts for the decrease in demand of the regulated group, due to an indirect price effect. As both supply and demand side of the market are regulated, this special set of regulations applied can, therefore, be compared to the grip of pincers embracing the entire market, leaving some of it virtually scarred. Consequently, we intended to search for alternative policy measures, which are able to achieve an increase in end-users' energy efficiency without the negative side-effects witnessed in case of a WCTS. In our model a subsidized reduction in the price for households' investment in energy efficiency renders just slightly more favorable results than an implementation of WCTS. However, the most effective way to accomplish all goals of environmental policy alike is to reduce the cap on emissions.
    Keywords: Energy markets, certificate trading scheme, white certificates, efficiency, regulation, market-based tool, pincers policy
    Date: 2008
  14. By: Don Fullerton
    Abstract: This chapter reviews literature on the distributional effects of environmental and energy policy. In particular, many effects of such policy are likely regressive. First, it raises the price of fossil-fuel-intensive products, expenditures on which are a high fraction of low-income budgets. Second, if abatement technologies are capital-intensive, then any mandate to abate pollution may induce firms to use more capital. If demand for capital is raised relative to labor, then a lower relative wage may also hurt low-income households. Third, pollution permits handed out to firms bestow scarcity rents on well-off individuals who own those firms. Fourth, low-income individuals may place more value on food and shelter than on incremental improvements in environmental quality. If high-income individuals get the most benefit of pollution abatement, then this effect is regressive as well. Fifth, low-income renters miss out on house price capitalization of air quality benefits. Well-off landlords may reap those gains. Sixth, transition effects could well hurt the unemployed who are already at some disadvantage. These six effects might all hurt the poor more than the rich. This paper discusses whether these fears are valid, and whether anything can be done about them.
    JEL: H22 Q48 Q52
    Date: 2008–08
  15. By: Linda Cohen (Department of Economics, University of California-Irvine); Amihai Glazer (Department of Economics, University of California-Irvine)
    Abstract: A government can use several mechanisms to induce firms to reduce pollution. Well studied are regulations by price and by quantity. We consider a third form of regulation -- government allocates a budget to an agency which subsidizes abatement. We demonstrate that uncertainty can make such constrained regulation more efficient than either regulation by quantity or regulation by price. We also show that the optimal budget declines with a mean-preserving spread in the distribution of marginal costs.
    Keywords: Regulation; Environmental subsidy; Pollution control
    JEL: H23 Q52
    Date: 2008–08
  16. By: Colm McCarthy (University College of Dublin); Sue Scott (Economic and Social Research Institute)
    Date: 2008–04–18
  17. By: Erin Marie Reid (Harvard Business School); Michael W. Toffel (Harvard Business School, Technology and Operations Management unit)
    Abstract: The challenges associated with climate change will require governments, citizens, and corporations to work collaboratively to reduce greenhouse gas emissions, a task that requires information on companies' emissions levels, risks, and reduction opportunities. This paper explores the conditions under which firms respond to shareholders' requests for this information. Building on previous theories of how social activists inspire field-level change, we hypothesize that shareholder actions and regulatory threats are likely to prime firms to cooperate with shareholder requests for information disclosure. Using a unique dataset, we find evidence of both direct and spillover effects. In the domain of private politics, shareholder resolutions filed against a firm, and against others in its industry, increase its propensity to acquiesce to these shareholder requests. Similarly, in the realm of public politics, the threat of state regulations that target a firm's industry, -as well as those that target other industries-increases the likelihood that the firm will acquiesce to shareholder requests to disclose related information. These findings extend existing theory by showing how organizational change can be sparked by both activist groups and government policymakers, and that challenges mounted against a single firm (and industry) can inspire field-level (and state-level) changes.
    Keywords: social movements theory, institutional change theory, private politics, activist shareholder resolutions, climate change, environmental sustainability
    Date: 2008–08
  18. By: Edward L. Glaeser; Matthew E. Kahn
    Abstract: Carbon dioxide emissions may create significant social harm because of global warming, yet American urban development tends to be in low density areas with very hot summers. In this paper, we attempt to quantify the carbon dioxide emissions associated with new construction in different locations across the country. We look at emissions from driving, public transit, home heating, and household electricity usage. We find that the lowest emissions areas are generally in California and that the highest emissions areas are in Texas and Oklahoma. There is a strong negative association between emissions and land use regulations. By restricting new development, the cleanest areas of the country would seem to be pushing new development towards places with higher emissions. Cities generally have significantly lower emissions than suburban areas, and the city-suburb gap is particularly large in older areas, like New York.
    JEL: Q5
    Date: 2008–08
  19. By: Iwata, Kazuyuki; Arimura, Toshi
    Abstract: This paper empirically examines the vehicle type regulation that was introduced under the Automobile Nitrogen Oxides–Particulate Matter Law to mitigate air pollution problems in Japanese metropolitan areas. The vehicle type regulation effectively sets various timings of vehicle retirement by the first registration year and by type. However, there was no consideration of cost or efficiency in choosing the timing of retirement. We set and solve an optimal problem to maximize the social net benefit under the current framework of the vehicle type regulation. The analysis finds that the net benefit can increase by about 104 percent if the optimal retirement timing is chosen. Further, we confirm that even a simple alteration of retirement timing can increase the social net benefit by 13 percent. Thus, we confirm the importance of an ex-ante quantitative policy evaluation, a regulatory impact analysis, from the viewpoint of efficiency.
    Keywords: air pollution, regulatory impact analysis, NOx-PM law, cost–benefit analysis, optimal retirement model
    JEL: Q52 Q53 Q58
  20. By: P. Michael Link; C. Ivie Ramos; Uwe A. Schneider; Erwin Schmid; J. Balkovic; R. Skalsky (Research unit Sustainability and Global Change)
    Abstract: In the continuous quest to reduce anthropogenic emissions of carbon dioxide, the production and use of organically grown fuels in Europe has increased in importance in the recent past. However, the production of so-called biofuels is a direct competitor of agricultural food production for land, labor, water resources etc. with both land use options influencing each other depending on the respective boundary conditions defined by political regulations and economic considerations. In this study we will explore the economic and technical potentials of biofuels in Europe as well as the interdependencies between these two land use options for different economic incentives for biofuels using the European Forest and Agriculture Sector Optimization Model (EUFASOM). Key data on biodiesel and ethanol production have been gathered and are used for calibration of the model. The simulations extend until the year 2030, for which results are presented. Results indicate that moderate production targets of biofuels lead to an expansion of mainly the biodiesel production while more ambitious targets call for a focus on bioethanol. This has to do with the different levels of production efficiency depending on the production output. Growth of bioethanol feedstock is spread over entire Europe while the production of biodiesel feedstock occurs mainly in Central Europe.
    Keywords: biodiesel, bioethanol, Europe, EUFASOM, modeling
    JEL: Q18 Q19 Q54
    Date: 2008–07
  21. By: Julien Daubanes (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: In a standard partial equilibrium model of resource depletion, this paper charac- terizes and examines the solution to the optimal taxation problem when extraction is monopolistic. The main result is that the family of subgame perfect effciency- inducing tax/subsidy schemes may include some strict tax policies. This illustrates how the static trade-off between inducing effciency and raising tax revenues in the presence of market power is relaxed under exhaustibility.
    Keywords: Exhaustible resources, Imperfect competition, Optimal taxation
    JEL: Q30 L12 H21
    Date: 2008–07
  22. By: Olmstead, Sheila M.; Stavins, Robert N.
    Abstract: Urban water conservation is typically achieved through prescriptive regulations, including the rationing of water for particular uses and requirements for the installation of particular technologies. A significant shift has occurred in pollution control regulations toward market-based policies in recent decades. We offer an analysis of the relative merits of marketbased and prescriptive approaches to water conservation, where prices have rarely been used to allocate scarce supplies. The analysis emphasizes the emerging theoretical and empirical evidence that using prices to manage water demand is more cost-effective than implementing non-price conservation programs, similar to results for pollution control in earlier decades. Price-based approaches also have advantages in terms of monitoring and enforcement. In terms of predictability and equity, neither policy instrument has an inherent advantage over the other. As in any policy context, political considerations are important.
    Keywords: cost-effectiveness, water conservation, market-based approaches, policy instrument choice, water price
    JEL: Q25 Q28 Q58 L95
    Date: 2008–06–15
  23. By: GAUDET, Gérard; LASSERRE, Pierre
    Abstract: Uncertainties as to future supply costs of nonrenewable natural resources, such as oil and gas, raise the issue of the choice of supply sources. In a perfectly deterministic world, an efficient use of multiple sources of supply requires that any given market exhausts the supply it can draw from a low cost source before moving on to a higher cost one; supply sources should be exploited in strict sequence of increasing marginal cost, with a high cost source being left untouched as long as a less costly source is available. We find that this may not be the efficient thing to do in a stochastic world. We show that there exist conditions under which it can be efficient to use a risky supply source in order to conserve a cheaper non risky source. The benefit of doing this comes from the fact that it leaves open the possibility of using it instead of the risky source in the event the latter’s future cost conditions suddenly deteriorate. There are also conditions under which it will be efficient to use a more costly non risky source while a less costly risky source is still available. The reason is that this conserves the less costly risky source in order to use it in the event of a possible future drop in its cost.
    Keywords: Security of suly ; Uncertainty, Nonrenewable resources ; Order of use
    JEL: Q31 D81 D90
    Date: 2008
  24. By: Rachel Griffith (Institute for Fiscal Studies and University College London); Lars Nesheim (Institute for Fiscal Studies)
    Abstract: <p><p>We use hedonic prices and purchase quantities to consider what can be learned about household willingness to pay for baskets of organic products and how this varies across households. We use rich scanner data on food purchases by a large number of households to compute household specific lower and upper bounds on willingness to pay for various baskets of organic products. These bounds provide information about willingness to pay for organic without imposing restrictive assumptions on preferences. We show that the reasons households are willing to pay vary, with quality being the most important, health concerns coming second, and environmental concerns lagging far behind. We also show how these methods can be used for example by stores to provide robust upper bounds on the revenue implication of introducing a new line of organic products. </p></p>
    Date: 2008–07

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