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on Environmental Economics |
| By: | Kumar, Surender |
| Abstract: | The paper analyzes the role of intergovernmental fiscal transfers in achieving environmental sustainability. Although the significance of socio-economic functions has a comparably long tradition in federal systems of countries including India, the respective consideration of environmental services is yet to be recognized. Assignment of responsibility for protecting the environment is very much clear in India, the genesis of environmental degradation could be found in the incentive structure of governance. Though environmental services are not directly considered in intergovernmental transfers, they find place in the grants-in-aid. About 35 percent of total grants-in-aid recommended by the 12th Finance Commission are for the provision of environmental services, and are given for developing end-of-pipe infrastructure. Precautionary activities such as nature conservation, landscape protection are never considered. The review of international practices highlights the Brazilian case to learn from. In Paraná (a Brazilian state) the area conserved increased by 165 percent in a span of nine years. The study underscores the need for both, lump-sum and earmarked grants for internalizing the spillover effects. Earmarked grants are better suited for environmental clean up activities, and lump-sum transfers based on a predefined formula are good candidates for precautionary activities. An illustration demonstrates that inclusion of forest cover in the disbursement formula not only help in internalizing the externalities but also make the transfers more progressive. Financial acknowledgment of the environmental services would raise environmental awareness and provide incentives for enhancing environmental services. The inclusion of environmental services in the allocation of fiscal transfers would also help in reducing poverty and regional disparities. |
| Keywords: | Environmental services; Fiscal federalism; spatial externalities; environmental expenditure; India |
| JEL: | H77 Q01 |
| Date: | 2008–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10188&r=env |
| By: | Jaafar , Abdul Hamid; Al-Amin, Abul Quasem; Siwar, Chamhuri |
| Abstract: | Environmental pollution is an emerging issue in many developing countries and its mitigation is increasingly being integrated into national development policies. One approach to mitigate the problem is by implement pollution control policies in the form of pollution tax or clean technology incentives. Empirical studies for developed countries reveal that imposition of an carbon tax would decrease CO2 emissions significantly and do not dramatically reduce economic growth. However, the same result may not apply for small-open developing countries such as Malaysia. The objective of this study is to quantify the impact of pollution tax on the Malaysian economy under the backdrop of trade liberalization. To examine the economic impact and effectiveness of carbon tax, a single-country, static Computable General Equilibrium model for Malaysia is constructed. The model is extended to incorporate output-specific carbon tax elements. Three simulations were carried out using a Malaysian 2000 Social Accounting Matrix. The first simulation examines the impact of halving the baseline tariff and export duty while the second solely focused on the impact of output-specific carbon tax. The third simulation combines both former scenarios. The model results indicate that the Malaysian economy is not sensitive to further liberalization. The reason could be attributed to the fact that Malaysian export duty is already low. Additionally, simulation results also indicate that while imposition of carbon tax reduces carbon emission, it also results in lower GDP and trade. |
| Keywords: | Trade; Air Emission; Environmental General Equilibrium; Malaysian Economy |
| JEL: | F00 C68 F1 |
| Date: | 2008–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10210&r=env |
| By: | Brian C. Murray; Richard G. Newell; William A. Pizer |
| Abstract: | On efficiency grounds, the economics community has to date tended to emphasize price-based policies to address climate change -- such as taxes or a "safety-valve" price ceiling for cap-and-trade -- while environmental advocates have sought a more clear quantitative limit on emissions. This paper presents a simple modification to the idea of a safety valve: a quantitative limit that we call the allowance reserve. Importantly, this idea may bridge the gap between competing interests and potentially improve efficiency relative to tax or other price-based policies. The last point highlights the deficiencies in several previous studies of price and quantity controls for climate change that do not adequately capture the dynamic opportunities within a cap-and-trade system for allowance banking, borrowing, and intertemporal arbitrage in response to unfolding information. |
| JEL: | D8 L51 Q54 Q58 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14258&r=env |
| By: | Stavins, Robert (Harvard U and Resources for the Future); Reinhardt, Forest (Harvard U); Vietor, Richard (Harvard U) |
| Abstract: | Business leaders, government officials, and academics are focusing considerable attention on the concept of "corporate social responsibility" (CSR), particularly in the realm of environmental protection. Beyond complete compliance with environmental regulations, do firms have additional moral or social responsibilities to commit resources to environmental protection? How should we think about the notion of firms sacrificing profits in the social interest? May they do so within the scope of their fiduciary responsibilities to their shareholders? Can they do so on a sustainable basis, or will the forces of a competitive marketplace render such efforts and their impacts transient at best? Do firms, in fact, frequently or at least sometimes behave this way, reducing their earnings by voluntarily engaging in environmental stewardship? And finally, should firms carry out such profit-sacrificing activities (i.e., is this an efficient use of social resources)? We address these questions through the lens of economics, including insights from legal analysis and business scholarship. |
| JEL: | L51 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp08-023&r=env |
| By: | Yukihiro Nishimura (Yokohama National University and Queen's University) |
| Abstract: | We consider international negotiations on the level of global pollution, and examine the Lindahl solution which determines the distribution of the pollution permits with unanimous agreement. We show various properties to clarify difficulties to achieve a Pareto efficient allocation as an agreement. The Lindahl solution may result in an unfair allocation, and it does not belong to the $\gamma$-core as in other solutions based on emissions trading. On the other hand, we provide mechanisms that implement the Lindahl solution as the subgame-perfect equilibrium. We also consider the market with region-specific prices as a device to induce second-best Pareto efficient allocations. |
| Keywords: | International emissions trading, Global externality, Lindahl equilibrium, Efficiency, Equity, Core, Implementability, Second-best analysis |
| JEL: | Q54 D61 D62 D63 D78 H87 Q58 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1177&r=env |
| By: | Stavins, Robert (Harvard U and Resources for the Future) |
| Abstract: | The need for a domestic U.S. policy that seriously addresses climate change is increasingly apparent. A cap-and-trade system is the best approach in the short to medium term. Besides providing certainty about emissions levels, cap-and-trade offers an easy means of compensating for the inevitably unequal burdens imposed by climate policy; it is straightforward to harmonize with other countries’ climate policies; it avoids the current political aversion in the United States to taxes; and it has a history of successful adoption in this country. The paper proposes a specific cap-and-trade system with several key features, including an upstream cap on CO2 emissions, with gradual inclusion of other greenhouse gases, a gradual downward trajectory of emissions ceilings over time, to minimize disruption and allow firms and households time to adapt, and mechanisms to reduce cost uncertainty. Initially, half of the program’s allowances would be allocated through auctioning and half through free distribution, primarily to those entities most burdened by the policy. This should help limit potential inequities while bolstering political support. The share distributed for free would phase out over twenty-five years. The auctioned allowances would generate revenue that could be used for a variety of worthwhile public purposes. The system would provide for linkage with international emissions reduction credit arrangements, harmonization over time with effective cap-and-trade systems in other countries, and appropriate linkage with other actions taken abroad that maintains a level playing field between imports and import-competing domestic products. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp07-052&r=env |
| By: | Reinhard Madlener (Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University); Weiyu Gao (Shanghai Development Research Center); Ilja Neustadt (Socioeconomic Institute, University of Zurich); Peter Zweifel (Socioeconomic Institute, University of Zurich) |
| Abstract: | The search for economically e±cient policy instruments designed to promote the diffusion of renewable energy technologies in liberalized markets has led to the introduction of quota-based tradable `green' certificate (TGC) schemes for renewable electricity. However, there is a debate about the pros and cons of TGC, a quantity control policy, compared to guaranteed feed-in tariffs, a price control policy. In this paper we contrast these two alternatives in terms of cost effectiveness and social welfare, taking into account that electricity markets are not perfectly competitive. |
| Keywords: | Tradable green certificates, Renewable portfolio standard, Quota target, Feed-in tariff, Cournot duopoly |
| JEL: | Q42 Q48 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:soz:wpaper:0809&r=env |
| By: | Stephen P. Holland; Michael Moore |
| Abstract: | Intertemporal tradability allows an emissions market to reduce abatement costs. We study intertemporal trading of nitrogen oxides permits in the RECLAIM program in Southern California. A theoretical model captures the program's key intertemporal features: two overlapping permit cycles, two compliance cycles for facilities, and tradable permits. We characterize the competitive equilibrium; show that it is cost effective; and demonstrate the firms' incentive to delay abatement, i.e., to trade intertemporally. Using model extensions to explore market design issues, an arbitrage condition implies that the equilibrium is invariant to overlapping compliance cycles, but depends crucially on overlapping permit cycles. We empirically investigate intertemporal trading of permits using panel data on RECLAIM facilities for 1994-2006. Facilities undertake trading by using a considerable proportion of permits of the opposite cycle. We econometrically test two theoretical propositions -- delayed abatement and trading across cycles -- with a difference-in-differences estimator. The results neither contradict nor provide conclusive support of the theory. |
| JEL: | L5 Q5 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14254&r=env |
| By: | Joshua Graff Zivin; Matthew Neidell |
| Abstract: | In this paper, we investigate the dynamics of informational regulatory approaches by analyzing the impact of smog alerts issued on consecutive days on discretionary outdoor activities in Southern California. Short-run adjustments to transitory risk entail costs that are likely to influence the set of evasive actions pursued by those at risk. Our results confirm that the cost of intertemporally substituting activities is increasing over time: when alerts are issued on two successive days, any response on the first day has largely disappeared by the second day. Small reprieves from alerts, however, reset these costs. Our findings imply that a time-varying decision rule that accounts for multiple day air quality forecasts may improve social welfare. |
| JEL: | D80 I18 Q53 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14271&r=env |
| By: | Olmstead, Sheila (Yale U); Stavins, Robert (Harvard U and Resources for the Future) |
| 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 market-based 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. |
| JEL: | L95 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp08-034&r=env |
| By: | Kumar, Surender |
| Abstract: | Sustainability requires that the productive base measured in terms of comprehensive wealth of a society should be increasing on per capita basis. Comprehensive wealth includes manufactured, human and natural capital along with knowledge base and institutions. This study offers methodological improvements and provides estimates of the growth rate of per capita comprehensive wealth over the period 1970-2006 for Indian economy. It considers air, water and soil degradation along with energy, minerals and forests depletion. To measure the value and composition of investment in natural capital, it estimates resource depreciation allowances on the basis of Hotelling rent; it adjusts education expenditure for depreciation in human capital; and uses the estimates of TFP that takes into account natural capital in the production of commodities and services. The empirical application suggests that Indian economy is barely sustainable. Growth rate of per capita comprehensive wealth was virtually near zero, it was only 0.15 percent per year for the study period. The growth rate was negative till 1983. Thereafter it became positive; however it was less than one percent in 1980s and 1990s. In recent years the growth rate was about 4 percent. Despite certain limitations, the study underscores the need for vigorous public policies that help in preventing excessive resource depletion and promoting higher genuine investment. |
| Keywords: | Sustainability; development; Comprehensive wealth; Hotelling rent; India |
| JEL: | E01 Q01 |
| Date: | 2008–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10086&r=env |
| By: | Gallagher, Kelly Sims (Harvard U); Muehlegger, Erich |
| Abstract: | Federal, state and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. We study the relative efficacy of state sales tax waivers, income tax credits and non-tax incentives and find that the type of tax incentive offered is as important as the value of the tax incentive. Conditional on value, we find that sales tax waivers are associated a seven-fold greater increase in hybrid sales than income tax credits. In addition, we estimate the extent to which consumer adoption of hybrid-electric vehicles (HEV) in the United States from 2000-2006 can be attributed to government incentives, changing gasoline prices, or consumer preferences for environmental quality or energy security. After controlling for model specific state and time trends, we find that rising gasoline prices are associated with higher hybrid sales, although the effect operates entirely through sales of the hybrid models with the highest fuel economy. In total, we find that tax incentives, rising gasoline prices and social preferences are associated with 6, 27 and 36 percent of high economy hybrid sales from 2000-2006. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp08-009&r=env |
| By: | Tom Kompas et. al. |
| Abstract: | The Australian Northern Prawn fishery (NPF) is one of the few that has adopted a dynamic version of a ‘maximum economic yield’ (MEY) target, and, on this basis, the fishery is undergoing a process of substantial stock rebuilding. This paper details the bioeconomic model that is used to provide scientific management advice for the NPF, in terms of the amount of allowable total (and tradable) gear length in the fishery, both in terms of the MEY target and the path to MEY. It combines the stock assessment process for two species of tiger prawns (brown and grooved tiger prawns) with a specification for discounted economic profits, where the harvest function in the profit equation is stock dependent. Results for the NPF show a substantial ‘stock effect’, indicating the importance of conserving fish stocks for profitability. MEY thus occurs at a stock size that is larger than that at which maximum sustainable yield is achieved, leading to a ‘win-win’ situation for both the industry (added profitability) and the environment (larger fish stocks and lower impacts on the rest of the ecosystem). Sensitivity results emphasize this effect by showing that the MEY target is much more sensitive to changes in the price of prawns and the cost of fuel, and far less so to the rate of discount. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec08-04&r=env |
| By: | Seiji Ikkatai (Institute of Economic Research, Kyoto University); Daiske Ishikawa (Institute of Economic Research, Kyoto University); Kengo Sasaki (Institute of Economic Research, Kyoto University) |
| Abstract: | We visited Belgian and Dutch companies that are covered by EU ETS in November 2007, in order to conduct interviews regarding the impact of the scheme and the resultant performance of these companies. The problems of the EU ETS that emerge from this interview are as follows: ‡@ the redundancy of emission allowance dampens the incentive to reduce the emission of CO2, ‡A the allocation scheme fails to consider inter-industrial and/or inter-district fairness, and ‡B since the duration of the National Allocation Plan is too short and highly uncertain, it is difficult to implement a long-term reduction investment plan. As European company officers pointed out, the current EU ETS has several problems. However, the recent political debate on the EU ETS seems to have entered a new dimension toward the second period of the National Allocation Plan. For instance, the cap of CO2 emission in the second period has tightened in comparison with the case in the first period, when the allowance excessive. Furthermore, in January 2008, the European Union set the goal of reducing emission by 20% from the 1990 level, by the year 2020. Moreover, the EU intends to introduce the complete auction of emission allowance after the year 2013 excluding the sector that is expected to experience serious leakage problems. The current EU ETS can be regarded as a CO2 reduction scheme in transition. The policy makers of the Japanese government should behold and draw upon the experiences of the European Union in order to implement appropriate policy measures against global warming in Japan. |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:660&r=env |
| By: | Montgomery, David B. (Stanford U and Singapore Management U); Ramus, Catherine (U of California, Santa Barbara) |
| Abstract: | Our research studies 759 MBA’s graduating from eleven business schools to gain insight into what MBA’s in the 21st Century care about during their job searches. We update the MBA job preference literature by using adaptive conjoint analysis to calibrate the relative importance of a wide variety of job factors combining factors found in previous research in disparate fields (general management, applied psychology, corporate social performance, ethics, and marketing). Our results show the relative importance of organizational reputation related to caring for employees, ethical products and practices, and social and environmental responsibility, compared to factors like financial package, job challenge, etc. to 759 MBA’s graduating from eleven business schools – eight in North America and three in Europe. Study limitations and some mitigations of these are discussed. |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:1981&r=env |
| By: | Schubert, Samuel R. |
| Abstract: | “Being rich in energy resources – a blessing or a curse” finds that an energy resource curse plagues many EU supplier states. This in turn directly affects Europe’s energy supply security and threatens to engulf Europe in unwanted hostilities at home and abroad. The study addresses seven issues including the evidence suggesting that a curse exists among Europe’s external energy suppliers, active programs to limit that risk, the significance of economic diversification, the applicability of dividend programs, the link between corruption and security of energy supplies, additional possible actions of the Union, and further threats posed by resource cursed countries. It establishes a definitive links between corruption and supply security, poor transparency, and inequality, and proves that a low level of economic diversification is a reliable indicator for the existence of the curse. It also finds that there are examples of excellence in recovering from and even converting the curse to a blessing. In looking at the policy instruments available to the Union, the study determines that the Union does have the technical expertise and financial means to restructure political and economic systems and strengthen public administrations and institutions and found that Europe’s successful implementation of similar past programs could be taken, at least in part, as models for future efforts. Finally, the study recommends the controversial approach of conditionality in the use of aid and finds that the Union should legislate standards for the reporting and auditing of energy exports and imports at home and abroad. |
| Keywords: | Resource Curse; Oil Curse; Energy Security; Energy Policy; EU; European Union; Foreign Policy; Development Policy; |
| JEL: | F52 F0 Q33 O1 Q38 N55 H56 E31 Y1 F59 E6 H2 F51 Q4 Q34 N50 Q32 L71 C19 F43 F35 L78 O2 F14 H10 N54 F50 A13 L13 L3 O57 F53 F41 |
| Date: | 2007–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10108&r=env |
| By: | NAUGES Céline; WHITTINGTON Dale |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:08.20.264&r=env |