nep-env New Economics Papers
on Environmental Economics
Issue of 2008‒09‒20
fourteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Productivity Dispersion across Plants, Emission Abatement, and Environmental Policy By Li, Zhe
  2. Delayed Participation of Developing Countries to Climate Agreements: Should Action in the EU and US be Postponed? By Carlo Carraro; Valentina Bosetti; Alessandra Sgobbi; Massimo Tavoni
  3. Delayed Action and Uncertain Targets. How Much Will Climate Policy Cost? By Carlo Carraro; Valentina Bosetti; Alessandra Sgobbi; Massimo Tavoni
  4. A Dynamic Analysis of Human Welfare in a Warming Planet By Humberto Llavador; John E. Roemer; Joaquim Silvestre
  5. Life expectancy and the environment By Fabio Mariani; Agustin Pérez-Barahona; Natacha Raffin
  6. Determinants of Two Pro-Environmental Behaviours in Northern Ireland By José Luis Iparraguirre D’Elia
  7. A note on sustainable agricultural intensification through agro-biodiversity conservation By Amani Omer; Unai Pascual; Noel Russell
  8. Tradeoffs among Free-flow Speed, Capacity, Cost, and Environmental Footprint in Highway Design By Chen Feng Ng; Kenneth Small
  9. A Framed Field Experiment on Collective Enforcement Mechanisms with Ethiopian Farmers By Reichhuber, Anke; Camacho, Eva; Requate, Till
  10. Mapping Poverty in Rural China: How Much Does the Environment Matter? By Susan Olivia; John Gibson; Scott Rozelle; Jikun Huang; Xiangzheng Deng
  11. Standards Applied to Water Use : An Attempt to Build up Dynamic Indicators By Arnaud Büchs
  12. Determinants of Household Waste Recycling in Northern Ireland By José Luis Iparraguirre D’Elia
  13. A Theoretical Model for the Extraction and Refinement of Natural Resources By Antonio Roma; Davide Pirino
  14. Measuring Tax Incidence: A Natural Experiment in the Hybrid Vehicle Market By Melissa Boyle; Victor Matheson

  1. By: Li, Zhe
    Abstract: Empirical studies suggest systematic relationships between plant’s productivity and plant’s emissions and emission-abatement costs. This paper demonstrates that productivity dispersion across plants is an important factor that influences the transmission of environmental policy. Within a general equilibrium framework, I model heterogeneous polluting plants by allowing them to be differing in productivity and to choose optimally a discrete emission-reduction technology taking into account both the costs of reducing emissions and the competition in the goods market. An emission-reduction policy affects the distribution of plants with the advanced abatement technology and relocates resources and market shares across plants. As a result, the aggregate effects of an environmental policy depend on the degree of productivity dispersion. Using Canadian data, I show quantitatively that the aggregate effects of an environmental policy significantly affected by the degree of productivity dispersion both in the transition periods and in the long-run steady-state equilibrium.
    JEL: Q52 E00 Q58
    Date: 2008–09–14
  2. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Alessandra Sgobbi (Fondazione Eni Enrico Mattei and CMCC); Massimo Tavoni (Fondazione Eni Enrico Mattei, Catholic University of Milan and CMCC)
    Abstract: This paper analyses the cost implications for climate policy in developed countries if developing countries are unwilling to adopt measures to reduce their own GHG emissions. First, we assume that a 450 CO2 (550 CO2e) ppmv stabilisation target is to be achieved and that Non Annex1 (NA1) countries decide to delay their GHG emission reductions by 30 years. What would be the cost difference between this scenario and a case in which both developed and developing countries start reducing their emissions at the same time? Then, we look at a scenario in which the timing of developing countries’ participation is uncertain and again we compute the costs of climate policy in developed and developing countries. We find that delayed participation of NA1 countries has a negative impact on climate policy costs. Economic inefficiencies can be as large as 10-25 TlnUSD. However, this additional cost wanes when developing countries are allowed to trade emission reductions from their baseline emission paths during the 30-year delay period. Thus, irrespective of whether NA1 countries are immediately assigned an emission reduction target or not, they should nonetheless be included in a global carbon market. Technology deployment is also affected by the timing of developing countries’ mitigation measures. Delayed NA1-country participation in a climate agreement would scale down the deployment of coal with CCS throughout the century. On the other hand, innovation in the form of energy R&D investments would be positively affected, since it would become crucial in developed countries. Finally, uncertainty about the timing of NA1-country participation does not modify the optimal abatement strategy for developed countries and does not alter policy costs as long as a global carbon market is in place.
    Keywords: Delayed Action, Climate Policy, Stabilisation Costs, Uncertain Participation
    JEL: C72 H23 Q25 Q28
    Date: 2007
  3. By: Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Alessandra Sgobbi (Fondazione Eni Enrico Mattei and CMCC); Massimo Tavoni (Fondazione Eni Enrico Mattei, Catholic University of Milan and CMCC)
    Abstract: Despite the growing concern about actual on-going climate change, there is little consensus about the scale and timing of actions needed to stabilise the concentrations of greenhouse gases. Many countries are unwilling to implement effective mitigation strategies, at least in the short-term, and no agreement on an ambitious global stabilisation target has yet been reached. It is thus likely that some, if not all countries, will delay the adoption of effective climate policies. This delay will affect the cost of future policy measures that will be required to abate an even larger amount of emissions. What additional economic cost of mitigation measures will this delay imply? At the same time, the uncertainty surrounding the global stabilisation target to be achieved crucially affects short-term investment and policy decisions. What will this uncertainty cost? Is there a hedging strategy that decision makers can adopt to cope with delayed action and uncertain targets? This paper addresses these questions by quantifying the economic implications of delayed mitigation action, and by computing the optimal abatement strategy in the presence of uncertainty about a global stabilisation target (which will be agreed upon in future climate negotiations). Results point to short-term inaction as the key determinant for the economic costs of ambitious climate policies. They also indicate that there is an effective hedging strategy that could minimise the cost of climate policy under uncertainty, and that a short-term moderate climate policy would be a good strategy to reduce the costs of delayed action and to cope with uncertainty about the outcome of future climate negotiations. By contrast, an insufficient short-term effort significantly increases the costs of compliance in the long-term.
    Keywords: Uncertainty, Climate Policy, Stabilisation Costs, Delayed Action
    JEL: C72 H23 Q25 Q28
    Date: 2007
  4. By: Humberto Llavador; John E. Roemer; Joaquim Silvestre
    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: 2008–09
  5. By: Fabio Mariani (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I); Agustin Pérez-Barahona (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Natacha Raffin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I)
    Abstract: We present an OLG model in which life expectancy and environmental quality dynamics are jointly determined. Agents may invest in environmental quality, depending on how much they expect to live, but also in order to leave good environmental conditions to future generations. In turn, environmental conditions affects life expectancy.The model produces multiple steady states development regimes) and initial conditions do matter. In particular, some countries may be trapped in a low life expectancy /low environmental quality trap. This outcome is consistent with stylized facts relating life expectancy and environmental performance measures. Possible strategies to escape from this kind of trap are also discussed. Finally, this result is robust to the introduction of human capital through parental education expenditures.
    Keywords: Environmental quality; life expectancy; poverty traps.
    Date: 2008–09
  6. By: José Luis Iparraguirre D’Elia (Economic Research Institute of Northern Ireland)
    Abstract: We investigated the factors driving three types of environmentally-friendly household behaviour in Northern Ireland between 2003 and 2006: household waste recycling, reduction in the use of cars and actions to improve wildlife in private gardens. We found that a general concern for environmental issues is positively related to pro-environmental activities and that the same applies to specific aspects closely related to each particular behaviour, except for household waste recycling: people who are more worried about how waste is managed in Northern Ireland does not necessarily recycle more of their household waste.
    Keywords: Recycling, Household Behaviour
    Date: 2008–04
  7. By: Amani Omer; Unai Pascual; Noel Russell
    Date: 2008
  8. By: Chen Feng Ng (Department of Economics, California State University at Long Beach); Kenneth Small (Department of Economics, University of California-Irvine)
    Abstract: This paper investigates differentiated design standards as a source of capacity additions that are more affordable and have smaller aesthetic and environmental impacts than expressways. We consider several tradeoffs, including narrow versus wide lanes and shoulders on an expressway of a given total width, and high-speed expressway versus lower-speed arterial. We quantify the situations in which off-peak traffic is sufficiently great to make it worthwhile to spend more on construction, or to give up some capacity, in order to provide very high off-peak speeds even if peak speeds are limited by congestion. We also consider the implications of differing accident rates. The results support expanding the range of highway designs that are considered when adding capacity to ameliorate urban road congestion.
    Keywords: Highway design; Capacity; Free-flow speed; Parkway
    JEL: L91 R42
    Date: 2008–08
  9. By: Reichhuber, Anke; Camacho, Eva; Requate, Till
    Abstract: We present the results of a framed field experiment with Ethiopian farmers that use the mountain rain forest as a common pool resource. Harvesting honey causes damage to the forest, and open access leads to overharvesting. We test different mechanisms for mitigating excessive harvesting: a collective tax with low and high tax rates, and a tax/subsidy system. We find that the high-tax scheme works best in inducing the desired level of harvesting while the tax-subsidy scheme may trigger tacit collusion. Via a panel data analysis we further investigate which variables influence the subjects’ decisions during the treatments.
    Keywords: common pool resources, collective tax, framed field experiment
    Date: 2008
  10. By: Susan Olivia (University of California, Davis); John Gibson (University of Waikato); Scott Rozelle (Stanford University); Jikun Huang (Chinese Academy of Sciences); Xiangzheng Deng (Chinese Academy of Sciences)
    Abstract: In this paper, we apply a recently developed small-area estimation technique to derive geographically detailed estimates of consumption-based poverty and inequality in rural Shaanxi, China. We also investigate whether using environmental variables derived mainly from satellite remote sensing improves upon traditional approaches that only use household survey and census data. According to our results, ignoring environmental variables in statistical analyses that predict small-area poverty rates leads to targeting errors. In other words, using environmental variables both helps more accurately identify poor areas (so they should be able to receive more transfers of poor area funds) and identify non-poor areas (which would allow policy makers to reduce poverty funds in these better off areas and redirect them to poor areas). Using area-based targeting may be an efficient way to reach the poor since many counties and townships in rural Shaanxi have low levels of inequality, even though, on average, there is more within-group than between-group inequality. Using information on locations that are, in fact, receiving poverty assistance, our analysis also produces evidence that official poverty policy in Shaanxi targets particular areas which in reality are no poorer than other areas that do not get targeted.
    Keywords: China; environment; poverty; small area estimation
    JEL: O15 O53 P36 Q56
    Date: 2008–09–12
  11. By: Arnaud Büchs (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Climate change, demographic concentration, new needs, sustainable development etc. are many examples of uncontrolled mutations in space and time, which impact on the degree of satisfaction of water needs in the world, and which call for a new analysis of the water issue. This new perspective, in this context of increased uncertainties, means that this has to be put into question. It involves, first, to have understood and assimilated the crucial role played by water in its natural, social, economic, cultural and political environment, by having identified the links which define Men-Water relations. Second, analysing the current water standards implies that we adopt the representation of reality they provide as a reading grid. Furthermore, it is also a way to wonder whether this grid corresponds to the future reality of human societies. Considering so would mean repeating the present development schemes. Not considering so would bring about a new approach, looking for new dynamic decision-making tools adapted to the realities of each field, in order to take into account present needs, as well as future ones. This process is in keeping with the premises of development strategies in a perspective of sustainable development.
    Keywords: Water ; standards ; indicators ; sustainable development ; water scarcity.
    Date: 2008–09–01
  12. By: José Luis Iparraguirre D’Elia (Economic Research Institute of Northern Ireland)
    Abstract: The European and local legislation imposes demanding targets for the reduction of biodegradable municipal waste sent to landfill. Recycling is very much at the heart of activities needed to meet these targets and therefore the Northern Ireland’s Waste Management Strategy has also set out targets for recycling and composting. However, given the gulf between existing recycling rates and the targets set out even for two years down the line, a major change in household behaviour will be required for Northern Ireland to meet the targets for recycling and, more importantly from both a fiscal and environmental point of view, those for waste sent to landfill. This paper investigates the determinants of household waste recycling in Northern Ireland between 2003 and 2006. Some of the results are in line with those reported in the recent literature, but not all of them – and some noteworthy policy implications stem from our findings.
    Keywords: Recycling, Waste Management
    Date: 2008–04
  13. By: Antonio Roma; Davide Pirino
    Abstract: The modelling of production in microeconomics has been the subject of heated debate. The controversial issues include the substitutability between production inputs, the role of time and the economic consequences of irreversibility in the production process. A case in point is the use of Cobb-Douglas type production functions. This approach completely ignores the physical process underlying the production of a good. We examine these issues in the context of the production of a basic commodity (such as copper or aluminium). We model the extraction and the refinement of a valuable substance which is mixed with waste material, in a way which is fully consistent with the physical constraints of the process. The resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used. We analyze the equilibrium pricing of a commodity extracted in an irreversible way. The thermodynamic model allows for the calculation of the ”energy yield” (energy return on energy invested) of production alongside a financial (real) return in a two-period investment decision. The two investment criteria correspond in our economy to a different choice of numeraire and means of payment and corresponding views of the value of energy resources. Under an energy numeraire, energy resources will naturally be used in a more parsimonious way
    JEL: D24 E42 O13
    Date: 2008–08
  14. By: Melissa Boyle (Department of Economics, College of the Holy Cross); Victor Matheson (Department of Economics, College of the Holy Cross)
    Abstract: This study measures the economic incidence of the hybrid vehicle tax credit implemented in the Energy Policy Act of 2005. By comparing hybrids to gasoline-powered counterparts as the credit is phased out and expires, we are able to isolate the impact of the credit on the market price of hybrid vehicles. We conclude that hybrid prices increase by $0.75 on average for every additional dollar of credit. Thus, the majority of the subsidy accrues to manufacturers, potentially encouraging producers to increase the variety and availability of hybrid models on the market.
    Keywords: Automobiles, tax incidence, hybrids, taxation
    JEL: H22 L62 Q48 Q53
    Date: 2008–09

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.