nep-env New Economics Papers
on Environmental Economics
Issue of 2008‒12‒07
twenty-two papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Biological Carbon Sinks: Transaction Costs and Governance By G. Cornelis van Kooten
  3. The Case for International Emission Trade in the Absence of Cooperative Climate Policy By Jared C. Carbone; Carsten Helm; Thomas F. Rutherford
  4. Climate change mitigation policies: Are R&D subsidies preferable to a carbon tax? By GRIMAUD André; LAFFORGUE Gilles
  5. Intra-Country Distributional Impact of Policies to Fight Climate Change: A Survey By Dorothée Boccanfuso; Antonio Estache; Luc Savard
  6. Carbon Lorenz Curves By Loek Groot
  7. Economic growth and environmental pressure: a worldwide panel analysis By Bagliani Marco; Bravo Giancarlo; Dalmazzone Silvana; Giaccaria Sergio; Golia Silvia
  8. Second Best Analysis in a General Equilibrium Climate Change Model By GRIMAUD, André; LAFFORGUE, Gilles
  9. The Value of Information in Public Decisions By Arvind Magesan; Matthew A. Turner
  10. Renewable Resource Management with Stock Externalities: Coastal Aquifers and Submarine Groundwater Discharge By Sittidaj Pongkijvorasin; James Roumasset; Thomas Kaeo Duarte; Kimberly Burnett
  12. Carbon Storage in a Growth Model with Climate and R&D Policy By GRIMAUD, André; MAGNE, Bertrand; ROUGÉ, Luc
  13. The competitiveness effects of the EU climate policy By Sonja Peterson; Gernot Klepper
  14. Wind Power Development: Opportunities and Challenges By G. Cornelis van Kooten; Govinda R. Timilsina
  15. Decentralized Equilibrium Analysis in a Growth Model with Directed Technical Change and Climate Change Mitigation By GRIMAUD, André; LAFFORGUE, Gilles; MAGNE, Bertrand
  16. Global Climate Change and the Funding of Adaptation By Seraina Buob; Gunter Stephan
  17. The Demands for Environmental Regulation and for Trade in the Presence of Private Mitigation By Louis Hotte; Stanley L. Winer
  18. Scope and Sustainability of Cooperation in Transboundary Water Sharing of the Volta River By Bhaduri, Anik; Perez, Nicostrato; Liebe, Jens
  20. Bioenergy and Rural Development in Developing Countries: a review of existing studies By Gerber, Nicolas
  21. Apports de l’économie sociale et solidaire dans des projets à dimensions agro-environnementales : quelles constructions territoriales ? By Geneviève Pierre; Bertille Thareau
  22. WTP vs. WTA: Christmas Presents and the Endowment Effect By Bauer, Thomas; Schmidt, Christoph M.

  1. By: G. Cornelis van Kooten
    Abstract: Activities that remove CO2 from the atmosphere and store it in forest and agricultural ecosystems can generate CO2-offset credits that can thus substitute for CO2 emissions reduction. Are biological CO2-uptake activities competitive with CO2 offsets from reduced fossil fuel use? In this paper, it is argued that transaction costs impose a formidable obstacle to direct substitution of carbon uptake offsets for emissions reduction in trading schemes, and that separate caps should be set for emissions reduction and sink-related activities. While a tax/subsidy scheme is preferred to emissions trading for incorporating biologically-generated CO2 offsets, contracts that focus on the activity and not the amount of carbon sequestered are most likely to lead to the lowest transaction costs.
    Keywords: carbon sequestration; transaction costs; climate change
    JEL: Q54 Q23 Q42 H23 D23
    Date: 2008–11
  2. By: Verghese, Shalet; MG, Chandrakanth
    Abstract: Conceptual development in the theory of externalities have opened up several policy options for their internalization including payment towards environmental services. Hence as externalities are social costs, accountability is crucial in increasing environmental awareness and for collective action through education and extension more so in developing countries. Here a modest attempt has been made to estimate externalities in water, forests and environment with field data from peninsular India to refl ect on the economic perception of externalities by farmers and users of environment for the consideration of policy makers to devise institutions for payment towards environmental services. The methodology largely used here in estimation / valuation of externalities is by considering €طith €Ӡwithout€٠situations (including €آefore €Ӡafter€٠in some cases) akin to €ذroject valuation€ٮ Studies cover empirical estimation of externalities inter alia due to over extraction of groundwater , sand mining, watershed development, conservation of forests, sacred groves, cultivation of organic coffee, use of medicinal plants as alternate medicines and the annual values presented are in 2008 prices. The negative externality due to sand mining 24 ‚̠per acre, that due to distillery effluent pollution is 34 ‚̠per acre. The positive externality due to watershed program is around 51 ‚̠per acre, and that due to rehabilitation of irrigation tanks is 26 ‚̠per acre. The positive externality due to cultivation of shade coffee is 9 ‚̠per acre and that due to forest conservation 27 ‚̠per acre. The positive externality due to sacred grove conservation was 12 ‚̠per family. The impact of forest conservation on Non timber forest products was 88 ‚̠/ per tribal household. The positive externality due to use of medicinal plants as alternate medicine is equal to 35 ‚̠per patient suffering from osteo-arthritis and 19 ‚̠per patient suffering from peptic-ulcer. While these estimates are not sacro sanct as the methodologies for valuation of externalities are subject to further review and improvement, they however serve as initial indicators of spillovers. And they signal possibilities for consideration of policy makers for devising alternate institutions for potential payment towards environmental services.
    Keywords: Consumer/Household Economics, Demand and Price Analysis, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods, Externalities, Environmental services, Sustainable development,
    Date: 2008–08–25
  3. By: Jared C. Carbone (University of Calgary); Carsten Helm (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Thomas F. Rutherford (ETH, Switzerland)
    Abstract: We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries' decisions about their participation in a trading system and about their initial permit endowment are made noncooperatively; so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains. Despite this, we find that emission trade agreements can be effective; that smaller groupings pairing developing and developed-world partners often perform better than agreements with larger rosters; and that general equilibrium responses play an important role in shaping these outcomes.
    Keywords: Global warming, coalitions, general equilibrium, tradable permits
    JEL: D7 F18 F42 Q58
    Date: 2008–10
  4. By: GRIMAUD André; LAFFORGUE Gilles
    Date: 2008–12
  5. By: Dorothée Boccanfuso; Antonio Estache; Luc Savard
    Abstract: In this paper we present a survey of distributional impact analysis of environmental policies envisaged or implemented to reduce greenhouse gaz emissions. The implementation of these policies usually aim at reducing greenhouse gases directly or indirectly. However, these policies can also produce important changes in factor allocation, relative prices in specific countries as well as on world markets when these policies are adopted by a large number of countries. The changes in welfare can be important for vulnerable groups of population in developing countries. This survey reviews the evidence on the incidence of these policies. In the process, it shows that the computable general equilibrium (CGE) microsimulation approach has not been fully exploited in the context of distributional impact analysis of CC policies.
    Keywords: Global warming, environmental policies, income distribution, developing countries
    JEL: D58 D60 H23 O13 Q52
    Date: 2008
  6. By: Loek Groot
    Abstract: The purpose of this paper is twofold. First, it exhibits that standard tools in the measurement of income inequality, such as the Lorenz curve and the Gini-index, can successfully be applied to the issues of inequality measurement of carbon emissions and the equity of abatement policies across countries. These tools allow policy-makers and the general public to grasp at a single glance the impact of conventional distribution rules such as equal caps or grandfathering, or more sophisticated ones, on the distribution of greenhouse gas emissions. Second, using the Samuelson rule for the optimal provision of a public good, the Pareto-optimal distribution of carbon emissions is compared with the distribution that follows if countries follow Nash-Cournot abatement strategies. It is shown that the Pareto-optimal distribution under the Samuelson rule can be approximated by the equal cap division, represented by the diagonal in the Lorenz curve diagram.
    Keywords: carbon emission, climate change, Gini, global warming, Lorenz curve, Samuelson rule
    JEL: D63 H3 Q01 Q4 Q5
    Date: 2008–11
  7. By: Bagliani Marco; Bravo Giancarlo; Dalmazzone Silvana (University of Turin); Giaccaria Sergio (University of Turin); Golia Silvia
    Abstract: This paper deepens the consumption-based line of inquiry on the Environmental Kuznets Curve (EKC) question by means of a large panel dataset of world countries covering the 1961–2003 period. As indicator of environmental pressure, we employ ecological footprint estimates. The ecological footprint is a consumption-based measure, since it attributes the environmental impact of a given good or service to the final consumer, independently of where the supplying area is located. We measure income by means of per capita GDP expressed both in absolute and in purchasing power parity (PPP) terms. None of the estimated models show evidence of a de-linking between economic growth and environmental pressure for high levels of income. Hence, as a whole, our analysis does not support the EKC hypothesis.
    Date: 2008–12
  8. By: GRIMAUD, André; LAFFORGUE, Gilles
    Date: 2008–04
  9. By: Arvind Magesan; Matthew A. Turner
    Abstract: This paper considers the problem of an imperfectly informed regulator constrained in his choice of environmental regulation by the political opposition of those affected by the policy. We compare the value of two types of information to the regulator: the social cost of pollution and the profitability of firms present in the economy. We find that in environments where small increases in the losses to regulated firms greatly affect the regulator's ability to implement the policy, it is most valuable to learn the types of firms, while it is most valuable to learn the social cost of pollution when small increases in losses are relatively ineffectual.
    Keywords: Environmental Policy, Pollution, Optimal Taxation
    JEL: H23 Q52 D81
    Date: 2008–12–03
  10. By: Sittidaj Pongkijvorasin (Chulalongkorn University); James Roumasset (University of Hawaii at Manoa); Thomas Kaeo Duarte (Kamehameha Schools); Kimberly Burnett (University of Hawaii Economic Research Organization)
    Abstract: This paper develops a hydrologic-ecologic-economic model of groundwater use. Particularly, we model coastal groundwater management and its effects on submarine groundwater discharge, nearshore marine water quality, and marine biota. We show that incorporating the external effects on nearshore resources increases the optimal sustainable steady-state head level. Numerical simulations are illustrated using data from the Kuki’o region on the island of Hawaii. Two different approaches for incorporating the nearshore resource are examined. Including algae’s market value in the objective function results in only slightly lower rates of extraction. When a minimum constraint is placed on the stock of the keystone species, however, greater conservation may be indicated. The constraint also results in non-monotonic paths of water extraction, head level, and water price in the optimal solution.
    Keywords: groundwater management, marine ecology, dynamic optimization, safe minimum standard, sustainability science
    JEL: Q25 Q28 C61 D62
    Date: 2008–11–10
  11. By: Alvaro Calzadilla; Katrin Rehdanz; Richard S.J. Tol (Economic and Social Research Institute)
    Abstract: Water problems are typically studied at the farm-level, the river–catchment-level or the country-level. About 70% of irrigation water is used for agriculture, and agricultural products are traded internationally. A full understanding of water use is impossible without understanding the international market for food and related products, such as textiles. Based on the global general equilibrium model GTAP-W, we offer a method for investigating the role of green (rain) and blue (irrigation) water resources in agriculture and within the context of international trade. Since problems related to groundwater availability are getting more severe in the future, we analyze the impact of different water use options for 2025 where data is readily available. We run two alternative scenarios. The first, called water crisis scenario, explores a deterioration of current trends and policies in the water sector. The second scenario, called sustainable water use scenario, assumes an improvement in policies and trends in the water sector and eliminates groundwater overdraft worldwide, increasing water allocation for the environment. In both scenarios, welfare gains or losses are not only associated with changes in agricultural water consumption. Under the water crisis scenario, welfare not only rises for regions where water consumption increases (China, South East Asia and the USA). Welfare gains are considerable for Japan and South Korea, Southeast Asia and Western Europe as well. These regions benefit from higher irrigated production and lower food prices. Alternatively, under the sustainable water use scenario, welfare losses not only affect regions where overdrafting is occurring. Welfare decreases in other regions as well. These results indicate that, for water use, there is a clear trade-off between economic welfare and environmental sustainability.
    Keywords: Agricultural Water Use, Computable General Equilibrium, Groundwater Use, Irrigation, Sustainable Water Use, Water Scarcity
    JEL: D58 Q17 Q25
    Date: 2008–12
  12. By: GRIMAUD, André; MAGNE, Bertrand; ROUGÉ, Luc
    Date: 2008–03
  13. By: Sonja Peterson; Gernot Klepper
    Abstract: To show global leadership and to foster the international negotiations for a long term international climate regime the EU has decided to reduce its GHG emissions by 20% relative to 1990 until the year 2020. These reductions will even rise to 30% “if there is an international agreement committing other developed countries to comparable emission reductions and economically more advanced developing countries to contributing adequately according to their responsibilities and respective capabilities”. At the same time, the European council started in 2000 the so-called Lisbon process which established the issue of competitiveness as a priority area for EU policy and there is some concern about the competitiveness effects of EU climate policy. We use the multi-sector, multi-region computable general equilibrium model DART to assess the impacts of the recent EU climate policy proposals for the competitiveness of the European economies and specific sectors. There are three general insights. First, the effects of EU climate policies on competitiveness are relatively small if one leaves out the fossil fuels themselves the consumption of which is supposed to be reduced anyway. The losses of the energy intensive industries are compensated by gains in other manufacturing sectors. Secondly, there is no uniform effect across the member states of the EU. It is the special circumstances in side the different sectors within the member states that determine whether a sector wins or looses competitiveness. And finally, the changes in competitiveness are strongly influenced by the choice of the particular policy design. A more efficient instrument choice not only reduces the competitiveness effects it also distributes the burden more equally
    Keywords: Post Kyoto, EU, emission trading, competitiveness
    JEL: D58 Q48 Q54
    Date: 2008–11
  14. By: G. Cornelis van Kooten; Govinda R. Timilsina
    Abstract: In this study, the prospects of wind power at the global level are reviewed. Existing studies indicate that the earth’s wind energy supply potential significantly exceeds global energy demand. Yet, only 1% of the global electricity demand is currently derived from wind power despite 40% annual growth in wind generating capacity over the last 25 years. More than 98% of total current wind power capacity is installed in the developed countries plus China and India. Existing studies estimate that wind power could supply 7% to 34% of global electricity needs by 2050. Wind power faces a large number of technical, financial, institutional, market and other barriers. To overcome these, many countries have employed various policy instruments, including capital subsidies, tax incentives, tradable energy certificates, feed-in tariffs, grid access guarantees and mandatory standards. Besides these policies, climate change mitigation initiatives resulting from the Kyoto Protocol (e.g., CO2-emission reduction targets in developed, the Clean Development Mechanism in developing countries) have played a pivotal role in promoting wind power.
    Keywords: wind energy, renewable energy, electricity grids
    JEL: Q25 Q32 Q42 Q48
    Date: 2008–11
  15. By: GRIMAUD, André; LAFFORGUE, Gilles; MAGNE, Bertrand
    Date: 2008–02
  16. By: Seraina Buob; Gunter Stephan
    Abstract: Mitigation and adaptation are the most important strategies in combating global climate change. It is expected that in a post Kyoto world industrialized countries have to engage in greenhouse gas abatement, and to support developing countries in adapting to climate change. Within the framework of a non-cooperative Nash game we analyze, whether funding adaptation is incentive compatible in the sense that it stipulates mitigation. In particular it is the aim of this paper to discuss: (1) How does foreign funding of adaptation affect mitigation and regional welfare? (2) Under which conditions is it economically rational to fund adaptation in developing regions? We find that, if strict complementarity between adaptation and mitigation exists, funding adaptation increases both global mitigation and the donors' welfare, but negatively affects the recipients' welfare. The later only benefit, if maladaptation or adaptation, which is neutral to mitigation, is funded, which, however, makes the donors worse off.
    Keywords: Climate change; mitigation and adaptation; funding of private goods
    JEL: C72 F51 Q54
    Date: 2008–11
  17. By: Louis Hotte (Department of Economics, University of Ottawa); Stanley L. Winer (School of Public Policy and Administration and Department of Economics, Carleton University)
    Abstract: We study the nature of individual demands for environmental regulation and for trade openness in the general equilibrium of a small open economy where the environment is an input to production. Differences in the ability of individuals to afford private mitigation of the adverse consequences of pollution is a central feature of the analysis. Private mitigation leads to an endogenous, unequal distribution of the health-related consequences of pollution across income groups in a manner consistent with epidemiologic studies, in contrast to much of the literature which assumes equal health effects for all. We show that when private mitigation is possible at a cost, trade polarizes the interests of rich and poor with respect to the stringency of regulation. Moreover, even though trade has the potential to benefit everyone, the poor may oppose trade openness because of a concern that laxer environmental regulation will then be imposed in the interest of the rich. We explain why and how heterogeneity in the intensity of preferences, and not just in their direction, is likely to play a role in the determination of collective choices with respect to the regulation of the environment and of trade. We conclude by drawing out the general implications of the analysis for the study of the political economy of the environmenttrade- welfare nexus.
    Keywords: regulation, environment, pollution, private mitigation, trade, welfare, collective choice
    JEL: D7 F18 Q56
    Date: 2008
  18. By: Bhaduri, Anik; Perez, Nicostrato; Liebe, Jens
    Abstract: The paper explores the scope and sustainability of a self-enforcing cooperative agreement in the framework of a game theoretic model, where the upstream and downstream country, Burkina Faso and Ghana respectively in the Volta River Basin, bargain over the level of water abstraction in the upstream. In the model we consider the case where the downstream country, Ghana, offers a discounted price for energy export to the upstream country, Burkina Faso, to restrict its water abstraction rate in the upstream. The paper examines the benefits and sustainability of such self-enforcing cooperative arrangements between Ghana and Burkina Faso given stochastic uncertainty in the river flow. The findings of the paper suggest that at the present condition, the marginal benefit of Burkina Faso from increasing the water abstraction is much higher than that of Ghana€ٳ marginal loss. However, the paper finds that if both countries€٠water abstraction rates are at a much higher level, then the marginal loss of Ghana increases phenomenally from similar increase in water abstraction rate by Burkina Faso. Under such circumstances, there is an opportunity for Ghana to provide side payments in terms of discounted export price of power in order to motivate Burkina Faso to restrict water abstraction.
    Keywords: Bargaining, Cooperation, Transboundary, Uncertainty, Volta River Basin, Demand and Price Analysis, Environmental Economics and Policy, Risk and Uncertainty,
    Date: 2008–09–19
  19. By: HM, Seema; MG, Chandrakanth; N, Nagaraj
    Abstract: In this study, economic impact of water harvesting and groundwater recharging was analyzed in the context of Sujala watershed equity and efficiency in the distribution of benefits in Chitradurga district, Karnataka. Field data for 2004-05 (drought year) and 2005-06 (normal year) from 30 sample farmers in Sujala watershed form the data base for the study. Another sample of 30 farmers from Non-Sujala (or DPAP) watershed, and 30 from outside watershed area form the control. Farmers were further classified as: (i) those who had bore well irrigation; and (ii) those who had no borewell irrigation in order to assess the impact of watershed. It was found that the amortized cost per functioning well and cost per acre inch of groundwater in Sujala watershed is lower than that in non-Sujala watershed and non-watershed area. The economic contribution in terms of incremental net returns per acre in (i) Sujala over non-watershed area (in drought year, normal year) as the contribution of Sujala watershed are Rs. 1726 and Rs. 3650; (ii) Sujala over Non-Sujala (DPAP) watershed (as the contribution of Sujala watershed institutions) is Rs. 1067 and Rs. 898); (iii) Non Sujala (DPAP) over non-watershed area (equal to contribution to Non-Sujala or DPAP watershed) is Rs. 133 and Rs. 2226. These indicate economic supremacy of Sujala watershed program. The incremental net returns of Sujala over non-watershed area in drought year and in normal year for farmers possessing irrigation wells were Rs. 614 and Rs. 5056 respectively; for farmers not possessing irrigation wells is Rs. 7354 and Rs. 5326; for all classes of farmers is Rs. 3066 and Rs. 4967 are the prima facie indicators of economic contributions of Sujala watershed program. The negative externality per well per year in Sujala was Rs 2652, in Non-Sujala watershed was Rs. 2735, and in non-watershed area was Rs. 4285. It shows that the negative externality in groundwater irrigation has reduced by 38% in Sujala over non-watershed area. Sujala watershed program had a higher expenditure as compared to non-sujala watershed. Still the B-C ratios were higher in Sujala watershed during both drought and normal year.
    Keywords: Agricultural and Food Policy, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies, Sujala watershed program, externalities, drought, ANOVA,
    Date: 2008–04
  20. By: Gerber, Nicolas
    Abstract: Four broad types of studies on rural development and bioenergy technologies are identified. Within these four types, this discussion paper presents a number of existing studies which are most relevant in the context of developing a research focus on the role, feasibility and issues associated with bioenergy, and in particular biofuels, as engine for rural development in developing countries. The results and recommendations of the referenced studies, reflecting the global trends of the current literature, highlight the importance of bioenergy technologies in the development process of poor rural communities. The surge of biofuels and in particular of their feedstocks on the international agricultural markets has recently commended a lot of attention. However, whilst biofuels hold a huge economic potential as internationally traded commodities, the various issues and challenges facing biofuel production systems could indicate that in the context of developing economies, they are better suited for the domestic energy markets. In any case, the analysis necessary to formulate policy recommendations on how, where and when to implement which bioenergy technology calls for a differentiated €Ӡper region and/or technology €Ӡand integrated €Ӡwithin and alongside other rural production systems €Ӡapproach. In this context, this review of existing studies exposes some unanswered questions and research gaps.
    Keywords: International Development, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy,
    Date: 2008–06–30
  21. By: Geneviève Pierre (ESO - Espaces et Sociétés - CNRS : UMR6590 - Université de Caen - Université d'Angers - Université du Maine - Université de Nantes - Université Rennes 2 - Haute Bretagne); Bertille Thareau (LARESS - Laboratoire de recherches et études en sciences sociales - Ecole Supérieure d'Agriculture d'Angers)
    Abstract: Deux exemples choisis dans la France de l’ouest, espace marqué par l’importance et l’ancienneté des structures d’encadrement agricole en économie sociale, questionnent les conditions de construction et d’appropriation territoriale, par les structures de l’ESS, de projets agri-environnementaux innovants liés à l’autonomie agricole. Face aux intentionnalités des acteurs, la pérennité des projets et de leurs territoires est interrogée.
    Keywords: Economie sociale et solidaire;territoire;agriculture
    Date: 2008–05–08
  22. By: Bauer, Thomas (RWI Essen); Schmidt, Christoph M. (RWI Essen)
    Abstract: Using data on the valuation of Christmas gifts received by students in different fields at a German university, we investigate whether the endowment effect differs between students of economics and other respondents and whether it varies with the market price of the object under consideration. Our estimation results suggest that economics students have both, a significant lower WTP and WTA, indicating that existing studies on the efficiency loss of holiday gifts and experimental studies on the endowment effect that rely on data from economics students may be biased. The result further indicates that the endowment effect is independent of the market price of the object.
    Keywords: loss aversion, endowment effect, Christmas presents, deadweight loss
    JEL: D01 D49 D61
    Date: 2008–11

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