nep-env New Economics Papers
on Environmental Economics
Issue of 2009‒02‒28
twenty papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Unintended Impacts of Multiple Instruments on Technology Adoption By Coria, Jessica
  2. Modelling Economic Impacts of Alternative International Climate Policy Architectures: A Quantitative and Comparative Assessment of Architectures for Agreement By Bosetti, Valentina; Carraro, Carlo; Sgobbi, Alessandra; Tavoni, Massimo
  3. What is the Top Priority on Climate Change? By Klemperer, Paul
  4. Delayed Participation of Developing Countries to Climate Agreements: Should Action in the EU and US be Postponed? By Bosetti, Valentina; Carraro, Carlo; Tavoni, Massimo
  5. The international stock pollutant control: a stochastic formulation By Omar J. Casas; Rosario Romera
  6. Delayed Action and Uncertain Targets. How Much Will Climate Policy Cost? By Bosetti, Valentina; Carraro, Carlo; Sgobbi, Alessandra; Tavoni, Massimo
  7. International Emission Permit Markets with Refunding By Gersbach, Hans; Winkler, Ralph
  8. Uncertainty, Climate Change and the Global Economy By Persson, Torsten; von Below, David
  9. Estimating the Effect of a Gasoline Tax on Carbon Emissions By Davis, Lucas W; Kilian, Lutz
  10. Assessing the Impact of Biodiversity on Tourism Flows: A Model for Tourist Behaviour and Its Policy Implications By Macagno, Giulia; Loureiro, Maria; Nunes, Paulo A.L.D.; Tol, Richard S. J.
  11. The Economic Impact of Ocean Acidification on Coral Reefs By Brander, Luke M.; Rehdanz, Katrin; Tol, Richard S J; van Beukering, Pieter J.H.
  12. Adaptive management of the climate change problem: bridging the gap between research and public policy By Săvoiu , Gheorghe
  13. Why Do Many Resource-Rich Countries Have Negative Genuine Saving? Anticipation of Better Times or Rapacious Rent Seeking By van der Ploeg, Frederick
  14. Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design By Jan K. Brueckner; Anming Zhang
  15. A General Framework for Estimating CO2 Emissions By Inmaculada Martínez-Zarzoso
  16. Why Previous Estimates of the Cost of Climate Mitigation are Likely Too Low By Beckman, Jayson; Hertel, Thomas
  17. Advertising to boost energy efficiency: the Power of One campaign and natural gas consumption By Diffney, Sean; Lyons, Sean; Malguzzi Valeri, Laura
  18. Towards a System of Open Cities in China: Home Prices, FDI Flows and Air Quality in 35 Major Cities By Siqi Zheng; Matthew E. Kahn; Hongyu Liu
  19. Taxation of Oil Products and GDP Dynamics of Oil-rich Countries By Julien Daubanes
  20. Development and Growth in Mineral-Rich Countries By Gylfason, Thorvaldur

  1. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: There are many situations where environmental authorities use a mix of environmental policy instruments, rather than one single instrument, to address environmental concerns. For example, one instrument may be used to reduce overall emissions of a pollutant while another is used to address specific seasonal concerns. Very little work has been done on the economic impacts of the application of multiple instruments. This paper investigates the unintended impacts of the interaction of a tradable permits scheme with direct seasonal regulations on the rate of adoption of advanced abatement technologies.<p>
    Keywords: Technology adoption; environmental policy; tradable permits; emission standards; interaction of policies
    JEL: O33 Q53 Q55 Q58
    Date: 2009–02–23
  2. By: Bosetti, Valentina; Carraro, Carlo; Sgobbi, Alessandra; Tavoni, Massimo
    Abstract: This paper provides a quantitative comparison of the main architectures for an agreement on climate policy. Possible successors to the Kyoto protocol are assessed according to four criteria: economic efficiency; environmental effectiveness; distributional implications; and their political acceptability which is measured in terms of feasibility and enforceability. The ultimate aim is to derive useful information for designing a future agreement on climate change control.
    Keywords: Climate Policy; Integrated Modelling; International Agreements
    JEL: C72 H23 Q25 Q28
    Date: 2008–10
  3. By: Klemperer, Paul
    Abstract: What should be the West's top priority for climate-change policy? This article is a revised and updated version of my talk to the Potsdam Global Sustainability Symposium (which drafted the Potsdam Declaration presented to the 2007 UN Climate Change Conference in Bali).
    Keywords: climate change mitigation; sustainability
    JEL: Q5 Q54 Q56 Q58
    Date: 2009–01
  4. By: Bosetti, Valentina; Carraro, Carlo; Tavoni, Massimo
    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: Climate Policy; Delayed Action; Stabilisation Costs; Uncertain Participation
    JEL: C72 H23 Q25 Q28
    Date: 2008–09
  5. By: Omar J. Casas; Rosario Romera
    Abstract: In this paper we provide a stochastic dynamic game formulation of the economics of international environmental agreements on the transnational pollution control when the environmental damage arises from stock pollutant that accumulates, for accumulating pollutants such as CO2 in the atmosphere. To improve the cooperative and the noncooperative equilibrium among countries, we propose the criteria of the minimization of the expected discounted total cost. Moreover, we consider Stochastic Dynamic Games formulated as Stochastic Dynamic Programming and Cooperative versus Noncooperative Stochastic Dynamic Games. The performance of the proposed schemes is illustrated by a real data based example.
    Keywords: Stochastic optimal control, Markov decision processes, Stochastic dynamic programming, Stochastic dynamic games, International pollutant control, Environmental economics, Sustainability,
    JEL: C61 C63 C73 C44 D70 Q20
    Date: 2009–02
  6. By: Bosetti, Valentina; Carraro, Carlo; Sgobbi, Alessandra; Tavoni, Massimo
    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: Climate Policy; Delayed Action; Stabilisation Costs; Uncertainty
    JEL: C72 H23 Q25 Q28
    Date: 2008–09
  7. By: Gersbach, Hans; Winkler, Ralph
    Abstract: We propose a blueprint for an international emission permit market such as the EU trading scheme. Each country decides on the amount of permits it wants to offer. A fraction of these permits is grandfathered, the remainder is auctioned. Revenues from the auction are collected in a global fund and reimbursed to member countries in fixed proportions. We show that international permit markets with refunding lead to outcomes in which all countries tighten the issuance of permits and are better off compared to standard international permit markets. If the share of grandfathered permits is sufficiently small, we obtain approximately socially optimal emission reductions.
    Keywords: climate change mitigation; global refunding scheme; international agreements; international permit markets; tradeable permits
    JEL: H23 H41 Q54
    Date: 2008–11
  8. By: Persson, Torsten; von Below, David
    Abstract: The paper illustrates how one may assess our comprehensive uncertainty about the various relations in the entire chain from human activity to climate change. Using a modified version of the RICE model of the global economy and climate, we perform Monte Carlo simulations, where full sets of parameters in the model's most important equations are drawn randomly from pre-specified distributions, and present results in the forms of fan charts and histograms. Our results suggest that under a Business-As-Usual scenario, the median increase of global mean temperature in 2105 relative to 1900 will be around 4.5 °C. The 99 percent confidence interval ranges from 3.0 °C to 6.9 °C. Uncertainty about socio-economic drivers of climate change lie behind a non-trivial part of this uncertainty about global warming.
    Keywords: Climate-economy models; Global warming; Monte Carlo study
    JEL: E17 O13 Q54
    Date: 2008–10
  9. By: Davis, Lucas W; Kilian, Lutz
    Abstract: Several policymakers and economists have proposed the adoption of a carbon tax in the United States. It is widely recognized that such a tax in practice must take the form of a tax on the consumption of energy products such as gasoline. Although a large existing literature examines the sensitivity of gasoline consumption to changes in price, these estimates may not be appropriate for evaluating the effectiveness of such a tax. First, most of these studies fail to address the endogeneity of gasoline prices. Second, the responsiveness of gasoline consumption to a change in tax may differ from the responsiveness of consumption to an average change in price. We address these challenges using a variety of methods including traditional single-equation regression models, estimated by least squares or instrumental variables methods, and structural vector autoregressions. We compare the results from these approaches, highlighting the advantages and disadvantages of each. Our preferred approach exploits the historical variation in U.S. federal and state gasoline taxes. Our most credible estimates imply that a 10 cent per gallon increase in the gasoline tax would reduce U.S. gasoline consumption by 4% and reduce total U.S. carbon emissions by about 1%. We conclude that there is no statistical evidence that a gasoline tax increase of the magnitude recently contemplated by policymakers would reduce carbon emissions enough to reach the targets described by the United Nation’s Intergovernmental Panel on Climate Change in 2007.
    Keywords: carbon tax; elasticity; gasoline consumption; gasoline tax; global warming; price endogeneity
    JEL: C53
    Date: 2009–02
  10. By: Macagno, Giulia ((FEEM) Venice); Loureiro, Maria ((IDEGA) Spain); Nunes, Paulo A.L.D. ((FEEM) Venice); Tol, Richard S. J. (ESRI)
    Abstract: This analysis provides an example of how biodiversity can be measured by means of different indicators, and how the latter can be used to assess the influence of the biodiversity profile of a region on the tourism flows towards it. Previous studies have considered environmental amenities as one of the determinants of tourism destination choice. The central hypothesis of this paper is that the destination’s biodiversity profile can be considered as a key component of environmental amenities. The main objective of this study is to propose a different perspective on this topic, considering the role of biodiversity on tourists’ choice of destination and duration of stay. Domestic Irish tourist flows have been chosen as a case study. The first step of the analysis required the construction of biodiversity indicators suitable for developing a biodiversity profile of each Irish county. Subsequently, a model was developed so as to explain the total number of nights spent in any location as a function of a set of explanatory variables including information about the sociodemographic characteristics of respondents, biodiversity and the landscape profile of the county of destination and features of the trip. Results show that most of the biodiversity and landscape indicators included in the analysis turn out to be statistically significant in determining tourists’ choices regarding the duration of their trip. As a result, policies pursuing biodiversity conservation appear to have a positive impact on the revenue of regional tourism.
    Keywords: species diversity, habitat fragmentation, landscape diversity, trip demand, indicators,ecosystem services, human well-being
    JEL: Q57
    Date: 2009–02
  11. By: Brander, Luke M. ((Vrije Universiteit) Amsterdam); Rehdanz, Katrin ((Kiel Institute for the World Economy) Germany); Tol, Richard S J (ESRI); van Beukering, Pieter J.H. ((Vrije Universiteit) Amsterdam)
    Abstract: Because ocean acidification has only recently been recognised as a problem caused by climate change, impact studies are still rare and estimates of the economic impact are absent. This paper estimates the economic impact of ocean acidification on coral reefs which are generally considered to be economically as well as ecologically important ecosystems. First, we conduct an impact assessment in which atmospheric concentration of CO2 is linked to ocean acidity causing coral reef area loss. Next, a meta-analysis is applied to determine the economic value of coral reefs around the world. Finally, these two analyses are combined to estimate the economic impact of ocean acidification on coral reefs for the four IPCC marker scenarios. We find that the annual economic impact rapidly escalates over time, because the scenarios have rapid economic growth in the relevant countries and coral reefs are a luxury good. Nonetheless, the annual value in 2100 in still only a fraction of total income, one order of magnitude smaller than the previously estimated impact of climate change. Although the estimated impact is uncertain, the estimated confidence interval spans one order of magnitude only. Future research should seek to extend the estimates presented here to other impacts of ocean acidification and investigate the implications of our findings for climate policy.
    Keywords: Ocean acidification, coral reefs, economic value
    JEL: Q51 Q54 Q57
    Date: 2009–02
  12. By: Săvoiu , Gheorghe
    Abstract: There are important differences between adaptation to normal climate and adaptation to climate change. One scientific community is organized to address extreme probabilities in current distributions, and their disaster potential. Another scientific community addresses the longer-term changes in the climate system. There are important differences between natural hazard (extreme and unpredictable events) and disaster as natural hazard with disastrous economic and social consequences as a matter of enormous concern. Finally, disaster management means a forecast for the real disaster events and after these disasters occurred, a post disaster attitude is necessary to ameliorate the situation and to take measures for rapid recovery. In this paper the author tries to address the description, understanding and prediction of extreme events in the weather system and their impact across a range of natural and socio-economic phenomena. Other goals of the paper are to present the weather and climate characteristics, the statistics of extreme events and to evaluate their impact on economy. Thus one major task of the work is to address the management of natural disasters caused by weather: the management of event forecast, risk assessment for various regions, and disaster management after the event occur. At the intersection between Economics, Management and Science of Weather Processes, this interdisciplinary study will provide the reader with insight and tools to address contemporary climate and weather hazard management problems.
    Keywords: weather disasters; natural hazard; human vulnerability; extreme events; statistics and impact; management of event forecast; regional risk assessment; post disaster management.
    JEL: G32 Q54
    Date: 2008–02
  13. By: van der Ploeg, Frederick
    Abstract: We investigate the Hartwick rule for saving of a nation necessary to sustain a constant level of private consumption for a small open economy with an exhaustible stock of natural resources. The amount by which a country saves and invests less than the marginal resource rents equals the expected capital gains on reserves of natural resources plus the expected increase in interest income on net foreign assets plus the expected fall in the cost of resource extraction due to expected improvements in extraction technology. Effectively, depletion is then postponed until better times. This suggests that it is not necessarily sub-optimal for resource-rich countries to have negative genuine saving. However, in countries with different groups with imperfectly defined property rights on natural resources, political distortions induce faster resource depletion than suggested by the Hotelling rule. Fractionalised societies with imperfect property rights build up more foreign assets than their marginal resource rents, but in the long run accumulate less foreign assets than homogenous societies. Hence, such societies end up with lower sustainable consumption and are worse off, especially if seepage is strong, the number of rival groups is large and the country does not enjoy much monopoly power on the resource market. Genuine saving is zero in such societies. However, World Bank genuine saving figures based on market rather than accounting prices will be negative, albeit less so in more fractionalised societies with less secure property rights.
    Keywords: accounting price; capital; common pool; exhaustible resources; extraction technology; fractionalisation; genuine saving; Hartwick rule; Hotelling rule; property rights; seepage; sovereign wealth fund; sustainable consumption; voracity
    JEL: E20 F32 O13 Q01 Q32
    Date: 2008–10
  14. By: Jan K. Brueckner; Anming Zhang (Department of Spacial Economics, VU University, Amsterdam)
    Abstract: This paper explores the effect of airline emissions charges on airfares, airline service quality, aircraft design features, and network structure, using a detailed and realistic theoretical model of competing duopoly airlines. These impacts are derived by analyzing the effects of an increase in the effective price of fuel, which is the path by which emissions charges will alter airline choices. The results show that emission charges will raise fares, reduce flight frequency, increase load factors, and raise aircraft fuel efficiency, while having no effect on aircraft size. Given that these adjustments occur in response to the treatment of an emissions externality that is currently unaddressed, they represent efficient changes that move society closer to a social optimum.
    Keywords: Emissions; Global warming; Airlines
    JEL: H23 L9
    Date: 2009–01
  15. By: Inmaculada Martínez-Zarzoso (Ibero-Amerika Institut, Universität Göttingen / Germany)
    Abstract: This paper proposes a new analytical framework with which to analyze the determinants of global CO2 emissions. It contributes to the existing literature by examining the determinants of CO2 emissions using a flexible functional form (transcendental logarithmic model), taking into account the presence of dynamic effects and allowing for heterogeneity in the sample of countries. The sample covers 121 countries and the period analyzed extends from 1975 through 2003. Two main results emerge. First, a static specification is rejected against a dynamic model. Second, the data also reject a general specification for all countries; hence slopeheterogeneity in the estimated coefficients has to be modeled. Conversely, the STIRPAT model is generally accepted for high-income countries, whereas for developing countries several interaction terms also play a role in explaining CO2 emissions.
    Keywords: CO2 emissions, developing countries, panel data, population growth, urbanization
    JEL: Q25 Q4 Q54
    Date: 2009–02–12
  16. By: Beckman, Jayson; Hertel, Thomas
    Abstract: Computable general equilibrium (CGE) models have been heavily utilized in analyses of the costs of Greenhouse Gas mitigation policies. This is in large part due to their ability to simulate potential impacts of prospective economic policies taking into inter-sectoral and international interactions. Although CGE models have received heavy usage; they are often criticized as being insufficiently validated. Key parameters are often not econometrically estimated, and the performance of the model as a whole is rarely checked against historical outcomes. As a consequence, questions frequently arise as to how much faith one can put in CGE results. Our findings indicate that many earlier CGE-based studies may have understated the cost of meeting these targets by overstating the price elasticity of demand for energy. These results suggest that we must revisit the cost of climate policies in light of newly validated CGE models.
    Date: 2009
  17. By: Diffney, Sean (ESRI); Lyons, Sean (ESRI); Malguzzi Valeri, Laura (ESRI)
    Abstract: In this paper we study the recent awareness and persuasion campaign launched by the Irish government to increase energy efficiency and we assess its effect on residential natural gas consumption. We first analyse changes in the daily consumption of natural gas and find that advertising leaflets had a significant effect on natural gas consumption. We then study three surveys administered to 1000 consumers prior to and during the campaign. This repeated cross-section allows us to determine that the efficiency campaign has increased self-reported interest in energy efficiency and awareness of behaviours that curb natural gas consumption. However we do not find any positive effect of the campaign on self-reported energy-saving behaviours.
    JEL: Q48 Q41
    Date: 2009–02
  18. By: Siqi Zheng; Matthew E. Kahn; Hongyu Liu
    Abstract: Over the last thirty years, China's major cities have experienced significant income and population growth. Much of this growth has been fueled by urban production spurred by world demand. Using a unique cross-city panel data set, we test several hypotheses concerning the relationship between home prices, wages, foreign direct investment and ambient air pollution across major Chinese cities. Home prices are lower in cities with higher ambient pollution levels. Cities featuring higher per-capita FDI flows have lower pollution levels.
    JEL: F21 Q53 R31
    Date: 2009–02
  19. By: Julien Daubanes (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: This article proposes a complementary explanation for why oil-rich economies have experienced a relative low GDP growth over the last decades: the proportion of taxes in the prices of petroleum products have been globally increasing for the four last decades, thus making oil revenues grow slower than output from manufacturing and yielding a low growth of oil-exporting countries' GDPs. This is illustrated in a two-country model of oil depletion examining why a net oil-exporting country and a net oil-importing country are dierently affected by increasing taxes on the resource use. The hypothesis is constructed on the theory of non-renewable resources taxation. The argument is based on the distributional effects of taxes on exhaustible resources, that are mainly borne by the suppliers. The theoretical predictions are not invalidated when put up against available statistics.
    Keywords: Oil curse, Non-renewable resources, Taxes, Oil revenues, GDP
    JEL: Q3 O4 F4
    Date: 2009–02
  20. By: Gylfason, Thorvaldur
    Abstract: This paper describes some of the ways in which mineral rents and their management influence economic growth and other determinants of growth as well as some of the reasons why many mineral-rich countries have not managed very well to divert their resource rents to furthering economic and social development – that is, why natural capital tends to crowd out human, social, financial and real capital. The empirical evidence of these linkages is presented in two rounds. First, we allow World Bank data covering 164 countries in 1960-2000 to speak for themselves through a sequence of bilateral correlations that suggest an inverse relationship between natural resource dependence and growth via human capital. We then repeat the exercise for two aspects of social capital, corruption and democracy, suggesting an additional adverse effect of natural resource dependence via social capital on growth. In the second round, we test for the robustness of natural resource dependence as a determinant of long-run growth by estimating a series of growth regressions for the same 164 countries.
    Keywords: Economic growth; natural resources; social policy
    JEL: O11
    Date: 2008–11

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