nep-env New Economics Papers
on Environmental Economics
Issue of 2009‒07‒28
39 papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Carbon Markets and their Implications for Natural Resource Management in Australia By Andrew Reeson
  2. Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation By Valentina Bosetti; Ruben Lubowski; Alexander Golub; Anil Markandya
  3. Market-Based Approaches to Environmental Management: A Review of Lessons from Payment for Environmental Services in Asia By Bhim Adhikari
  4. On the effectiveness of carbon-motivated border tax adjustments By John Whalley
  5. Total Factor Productivity Growth when Factors of Production Generate Environmental Externalities By Anastasios Xeapapadeas; Dimitra Vouvaki
  6. Climate Change Feedback on Economic Growth: Explorations with a Dynamic General Equilibrium Model By Fabio Eboli; Ramiro Parrado; Roberto Roson
  7. Is It Fair to Treat China as a Christmas Tree to Hang Everybody’s Complaints? Putting its Own Energy Saving into Perspective By ZhongXiang Zhang
  8. Climate Change Mitigation Strategies in Fast-Growing Countries: The Benefits of Early Action By Massimo Tavoni; Valentina Bosetti; Carlo Carraro
  9. Energia solar fotovoltaica: Contributo para um roadmapping do seu desenvolvimento tecnológico [Fotovoltaic solar energy: a contribute to a technological development roadmapping] By Hugo Gil Silva; Marcos Afonso
  10. Climate change mitigation options and directed technical change: A decentralized equilibrium analysis By GRIMAUD Andre; LAFFORGUE Gilles; MAGNE Bertrand
  11. Emissions Trends and Labour Productivity Dynamics Sector Analyses of De-coupling/Recoupling on a 1990-2005 Namea By Giovanni Marin; Massimiliano Mazzanti
  12. Performance Payments for Environmental Services : Lessons from Economic Theory on the Strength of Incentives in the Presence of Performance Risk and Performance Measurement Distortion By Astrid Zabel; Brian Roe
  13. Energy consumption and income : a semiparametric panel data analysis. By Phu Nguyen-Van
  14. The Incentive to Invest in Environmental-Friendly Technologies: Dynamics Makes a Difference By Davide Dragone; Luca Lambertini; Arsen Palestini
  15. The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes: Empowering Consumers to Choose Optimally By Eftichios S. Sartzetakis; Anastasios Xepapadeas; Emmanuel Petrakis
  16. La Protección Del Medio Ambiente Y El Comercio Internacional: ¿Hay Que "Pensar En Verde" El Arbitraje De Inversiones? By Fach Gómez, katia
  17. Efficient Economic and Environmental Policies Combining Multicriteria Techniques and General Equilibrium Modelling. By Francisco J. André; M. Alejandro Cardenete
  18. Dynamic Core-Theoretic Cooperation in a Two-Dimensional International Environmental Model By Marc Germain; Henry Tulkens; Alphonse Magnus
  19. Climate policy options and the World Trade Organization By Hufbauer, Gary Clyde; Kim, Jisun
  20. Dynamic core-theoretic cooperation in a two-dimensional international environmental model By Marc, GERMAIN; Henry, TULKENS; Alphonse, MAGNUS
  21. Additive Damages, Fat-Tailed Climate Dynamics, and Uncertain Discounting By Weitzman, Martin L.
  22. On the realized volatility of the ECX CO2 emissions 2008 futures contract: distribution, dynamics and forecasting By Julien Chevallier; Benoît Sévi
  23. Mapping of Forest Biodiversity Values: A Plural Perspective By Paulo A.L.D. Nunes; Elena Ojea; Maria Loureiro
  24. A contribuição da Informática para o Desenvolvimento Sustentável: o exemplo do conceito de Grid Computing [The contribution of informatics to the sustainable development: the example of the Grid Computing concept] By Hugo M. M. Aguiar; Pedro M. B. Afonso
  25. Environmental Regulation and Industry Location By Abay Mulatu; Reyer Gerlagh; Dan Rigby; Ada Wossink
  26. Ocean Iron Fertilization in the Context of the Kyoto Protocol and the Post-Kyoto Process By Christine Bertram
  28. Options Introduction and Volatility in the EU ETS By Julien Chevallier; Yannick Le Pen; Benoît Sévi
  29. Urban Issues and Solutions in the Context of Sustainable Development - A review of the literature By Jurijs Grizans
  30. The Stock Concept Applicability for the Economic Evaluation of Marine Ecosystem Exploitation By Lars J. Ravn-Jonsen
  31. Intertemporal Choice of Marine Ecosystem Exploitation By Lars J. Ravn-Jonsen
  32. Ecosystem Management a Management View By Lars J. Ravn-Jonsen
  33. The Allocation and Dissipation of Resource Rents: Implications for Fishery Reform By Gary D. Libecap; Terry L. Anderson
  34. Adverse health effects, risk perception and pesticide use behavior By Khan, Muhammad
  35. A Size-Based Ecosystem Model By Lars J. Ravn-Jonsen
  36. Avoiding Extinction: Equal Treatment of the Present and the Future By Chichilnisky, Graciela
  37. Genuine savings with adjustment costs By Yamaguchi, Rintaro; Sato, Masayuki; Ueta, Kazuhiro
  38. Comparing Conventional and New Policy Approaches for Carnivore Conservation – Theoretical Results and Application to Tiger Conservation By Astrid Zabel; Karen Pittel; Göran Bostedt; Stefanie Engel
  39. Valuing the Prevention of an Infestation: The Threat of the New Zealand Mud Snail in Northern Nevada By Allison Davis; Klaus Moeltner

  1. By: Andrew Reeson (CSIRO Sustainable Ecosystems, Australia)
    Abstract: Just as the world must adapt to climate change, it must also adapt to carbon markets. While some industries see carbon markets as a threat, many conservationists see a major opportunity. This paper considers implications of carbon markets for natural resource management (NRM) in Australia. There are in fact a range of distinct, but overlapping carbon markets. These range from international compliance markets (the Kyoto Protocol flexibility mechanisms) through national compliance markets (such as Australia’s proposed emissions trading scheme) to unregulated voluntary markets. While NRM is intimately linked to the global carbon cycle, it has a very limited role in existing and proposed carbon markets. The only significant direct impact likely up to 2015 is a small increase in tree planting. While trees have excellent potential to sequester carbon, the incentives for tree planting will be relatively small, given the limited scope of Australia’ proposed emissions reductions and the ability to import carbon credits from international markets. NRM managers should continue to manage carbon as one of a suite of issues without expecting rivers of gold to flow from carbon markets. Some may choose to participate directly in carbon markets, although this is inherently risky given their ill-defined and rapidly evolving nature. There is a need to develop improved understanding of carbon stocks and flows in the landscape, at both national and local scales. New institutions will be needed to secure carbon opportunities from agriculture and land management while also recognising other social and environmental objectives.
    Keywords: carbon trading; emissions trading; environment; agriculture
    JEL: Q50 Q52 Q54 Q57 Q58
    Date: 2009–06
  2. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Ruben Lubowski (limate and Air Program, Environmental Defense Fund); Alexander Golub (Climate and Air Program, Environmental Defense Fund); Anil Markandya (Basque Center for Climate Change (BC3) and University of Bath)
    Abstract: Discussions over tropical deforestation are currently at the forefront of climate change policy negotiations at national, regional, and international levels. This paper analyzes the effects of linking Reduced Emissions from Deforestation and Forest Degradation (REDD) to a global market for greenhouse gas emission reductions. We supplement a global climate-energy-economy model with alternative cost estimates for reducing deforestation emissions in order to examine a global program for stabilizing greenhouse gas concentrations at 550 ppmv of CO2 equivalent. Introducing REDD reduces global forestry emissions through 2050 by 20-22% in the Brazil-only case and by 64-88% in the global REDD scenarios. At the same time, REDD lowers the total costs of the climate policy by an estimated 10-25% depending on which tropical countries participate and whether the “banking” of excess credits for use in future periods is allowed. As a result, REDD could enable additional reductions of at least 20 ppmv of CO2-equivalent concentrations with no added costs compared to an energy-sector only policy. The cost savings from REDD are magnified if banking is allowed and there is a need to increase the stringency of global climate policy in the future in response, for example, to new scientific information. Results also indicate that REDD decreases carbon prices in 2050 by 8-23% with banking and 11-26% without banking. While developing regions, particularly Latin America, gain the value of REDD opportunities, the decrease in the carbon price keeps the value of international carbon market flows relatively stable despite an increase in volumes transacted. We also estimate that REDD generally reduces the total portfolio of investments and research and development of new energy technologies by 1-10%. However, due to impacts on the relative prices of different fossil fuels, REDD has a slight positive estimated effect on investments in coal-related technologies (IGCC and CCS) as well as, in some cases, non-electric energy R&D. This research confirms that integrating REDD into global carbon markets can provide powerful incentives for the preservation of tropical forests while lowering the costs of global climate change protection and providing valuable policy flexibility.
    Keywords: Carbon market, Climate change, Innovation, Mitigation, Policy costs, Offsets, Reduced Emissions from Deforestation and Degradation (REDD), Technological change, Tropical deforestation
    JEL: Q23 Q24 Q42 Q52 Q54 Q55
    Date: 2009–07
  3. By: Bhim Adhikari
    Abstract: In this paper, we review several case studies from Asia on payment for environmental services to understand how landowners decide to participate in payment for environmental services (PES) schemes. The analysis demonstrates the significance of four major elements facilitating the adoption and implementation of PES schemes: property rights and tenure security, transaction costs, household and community characteristics, communications, and the availability of PES-related information. PES schemes should target win-win options through intervention in these areas, aimed at maintaining the provision of ecological services and improving the conditions for local inhabitants. [WP No. 134].
    Keywords: resource management, forestry sector, Indonesia, Asia, payment for environmental services, PES, property rights, security, transaction costs, household, community, communications, ecological srvices, local inhabitants, Philippines, Information, socio-ecological, Viet Nam
    Date: 2009
  4. By: John Whalley (the University of Western Ontario)
    Abstract: As governments consider commitments to reduce carbon emissions, an accompanying question is what adjustments are appropriate to counteract any competitive disadvantage to domestic producers resulting from such commitments, particularly in the European Union, the United States and other Organisation for Economic Co-operation and Development countries.1 Considering the widely diverging levels of commitments in the area of carbon reductions, many specialists consider that some form of remedy is reasonable in order to maintain the competitiveness of domestic industries. Current thinking in global environmental policy circles is that border tax adjustments (BTAs) could be one solution, and may be included in an agreement that might emerge from Copenhagen in 2009 as part of the post-Kyoto world/United Nations Framework Convention on Climate Change post-Bali process (see also Walsh and Whalley, 2008). This text is based on more extensive research2 and focuses only on the issue of effectiveness of BTAs in relation to policies on carbon emission reductions. This debate carries important lessons for developed as well as developing countries in the Asia-Pacific region.
    Keywords: carbon tax adjustments, WTO, GATT
    JEL: F1
    Date: 2009–03
  5. By: Anastasios Xeapapadeas (Athens University of Economics and Business); Dimitra Vouvaki (University of Crete)
    Abstract: Total factor productivity growth (TFPG) has been traditionally associated with technological change. We show that when a factor of production, such as energy, generates an environmental externality in the form of CO2 emissions which is not internalized because of lack of environmental policy, then TFPG estimates could be biased. This is because the contribution of environment as a factor of production is not accounted for in the growth accounting framework. Empirical estimates confirm this hypothesis and suggest that part of what is regarded as technology’s contribution to growth could be attributed to the use of environment in output production.
    Keywords: Total Factor Productivity, Sources of Growth, Environmental Externalities, Energy, Environmental Policy
    JEL: O47 Q20 Q43
    Date: 2009–03
  6. By: Fabio Eboli (Fondazione Eni Enrico Mattei); Ramiro Parrado (Fondazione Eni Enrico Mattei and Ca’ Foscari University); Roberto Roson (Ca’ Foscari University, Venice)
    Abstract: Human-generated greenhouse gases depend on the level of economic activity. Therefore, most climate change studies are based on models and scenarios of economic growth. Economic growth itself, however, is likely to be affected by climate change impacts. These impacts affect the economy in multiple and complex ways: changes in productivity, resource endowments, production and consumption patterns. We use a new dynamic, multi-regional Computable General Equilibrium (CGE) model of the world economy to answer the following questions: Will climate change impacts significantly affect growth and wealth distribution in the world? Should forecasts of human-induced greenhouse gases emissions be revised, once climate change impacts are taken into account? We found that, even though economic growth and emission paths do not change significantly at the global level, relevant differences exist at the regional and sectoral level. In particular, developing countries appear to suffer the most from climate change impacts.
    Keywords: Computable General Equilibrium Models, Climate Change, Economic Growth
    JEL: C68 E27 O12 Q54 Q56
    Date: 2009–06
  7. By: ZhongXiang Zhang (East-West Center)
    Abstract: China had been the world’s second largest carbon emitter for years. However, recent studies show that China had overtaken the U.S. as the world’s largest emitter in 2007. This has put China on the spotlight, just at a time when the world community starts negotiating a post-Kyoto climate regime under the Bali roadmap. China seems to become such a Christmas tree on which everybody can hang his/her complaints. This paper first discusses whether such a critics is fair by examining China’s own efforts towards energy saving, the widespread use of renewable energy and participation in clean development mechanism. Next, the paper puts carbon reductions of China’s unilateral actions into perspective by examining whether the estimated greenhouse gas emission reduction from meeting the country’s national energy saving goal is achieved from China’s unilateral actions or mainly with support from the clean development mechanism projects. Then the paper discusses how far developing country commitments can go in an immediate post-2012 climate regime, thus pointing out the direction and focus of future international climate negotiations. Finally, emphasizing that China needs to act as a large and responsible developing country and take due responsibilities and to set a good example to the majority of developing countries, the paper articulates what can be expected from China to illustrate that China can be a good partner in combating global climate change.
    Keywords: Energy Saving, Renewable Energy, Post-Kyoto Climate Negotiations, Clean Development Mechanism, China, USA
    JEL: Q42 Q48 Q53 Q54 Q58
    Date: 2009–06
  8. By: Massimo Tavoni (Fondazione Eni Enrico Mattei); Valentina Bosetti (Princeton University, Fondazione Eni Enrico Mattei and CMCC); Carlo Carraro (University of Venice, Fondazione Eni Enrico Mattei, CEPR, CESifo and CMCC)
    Abstract: This paper builds on the assumption that OECD countries are (or will soon be) taking actions to reduce their greenhouse gas emissions. These actions, however, will not be sufficient to control global warming, unless developing countries also get involved in the cooperative effort to reduce GHG emissions. This paper investigates the best short-term strategies that emerging economies can adopt in reacting to OECD countries’ mitigation effort, given the common long-term goal to prevent excessive warming without hampering economic growth. Results indicate that developing countries would incur substantial economic losses by following a myopic strategy that disregards climate in the short-run, and that their optimal investment behaviour is to anticipate the implementation of a climate policy by roughly 10 years. Investing in innovation ahead of time is also found to be advantageous. The degree of policy anticipation is shown to be important in determining the financial transfers of an international carbon market meant to provide incentives for the participation of developing countries. This is especially relevant for China, whose recent and foreseeable trends of investments in innovation are consistent with the adoption of domestic emission reduction obligations in 2030.
    Keywords: Energy-economy Modeling, Climate Policy, Developing Countries
    JEL: Q54 Q55 Q43
    Date: 2009–07
  9. By: Hugo Gil Silva (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia); Marcos Afonso (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia)
    Abstract: The main goal for this report is to alert for the need of a continuous investment in policies that should be developed worldwide, with respect to research and development (R&D), at all levels, in photovoltaic energy. The R&D in this area leads to a strong and possible solution to the actual environmental problems. Such problems are based on the climate change due to polluted gas emissions and due to the non-renewable resources exhaustion. Therefore, this contribution for a roadmap of photovoltaic technology aims to support the knowledge on projects that allow photovoltaic module cost reduction, efficiency and longevity improvement. In this paper we analyze the implemented policies and projects that were and are being developed worldwide. A development monitoring is done in photovoltaic energy since its origin, in order to predict its evolution in actual market. The data was analyzed and the conclusion was drawn that the solar energetic consumption evolution is related to the efficiency improvement and cost reduction in photovoltaic technologies, mainly due to the rising competitiveness among other sources of energy. The non-dependency on non-renewable and pollutant resources implies a significant rising of hope for a better future.
    Keywords: photovoltaic energy; renewable resources
    JEL: O31 Q29
    Date: 2009–07
  10. By: GRIMAUD Andre; LAFFORGUE Gilles; MAGNE Bertrand
    Date: 2009–07
  11. By: Giovanni Marin (University of Ferrara); Massimiliano Mazzanti (University of Ferrara)
    Abstract: This paper provides new empirical evidence on Environmental Kuznets Curves (EKC) for greenhouse gases (GHGs) and air pollutants at sector level. A panel dataset based on the Italian NAMEA over 1990-2005 is analysed, focusing on both emission efficiency (EKC model) and total emissions (IPAT model). Results show that looking at sector evidence, both decoupling and also eventually re-coupling trends could emerge along the path of economic development. CH4 is moderately decreasing in recent years, but being a minor gas compared to CO2, the overall performance on GHGs is not compliant with Kyoto targets, which do not appear to have generated a structural break in the dynamics at least for GHGs. SOx and NOx show decreasing patterns, though the shape is affected by some outlier sectors with regard to joint emission-productivity dynamics, and for SOx exogenous innovation and policy related factors may be the main driving force behind observed reductions. Services tend to present stronger delinking patterns across emissions. Trade expansion validates the pollution haven in some cases, but also show negative signs when only EU15 trade is considered: this may due to technology spillovers and a positive ‘race to the top’ rather than the bottom among EU15 trade partners (Italy and Germany as the main exporters and trade partner in the EU). Finally, general R&D expenditure show weak correlation with emissions efficiency. EKC and IPAT derived models provide similar conclusions overall; the emission-labour elasticity estimated in the latter is generally different from 1, suggesting that in most cases, and for both services and industry, a scenario characterised by emissions saving technological dynamics. Further research should be directed towards deeper investigation of trade relationship at sector level, increased research into and efforts to produce specific sectoral data on ‘environmental innovations’, and to verifying the value of heterogeneous panel models capturing sector heterogeneity.
    Keywords: Greenhouse Gases, Air Pollutants, NAMEA, Trade Openness, Labour Productivity, EKC, STIRPAT, Delinking
    JEL: C23 O4 Q55 Q56
    Date: 2009–06
  12. By: Astrid Zabel (Environmental Policy and Economics PEPE, Institute for Environmental Decisions IED, ETH Zurich); Brian Roe (Department of Agricultural, Environmental and Development Economics, Ohio State University, Columbus, OH, USA)
    Abstract: Payments for environmental services (PES) schemes have become an increasingly accepted and popular mode for governmental and non-governmental agencies to use in addressing local and regional declines in ecosystem services. A defining characteristic of performance payments, a sub-category of PES schemes, is the linking of individual payments to environmental outputs themselves rather than to the inputs that affect the production of environmental services. Such a focus raises several practical issues during implementation. We review and translate key aspects of the economic theory of incentives into the context of performance payments schemes with special attention paid to two practical issues. The first is that of structuring individual incentives to account for risks outside the individual’s control such as weather that can affect the level of environmental services generated. The second deals with the possibility of distortion in the measurements of environmental services used to determine individual payments under PES schemes. Each challenge is accompanied by a discussion of advice based upon economic theory and a discussion of examples from different countries where such implementation issues arise.
    Keywords: Optimal Incentive Contracts, Payments for Environmental Services, Performance Incentives, Distortion
    JEL: Q20
    Date: 2009–06
  13. By: Phu Nguyen-Van
    Abstract: This paper proposes a semiparametric analysis for the study of the relationship between energy consumption per capita and income per capita for an international panel dataset. It shows little evidence for the existence of an environmental Kuznets curve for energy consumption. Energy consumption increases with income for a majority of countries and then stabilizes for very high income countries. Neither changes in energy structure nor macroeconomic cycle/technological change have significant effect on energy consumption.
    Keywords: Energy consumption, environmental Kuznets curve, semiparametric panel model, nonstationarity.
    Date: 2009
  14. By: Davide Dragone (Department of Economics, University of Bologna); Luca Lambertini (Department of Economics, University of Bologna; ENCORE, University of Amsterdam; RCEA); Arsen Palestini (Department of Economics, University of Bologna)
    Abstract: The established view on oligopolistic competition with environmental externalities has it that, since firms neglect the external effect, their incentive to invest in R&D for pollution abatement is nil unless they are subject to some form of environmental taxation. We take a dynamic approach to this issue, using a simple differential game to show that the conclusion reached by the static literature is not robust, as the introduction of dynamics shows that firms do invest in R&D for environmental-friendly technologies throughout the game, as long as R&D is accompanied by an output restriction exhibiting a distinctively collusive flavour. We also examine the social planning case and the effects of Pigouvian taxation, to show that there exists a feasible tax rate inducing profit-seeking firms to choose a combination of output and R&D such that the resulting social welfare level is the same as in the first best
    Keywords: pollution, environmental externality, R&D, differential games, social planning
    JEL: H23 L13 O31 Q55
    Date: 2009–01
  15. By: Eftichios S. Sartzetakis (University of Macedonia); Anastasios Xepapadeas (Athens University of Economics and Business and Beijer Fellow); Emmanuel Petrakis (University of Crete)
    Abstract: The present paper examines, within a dynamic framework, the use of information provision as a policy instrument to supplement environmental taxation. We assume that at least a fraction of consumers do not posses the required information to make the optimal choices, and that their behavior at each time period depends on the accumulated stock of information. We show that, as the accumulated stock of information provision increases, both the optimal level of information provided at each period of time and the optimal tax rate decline over time. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies. Information provision can shift the demand towards environmentally friendly products over time and thus, reduce the required level of the tax rate.
    Keywords: Information Provision, Environmental Taxation
    JEL: Q53 Q58 D62 D82
    Date: 2009–06
  16. By: Fach Gómez, katia
    Abstract: This paper studies several relevant cases in the area of investment arbitration. The author stresses how the environmental protection is a very relevant issue in these ICSID´s decisions.
    Keywords: ICSID; Investment arbitration; environmental protection
    JEL: K32 F18 K33 F23 F02
    Date: 2009–02–01
  17. By: Francisco J. André (Department of Economics, Universidad Pablo de Olavide); M. Alejandro Cardenete (Department of Economics, Universidad Pablo de Olavide)
    Abstract: In this paper we propose an analytical approach to obtain so-called efficient policies in terms of environmental and economic objectives. A policy is said to be efficient if any environmental or economic achievement is obtained with the minimum possible detriment to other relevant objectives. We apply this concept obtain the minimum possible environmental impact for a given growth rate or, symmetrically, the maximum economic growth for a given amount of polluting emissions. We present an application to Spanish economy with 2000 data using a Computable General Equilibrium model. We evaluate the efficiency of the observed policy and give some policy recommendations. Finally, we give an idea about how to enlarge the analysis by including additional objectives.
    Keywords: Efficient policies, Computable general equilibrium, multicriteria decision making.
    JEL: C61 C68 D78
    Date: 2009–07
  18. By: Marc Germain (Universite catholique de Louvain); Henry Tulkens (Université catholique de Louvain); Alphonse Magnus (Institut de mathématique, Université catholique de Louvain)
    Abstract: This article deals with cooperation issues in international pollution problems in a two di- mensional dynamic framework implied by the accumulation of the pollutant and of the capital goods. Assuming that countries do reevaluate at each period the advantages to cooperate or not given the current stocks of pollutant and capital, and under the assumption that damage cost functions are linear, we define at each period of time a transfer scheme between countries, which makes cooperation better for each of them than non-cooperation. This transfer scheme is also strategically stable in the sense that it discourages partial coalitions.
    Keywords: Stock Pollutant, Capital Accumulation, International Environmental Agreements, Dynamic Core Solution
    JEL: Q54 Q58 F42 F53 O21
    Date: 2009–05
  19. By: Hufbauer, Gary Clyde; Kim, Jisun
    Abstract: This paper examines whether the climate policy options policymakers are contemplating are compatible with core principles of the world trading system set forth in the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), and Appellate Body decisions. The authors argue that border measures—both import restrictive measures and export subsidies—contemplated in US climate bills and the climate policies of other countries stand a fair chance of being challenged in the WTO. Given the prospect of foreseeable conflicts with WTO rules, the authors suggest that key WTO members should attempt to negotiate a new code that delineates a large “green space” for measures that are designed to limit GHG emissions both within the member country and globally. By “green space,” the authors mean policy space for climate measures that are imposed in a manner broadly consistent with core WTO principles even if a technical violation of WTO law could occur. To encourage WTO negotiating efforts along these lines, the authors recommend a time-limited “peace clause” to be adopted into climate legislation of major emitting countries. The peace clause would suspend the application of border measures or other extraterritorial controls for a defined period while WTO negotiations are under way.
    Keywords: Global warming climate change, climate policy options, world trading system, world trade organization, WTO, border measures
    JEL: F13 F53 K33 Q54 Q58
    Date: 2009
  20. By: Marc, GERMAIN (UNIVERSITE DE LILLE-3, Laboratoire EQUIPPE and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Henry, TULKENS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Alphonse, MAGNUS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de MathŽmatique)
    Abstract: This article deals with cooperation issues in international pollution problems in a two dimensional dynamic framework implied by the accumulation of the pollutant and of the capital goods. Assuming that countries do reevaluate at each period the advantages to cooperate or not given the current stocks of pollutant and capital, and under the assumption that damage cost functions are linear, we deøne at each period of time a transfer scheme between countries, which makes cooperation better for each of them than non-cooperation. This transfer scheme is also strategically stable in the sense that it discourages partial coalitions.
    Keywords: stock pollutant, capital accumulation, international environmental agreements, dynamic core solution
    JEL: Q54 Q58 F42 F53 O21
    Date: 2009–03
  21. By: Weitzman, Martin L.
    Abstract: This paper in applied theory argues that there is a loose chain of reasoning connecting the following three basic links in the economics of climate change: 1) additive damages may be more appropriate for analyzing the impacts of global warming than multiplicative damages; 2) an uncertain feedback-forcing coefficient, which might be near one with infinitesimal probability, can cause the distribution of the future time trajectory of global temperatures to have fat tails and a high variance; 3) when highvariance additive damages are discounted at an uncertain rate of pure time preference, which might be near zero with infinitesimal probability, it can make expected present discounted disutility very large. Some possible implications for welfare analysis and climate-change policy are briefly noted.
    Keywords: Climate change, fat tails
    JEL: Q54
    Date: 2009
  22. By: Julien Chevallier; Benoît Sévi
    Abstract: The recent implementation of the EU Emissions Trading Scheme (EU ETS) in January 2005 created new financial risks for emitting firms. To deal with these risks, options are traded since October 2006. Because the EU ETS is a new market, the relevant underlying model for option pricing is still a controversial issue. This article improves our understanding of this issue by characterizing the conditional and unconditional distributions of the realized volatility for the 2008 futures contract in the European Climate Exchange (ECX), which is valid during Phase II (2008-2012) of the EU ETS. The realized volatility measures from naive, kernel-based and subsampling estimators are used to obtain inferences about the distributional and dynamic properties of the ECX emissions futures volatility. The distribution of the daily realized volatility in logarithmic form is shown to be close to normal. The mixture-of-distributions hypothesis is strongly rejected, as the returns standardized using daily measures of volatility clearly departs from normality. A simplified HAR-RV model (Corsi, 2009) with only a weekly component, which reproduces long memory properties of the series, is then used to model the volatility dynamics. Finally, the predictive accuracy of the HAR-RV model is tested against GARCH specifications using one-step-ahead forecasts, which confirms the HAR-RV superior ability. Our conclusions indicate that (i) the standard Brownian motion is not an adequate tool for option pricing in the EU ETS, and (ii) a jump component should be included in the stochastic process to price options, thus providing more efficient tools for risk-management activities.
    Keywords: CO2 Price, Realized Volatility, HAR-RV, GARCH, Futures Trading, Emissions Markets, EU ETS, Intraday data, Forecasting
    JEL: C5 G1 Q4
    Date: 2009
  23. By: Paulo A.L.D. Nunes (Venice International University and Fondazione Eni Enrico Mattei); Elena Ojea (IDEGA-Universidade de Santiago de Compostela); Maria Loureiro (Universidade de Santiago de Compostela)
    Abstract: The Millennium Ecosystem Assessment is built on a conceptual framework that links biodiversity to the services ecosystems provide to society. Based on this framework, we first compile market and non-market forest valuation studies and, secondly, explore the potential of an econometric modeling exercise by conducting a world wide meta-analysis. This exercise aims to highlight the mapping of biodiversity indicators and assesses their respective role on the valuation exercise. Our results show that biodiversity loss is having an effect on forest ecosystem values. In addition, these effects reveal to be dependent on the type of services and global geo-climatic regions.
    Keywords: Millennium Ecosystems Approach, Biodiversity Loss, Meta-Analysis, Market Valuation, Non-Market Valuation, Forests
    JEL: Q57
    Date: 2009–01
  24. By: Hugo M. M. Aguiar (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia); Pedro M. B. Afonso (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia)
    Abstract: Some years ago, Information Technologies (IT) were in the leading edge, it was possible to have a power never seen before in calculation, simulation and data storage. This fact turned the computational power of the new technologies essential, currently representing a significant weight in the budget of companies, the state and even the common households. Today, the world is positively condemned to focus itself on sustainability - conserving an ecological balance by avoiding depletion of natural resources. We can find the great world-wide leaders face to face with a great challenge - to contribute for the development of a sustainable world. It is important that these leaders are able to focus themselves on the economic development without forgetting important environmental and social matters that every time become more and more pertinent. Innovation in informatics and grid computing appears not only as a promising solution concerning this sustainable economic development but also as the best answer to the stagnation or contraction of the world-wide economy. Our paper presents some trends and examples of development of new systems that use in a sustainable way the computer energy available and contribute to more productive and powerful computer systems.
    Keywords: Sustainable Development, Informatics, Computer Energy, Grid Computing
    JEL: L59 O31
    Date: 2009–07
  25. By: Abay Mulatu (University of Manchester); Reyer Gerlagh (University of Manchester); Dan Rigby (University of Manchester); Ada Wossink (University of Manchester)
    Abstract: This paper estimates the effect of environmental regulation on industry location and compares it with other determinants of location such as agricultural, education and R&D country characteristics. The analysis is based on a general empirical trade model that captures the interaction between country and industry characteristics in determining industry location. The Johnson-Neyman technique is used to fully explicate the nature of the conditional interactions. The model is applied to data on 16 manufacturing industries from 13 European countries. The empirical results indicate that the pollution haven effect is present and that the relative strength of such an effect is of about the same magnitude as other determinants of industry location. A significant negative effect on industry location is observed only at relatively high levels of industry pollution intensity.
    Keywords: Pollution Haven Hypothesis, Comparative Advantage, Industry Location
    JEL: O14
    Date: 2009–01
  26. By: Christine Bertram
    Abstract: Ocean iron fertilization is currently discussed as a potential measure to mitigate climate change by enhancing oceanic CO2 uptake. Its mitigation potential is not yet well explored, and carbon offsets generated through iron fertilization activities could currently not be traded on regulated carbon markets. Still, commercial interests in ocean iron fertilization already exist, which underlines the need to investigate a possible regulatory framework for it. To this end, I first discuss important basic aspects of ocean iron fertilization, namely its scientific background, quantitative potential, side effects, and costs. In a second step, I review regulatory aspects connected to ocean iron fertilization, like its legal status and open access issues. Moreover, I analyze how the regulations for afforestation and reforestation activities within the framework of the Kyoto Clean Development Mechanism (CDM) could be applied to ocean iron fertilization. Main findings are that the quantitative potential of ocean iron fertilization is limited, that costs are higher than initially hoped, and that potential adverse side effects are severe. Moreover, the legal status of ocean iron fertilization is currently not well defined, open access might cause inefficiencies, and the CDM regulations could not be easily applied to ocean iron fertilization
    Keywords: Ocean Iron Fertilization, Kyoto Protocol, CDM
    JEL: D62 K33 Q54 Q58
    Date: 2009–06
  27. By: Witt, Rudolf; Waibel, Hermann
    Abstract: Climate risk is particularly burdensome to small-scale farmers in developing countries due to heavy dependence on natural resources, limited and erratic rainfall with high inter- and intra-annual variability, and other natural calamities. Numerous studies on climate change suggest that climate variability is expected to increase in the next few decades, and that it is likely to be severe for tropical areas. For the design of better intervention strategies that are capable to stabilize the incomes of the poor and decrease vulnerability, it is mandatory to have a good understanding of the livelihoods of rural populations, and the risks they are facing.<br />This paper presents an approach to measuring climate risk and its impact on livelihood outcomes in fishery-dependent communities in the ya\'eres floodplain (Far North Province of Cameroon) by applying portfolio theory and stochastic dominance rules. The focus of the analysis is put on the question, how portfolio decisions of households affect income and risk in different production systems. Assuming possible future scenarios we can derive approximate predictions of the effects of climate change and rural development interventions on income and the "riskiness" of different activity portfolios. The results suggest that the diversification effect in the study area is limited due to high correlation of income flows from different activities. However, we show that development intervention strategies, which particularly aim at changing the covariation structure of income flows, are most successful in reducing risk, and potentially increasing income.
    Keywords: Climate risk, agricultural diversification, portfolio theory, Sub Saharan Africa
    JEL: G11 Q12 Q54
    Date: 2009–07
  28. By: Julien Chevallier (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre); Yannick Le Pen (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Benoît Sévi (GRANEM LEMNA - Université d'Angers - Université de Nantes)
    Abstract: To improve risk management in the European Union Emissions Trading Scheme (EU ETS), the European Climate Exchange (ECX) has introduced option instruments in October 2006 after regulatory authorization. The central question we address is: can we identify a potential destabilizing effect of the introduction of options on the underlying market (EU ETS futures)? Indeed, the literature on commodities futures suggest that the introduction of derivatives may either decrease (due to more market depth) or increase (due to more speculation) volatility. As the identification of these effects ultimately remains an empirical question, we use daily data from April 2005 to April 2008 to document volatility behavior in the EU ETS. By instrumenting various GARCH models, endogenous break tests, and rolling window estimations, our results overall suggest that the introduction of the option market had no effect on the volatility in the EU ETS. These finding are robust to other likely influences linked to energy and commodity markets.
    Keywords: EU ETS, Option prices, Volatility, GARCH, Rolling Estimation, Endogenous Structural Break Detection
    Date: 2009–07–20
  29. By: Jurijs Grizans (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Cities are at the heart of Europe. As four of every five European citizens live in urban areas, their quality of life and the quality of their environment depends upon how cities look and how they function. Cities are also places where business is done, investments are made and jobs are created. In Northern Europe, people spend over 90% of their time inside and in the winter months, this can rise to almost 100%. If they are not inside, people are usually travelling from one building to another, using civil infrastructure facilities such as roads, bridges and railways. For most people in the developed world, most of the time, the urban environment is their environment. As cities continue to grow, increasing attention must be given to the quality of their urban environment and to their livability. Improving the urban environment – and city dweller's quality of life – has become a major issue in the global effort to achieve sustainable development. This literature study focuses on the urban environment issues and solutions in the context of sustainable development. The purpose of this paper is to study the causes and processes of the emergence, formation and development of the city and the urban environment. The field of urban environment comprises a vital area for the application of sustainable development principles, not least because of the scope for conflicts between interpretations of development. As an activity that has clear economic, social and environmental dimensions, urban policy holds considerable potential to make a positive contribution to the practical realization of sustainable development. Urban environment in this paper is seen as a complex social, economic and biophysical system produced by the interaction between a man-made fabric and the physical characteristics of the landscapes.
    Date: 2009–06
  30. By: Lars J. Ravn-Jonsen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Stock models, in which production is interpreted as if it were the population growth of a stock, have been the preferred tool for fishery economics since Clark and Munro (1975) introduced capital theory in these models. Ravn-Jonsen (2009c) applied capital theory to a model in which the production in the ecosystem is a consequence of predator–prey interaction and the somatic growth of the predator as a result of this interaction. By deducing the results of Clark and Munro anew, the assumptions of the stock model are clarified. Four different biomass measures are introduced in the ecosystem model as stocks. The optimum point found with the stock model approach is compared with the optimum point found in the ecosystem model with the capital value calculations of the occurring rent flow. A comparison shows that the stock model fails to generate the correct optimal point. The assumptions behind the use of stock models for species population models are discussed. The population stock model corresponds to a holistic community view, which has in fact failed to explain various phenomena. The production of the marine ecosystem cannot be reduced to a model as if the production were a consequence of the growth of a stock. The concept of a stock is rather an illusion, as is the concept of an optimal stock level. It is essential to liberate fishery economics from a simplified view of population and communities.
    Date: 2009–03
  31. By: Lars J. Ravn-Jonsen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: The term “Fishing Down Marine FoodWebs” describes the gradual transition in landing from marine ecosystems towards organisms lower in the food web. To address this issue and the need to manage the marine ecosystem in a broader perspective, Ecosystem Management is recommended. Ecosystem Management, however, requires models that can link the ecosystem level to the operation level, so this paper examines an ecosystem production model and shows that it is suitable for applying ground rent theory. This model is the simplest possible that incorporates the principles of size as the main determinant of the predator–prey interaction, the inclusion of mass balance in the predator–prey allocation, and mortality and somatic growth as consequences of the predator–prey allocation. The model needs to be parameterized for the specific ecosystem and the price and cost functions must be established empirically before drawing the conclusion that Fishing Down Marine Food Webs is economically detrimental can be established directly. Nevertheless, the model does reveal a need for intertemporal balance with respect to both fish size and harvest volume. These aspects are not addressed in any systematic way at the ecosystem level in the present management. Therefore, economic predictions for an ecosystem managed as a common pool resource must be that the exploitation probably are conducted at lower sized than optimum. In addition, given its population stock approach, the present management probably overlooks the ability of an ecosystem to sustain total volume of harvest. Given the two aspects of intertemporal choice revealed by the model, the conclusion must be that the Fishing Down Marine Food Webs is probably driven by the current management’s inability to conduct adequate intertemporal balancing; therefore, it is probably detrimental from an economic point of view. The marine ecosystem therefore requires an ecosystem management for economic reasons; in this context, models like the one presented here can serve as useful planning tools.
    Date: 2009–03
  32. By: Lars J. Ravn-Jonsen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: The need for management of the marine ecosystem using a broad perspective has been recommended under a variety of names. This paper uses the term Ecosystem Management, which is seen as a convergence between the ecological idea of an organisational hierarchy and the idea of strategic planning with a planning hierarchy—with the ecosystem being the strategic planning level. Management planning requires, in order to establish a quantifiable means and ends chain, that the goals at the ecosystem level can be linked to operational levels; ecosystem properties must therefore be reducible to lower organisational levels. Emergence caused by constraints at both the component and system levels gives rise to phenomena that can create links between the ecosystem and operational levels. To create these links, the ecosystem’s functional elements must be grouped according to their functionality, ignoring any genetic relation. The population structure is below the ecosystem in terms of the planning level, and goals for the community’s genetic structure cannot be meaningful defined without setting strategic goals at the ecosystem level for functional groups.
    Date: 2009–03
  33. By: Gary D. Libecap; Terry L. Anderson
    Abstract: In the move to adopt rights based arrangements for renewable resources to avoid the losses of open access and the inefficiencies of prescriptive regulation, we argue that grandfathering the allotments of local users can be the most efficient distribution mechanism. We differ from the standard support among economists for auctions which contends that auctions allocate rights to the highest valued users and thereby maximize rents. Our contention is that rents are not a fixed stock as is commonly assumed, but rather depend upon the actions of those who use the natural resource and convert it into valuable goods and services. First-possession allocation assigns ownership and rents to existing users, reinforcing their incentives for stewardship and rent maximization. Resource rents are an important source of wealth and well being, especially in developing countries. By contrast the alternative, auction allocation, assigns ownership to winning bidders, but the rents are captured by the auctioneer, often the state, not local agents. We argue that there can be important efficiency effects. Our empirical focus is on fisheries, but the implications extend to other settings.
    Date: 2009–07
  34. By: Khan, Muhammad
    Abstract: The use of pesticides on the farm is largely governed by voluntary behavior. It is important to understand what drives farmer’s behavior of pesticide use. Health belief models in public health and social psychology argue that persons who have had adverse health experiences are likely to undertake greater preventive behavior which was tested here. We drew a survey of 163 farmers in, Vehari and Lodhran District of southern Punjab. Almost all the farmers were found, using pesticides extensively and covering their body partially. Resultantly more than 77% farmers experienced at least one health symptom. The analysis appeared to confirm the hypothesis that Farmers who have experienced health problems from pesticide are having heightened concern about health effects of pesticides, than farmers who have not experienced such problems. Farmers who report experiencing such problems are also more likely to report using protective clothing than farmers who do not report having such problems. The study however, does not support the hypothesis that Farmers who have had experienced health problems from pesticides are likely to use alternative pest management practices. Finally study concludes that to improve practices of pesticide use, specific and relevant information through training programs should be provided to farmers focusing health and environmental risks of pesticide use.
    Keywords: Health experiences; risk perception; health belief; pesticide use behavior
    JEL: I12 A14
    Date: 2009–06–23
  35. By: Lars J. Ravn-Jonsen (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Ecosystem Management requires models that can link the ecosystem level to the operation level. This link can be created by an ecosystem production model. Because the function of the individual fish in the marine ecosystem, seen in trophic context, is closely related to its size, the model groups fish according to size. The model summarises individual predation events into ecosystem level properties, and thereby uses the law of conservation of mass as a framework. This paper provides the background, the conceptual model, basic assumptions, integration of fishing activities, mathematical completion, and a numeric implementation. Using two experiments, the model’s ability to act as tool for economic production analysis and regulation design testing is demonstrated. The presented model is the simplest possible and is built on the principles of (i) size, as the attribute that determines the predator–prey interaction, (ii) mass balance in the predator–prey allocation, and (iii) mortality and somatic growth as a consequence of the predator–prey allocation. By incorporating additional assumptions, the model can be extended to other dimensions of the ecosystem, for example, space or species. The formulation and description of the present model can serve as a reference for future work.
    Keywords: Ecosystem-model, side-based-model, trophic-model, numeric, fishery, economic.
    Date: 2009–03
  36. By: Chichilnisky, Graciela
    Abstract: Equal treatment for the present and the future was required in two axioms for sustainable development introduced by the author. This article shows that the two axioms are equivalent to awareness of physical limits in the long run future. We prove that two optimization problems are equivalent : maximizing discounted utility with a long run survival constraint, and maximizing utilites that treat equally the present and the future. The equal treatment axioms are therefore the essence of sustainable development. The "weight" 'lambda' given to the long run future is identified with the marginal utility of the nvironmental asset along a path that narrowly avoids extinction. An existence theorem is provided for optimizing according to the welfare criterion that treats equally the present and the future. We show that no prior welfare criteria satisfy the axioms for sustainable development introduced in [12].
    Keywords: Sustainable development, sustainable preferences, axioms for sustainable development, the present and the future
    JEL: D63 D71 Q01
    Date: 2009
  37. By: Yamaguchi, Rintaro; Sato, Masayuki; Ueta, Kazuhiro
    Abstract: In this paper, we consider how genuine savings would be altered if the adjustment costs of capitals are taken into account in the stylized capitalresource model. It is shown that, in order to derive the modified genuine savings, through shadow prices, the original genuine savings have to be divided by the marginal adjustment costs of the capital in question. This implies that economies with volatile savings harbor hidden costs even if they are judged as sustainable by conventional genuine savings indicators.
    Keywords: genuine savings; adjustment costs; sustainable development; natural capital
    JEL: O11 Q56 E21
    Date: 2009
  38. By: Astrid Zabel (Environmental Policy and Economics PEPE, Institute for Environmental Decisions IED, ETH Zurich); Karen Pittel (CER-ETH - Center of Economic Research, ETH Zurich); Göran Bostedt (Department of Forest Economics, Swedish University of Agricultural Sciences, Umeå, Sweden); Stefanie Engel (IED Institute for Environmental Decisions, ETH Zurich)
    Abstract: New policy approaches to facilitate the co-existence of wildlife and livestock are increasingly being sought-after as human sprawl increases and carnivore populations decrease. In this paper, models are developed to assess how alternative policy approaches can provide a livestock herder with incentives to sustain the socially optimal carnivore population. The wellestablished policy ex-post compensation is analyzed and compared to the innovative conservation performance payment approach. An empirical analysis of the model with data from tiger-livestock conflicts in India is presented.
    Date: 2009–02
  39. By: Allison Davis (Department of Agricultural Economics, University of Kentucky); Klaus Moeltner (Department of Resource Economics, University of Nevada, Reno)
    Abstract: The Truckee / Carson / Walker River Watershed in Northern Nevada is under an imminent threat of infestation by the New Zealand Mud Snail, an aquatic nuisance species with the potential to harm recreational fisheries. We combine a utility-theoretic system-demand model of recreational angling with a Bayesian econometric framework to provide estimates of trip and welfare losses under different types of regulatory control policies. We find that such losses can be substantial, warranting immediate investments in preemptive strategies via public outreach and awareness campaigns.
    Keywords: New Zealand Mud Snail; Incomplete Demand System; Hierarchical Modeling; Bayesian Simulation
    JEL: C11 C35 Q22 Q26 Q51
    Date: 2009–07

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