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on Environmental Economics |
| By: | Haller, Stephanie; Murphy, Liam |
| Abstract: | We examine the determinants of firm's current environmental expenditure and firm's capital investment in equipment for pollution control using a Heckman selection model. As regards current environmental expenditure, we find that larger, exporting firms and firms subject to the Integrated Pollution Prevention and Control directive are more likely to spend resources at all. Once the decision to commit resources has been taken, larger firms, firms that are foreign-owned, and firms that report low shares of water and refuse charges in turnover have higher absolute levels of environmental expenditure. With respect to investment in equipment for pollution control, we find that energy intensive and exporting firms are more likely to invest at all. Once the decision to invest has been taken, larger firms and firms that report high water and refuse charges invest more in equipment for pollution control. This suggests that the firms for whom environmental concerns are most costly in terms of production and image do most to address them. |
| Keywords: | capital expenditure on pollution abatement/environmental expenditure/firm-level analysis/manufacturing/investment |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp347&r=env |
| By: | David Stern (Arndt-Corden Division of Economics, Crawford School of Economics and Government, Australian National University, and Centre for Applied Macroeconomic Analysis, Canberra, Australia); Ross Lambie (Crawford School of Economics and Government, Australian National University, Australia. Australian National University) |
| Abstract: | The relative cost of carbon emissions reductions across regions depends on whether we measure cost by marginal or total cost, private or economy-wide cost, and using market or purchasing power parity exchange rates. If all countries are on the same marginal carbon abatement cost curve then lower marginal costs of abatement are associated with higher energy intensities and higher total costs of abatement in achieving proportional cuts in emissions, equal emissions per capita, or common global carbon price targets. We test this conjecture using the results of the GTEM computable general equilibrium model as presented in the climate change economics review conducted by the Australian Treasury Department. Rankings of countries by costs do differ depending on whether marginal or total cost is used. But some regions, including OPEC and the former USSR, have high marginal costs and high emissions intensities and, therefore, high total costs and others like the EU relatively low marginal and total costs. Under a global emissions trading regime real economy-wide costs of abatement are higher in developing economies with currencies valued below purchasing power parity and large differences between private and economy-wide costs such as India contributing to the high GDP losses experienced in those countries. |
| Keywords: | Climate change, costs, developing countries, computable general equilibrium |
| JEL: | Q52 Q54 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1063&r=env |
| By: | Takeshi Iida (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University) |
| Abstract: | We investigate how environmental and trade policies affect the transfer of environmental technology in a two-country model with global pollution. By comparing free trade and tariff policy without commitment, the following results are obtained. First, the existence of an environmental policy in a local country induces technology transfer from a foreign country. Second, there is a possibility that free trade is preferable to a tariff policy for both countries even though free trade lowers the environmental tax rate. Third, the quantity of the local firmfs product decreases for higher environmental damage. On the other hand, import of environmentally efficient goods from the foreign country increases. |
| Keywords: | Environmental technology transfer; Free trade; Tariff protection |
| JEL: | D43 F13 L13 Q56 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1008&r=env |
| By: | Ulrich Dilger |
| Date: | 2010–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwneu:neurusp137&r=env |
| By: | Matthew J. Kotchen |
| Abstract: | Can simple government programs effectively promote voluntary initiatives to reduce greenhouse-gas emissions? This paper provides an evaluation of how the Connecticut Clean Energy Communities program affects household decisions to voluntarily purchase “green” electricity, which is electricity generated from renewable sources of energy. The results suggest that, within participating communities, subsidizing municipal solar panels as matching grants for reaching green-electricity enrollment targets increases the number of household purchases by 35 percent. The Clean Energy Communities program thus demonstrates how mostly symbolic incentives can mobilize voluntary initiatives within communities and promote demand for renewable energy. |
| JEL: | Q2 Q4 Q58 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16117&r=env |
| By: | Sophie Bernard (Department of Economics, University of Ottawa, Ottawa, ON) |
| Abstract: | Remanufacturing is a form of recycling where used durable goods are refurbished to a condition comparable to new products. With reduced energy and resource consumption, remanufactured goods are produced at a fraction of the original cost and with lower emissions of pollution. This paper presents a theoretical model of remanufacturing where a duopoly of original manufacturers produce a component of a final good. The component needing to be replaced creates an aftermarket. An environmental regulation assessing a minimum level of remanufacturability is also introduced. The main results indicate that a social planner could use collusion of the firms on the level of remanufacturability as a substitute for environmental regulation. However, if an environmental regulation is to be implemented, collusion should be repressed since competition supports the public intervention better. One of the results also coincides with the Porter Hypothesis. |
| Keywords: | remanufacturing, competition, environmental regulation, Porter Hypothesis |
| JEL: | H23 L10 L51 Q53 Q58 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:1003e&r=env |
| By: | Arik Levinson |
| Abstract: | With few exceptions, economic analyses of "cap-and-trade" permit trading mechanisms for climate change mitigation have been based on first-best scenarios without pre-existing distortions or regulations. The reason is obvious: interactions between permit trading and other regulations will be complex. However, climate policy proposed for the U.S. will certainly interact with existing laws, and will also likely include additional regulatory changes with their own sets of interactions. Major bills introduced in the U.S. Congress have included both permit trading and traditional command and control regulations – a combination sometimes called "belts and suspenders." This paper discusses interactions between these instruments, and begins to lay out a framework for thinking about them systematically. The most important determinant of how the two types of instruments interact involves whether or not the cap-and-trade permit price would induce more or less abatement than mandated by the traditional standards alone. Moreover, economists' experience predicting the costs of environmental regulations suggests we are more likely to overestimate the costs of cap-and-trade, and therefore the price of carbon permits, than we are to overestimate the costs of a traditional regulatory standard, and that therefore the regulatory standards will likely reduce the cost-effectiveness benefits of cap-and-trade. |
| JEL: | Q58 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16109&r=env |
| By: | Christoph Heinzel (Centre for Energy and Environmental Markets (CEEM) School of Economics, Australian School of Business, University of New South Wales, Sydney, Australia); Thomas Winkler (WSB Neue Energien GmbH) |
| Abstract: | Quota obligation schemes based on tradable green certificates have become a popular policy instrument to expand power generation from renewable energy sources (RES). Their application, however, can neither be justified as a first-best response to a market failure, nor, in a second-best sense, as an instrument mitigating distortionary effects of the emissions externality, if an emissions trading system exists that fully covers the energy industry. We study how ancillary reasons, in form of overcoming various barriers for RES use and establishing beneficial side-effects, such as industry development, energy security, and abatement of pollutants not covered under the ETS, apply to the scheme recently introduced in Poland. While setting substantial expansion incentives, an advantage for local industry or job-market development or energy security can hardly be seen. With rising power prices for end consumers and awareness that the extra rents from the schemes mostly accrue to foreign investors and renewable and polluting generators, we expect a negative impact on social acceptance for RES and RES deployment support policies. |
| Keywords: | tradable green certificates, environmental policy, Poland |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1058&r=env |
| By: | Severin Borenstein |
| Abstract: | Human activity has disrupted the natural balance of greenhouse gases in the atmosphere and is causing climate change. Burning fossil fuels and deforestation result directly in about 9 gigatons of carbon (GtC) emissions per year against the backdrop of the natural carbon flux -- emission and uptake -- of about 210 GtC per year to and from oceans, vegetation, soils and the atmosphere. But scientific research now indicates that humans are also impacting the natural carbon cycle through less-direct, but very important, mechanisms that are more difficult to monitor and control. I explore the challenges this presents to market or regulatory mechanisms that might be used to reduce greenhouse gases: scientific uncertainty about these indirect processes, pricing heterogeneous impacts of similar human behaviors, and the difficulty of assigning property rights to a far larger set of activities than has previously been contemplated. While this does not undermine arguments for market mechanisms to control direct anthropogenic release of greenhouse gases, it suggests that more research is needed to determine how and whether these mechanisms can be extended to address indirect human impacts. |
| JEL: | H23 Q54 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16104&r=env |
| By: | Patrick Richard (GREDI, Département d'économique, Université de Sherbrooke) |
| Abstract: | Capital markets may be an important tool in the reduction of pollution emissions. Indeed, they provide firms with an incentive to maintain a good environmental record (or at least, a good reputation) in order to maximize the value of their equity shares. Also, efficient capital markets may facilitate financing of environmentally friendly projects and reduce problems resulting from asymmetric information. In this paper, I use a panel of 36 countries between 1981 and 2007 to study the impact of financial market instability on CO2 emissions at the national level. According to my results, higher financial stability is beneficial for the environment. |
| Keywords: | CO2 emissions; financial stability; dynamic panel data model |
| Date: | 2010–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:10-20&r=env |
| By: | Jason Potts; John Foster; Anna Straton (School of Economics, The University of Queensland) |
| Abstract: | A basic tenet of ecological economics is that economic growth and development are ultimately constrained by environmental carrying capacities. It is from this basis that notions of a sustainable economy and of sustainable economic development emerge to undergird the ‘standard model’ of ecological economics. However, the belief in ‘hard’ environmental constraints may be obscuring the important role of the entrepreneur in the coevolution of economic and environmental relations, and hence limiting or distorting the analytic focus of ecological economics and the range of policy options that are considered for sustainable economic development. This paper outlines a co-evolutionary model of the dynamics of economic and ecological systems as connected by entrepreneurial behaviour. We then discuss some of the key analytic and policy implications. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:409&r=env |
| By: | Semenova, Natalia (Åbo Akademi University) |
| Abstract: | This study is among the first to provide insight into the assessment of the convergent validity of widely used environmental performance ratings. Using a set of environmental dimensions in KLD, GES, and ASSET4 ratings, this study demonstrates that the different environmental performance aggregated metrics sufficiently correlate and provide consistent information when comparing companies. The KLD environmental concerns measure provides a summary of the environmental impact of industrial activities in contrast to the KLD measure of strengths that is a proxy for environmental performance. The observed different patterns in KLD environmental dimensions suggest that they are distinct constructs and should not be combined in future research. This study demonstrates that GES environmental industry risk and KLD concerns are impact factors that drive corporate environmental performance. Companies in high impact sectors are on average rated with high environmental performance. The contribution of this paper is, therefore, a validation of environmental ratings and a sharper focus upon impact factors that are associated with high levels of environmental performance. In addition, this study discusses the implications of findings for advocates and sceptics of environmental ratings, as well as for academics and practitioners in the realm of SRI and CSR. |
| Keywords: | Environmental performance; Ratings; Convergent validity; Industry risk |
| Date: | 2010–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:sicgwp:2010_009&r=env |
| By: | Houssem Eddine Chebbi (Faculty of Economic Sciences and Management of Nabeul (FSEGN), Tunisia); Marcelo Olarreaga; Habib Zitouna |
| Abstract: | The literature on trade often focuses on its impact on economic growth. However, more recently attention has been paid to the impact of openness on other important aspects of individual welfare, such as the environment. Because openness affects economic activity it will also affect pollution levels. But changes in economic activity also imply changes in the levels of income per capita which may lead to changes in the demand for environmental standards. Moreover, trade will affect pollution levels directly through its impact on the composition of the production bundle, as resources get reallocated across more, or less polluting sectors. All this suggests that the impact of trade openness on pollution is likely to depend on initial conditions and therefore cross-country results are likely to hide significant heterogeneity which may lead to the wrong policy conclusions. The objective of this paper is to assess the impact of Tunisia’s trade reforms over the last four decades on its CO2 emissions by taking into account not only the direct effect of trade on emissions, but also its indirect effect through growth. Using cointegration techniques we disentangle the long and short-run relationship between trade openness, income per capita and CO2 emissions in Tunisia, and explore the extent of Granger causality among these variables. Results suggest that the direct effect of trade openness on CO2 emissions is positive both in the short and the long run, but the indirect effect is negative at least in the long run. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:518&r=env |
| By: | John Rolfe (Faculty of Business and Informatics at Central Queensland University y); Jill Windle (Faculty of Business and Informatics at Central Queensland University) |
| Abstract: | In this paper the results of a choice modelling experiment to value increased protection of the Great Barrier Reef in Australia is reported. There are very few previous studies that identify protection values for the Great Barrier Reef, making it difficult to evaluate whether the community benefits from future additional protection measures are larger than the costs involved. The valuation experiment that has been conducted is novel in two important ways. First, different management policies to increase protection have been included as labels in the choice experiment to test if the mechanisms to achieve improvements are important to respondents. Second, the level of certainty associated with predicted reef health has been included as an attribute in the choice profiles, helping to distinguish between outcomes of different management policies. The results show that protection values vary with the policy scope of the improvements being considered. Values are sensitive to whether protection will be generated by improving water quality entering the reef, increasing conservation zones or reducing greenhouse gas emissions, and the level of certainty of outcomes. The average household willingness to pay for five years for each additional 1% of protection is approximately $26.37 when the broad management options to generate improvements were included in the choice sets. These results can be extrapolated to a total value held by Queensland households of $132.8M to $171.5M per 1% improvement, depending on the assumptions used about the discount rate. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1057&r=env |
| By: | Charles Figuières; Solenn Leplay; Estelle Midler; Sophie Thoyer |
| Abstract: | Bioprospection is, largely, meant to help reducing deforestation and, the other way around, stopping deforestation enhances the prospects of bioprospection. The need for a global agreement to the problem of tropical deforestation has led to the REDD (Reducing Emissions from Deforestation and Degradation) scheme, which proposes that developed countries pay developing countries for CO2 emissions saved through avoided deforestation and degradation. The remaining issue at stake is to definer the rules defning payments to countries reducing their deforestation rate. This article develops a game-theoretic bargaining model, simulating the on-going negotiation process which is currently taking place within the Convention of Climate Change, after the Copenhagen agreement of December 2009. It shows that the conditions under which developing countries are left to bargain over the allocation of the global forest fund may lead to an ineffective system of incentives. Below a given level of contributions from the North, the mechanism fails to curb the deforestation. Beyond this level, it induces perverse effects: the larger the North's contribution, the larger the deforestation rate. Consequently, the mechanism is most effective only at a specifc threshold level which, given the unobservability of countries'preferences, can only be found by a repeated "trial and error" implementation process. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:10-06&r=env |
| By: | Natacha Raffin (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | We develop a political economy model that might explain the different environmental performance of countries, through educational choices. Individuals decide whether to invest in additional education according to their expectations regarding future environmental quality. They also vote on a tax that will be exclusively used to finance environmental protection. We show that the model may generate multiple equilibria and agents' expectations may be self-fulfilling when the public policy is endogenous. Then, we analyse the long-term implications of a public policy that would favour education and make it possible to select the higher equilibrium. |
| Keywords: | Environmental quality, human capital, education, self-fulfilling prophecies, public policy. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00492178_v1&r=env |
| By: | Cerin, Pontus (Umeå School of Business at Umeå University); Belhaj, Mohammed (IVL Swedish Environmental Research Institute) |
| Abstract: | External assessment of companies’ environmental aspects often focus on the existence of strategies, commitments, management systems and reporting of firms that concerns environmental aspects. Instead, in line with extra financial analysis, in order to play a role in decision-making, analysis of environmental aspects should incorporate the influence that stakeholders may have on future revenues of the assessed firm and how well advanced corporate strategies are in meeting these threats, turning them into business opportunities. Thereafter, the environmental information financial analysts’ use in their financial analyst reports as well as the relation between environmental and financial performance are illuminated. Three industry sectors, Chemicals, Electrical Equipment and Paper & Forest Products, are specially analysed in this report. Out of almost 4500 analyst reports about 36 percent contain environmental information, but when looking at industry sectors these numbers range from only 3 to up to 79 percent. The type of environmental information that the analysts focus on in their reports are on how firms’ products and product portfolios are adopted to Environmental regulations facing customers/markets, Customer demands and Eco-Efficiency. This product perspective is strongly related to discussions of business opportunities of the firm. In fact, a good 77 % of the financial analyst reports containing environmental information dealt with opportunities linked to environmental aspects. To a lower extent, financial analysts write about company specific risk issues like emissions and litigations while their reports is virtually absent from aspects like environmental strategies, policies, management systems, reporting and auditing. The correlation between corporate financial and environmental performances is illuminated through regression analyses. Industry environmental risk is found to be negatively correlated to corporate return on assets – ROA – (in an static model) while (when applying a dynamic model) corporate environmental performance and ROA have a positive correlation in the short term, which can find support by other studies using different data. |
| Keywords: | Extra financial analysis; EFA; Financial analyst reports; Content analysis; ESG Framework; Return on assets; ROA; Environmental performance; Social performance; financial performance; Financial accounting; Non-financial information |
| Date: | 2009–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:sicgwp:2009_008&r=env |
| By: | Peter Wood (Resource Management in Asia-Pacific Program, Crawford School of Economics and Government, Australian National University) |
| Abstract: | This survey paper examines the problem of achieving global cooperation to reduce greenhouse gas emissions. Contributions to this problem are reviewed from non-cooperative game theory, cooperative game theory, and implementation theory. Solutions to games where players have a continuous choice about how much to pollute, games where players make decisions about treaty participation, and games where players make decisions about treaty ratification, are examined. The implications of linking cooperation on climate change with cooperation on other issues, such as trade, is examined. Cooperative and non-cooperative approaches to coalition formation are investigated in order to examine the behaviour of coalitions cooperating on climate change. One way to achieve cooperation is to design a game, known as a mechanism, whose equilibrium corresponds to an optimal outcome. This paper examines some mechanisms that are based on conditional commitments, and could lead to substantial cooperation. |
| Keywords: | Climate change negotiations; game theory; implementation theory; coalition formation; subgame perfect equilibrium |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1062&r=env |
| By: | Huifang Tian; John Whalley |
| Abstract: | We report numerical simulation results using a multiyear global multi country modeling framework which we use to assess the impacts of alternative emissions cuts which will likely come under consideration for the process to follow the December 2009 UNFCCC negotiation in Copenhagen. The Copenhagen Accord sets out prior country unilateral commitments, and provides a framework for further negotiation of mutually agreed cuts. We also consider possible financial transfers under the Adaptation Fund and possible trade linked border measures against non participants. Countries are linked not only through shared impacts of global temperature change but also through trade among country subscripted goods. We can thus evaluate the potential impacts of either explicit or implicit accompanying mechanisms including funds/transfers, border adjustments, and tariffs. We calibrate the model to alternative BAU damage scenarios largely as set out in the Stern report. The welfare impacts of both emission reductions and accompanying measures are computed in Hicksian money metric equivalent form over alternative potential commitment periods: 2012-2020, 2012-2030, and 2012-2050. We consider different depth, forms, and timeframes for reductions by China, India, Russia, Brazil, US, EU, Japan and a residual Row. Given the damage estimates we use all countries lose from joint reductions since their foregone consumption is more costly than saved damage from reduced climate change. With the use of larger damage estimates this reverses the depth of cut and allocation of cuts by country cause large differences in impacts by country, while differences in form of cut (intensity, embedment) matter less. Accompanying mechanisms also can make a large difference to participation decisions and especially for large population, low wage, rapidly growing non OECD countries, but are costly for the OECD countries. This all suggests that the bargaining set for the post Copenhagen process is very large, making an eventual jointly agreed outcome difficult to achieve. |
| JEL: | F01 F51 Q54 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16090&r=env |
| By: | Frank Jotzo (ANU Climate Change Institute (Crawford School of Economics and Government), the Australian National University) |
| Abstract: | There is demand for qualitative and quantitative economic analysis on the optimum degree of climate change mitigation and adaptation, the optimal timing of such actions, and their optimum distribution between countries and sectors. This paper discusses what is possible for economic modelling in this field and what is not, with specific reference the paper by Bosello, Carraro and de Cian (2009) as well as Tol (2009). Integrated assessment modelling can provide powerful qualitative insights, for example about the need for both mitigation and adaptation and the interactions between the two, or the need for both individual and policy-driven adaptation. However, the more detailed quantitative results from such studies are subject to such strong limitations, and in many cases are virtually irrelevant as a guide to policy. Three important features are needed in economic models of climate change in order for these models to be useful representations of reality: representation of uncertainty about impacts, in particular the risk of abrupt climate change; fuller representation of economic impacts from climate change and inclusion of non-market impacts; and modelling of equity dimensions. These features are absent in many model currently used, and as a result quantitative results tend to be biased against mitigation as an option to address climate change, and in favour of other adaptation. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1055&r=env |
| By: | Katrin Millock (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Céline Nauges (LERNA-INRA - Toulouse School of Economics) |
| Abstract: | Using survey data of around 10,000 households from 10 OECD countries, we identify the driving factors of household adoption of water-efficient equipment by estimating Probit models of a household's probability to invest in such equipment. The results indicate that environmental attitudes and ownership status are strong predictors of adoption of water-efficient equipment. In terms of policy, we find that households that were both metered and charged for their water individually had a much higher probability to invest in water-efficient equipment compared to households that paid a flat fee. |
| Keywords: | Attitudes, metering, residential water use, technology adoption. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00492291_v1&r=env |
| By: | Erin T. Mansur |
| Abstract: | This chapter examines the tradeoffs of regulating upstream (e.g., coal, natural gas, and refined petroleum product producers) versus regulating downstream (e.g., direct sources of greenhouse gases (GHG)). In general, regulating at the source provides polluters with incentives to choose among more opportunities to abate pollution. This chapter develops a simple theoretical model that shows why this added flexibility achieves the lowest overall costs. I broaden the theory to incorporate several reasons why these potential gains from trade may not be realized--transactions costs, leakage, and offsets--in the context of selecting the vertical segment of regulation. |
| JEL: | Q4 Q5 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16116&r=env |
| By: | Evan Calford (Centre for Energy and Environmental Markets, School of Economics, University of New South Wales, Australia); Christoph Heinzel (Centre for Energy and Environmental Markets (CEEM) School of Economics, Australian School of Business, University of New South Wales, Australia); Regina Betz (Centre for Energy and Environmental Markets, School of Economics, University of New South Wales, Australia) |
| Abstract: | We analyse the efficiency effects of the initial permit allocation given to firms with market power in both permit and output market. We examine two models: a long-run model with endogenous technology and capacity choice, and a short-run model with fixed technology and capacity. In the long run, quantity pre-commitment with Bertrand competition can yield Cournot outcomes also under emissions trading. In the short run, Bertrand output competition reproduces the effects derived under Cournot competition, but displays higher pass-through profits. In a second-best setting of overallocation, a tighter emissions target tends to improve permit-market efficiency in the short run. |
| Keywords: | Emissions trading, Initial permit allocation, Bertrand competition, EU ETS, Endogenous technology choice, Kreps and Scheinkman |
| JEL: | L13 Q28 D43 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1059&r=env |
| By: | Eric Neumayer (London School of Economics and Political Science) |
| Abstract: | The literatures and debates on human development on the one hand and sustainability on the other share much in common. Human development is essentially what sustainability advocates want to sustain and without sustainability, human development is not true human development. Yet the two strands of research have largely been separate and this paper shows how they can learn from each other. I put forward a concrete proposal on how human development and its measurement in the form of the Human Development Index (HDI) can be linked with measures of both weak and strong sustainability. Weak sustainability is built on the assumption that different forms of capital are substitutable, whereas strong sustainability rejects the notion of substitutability for certain critical forms of natural capital. Empirical results over the period 1980 to 2006 show that many of the lowest performing countries on the HDI also face problems of weak unsustainability, as measured by genuine savings. Countries with high to very high HDI performance, on the other hand, typically appear to be strongly unsustainable, as measured by ecological footprints, mostly because of unsustainably large carbon dioxide emissions. Two of the biggest challenges facing mankind this century will be to break the link between high human development and strongly unsustainable damage to natural capital on the one hand, requiring a very significant and rapid decarbonisation of their economies, and assisting countries with very low human development to overcome weak unsustainability by raising their investment levels into all forms of capital on the other. |
| Keywords: | weak sustainability, strong sustainability, Human Development Index, genuine savings, ecological footprints, climate change |
| JEL: | Q01 Q2 Q3 Q4 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:hdr:papers:hdrp-2010-05&r=env |
| By: | Chakraborty, Debashis; Mukherjee, Sacchidananda |
| Abstract: | The inter-linkage between economic openness and environmental repercussions is a widely researched area. The current study contributes in the existing pool of research by conducting a cross-country empirical analysis for the year 2008 by exploring the interrelationship between openness indicators (trade and investment) and environmental performance of a country. For this purpose, the analysis separately considers export orientation, import orientation, FDI inwardness and FDI outwardness of the countries in different variations of the proposed empirical model. The regression results do not provide strong support to the Pollution Haven Hypothesis (PHH). The findings also confirm a relationship between socio-economic and socio-political factors in a country and its environmental performance. |
| Keywords: | Trade and Environment; International Investment |
| JEL: | F18 F21 |
| Date: | 2010–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23333&r=env |
| By: | Mariko Onoda (Doctoral Course Researcher in the Graduate School of Economics, Kwansei Gakuin University) |
| Abstract: | In this paper, we construct a partial equilibrium model of a product that can be manufactured by using a recycled material as well as a virgin natural resource. In particular, we consider the possibility that a household may resort to the illicit disposal of its waste, such as midnight dumping, instead of discarding it properly. Our focus is on conducting a comparative static analysis on the second-best level of the governmentfs policing effort to counter illegal disposal. More specifically, we examine how the government should adjust the effort level in response to changes in the environmental damage cost of illegal disposal and exported waste. |
| Keywords: | illegal waste disposal, recycling, second-best policy |
| JEL: | Q20 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:56&r=env |
| By: | Abbie McCartney (School of Agricultural and Resource Economics, University of Western Australia.); Jonelle Cleland (School of Agricultural and Resource Economics, University of Western Australia.); Michael Burton (School of Agricultural and Resource Economics, University of Western Australia.) |
| Abstract: | This working paper utilises the choice modelling technique to investigate how information and understanding influences preferences of the general public for conservation of natural environments, specifically the tropical waterways and wetlands of the Kimberley region in Western Australia. The paper forms part of a larger study investigating preference divergence for environmental systems between experts and non?experts. By priming the public with more information about complex environmental problems, one might expect them to form preferences similar to that of experts. A preliminary analysis of public low and high information samples finds that, when birds and plants are the focus of species conservation with respect to the tropical waterways, increased information does not significantly impact preferences. However, when fish species conservation is considered significant differences are found. In this instance individuals appear to have reacted favourably to the additional information, recognising that rare species require more protection than widespread iconic species by placing higher values on their conservation. Generally speaking, respondents preferred high levels of conservation improvements over all attributes considered, rather than lower incremental improvements. Results should be interpreted with care as further analysis is required, including investigation of the alternative specific constant and inclusion of individual characteristics to explain sample heterogeneity. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1060&r=env |
| By: | Chevallier, Julien |
| Abstract: | EUAs are European Union Allowances traded on the EU Emissions Trading Scheme (EU ETS), while Certified Emissions Reductions (CERs) arise from the Clean Development Mechanism under the Kyoto Protocol. These emissions assets attract an increasing attention among brokers, investors and operators on emissions markets, because they may be both used for compliance under the EU ETS (up to fixed limits). This paper proposes a statistical analysis of the inter-relationships between EUA and CER price series, by using vector autoregression, impulse response function, and cointegration analysis on daily data from March 9, 2007 to January 14, 2010. The central results show that EUAs and CERs affect each other significantly through the vector autoregression model, and react quite rapidly to shocks on each other through the impulse response function analysis. Most importantly, both price series are found to be cointegrated, with EUAs leading the price discovery process in the long-term through the vector error correction mechanism. |
| Keywords: | EUA; CER; Vector Autoregression; Impulse Response Function; Cointegration; Vector Error Correction Model; EU ETS; Price Discovery; |
| JEL: | Q4 C3 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/4226&r=env |
| By: | Gilbert E. Metcalf; Aparna Mathur; Kevin A. Hassett |
| Abstract: | This paper provides a simple analytic approach for measuring the burden of carbon pricing that does not require sophisticated and numerically intensive economic models but which is not limited to restrictive assumptions of forward shifting of carbon prices. We also show how to adjust for the capital income bias contained in the Consumer Expenditure Survey, a bias towards regressivity in carbon pricing due to underreporting of capital income in higher income deciles in the Survey. Many distributional analyses of carbon pricing focus on the uses-side incidence of carbon pricing. This is the differential burden resulting from heterogeneity in consumption across households. Once one allows for sources-side incidence (i.e. differential impacts of changes in real factor prices), carbon policies look more progressive. Perhaps more important than the findings from any one scenario, our results on the progressivity of the leading cap and trade proposals are robust to the assumptions made on the relative importance of uses and sources side heterogeneity. |
| JEL: | H22 H23 Q48 Q54 Q58 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16101&r=env |
| By: | Hervé-Mignucci, Morgan; Chevallier, Julien; Alberola, Emilie; Mansanet-Bataller, Maria |
| Keywords: | European CO2 allowance; Certified Emission Reduction; |
| JEL: | Q52 Q56 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/4214&r=env |
| By: | V. Kerry Smith |
| Abstract: | This paper considers the role of incentive based climate adaptation policies. It uses the early literature on pricing and capacity choices under demand uncertainty to describe how revised price structures for the substitutes for climate services can be treated as anticipatory adaptation. In many situations the policies determining the prices of these services make them difficult to adjust. Thus, excess demand will not be managed through price adjustment. This situation is important because it implies that the rationing rules determining who is served influence both capacity planning and pricing decisions. The lesson drawn from these models is that reform of pricing policy for climate substitutes offers a ready basis for incentive based adaptation policy. The last part of the paper offers some empirical evidence on how the price elasticity of the residential demand for water changes with variations in seasonal precipitation. The findings suggest marked differences between normal and dry conditions for the Phoenix metropolitan area. These results reinforce the need to co-ordinate changes in pricing policy with any capacity planning developed for water supplies as part of anticipatory climate adaptation. Similar relationships may well apply for other substitutes for climatic services. |
| JEL: | Q4 Q54 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16100&r=env |
| By: | Chevallier, Julien |
| Abstract: | This article develops a forecasting exercise of the volatility of EUA spot, EUA futures, and CER futures carbon prices (modeled after an AR(1)-GARCH(1,1)) using two dynamic factors as exogenous regressors that were extracted from a Factor Augmented VAR model (Bernanke et al. (2005)). The dataset includes 115 macroeconomic, financial and commodities indicators with daily frequency from April 4, 2008 through January 25, 2010 totalling 463 observations that capture the strong uncertainties emerging on the carbon market. The main result shows that the best forecasting performance for the volatility of carbon prices is achieved for the model including the dynamic factors as exogenous regressors, which can be useful to inform hedging or speculative trading strategies by energy utilities, financial market players and risk managers. |
| Keywords: | Volatility Forecasting; Carbon price; Factor models; |
| JEL: | Q4 C3 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/4349&r=env |
| By: | Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Neustadt, Ilja (Socioeconomic Institute (SOI), Faculty of Economics, University of Zurich) |
| Abstract: | In a perfectly competitive market with a possibility of technological innovation we contrast guaranteed feed-in tariffs for electricity from renewables and tradable green certificates from a dynamic efficiency and social welfare point of view. Specifically, we model decisions about the technological innovation with convex costs within the framework of a game-theoretic model, and discuss implications for optimal policy design under different assumptions regarding regulatory pre-commitment. We find that for the case of technological innovation with convex costs subsidy policies are preferable over quota-based policies. Further, in terms of dynamic efficiency, no pre-commitment policies are shown to be at least as good as the pre-commitment ones. Thus, a government with a preference for innovation being performed if the achievable cost reduction is high should be in favor of the no pre-commitment regime. |
| Keywords: | Renewable Electricity; Feed-In Tariffs; Regulatory Pre-Commitment; Tradable Green Certificates; Quota Target; Innovation; Energy Policy |
| JEL: | Q42 Q48 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2010_004&r=env |
| By: | Jacqueline de Chazal (Resource Management in Asia-Pacific Program, Crawford School of Economics and Government, The Australian National University, Australia Author-Homepage http://rspas.anu.edu.au/people/personal/dechj_rmap.php) |
| Abstract: | I offer a protocol for assessing the sustainability of livability. This protocol draws on a framework developed to assess vulnerability, and offers two key pertinent features. These are (a) a capacity to incorporate multiple and shifting stakeholder values, and (b) a means of moving from expressions of livability to underlying ecological attributes that deliver or constrain system change. The applicability of these features to both assessing the sustainability of livability, and a reappraisal given system change are illustrated using data from a study site in the French Alps. The central place of values intrudes into livability and sustainability so as to complicate the situation. Even so, the protocol presented here is able to ground the abstractions and equivocation in a transparent and explicit set of announcements. Laying the steps out in the open allows for consistency in comparison and replication without artificially removing the labile flexibility embedded in livability and sustainability. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:1064&r=env |
| By: | Olivier Deschenes |
| Abstract: | An important component of the debate surrounding climate legislation in the United States is its potential impact on labor markets. Theoretically the connection is ambiguous and depends on the sign of cross-elasticity of labor demand with respect to energy prices, which is a priori unknown. This paper provides some new evidence on this question by estimating the relationship between real electricity prices and indicators of labor market activity using data for 1976-2007. A key contribution of this analysis is that it relies on within-state variation in electricity prices to identify the models and considers all sectors of the U.S. economy rather than focusing only on the manufacturing sector. The main finding is that employment rates are weakly related to electricity prices with implied cross elasticity of full-time equivalent (FTE) employment with respect to electricity prices ranging from -0.16% to -0.10%. I conclude by interpreting these empirical estimates in the context of increases in electricity prices consistent with H.R. 2454, the American Clean Energy and Security Act of 2009. The preferred estimates in this paper suggest that in the short-run, an increase in electricity price of 4% would lead to a reduction in aggregate FTE employment of about 460,000 or 0.6%. |
| JEL: | J23 Q50 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16111&r=env |