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on Environmental Economics |
| By: | Lindmark, Magnus (CERE); Bergquist, Ann-Kristin (CERE); Andersson, Lars Fredrik (CERE) |
| Abstract: | This study examines the historical relation between carbon dioxide emission and output growth in the Swedish pulp and paperindustry 1973-2006. We find that the industry achieved an 80 per cent reduction in CO2 emission. Foremost energy substitution but also efficiently improvement contributed to the reduction. Growing prices of fossil fuel due to market price change and taxes and subvention, explains most of the efficiency improvements and substitution. Taxes on energy explain 40 per cent of the total reduction in CO2 intensity. Most of the reduction took place before the implementation of active climate policy in 1991. |
| Keywords: | Sweden; Climate policy; economic growth; carbon dioxide reduction; carbon tax; paper and plant industry |
| JEL: | N54 |
| Date: | 2010–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_008&r=env |
| By: | Lundgren, Tommy (CERE); Marklund, Per-Olov (CERE) |
| Abstract: | As widely recognized, human mankind stands before the most challenging problem of preventing anthropogenic climate change. As a response to this, the European Union advocates an ambitious climate policy mix. However, there is no consensus concerning the impact of stringent environmental policy on firms’ competitiveness and profitability. From the traditional ‘static’ point of view there are productivity losses to be expected. On the other hand, the so called Porter hypothesis suggests the opposite; i.e., due to ‘dynamic’ effects, ambitious climate and energy policies within the EU could actually be beneficial to firms in terms of enhanced profitability and competitiveness. Based on Sweden’s manufacturing industry, our main purpose is to specifically assess the impact of the CO2 tax scheme of Sweden on firms’ profit efficiency. The empirical methodology is based on stochastic frontier estimations and, in general, the results suggest we can neither reject nor confirm the Porter hypothesis across industry sectors. Therefore, we do not generally confirm the argument of stringent environmental policies having positive dynamic effects that potentially offset costs related to environmental policy. |
| Keywords: | CO2 tax; efficiency; stochastic frontier analysis; Swedish industry |
| JEL: | D20 H23 Q52 Q55 |
| Date: | 2010–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_011&r=env |
| By: | David Carey |
| Abstract: | The consensus view of scientists is that the build-up of greenhouse gases (GHG) in the atmosphere is causing global warming. To reduce the probability of severe climate-change impacts and costs occurring, global GHG emissions need to be reduced substantially over coming decades. The United States agreed to a global political agreement to reduce GHG emissions that was acknowledged at Copenhagen (COP15) in December 2009 and negotiations are continuing to work towards binding emissions-reduction commitments by all countries. In view of the scale of emission reductions called for, it is vital that the United States adopt a cost-effective and comprehensive climate change policy. The current Administration is endeavouring to put such a policy package in place. Its core elements are comprehensive pricing of GHG emissions and increased support for the development and deployment of GHG-emissions-reducing technologies. The alternative regulatory approach would be more costly and unlikely to deliver the required scale of reductions in emissions.<P>Mettre en oeuvre des politiques efficaces par rapport à leur coût aux États-Unis pour atténuer le changement climatique<BR>Les scientifiques s’accordent globalement à considérer que l’accumulation de gaz à effet de serre (GES) dans l’atmosphère est à l’origine d’un réchauffement de la planète. Pour réduire le risque que le changement climatique ait des répercussions graves et des coûts élevés, il faudra diminuer sensiblement les émissions mondiales de GES dans les décennies à venir. Les États-Unis ont souscrit à l’économie d’un accord politique mondial axé sur cette diminution, dont il a été pris acte à Copenhague en décembre 2009 (CdP15). Les négociations se poursuivent en vue d’obtenir de tous les pays des engagements contraignants de réduction de leurs émissions. Compte tenu de l’ampleur des réductions nécessaires, il est vital que les États-Unis adoptent une politique globale de lutte contre le changement climatique qui soit efficace par rapport à son coût. Le gouvernement en place s’efforce d’agencer ce dispositif, dont les principaux éléments sont la tarification générale des émissions de GES et le renforcement du soutien apporté au développement et au déploiement des technologies qui font diminuer ces dernières. L’approche alternative par la voie réglementaire serait plus coûteuse et peu susceptible de fournir à l’échelle requise des réductions des émissions. |
| Keywords: | climate change, GHG emissions, biofuels, carbon tax, cap-and-trade, United States 2010, changement climatique, bio-carburants, taxes carbone, émissions de gaz à effet de serre, système de plafonnement et d’échange, États-Unis 2010 |
| Date: | 2010–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:807-en&r=env |
| By: | Agnar Sandmo |
| Abstract: | This paper considers the role of global environmental taxes both as instruments for improving the global environment and as a source of revenue for funding economic development. It reviews the general case for environmental taxes and the particular issues that arise for the adoption of such taxes in an international setting without a single jurisdiction. It also discusses the possibilities for political acceptance of such taxes when tax revenue is linked to the goal of economic development. The revenue potential of global environmental taxes is evaluated with special reference to a global carbon tax. It is found that this tax alone has the potential to raise sufficient revenue to finance the United Nations’ Millennium Development Goals. [Discussion Paper No. 2003/86] |
| Keywords: | environment, taxation, carbon tax, consumption |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3200&r=env |
| By: | Parry, Ian W.H. (Resources for the Future); Williams, Roberton C. III (Resources for the Future) |
| Abstract: | This paper develops an analytical model to quantify the costs and distributional effects of various fiscal options for allocating the (large) rents created under prospective cap-and-trade programs to reduce domestic, energy-related carbon dioxide (CO2) emissions. The trade-off between cost-effectiveness and distribution is striking. The welfare costs of different policies, accounting for linkages with the broader fiscal system, range from –$6 billion per year to $53 billion per year in 2020, or between –$12 to almost $100 per ton of CO2 reductions. The least costly policy involves auctioning all allowances with revenues used to cut proportional income taxes, while the most costly policies involve recycling revenues in lump-sum dividends or grandfathering emissions allowances. The least costly policy is regressive, however, while the dividend policy is progressive, and grandfathering permits is both costly and regressive. A distribution-neutral policy costs $18–$42 per ton of CO2 reductions. |
| Keywords: | cap-and-trade, welfare cost, distributional incidence, revenue recycling |
| JEL: | Q48 Q54 Q58 H22 |
| Date: | 2010–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-10-51&r=env |
| By: | Esther Duflo; Michael Greenstone; Nicholas Ryan; Rohini Pande |
| Abstract: | This paper connects experience with emissions trading, from programs like the U.S. Rain program, to lessons for implementation of a Trading Pilot Scheme in India. This experience suggests that four areas are especially important for successful implementation of an emissions trading scheme. |
| Keywords: | India, emissions trading, US, rain program, air pollutants, industry, industries, costs, pollution, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3178&r=env |
| By: | Constance C. Neely |
| Abstract: | The relationships between agriculture, the environment, and development are deep and complex. By 2050 a 70 per cent increase in production will be needed to feed an additional 2.7 billion people on an already degraded natural resource base. In light of this and amid the realities of climate change, the agricultural sector is now coming to terms with its potential role for contributing to – rather than diminishing - environmental, institutional, social and economic resilience. The purpose of this paper is to highlight the importance of environmental management and governance in the agricultural sector; to present environmental goals, requirements, entry points, and strategies/approaches to capacity development for the environment (CDE) in this sector; and to discuss implications for donors. The focus is on CDE in a developing country context. The paper recognises that CDE must be seen as part of an endogenous process of change, and that it must operate at multiple levels: the enabling environment, the organisation, and the individual. The paper argues that CDE should focus on the sustainable production and provision of sufficient, safe, and nutritious food that simultaneously builds and reinforces ecosystem resilience, leading to equitable and economically viable livelihoods at an adequate scale. The paper links these concepts to the country systems approach to development assistance advocated in the Paris Declaration on Aid Effectiveness. |
| Keywords: | developing countries, environmental management, Capacity development, environmental governance, agricultural sector, sustainable agriculture |
| JEL: | O20 Q1 Q2 Q56 |
| Date: | 2010–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:26-en&r=env |
| By: | Dimitrios Varvarigos |
| Abstract: | The current paper offers a new explanation on the emergence of threshold effects and multiple equilibria, for which the high (low) income equilibrium is associated with high (low) environmental quality. This new explanation rests on endogenous technological choice in the presence of environmental taxation – an idea whose foundations find strong support from existing empirical evidence. Thus, the interactions between environmental policy and technology choice, within a framework that accounts for the health effects of pollution, can explain some of the observed differences in income, life expectancy and environmental quality among countries. |
| Keywords: | Pollution; Capital accumulation; Endogenous longevity; Multiple equilibria |
| JEL: | O41 Q56 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:11/05&r=env |
| By: | Andrés J. Picazo-Tadeo (Universidad de Valencia. Dpto. Economía Aplicada II.); José A. Gómez-Limón (Instituto Andaluz de Investigación y Formación Agraria y Pesquera. Dpto. Economía Agraria. Córdoba.); Ernest Reig-Martínez (Universidad de Valencia. Dpto. Economía Aplicada II and Instituto Valenciano de Investigaciones Económicas (IVIE).) |
| Abstract: | This paper assesses farming eco-efficiency using Data Envelopment Analysis (DEA). Eco-efficiency scores at both farm and environmental pressurespecific levels are computed for a sample of Spanish farmers operating in the rainfed agricultural system of Campos County. The determinants of eco-efficiency are then studied using truncated regression and bootstrapping. We contribute to previous literature by including information on slacks in the assessment of the potential environmental-pressure reductions in a DEA framework. Our results reveal that farmers are quite eco-inefficient, with very few differences emerging among specific environmental pressures. Furthermore, farmers benefiting from agrienvironmental programs as well as those with university education are found to be more eco-efficient. Concerning the policy implications of these results, public expenditure in agricultural extension and farmer training could be of some help to promote integration between farming and the environment. Furthermore, Common Agricultural Policy agri-environmental programs are also an effective policy to improve eco-efficiency. |
| Keywords: | Farming; economic-ecological efficiency; environmental pressures; Data Envelopment Analysis; bootstrapping |
| JEL: | C61 D21 Q56 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1004&r=env |
| By: | Choi, Eunho (Korea University); Heshmati, Almas (Korea University); Cho, Yongsung (Korea University) |
| Abstract: | This paper investigates the existence of the environmental Kuznets curve (EKC) for carbon dioxide (CO2) emissions and its causal relationships with economic growth and openness by using time series data (1971-2006) from China (an emerging market), Korea (a newly industrialized country), and Japan (a developed country). The sample countries span a whole range of development stages from industrialized to newly industrialized and emerging market economies. The environmental consequences according to openness and economic growth do not show uniform results across the countries. Depending on the national characteristics, the estimated EKC show different temporal patterns. China shows an N-shaped curve while Japan has a U-shaped curve. Such dissimilarities are also found in the relationship between CO2 emissions and openness. In the case of Korea and Japan it represents an inverted U-shaped curve, while China shows a U-shaped curve. We also analyze the dynamic relationships between the variables by adopting a vector auto regression or a vector error correction model. These models through the impulse response functions allow for analysis of the causal variable's influence on the dynamic response of emission variables and it adopts a variance decomposition to explain the magnitude of the forecast error variance determined by the shocks to each of the causal variables over time. Results show evidence of large heterogeneity among the countries and variables impacts. |
| Keywords: | carbon dioxide (CO2), environmental Kuznets curve (EKC), economic growth, free trade, development |
| JEL: | C32 F18 F43 N55 O13 Q56 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5304&r=env |
| By: | George Matheson; Laurie Giroux |
| Abstract: | The relationships between energy, the environment, and development are deep and complex. The International Energy Agency has noted that energy is deeply implicated in each of the economic, social and environmental dimensions of human development. Energy services provide an essential input to economic activity, contribute to social development, and help meet basic human needs. But energy production and use also has significant environmental implications that must be managed if countries are to meet their long term sustainable development goals. The purpose of this paper is to highlight the importance of environmental management and governance in the energy sector; to present environmental goals, requirements, entry points, and strategies/approaches to capacity development for the environment (CDE) in this sector; and to discuss implications for donors. The focus is on CDE in a developing country context. The paper recognises that CDE must be seen as part of an endogenous process of change, and that it must operate at multiple levels: the enabling environment, the organisation, and the individual. The paper argues that capacity development is not an end in itself; instead, defined environmental goals should be the basis for determining capacity requirements, which in turn should be the basis for defining capacity development priorities. Based on this, the paper further argues that CDE should focus on sustainable energy sources of relevance to the majority of the population, and on increased efficiency of energy use. The paper links these concepts to the country systems approach to development assistance advocated in the Paris Declaration on Aid Effectiveness, and discusses some of the challenges donors face in providing CDE assistance that responds to these concepts and principles. |
| Keywords: | developing countries, energy sector, renewable energy, energy efficiency, environmental management, Capacity development, environmental governance, sustainable energy, country systems |
| JEL: | H23 O13 O17 O19 O29 O33 Q01 Q4 Q5 |
| Date: | 2010–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:25-en&r=env |
| By: | Kenji Fujiwara (Kwansei Gakuin University) |
| Abstract: | Recent empirics suggest the relevance of transport cost reductions for world trade growth along with eliminations in protectionist trade barriers. To address the welfare effects of trade cost reductions in a context of `trade and the environment,' we develop a two-stage game model where governments choose environmental and trade policies and rms play a Cournot-Nash game. We show that reductions in transport costs lead to lower emission taxes and higher tariffs. And, we nd that the degree of pollution damage plays a central role in whether market integration is welfare-improving relative to autarky. |
| Keywords: | market integration, oligopoly, pollution tax, tariff, gains/losses from trade |
| JEL: | F12 F18 L13 Q56 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:63&r=env |
| By: | Alberola, Emilie; Chevallier, Julien; Mansanet-Bataller, Maria; Hervé-Mignucci, Morgan |
| Abstract: | This article studies the price relationships between EU emissions allowances (EUAs) - valid under the EU Emissions Trading Scheme (EU ETS) - and secondary Certified Emissions Reductions (sCERs) - established from primary CERs generated through the Kyoto Protocol's Clean Development Mechanism (CDM). Given the price differences between EUAs and sCERs, financial and industrial operators may benefit from arbitrage strategies by buying sCERs and selling EUAs (i.e. selling the EUAsCER spread) to cover their compliance position as industrial operators are allowed to use sCERs towards compliance with their emissions cap within the European system up to 13.4%. Our central results show that the spread is mainly driven by EUA prices and market microstructure variables and less importantly, as we would expect, by emissions-related fundamental drivers. This might be justified by the fact that the EU ETS remains the greatest source of CER demand to date. |
| Keywords: | EUA-sCER Spread; Arbitrage; Emissions Markets; |
| JEL: | Q58 Q57 Q48 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/5109&r=env |
| By: | Matthew A Cole; Robert J R Elliott; Khemrutai Khemmarat |
| Abstract: | This paper examines the role played by community characteristics in influencing local environmental quality, focusing specifically on ethnic diversity. In contrast to the previous literature, this study argues that it is the fractionalization and/or polarization of ethnic groups that is the relevant consideration, rather than the population share of ethnic minorities, since such diversity may significantly increase the difficulty of co-ordinating community action. Using toxic release data for the period 1990-1995 and, for the first time, 2000-2005, we find that measures of ethnic diversity do indeed influence local toxic release emissions. This finding persists across a range of robustness exercises. |
| Keywords: | pollution, ethnic diversity, fractionalization, polarization, community characteristics, environmental justice |
| JEL: | Q53 Q56 D70 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:10-29&r=env |
| By: | David Maddison; Katrin Rehdanz |
| Abstract: | We analyse the influence of climate on average life satisfaction in 87 countries using data from the World Values Survey. Climate is described in terms of ‘degree-months’ calculated using an optimally-selected base temperature of 65°F (18.3°C). Our results suggest that countries with climates characterised by a large number of degree-months enjoy significantly lower levels of life satisfaction. This finding is robust to a wide variety of model specifications. Using our results to analyse a particular climate change scenario associated with the IPCC A2 emissions scenario points to major losses for African countries, but modest gains for Northern Europe |
| Keywords: | climate; climate change; happiness; life satisfaction; survey data |
| JEL: | D60 H41 I31 Q51 Q54 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1658&r=env |
| By: | Furtenback, Örjan (CERE) |
| Abstract: | This study presents a Dynamic Computable General Equilibrium model that combines economic and ecological aspects of forest biomass. A framework is introduced for modeling the growth of a biomass stock which interacts with economic sectors. Harvest of and demand for forest products and forest amenities are determined endogenously in an inter-temporally consistent way. The idea is based on a Markovian growth model of the forest. The study demonstrates an approach for incorporating non-market values of forests, such as carbon sequestration, recreation and biodiversity, into a growth model. A simulation illustrates harvest behaviour when the economy is subjected to shocks. |
| Keywords: | Dynamic CGE; Markovian growth; Ecosystem modeling; Inter-temporal optimization; Infinite-horizon equilibria |
| JEL: | C68 D58 Q26 |
| Date: | 2010–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_006&r=env |
| By: | Nadine Heitmann; Christine Bertram; Daiju Narita |
| Abstract: | Carbon dioxide capture and storage (CCS) has recently been receiving increasing recognition in policy debates. Various aspects of possible regulatory frameworks for its implementation are beginning to be discussed in Europe. One of the issues associated with the wide use of CCS is that it requires the establishment of a carbon dioxide (CO2) transport network, which could result in the spatial restructuring of power generation and transmission systems. This poses a significant coordination problem necessitating public planning and regulation. This paper reviews the recent literature on energy system modeling pertaining to the problem of installing CCS-related infrastructure throughout Europe and also discusses the policy issues that need to be addressed for a potential wide implementation of CCS in the next decades |
| Keywords: | CCS (carbon dioxide capture and storage), the European Union, climate policy, energy system models, cost effectiveness |
| JEL: | Q41 Q48 Q52 Q54 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1657&r=env |
| By: | Brännlund, Runar (Centre for Environmental and Resource Economics); Persson, Lars (Centre for Environmental and Resource Economics) |
| Abstract: | Today, many countries around the world respond to the global warming and its consequences with various policy instruments such as e.g. taxes, subsidies, emission permit trading, regulations and information campaigns. In the economic literature, policy instruments have typically been analyzed with respect to efficiency, while little effort has been put on public preferences for these instruments. In this paper, an Internet-based choice experiment is conducted where respondents are asked to choose between two alternative policy instruments that both reduce the emissions of CO2 by the same amount. The policy instruments are characterized by a number of attributes; a technology-effect, an awarenesseffect, cost distribution, geographic distribution and private cost (presented in more detail in the paper). By varying the levels of each of the attributes, respondents indirectly reveal their preferences for these attributes. Half of the respondents are faced with instruments labeled by ‘tax’ and ‘other’, whereas the other half are faced with unlabeled instruments. As for the label, the results show that people dislike the ‘tax’. The results also show that people prefer instruments with a positive effect on environmentally-friendly technology and climate awareness. A progressive-like cost distribution is preferred to a regressive cost distribution, and the private cost is negatively related to the choice. Finally, the results indicate that Swedes want the reduction to take place in Europe but not necessarily in Sweden. |
| Keywords: | preferences; climate policy measures; choice experiment; web-survey |
| JEL: | H20 H31 Q48 Q50 |
| Date: | 2010–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_004&r=env |
| By: | Benjamin Bureau (CERNA - Centre d'économie industrielle - Mines ParisTech) |
| Abstract: | This paper analyses the distributional effects of alternative scenarios of carbon taxes on car fuels using disaggregated French panel data from 2003 to 2006. It incorporates household price responsiveness that differs across income groups into a consumer surplus measure of tax burden. Carbon taxation is regressive before revenue recycling. However, taking into account the benefits from congestion reduction induced by the tax mitigates regressivity. We show also that recycling additional revenues from the carbon tax either in equal amounts to each household or according to household size makes poorest households better off. |
| Keywords: | carbon tax; distributional effects |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00530054_v2&r=env |
| By: | Johansson, Per-Olov (Stockholm School of Economics); Kriström, Bengt (CERE, SLU-Umeå and Umeå University) |
| Abstract: | In this note we discuss two alternative ways of undertaking a social cost-benefit analysis. One approach is the conventional one where benefits and costs are expressed in monetary units. The other approach uses an environmental asset as the payment vehicle. The properties of the two approaches are discussed and the measurement problems are stressed. |
| Keywords: | Cost-benefit analysis; externalities; choice of numeraire; habitat equivalence analysis; resource equivalency methods |
| JEL: | D61 H43 Q51 Q57 |
| Date: | 2010–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_001&r=env |
| By: | Östberg, Katarina (CERE); Hasselström, Linus (Enveco); Håkansson, Cecilia (KTH) |
| Abstract: | The EU Water Framework Directive (WFD) requires coastal water quality to be classified according to ecological indicators. In this paper, contingent valuation is used to estimate the value of improving the water quality status according to this classification, investigating if this type of holistic political-ecological measure can be related to and valued in monetary terms by the general public. A web-based survey was conducted in two study areas on the Swedish East and West coast. The paper focuses on eutrophication effects, such as bad water clarity, a decrease of bladder wrack stands and algae mats. These water quality elements affect recreational use of coastal areas. Relating to recreational use, two other environmental attributes are addressed – algae blooms and protection of marine areas in terms of e.g. restrictions for boat traffic. The restrictions scenario is also holistic in terms of several imposed restrictions, as well as tightly linked with existing policy. Conducting valuation studies based on a policy-determined measure is beneficial for decisionmakers but also for research e.g. in terms of data availability. It is concluded that these politically defined measures seem to work well as a basis for economic valuation. The respondents are in general both able to understand and to put a monetary value to the measures. This is an important first step, paving the ground for further studies. The monthly mean household WTP between the years 2010 – 2029 ranges from 61 to 108 SEK for improved water quality, from 54 to 84 SEK for less algae blooms and from 32 to 50 SEK for less noise and littering. Regarding noise and littering in archipelago areas in Northern Europe, this is to our knowledge the first WTP estimate that has been presented. The respondents from the East coast region express relatively high mean WTP values compared to the respondents on the West coast for all scenarios. The differences in mean WTP values between the study areas, which are reflected in the transfer errors, indicate that even though the coasts are similar in terms of use and environmental problems, and the respondents have many similar characteristics, a point estimate benefit transfer between the two coasts is not recommended unless high transfer errors are acceptable. WTP is affected by gender, membership of an NGO, whether or not the respondent has children, whether or not the respondent has a foreign background, frequency of visiting the area and whether or not the respondent uses a boat with an engine effect of more than 10 hp while visiting the area. |
| Keywords: | non-market valuation; choice experiments; water framework directive |
| JEL: | Q25 Q51 |
| Date: | 2010–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_010&r=env |
| By: | Sam Howison; Daniel Schwarz |
| Abstract: | We present a novel approach to the pricing of financial instruments in emission markets, for example, the EU ETS. The proposed hybrid model is positioned between existing complex full equilibrium models and pure risk-neutral models. Using an exogenously specified demand for a polluting good it gives a causal explanation for the accumulation of CO2 emissions and takes into account the feedback effect from the cost of carbon to the rate at which the market emits CO2. We derive a forward-backward stochastic differential equation for the price process of the allowance certificate and solve the associated semilinear partial differential equation numerically. We also show that derivatives written on the allowance certificate satisfy a linear partial differential equation. The model is extended to emission markets with multiple compliance periods and we analyse the impact different intertemporal connecting mechanisms, such as borrowing, banking and withdrawal, have on the allowance price. |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1011.3736&r=env |
| By: | Philippine de T’Serclaes |
| Abstract: | Scaling-up investment in energy efficiency is essential to achieving a sustainable energy future. Despite energy efficiency’s recognised advantages as a bankable investment with immense climate change mitigation benefits, most of the energy efficiency potential remains untapped and the investment gap to achieve climate goals is tremendous. This report seeks to improve understanding as to why this is so, and what can be done about it. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ieaaaa:2010/10-en&r=env |
| By: | David Greene |
| Abstract: | Passenger vehicles are a major source of greenhouse gas emissions and prodigious consumers of petroleum, making their fuel economy an important focus of energy policy. Whether or not the market for fuel economy functions efficiently has important implications for both the type and intensity of energy and environmental policies for motor vehicles. There are undoubtedly imperfections in the market for fuel economy but their consequences are difficult to quantify. The evidence from econometric studies, mostly from the US, is reviewed and shown to vary widely, providing evidence for both significant under- and over-valuation and everything in between. Market research is scarce, but indicates that the rational economic model, in general, does not appear to be used by consumers when comparing the fuel economy of new vehicles. Some recent studies have stressed the role of uncertainty and risk or loss aversion in consumers’ decision making. Uncertainty plus loss aversion appears to be a reasonable theoretical model of consumers’ evaluation of fuel economy, with profound implications for manufacturers’ technology and design decisions. The theory implies that markets will substantially undervalue fuel economy relative to its expected present value. It also has potentially important implications for welfare analysis of alternative policy instruments. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaaa:2010/6-en&r=env |
| By: | Salies, Evens (Centre de recherche en économie de Sciences Po) |
| Abstract: | In response to climate change, many electric utilities introduce pricing schemes to induce their customers to consume less electricity. When a significant portion of the consumer population finds it more costly to economize electricity, one would expect utilities to offer incentives in return for lower usage of electricity. The model put forward in this paper enhances understanding of why a typical electric utility may instead prefer to increase prices, in so doing discriminating against environmentally conscious customers. This result holds even when the utility is charged for its greenhouse gas emissions. But in this case the price increase is sufficiently small to induce energy savings also from customers for whom there is a net cost in doing so. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:sciepo:info:hdl:2441/5k7940uimfdf9c898a1ol5436&r=env |
| By: | Lundgren, Tommy (Centre of Environmental and Resource Economics); Olsson, Rickard (Umeå School of Business) |
| Abstract: | Event study methodology is used to analyze whether bad news in the form of environmental (EV) incidents affect firm value negatively. An international sample of firms with EV incidents is studied. It is found that EV incidents are generally associated with loss of value. For European firms the loss is statistically significant and the magnitude of the abnormal returns should be of economic significance to corporations and investors. The results are not sensitive to multiple variations in methodology, including the use of international versions of the market model as well as of multi-factor models of the Fama-French type. Results are also robust to different parametric and non-parametric test statistics. |
| Keywords: | multi-country-multi-factor event study; environmental incidents; abnormal returns |
| JEL: | M14 |
| Date: | 2010–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_003&r=env |
| By: | Massimo Morelli; Dominic Rohner |
| Abstract: | We examine how natural resource location, rent sharing and fighting capacities of different groups matter for ethnic conflict. A new type of bargaining failure due to multiple types of potential conflicts (and hence multiple threat points) is identified. The theory predicts conflict to be more likely when the geographical distribution of natural resources is uneven and when a minority group has better chances to win a secessionist rather than a centrist conflict. For sharing rents, resource proportionality is salient in avoiding secessions and strength proportionality in avoiding centrist civil wars. We present empirical evidence that is consistent with the model. |
| Keywords: | Natural Resources, Conflict, Strength Proportionality, Resource Proportionality, Secession, Bargaining Failure |
| JEL: | C72 D74 Q34 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:050&r=env |
| By: | Chevallier, Julien |
| Abstract: | This article assesses the transmission of international shocks to EUA spot, EUA futures, and CER futures carbon prices using a broad dataset that includes 115 macroeconomic, financial and commodities indicators with daily frequency from April 4, 2008 to January 25, 2010 totalling 463 observations. The framework adopted is a Factor-Augmented Vector Autoregression model with latent factors extracted from the dataset, as proposed by Bernanke et al. (2005). The main results can be summarized as follows. First, based on impulse responses, we show that carbon prices tend to respond negatively (between − 0.2 and − 1.2 standard deviation) to an exogenous shock that reduces global economic indicators by one standard deviation. Second, we find evidence that the responses are heterogeneous among the different kinds of carbon prices: CER futures prices tend to react much more significantly than EUA spot and futures prices. Third, the factors explain about 50% of the total variance of all variables in the dataset. The largest contribution is accounted for by the factor correlated with commodities markets, which explains about 28% of the total variability. |
| Keywords: | FAVAR; Carbon price; Macroeconomics; Finance; Commodities; Factor models; |
| JEL: | C53 E52 F41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/5111&r=env |
| By: | Levy, Amnon (University of Wollongong); Berck, Peter (University of California, Berkeley); Chowdhury, Khorshed (University of Wollongong) |
| Abstract: | Due to the open-access nature of the environment we consider an ad hoc adjustment of people’s footprints to the quality of the environment. The adjustment is due to concerns, but hindered by skepticism about announced changes in the state of the environment. Changes in the quality of the environment affect Earth’s carrying capacity. By expanding the Lotka-Volterra predator-prey model to include these features we show that despite skepticism the environment-population system does not collapse. We also show that in the ideal case of no skepticism, the interplay between the non-optimally changing environmental concerns and carrying capacity sends the world’s environment and human population on an oscillating course that leads to a unique interior steady state. These results require no further technological, social or international progress. |
| Keywords: | Environment; Population; Carrying Capacity; Concerns; Skepticism |
| JEL: | O13 Q20 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp10-10&r=env |
| By: | Chevallier, Julien |
| Abstract: | This article investigates the presence of outliers in the volatility of carbon prices. We compute three different measures of volatility for European Union Allowances, based on daily data (EGARCH model), option prices (implied volatility), and intraday data (realized volatility). Based on the methodology developed by Zeileis et al. (2003) and Zeileis (2006), we detect instability in the volatility of carbon prices based on two kinds of tests: retrospective tests (OLS-/Recursive-based CUSUM processes, F-statistics, and residual sum of squares), and forward-looking tests (by monitoring structural changes recursively or with moving estimates). We show evidence of strong shifts mainly for the EGARCH and IV models during the time period. Overall, we suggest that yearly compliance events, and growing uncertainties in post-Kyoto international agreements, may explain the instability in the volatility of carbon prices. |
| Keywords: | Instability test; EGARCH; Implied volatility; Realized volatility; EU ETS; Carbon price; |
| JEL: | C1 G1 Q5 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/5110&r=env |
| By: | Alev Atak (Queen Mary, University of London); Oliver Linton (London School of Economics); Zhijie Xiao (Boston College) |
| Abstract: | This paper is concerned with developing a semiparametric panel model to explain the trend in UK temperatures and other weather outcomes over the last century. We work with the monthly averaged maximum and minimum temperatures observed at the twenty six Meteorological Office stations. The data is an unbalanced panel. We allow the trend to evolve in a nonparametric way so that we obtain a fuller picture of the evolution of common temperature in the medium timescale. Profile likelihood estimators (PLE) are proposed and their statistical properties are studied. The proposed PLE has improved asymptotic property comparing the the sequential two-step estimators. Finally, forecasting based on the proposed model is studied. |
| Keywords: | Global warming; Kernel estimation; Semiparametric; Trend analysis |
| JEL: | C13 C14 C21 D24 |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:762&r=env |
| By: | OECD |
| Abstract: | The Model Framework proposes principles for addressing twenty-nine key issues associated with regulating CCS, based on the work of early-movers such as Australia, Europe and the United States, to assist national and regional CCS regulatory framework development. For each issue, an explanation is provided as well as examples of how the issue has been addressed in existing legislation. For CO2 storage issues, base, or “starting point”, model legislative text is also provided, which countries and regions can draw on in developing CCS regulatory frameworks. |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ieaaaa:2010/12-en&r=env |
| By: | Ernest Reig-Martínez (Universidad de Valencia. Dpto. Economía Aplicada II); José A. Gómez-Limón (Instituto Andaluz de Investigación y Formación Agraria y Pesquera. Dpto. Economía Agraria. Córdoba.); Andrés J. Picazo-Tadeo (Universidad de Valencia. Dpto. Economía Aplicada II and Instituto Valenciano de Investigaciones Económicas (IVIE).) |
| Abstract: | The assessment of sustainability at farm level has been growing in popularity over the last years. This paper contributes to this line of research by building up composite indicators for different facets –social, economic, environmental and global– of farm sustainability using a methodological approach that combines Data Envelopment Analysis and Multi Criteria Decision Methods. This approach is applied to a database of 163 farms located in the Spanish Northern Plateau. Our findings show that both economic and environmental sustainability indicators are positively correlated, but that this is not the case for the social indicator. We also check the influence of a set of variables on farm sustainability using bootstrapping techniques, and showing that increasing farm size, membership on agricultural cooperatives and farmers’ medium and upper agricultural-specific technical education all exert a significant positive influence on sustainability. These results provide clues for policy-makers that intend to design sustainability-increasing structural agricultural policies. |
| Keywords: | Sustainability index, Agriculture, Data Envelopment Analysis, Multi-Criteria Decision Making, Spain |
| JEL: | C61 D60 H41 Q10 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1005&r=env |
| By: | Magali A. Delmas (University of California, Los Angeles); Michael W. Toffel (Harvard Business School, Technology and Operations Management Unit) |
| Abstract: | A broad literature has emerged over the past decades demonstrating that firms' environmental strategies and practices are influenced by stakeholders and institutional pressures. Such findings are consistent with institutional sociology, which emphasizes the importance of regulatory, normative and cognitive factors in shaping firms' decisions to adopt specific organizational practices, above and beyond their technical efficiency. Similarly, institutional theory emphasizes legitimation processes and the tendency for institutionalized organizational structures and procedures to be taken for granted, regardless of their efficiency implications. However, the institutional perspective does not address the fundamental issue of business strategy necessary to explain the persistence of substantially different strategies among firms that are subjected to comparable levels of institutional pressures. In this chapter, we present current research arguing that such firms adopt heterogeneous sets of environmental management practices despite facing common institutional pressures because organizational characteristics lead managers to interpret these pressures differently. |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:11-050&r=env |
| By: | Christine Bertram |
| Abstract: | Processes of regional economic integration have been shaping the economic relations between countries significantly during the last decades. In addition, an increasing integration of the national economies into the global economy has affected these economic relations, too. In an effort to operationalize these integration processes for the purpose of empirical analyses, this paper reviews and analyses concepts and actual measures of European integration and globalization. In particular, it discusses how to separate the effects of European integration from those of globalization. The paper searches for regional integration and globalization indices that reduce the endogeneity problem, and it discusses collinearity between them, and their workability in an illustrative gravity model |
| Keywords: | Biodiversity, Renewable Resources, Optimal Control, Non-Concavity |
| JEL: | Q20 Q29 Q57 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1662&r=env |
| By: | JeenaT Srinivasan |
| Abstract: | This paper is an attempt to understand the ecological and economic importance as well as the associated property rights issues of wetlands in general and the Kole wetlands in Thrissur, Kerala in particular. It also seeks to analyse the wetland agriculture interactions in Kole lands and identify the various livelihood and other activities undertaken with a purpose to identify the various interlinkages and feedbacks between various uses and the pressures facing the ecosystem. Both secondary and primary data have been used. The Driver Pressure State Impact Response (DPSIR) framework has been used to understand wetland-agriculture interactions and the various pressures facing the ecosystem. [CESS WP No. 89]. |
| Keywords: | kole lands, kerala, thrissur, ecosystem, primary data, livelihood, ecological, wetland, agriculture, economic, thrissur, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3172&r=env |
| By: | Zabel, Astrid (Institute of Environmental Decisions (IED)); Bostedt, Göran (CERE, Center of Environmental and Resource Economics); Engel, Stefanie (Institute of Environmental Decisions (IED)) |
| Abstract: | This paper presents a first empirical assessment of the outcomes and determinants of carnivore conservation success in Sweden’s pioneer performance payment scheme. Carnivores in northern Sweden depend on reindeer as prey which causes conflicts with reindeer herders. As compensation and conservation incentive, the government issues performance payments to reindeer herder villages based on the number of carnivore offspring certified on their land. The villages decide on the internal use and distribution of the payments. In the literature, it is generally assumed that benefit distribution rules are exogenously given. We extend the literature by developing a model to investigate such rules as endogenous decision. We hypothesize that conservation success is determined by natural geographical factors and each village’s capability to engage in collective action to manage the internal payments so that conserving rather than hunting carnivores becomes villagers’ optimal strategy. The hypotheses developed are tested with empirical village and household-level data from Sweden. The paper concludes that if limited hunting is legal, conservation success strongly depends on villages’ potential for collective action and their payment distribution rule. In cases without legal hunting, performance payments together with penalties on poaching provide sufficient incentives for herders to refrain from illicit hunting. Furthermore, the data reveals that villages’ group size has a direct negative effect on conservation outcomes as predicted by collective action theory. However, there is also an indirect effect which positively impacts conservation outcomes through the payment distribution rule. This result, at least in part, revises the general collective action hypothesis on purely negative effects of group size and highlights the importance of investigating factors driving groups’ internal benefit distribution rules. |
| Keywords: | Conservation performance payments; wildlife conservation; collective action; empirical policy assessment; Sweden |
| JEL: | Q20 |
| Date: | 2010–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_007&r=env |
| By: | Gong, Peichen (CERE); Löfgren, Karl-Gustaf (CERE); Rosvall, Ola (SkogForsk) |
| Abstract: | The paper assesses the welfare effects of biotechnological progress, as exemplified by tree improvements, using a partial equilibrium model. Timber demand is assumed to be stochastic and the distributions of the coefficients of the demand function are known. Assuming that timber supply is a log-linear function of timber price and forest inventory, we determine the coefficients of the supply function by maximizing the expected present value of the total surplus of timber production, both in the presence and in the absence of genetically improved regeneration materials. The supply functions are then used to estimate the expected present values of the total surplus in different cases through simulation. These estimates enable us to assess the direct effect and the total effect of the genetically improved regeneration materials on the expected present value of the total surplus. By taking the difference between these two effects, we obtain an estimate of the effect of changing harvest behavior induced by the use of genetically improved regeneration materials in forestry. The main results of the study are (1) the presence of genetically improved regeneration materials has significant impacts on the aggregate timber supply function; (2) application of genetically improved regeneration materials leads to a significant increase in the expected present value of the total surplus; (3) a considerable proportion of the welfare gain results from the change in timber harvest behavior; and (4) the use of genetically improved regeneration materials reduces the profits of timber production. |
| Keywords: | timber market model; tree improvement; optimal harvesting decision; timber supply |
| JEL: | Q23 |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_012&r=env |
| By: | Brännlund, Runar (CERE); Johansson, Maria (Department of Architecture and Built Environment); Karlsson, Jens (Grimsö Wildlife Research Station); Sjöström, Magnus (Department of Economics) |
| Abstract: | From an interdisciplinary approach, this study aims at analysing self-reported animal fear, specifically large carnivore fear, in relation to public willingness to financially contribute to fulfil a governmental policy on large carnivore-induced costs. In a survey of 2 455 Swedes, it was found that people whose animal fear was directed particularly towards large carnivores, were less likely to be willing to pay (WTP), or were likely to be willing to pay a lower amount of money. In the prediction of WTP, the contribution of the fear variables was equally important as the socio-economic factors. From a management point of view it seems urgent to understand what kinds of measures that may reduce human fear of large carnivores. It is also suggested that further studies should include standardised measures of anxiety and fear in order to be able to closer link the results of large carnivore fear to the psychological literature on human fears. |
| Keywords: | Carnivores; willingness-to-pay |
| JEL: | Q51 |
| Date: | 2010–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2010_009&r=env |