nep-env New Economics Papers
on Environmental Economics
Issue of 2011‒11‒28
seventeen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Renewable and nonrenewable energy consumption, real GDP and CO2 emissions nexus: a structural VAR approach in Pakistan By Muhammad, Shahbaz Shabbir; Muhammad, Zeshan; Muhammad, Shahbaz
  2. The Environment and Directed Technical Change By Acemoglu, Daron; Aghion, Philippe; Bursztyn, Leonardo; Hemous, David
  3. Regional Initiatives and the Cost of Delaying Binding Climate Change Agreements By Beccherle, Julien; Tirole, Jean
  4. Environmental Protection Agencies: Measuring the Welfare Benefits from Regulation under Different Information Contexts By Ana Espinola-Arredondo; Felix Munoz-Garcia
  5. The Optimal Allocation of Global Land Use in the Food-Energy-Environment Trilemma By Steinbuks, Jevgenijs; Hertel, Thomas
  6. The Welfare Effect of Common Property Forestry Rights:Evidence from Ethiopian Villages By Dambala Gelo; Steven F. Koch
  7. The valuation of biodiversity conservation by the South African Khomani San "bushmen" community By Johane Dikgang; Edwin Muchapondwa
  8. A Mechanism Design Approach to Climate Agreements By Martimort, David; Sand-Zantman, Wilfried
  9. Aligning Local Incentives to Regional Goals: Water Conservation in the Upper Tigris-Euphrates River System By Hasan Tekguc
  10. Preference-Directed Regulation When Ethical Environmental Policy Choices Are Formed With Limited Information By Christopher Jeffords
  11. Environmental and Innovation Performance in a Dynamic Impure Public Good Framework By Massimiliano Mazzanti; Valeria Costantini; Susanna Mancinelli; Massimilano Corradini
  12. General knowledge about climate change, factors influencing risk perception and willingness to insure By Menny, Claas; Osberghaus, Daniel; Pohl, Max; Werner, Ute
  13. Climate Change and Development: Trade Opportunities of Climate Smart Goods and Technologies in Asia By Dinda, Soumyananda
  14. Contingent Valuation of Community Forestry in Ethiopia: Should We Care About Preference Anomalies in Double-Bounded CVM? By Dambala Gelo; Steven F. Koch
  15. Statistical analysis of global surface air temperature and sea level using cointegration methods By Torben Schmith; Søren Johansen; Peter Thejll
  16. Economie du Développement Durable et Economie Sociale et Solidaire: des relations complexes pour des enjeux majeurs By Akhabbar, Amanar; Swaton, Sophie
  17. Growth strategies in a greener world By Nabeshima, Kaoru

  1. By: Muhammad, Shahbaz Shabbir; Muhammad, Zeshan; Muhammad, Shahbaz
    Abstract: Any rise in real GDP crafts higher energy demand in Pakistan. This short-term rising energy requirement is fulfilled with the help of nonrenewable and renewable energy consumption, but nonrenewable energy consumption adds more in it. The rise in nonrenewable energy consumption lifts real GDP up in short-run. Forecast error variance decomposition illustrates nonrenewable energy consumption alone passes 87% variation in the CO2 emissions. This verifies fossil fuels are accountable for environmental degradation in Pakistan. The CO2 emissions worsen economic activity, real GDP falls but renewable energy consumption augments. This elevation in renewable energy consumption is the proof of stabilization efforts that are being initiated by official authorities as CO2 emissions reach to alarming level. The rise in renewable energy consumption boosts economic activity, and real GDP breeds. Most of times, an increase in renewable energy consumption is an effort to substitute it with nonrenewable energy consumption, resulting in lower level of CO2 emissions.
    Keywords: Energy Consumption; Real GDP; CO2 Emissions
    JEL: Q4
    Date: 2011–11–17
  2. By: Acemoglu, Daron; Aghion, Philippe; Bursztyn, Leonardo; Hemous, David
    Abstract: This paper introduces endogenous and directed technical change in a growth model with environmental constraints. A unique final good is produced by combining inputs from two sectors. One of these sectors uses "dirty" machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both .carbon taxes. and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly: the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth.
    Keywords: directed technological change; environment; exhaustible resources; innovation
    JEL: C65 O30 O31 O33
    Date: 2011–11
  3. By: Beccherle, Julien; Tirole, Jean
    Abstract: The Kyoto and Copenhagen Protocols on climate change mitigation postponed the specification of binding commitments to a future negotiation. This paper analyzes the strategic implications of delayed negotiations. While, as iswell-understood, the incentive to free ride leads to excessive emissions prior to a binding agreement, the cost of delay is magnified by players’ attempt to secure a favorable bargaining position in the future negotiation. A “brinkmanship”, an “effort rebalancing”, and a “raising rival’s cost” effects all concur to generate high post-agreement emissions. The paper applies this general insight to a variety of policy instruments, from the issuance of forward or bankable permits to standards and green investment policies.
    Keywords: International negotiations, climate change, cap and trade, bankable permits, standards
    JEL: D62 F51 H23 Q52
    Date: 2010–12
  4. By: Ana Espinola-Arredondo; Felix Munoz-Garcia (School of Economic Sciences, Washington State University)
    Abstract: This paper evaluates the welfare benefits of introducing environmental regulation in a market that is subject to the threat of entry. We consider complete and incomplete information settings, where potential entrants use the regulator’s tax policy and the incumbent’s output decisions in order to infer the incumbent’s cost structure. When the regulator is absent, we show that firms? entry-deterring practices increase pollution relative to complete information. Hence, under certain conditions, environmental regulation becomes more beneficial in incomplete than in complete information contexts. Our results, therefore, identify under which cases an under-or over-estimation of the welfare benefits of environmental regulation arises from ignoring the information setting in which firms interact. We also examine how this estimation error increases as firms become more symmetric in their production costs.
    Keywords: Entry deterrence; Signaling; Emission fees; Welfare Benefits
    JEL: D82 H23 L12 Q5
    Date: 2011–11
  5. By: Steinbuks, Jevgenijs; Hertel, Thomas
    Abstract: This study analyzes the optimal allocation of the world's land resources over the course of the next century in the dynamic forward-looking framework, which brings together distinct strands of economic, agronomic, and biophysical literature and incorporates key drivers affecting global landuse. We show that, while some deforestation is optimal in the near term, the desirability of further deforestation is elimated by mid-century under the baseline scenario. While the adverse productivity shocks from climate change have a modest effect on global land use, when combined with high growth in energy prices they lead to significant deforestation and higher GHG emissions than in the baseline. Imposition of GHG emissions constraint further heightens the competition for land, as fertilizer use declines and land-based mitigation strategies expand. However, the effectiveness of such a pre-announced constraint is completely diluted by intertemporal substitution of deforestation which accelerates prior to imposition of the target.
    Date: 2011
  6. By: Dambala Gelo (Department of Economics, University of Pretoria); Steven F. Koch (Department of Economics, University of Pretoria)
    Abstract: In this study, welfare impacts associated with a unique common-property forestry program in Ethiopia were examined. This program is different from other programs, because it is two-pronged: a community forest is developed and additional support is provided for improved market linkages for the community’s forestry products. The treatment effects analysis is based on both matching, which assumes random treatment assignment conditional on the observable data, and instrumental variable (IV) methods, which relax the matching assumptions. Data for the analysis is taken from selected villages in Gimbo district, southwestern Ethiopia. The program was found to raise the average welfare of program participant households. Correcting for selection into the program led to both increased welfare impacts and less precise estimates, as is common in IV analyses. The analysis results underscore the benefits to be derived from expanding the current forestry management decentralization efforts, although these benefits, given the design of the program, cannot be separated from the benefits to be derived from increasing market access for forestry products. However, the evidence suggests that placing property rights in the hands of those closest to the forest, combined with improved forest product market linkages, offers one avenue for both rural development and environmental improvement.
    Keywords: community forestry, treatment effects, IV, matching and Ethiopia
    Date: 2011–11
  7. By: Johane Dikgang; Edwin Muchapondwa
    Abstract: The restitution of land to the Khomani San "bushmen" and Mier "agricultural" communities in May 2002 marked a significant shift in conservation in the Kgalagadi area in South Africa. The Khomani San and Mier communities were awarded land inside and outside the Kgalagadi Transfrontier Park. Given that the Khomani San interact more with nature, biodiversity conservation will only benefit from the land restitution in this case if the Khomani San are good environmental stewards. Therefore, this paper uses the contingent valuation method to investigate the values assigned to biodiversity conserved under the various forms of land tenure arrangements by the Khomani San in the Kgalagadi area and compares them to similar valuations by the adjacent Mier community. The proposed conservation programme sought to plant as many native trees, shrubs and grasslands as required to reduce biodiversity loss by 10% in terms of the quantities of each of the selected major species of the area. Despite the fact that the conservation programme has both winners and losers when implemented under any of the three land tenure arrangements considered, the findings suggest that the Khomani San, whose attitudes towards modern conservation have not been evaluated until now, and the adjacent Mier community generally attach a significant economic value to biodiversity in their area. The net economic value for conserving biodiversity under the various forms of land tenure arrangements by the Khomani San ranged from R928 to R4 672 relative to the Mier community’s range of R25 600 to R64 000. However, for both communities, in order for all members of the local communities to support biodiversity conservation unconditionally, mechanisms for fair distribution of the associated costs and benefits should be put in place.
    Keywords: biodiversity, contingent valuation, Khomani San, Kgalagadi, land restitution
    JEL: Q01 Q53 Q57
    Date: 2011
  8. By: Martimort, David; Sand-Zantman, Wilfried
    Abstract: We analyze environmental agreements in contexts with asymmetric information, voluntary participation by sovereign countries and possibly limited enforcement. Taking a mechanism design perspective, we study how countries can agree on effort levels and compensations to take into account multilateral externalities. We delineate conditions for efficient agreements and trace out possible inefficiencies to the conjectures that countries hold following disagreement. We show how optimal mechanisms admit simple approximations with attractive implementation properties. Finally, we also highlight how limits on commitment strongly hinder performances of optimal mechanisms.
    JEL: D82
    Date: 2011–08–31
  9. By: Hasan Tekguc (Mardin Artuklu Univeristy)
    Abstract: Instead of international agreement between Syria, Iraq, and Turkey, the best hope for sustainable water conservation in the Euphrates-Tigris river basin lies with policies that can be justified on individual and local grounds within Turkey: reducing water run-off and accompanied pollution; reducing soil salinity; developing drought resistant strains of crops; and storing water as an insurance against future droughts that are likely to increase in occurrence and intensity as a result of climate change induced extreme weather. After reviewing the predictions on climate change for the region, irrigation related problems including out-migration, I evaluate policy options for water conservation: i) agricultural training and extension services, ii) escalating user fees for water to encourage conservation at micro level, iii) reforming of Water User Associations (WUAs). The least controversial policy to pursue is on-the-ground agricultural training and extension. Unfortunately, implementing escalating user fees for water – the most advocated solution – cannot be separated from democratizing WUAs – the most vexing problem – to open board seats and management to ordinary members.
    Keywords: South-eastern Turkey, climate change, salinity, migration, Water User Associations
    JEL: Q53 Q57 H41
    Date: 2011–02
  10. By: Christopher Jeffords (Department of Agriculture and Resource Economics at University of Connecticut)
    Abstract: Preference-directed regulation (PDR) can supplement traditional environmental policies through frequent regulatory revision(Livermore, 2007). Stakeholders can use PDR to garner popular support for a specific policy. By providing individuals with information that augments their opinions about the effectiveness of a policy at driving environmental outcomes, stakeholders can induce preference switching in favor of or in detriment to a specific policy. This paper documents the extent to which this is true using cross-sectional data from an original national survey where individuals were asked to choose one of three policies aimed at reducing the number of products manufactured in environmentally damaging ways. Proxies for policy-specific opinions about the effectiveness of each policy are extracted from the data and form the central focus of inducing preference switching. PDR is operationalized by exogenously augmenting individual opinions via counterfactual simulations within a limited information discrete choice model. The results demonstrate that the extent of preference switching depends not only on the relative change in opinion for a specific policy, but that different forms of PDR may be more effective at inducing preference switching. The substitution patterns arising from the counterfactual simulations are further explained by analytically demonstrating the mitigation of the Independence of Irrelevant Alternatives property endemic to traditional multinomial choice models (i.e., full information). Additional empirical results are documented by comparing the results to a full information model, including downward bias in mean utility levels and individual-level preference switching across the limited and full information conditional choice utilities.
    Keywords: Discrete Choice, Limited Information, Preference Switching, Survey Data, Environmental Policy, Preference-Directed Regulation
    Date: 2011–10
  11. By: Massimiliano Mazzanti; Valeria Costantini; Susanna Mancinelli; Massimilano Corradini
    Abstract: We model investment decisions regarding innovation and emissions abatement in a dynamic theoretical framework. Considering knowledge stock as an impure public good, we study the reaction function between one representative agent’s investments in innovation and the other agents’ investments in the public characteristic of the impure public good. We demonstrate that the reaction function has a positive slope under general conditions and that its sensitiveness is affected by assumptions on the elasticity of substitution in the benefit function. The positivity of the reaction function is then empirically tested in an econometric estimation. We exploit an original sector-based database by gathering innovation efforts as well as polluting emissions and economic dimensions over the time span 1996-2005 for 15 European countries and 23 manufacturing sectors. Empirical results show that sector-based innovation investment is positively driven by the public characteristics provided by other sectors. Different reactivity strength for different polluting emissions also allows us to disclose the role of complementarity in agents’ decisions.
    Keywords: impure public goods; environmental externalities; innovation spillovers
    JEL: D21 H41 O33 Q53 Q55
    Date: 2011–11–19
  12. By: Menny, Claas; Osberghaus, Daniel; Pohl, Max; Werner, Ute
    Abstract: In two empirical surveys in Germany the link between the information respondents have about climate change and their risk perception of the phenomenon was analysed. We found that a better understanding of the effects of climate change might lead to a decrease of the perceived hazard. In contrast, a high self-declared knowledge about climate change might correspond with higher risk perception. Further factors affecting the risk perception of climate change are gender, experience of extreme weather events and trust in external aid. Surprisingly, information campaigns based on scientific facts are not effective for increasing risk perception and willingness to insure. Higher risk perception might induce higher interest in precautionary measures like insurance. --
    Keywords: Climate Change,Knowledge Illusion,Insurance,Risk Perception,Information,Psychometric paradigm
    JEL: Q54 Q58 D83
    Date: 2011
  13. By: Dinda, Soumyananda
    Abstract: This study focuses on trade opportunities of climate smart goods and technologies (CSGT) in Asia. Paper mainly highlights the export gaps for climate smart goods and technologies (CSGT) in Asia and identifies the trade opportunities among trade partners in intraregional and interregional. Applying the gravity model we estimate the export gap for the CSGT as the difference between the actual bilateral export flow and the mean value predicted by the model. In other words, ‘export gap’ is the difference between the actual and predicted export value. There is a scope to increase the export of climate smart goods and technologies with trading partners when the actual trade is below the predicted value ( i.e., negative value of the export gap). This gap actually provides the opportunity to raise the trade and attracting investment in CSGT sector and thereby development takes place. This paper also identifies the export gaps in CSGT for each regional member in its trade with partners within the region, EU, and North America (i.e., the US and Canada). This study contributes to the empirical literature in terms of measuring and identifying the potential trade opportunity of CGST in Asia.
    Keywords: Climate Change; Business and Development; Bilateral trade flow; Climate Smart Goods and Technologies; Gravity model; Export gap; Potential Trade; China; India; Asia
    JEL: C13 F18 O53 Q56 C01 M21
    Date: 2011–08
  14. By: Dambala Gelo (Department of Economics, University of Pretoria); Steven F. Koch (Department of Economics, University of Pretoria)
    Abstract: This study examines the potential for anomalous response behaviour effects within the context of double-bounded contingent valuation methods applied to community forestry programs in rural Ethiopia. Anomalous responses considered include shift effects, framing effects and anchoring effects, and these effects are considered within a double-bounded contingent valuation study. The results confirmed the presence of incentive incompatibility and framing effects. However, anchoring effects are not uncovered. After controlling for these biases, the community forestry program considered is shown to offer a welfare gain ranging from Ethiopian Birr (ETB) 20.14 to 22.80. In addition to these welfare benefits, the results raise questions with respect to the validity of previous welfare estimates associated with double-bounded CVM studies in developing countries, suggesting that future studies should control for incentive incompatibility and framing effects bias.
    Keywords: Double-bounded CVM, incentive incompatibility bias, anchoring bias
    JEL: Q26 Q23 Q28
    Date: 2011–11
  15. By: Torben Schmith (Danish Meteorological Institute); Søren Johansen (University of Copenhagen and CREATES); Peter Thejll (Danish Meteorological Institute)
    Abstract: Global sea levels are rising which is widely understood as a consequence of thermal expansion and melting of glaciers and land-based ice caps. Due to physically-based models being unable to simulate observed sea level trends, semi-empirical models have been applied as an alternative for projecting of future sea levels. There is in this, however, potential pitfalls due to the trending nature of the time series. We apply a statistical method called cointegration analysis to observed global sea level and surface air temperature, capable of handling such peculiarities. We find a relationship between sea level and temperature and find that temperature causally depends on the sea level, which can be understood as a consequence of the large heat capacity of the ocean. We further find that the warming episode in the 1940s is exceptional in the sense that sea level and warming deviates from the expected relationship. This suggests that this warming episode is mainly due to internal dynamics of the ocean rather than external radiative forcing. On the other hand, the present warming follows the expected relationship, suggesting that it is mainly due to radiative forcing. In a second step, we use the total radiative forcing as an explanatory variable, but unexpectedly find that the sea level does not depend on the forcing. We hypothesize that this is due to a long adjustment time scale of the ocean and show that the number of years of data needed to build statistical models that have the relationship expected from physics exceeds what is currently available by a factor of almost ten.
    Keywords: Sea level, mean annual temperature, forcing variables, cointegration.
    JEL: C32
    Date: 2011–10–14
  16. By: Akhabbar, Amanar; Swaton, Sophie
    Abstract: Social Economy and Sustainable economics are two independent fields that sometimes refer one to another. The former is primarily concerned with “social capital” issues, while the latter deal with “natural capital” stakes. When referring to the other field, there is no systematic analysis of the interrelations between their respective goals, tools, methods and concepts. As a matter for fact, it happens that goals of social economy actors are opposite to those of sustainable economy actors; conversely, they sometimes lead to the same conclusions and policies. In this paper we explore the positive and negative relations between the two fields in order to evaluate in a systematic way how they could cooperate. We show that social economy concepts were developed much earlier and, thus, without reference to sustainable development issues. Nowadays, social economy studies remain primarily focused on social capital development. However, sustainable economics might find very useful tools and concepts in the field of social economy, which should encourage cooperation between scientists and actors of the two fields.
    Keywords: Sustainable development; strong sustainability; weak sustainability; social economy; social utility; social enterprises; growth; index;
    JEL: D63 A13 Q5
    Date: 2011–09–15
  17. By: Nabeshima, Kaoru
    Abstract: Two new developments in the global landscape - growing concerns towards global warming and the rising prices of commodities – require countries to craft new growth strategies. These recent developments in the global market offer fresh industrial opportunities as well as difficulties for developing countries embarking on industrialization. In this paper, we examine current developments in global market that would affect industrialization prospects in East Asia and explores development strategies that are suitable for development based on export oriented manufacturing industries in a green world.
    Keywords: East Asia, Southeast Asia, Industrialization, Climatic change, Economic development, Development plans, Green growth, Environment and trade
    JEL: F18 O14 Q01
    Date: 2011–11

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