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on Environmental Economics |
| By: | Joseph E. Aldy (Assistant Professor of Public Policy, Harvard Kennedy School; Nonresident Fellow, Resources for the Future; and Faculty Research Fellow, National Bureau of Economic Research); Robert N. Stavins (Albert Pratt Professor of Business and Government, Harvard Kennedy School; University Fellow, Resources for the Future; and Research Associate, National Bureau of Economic Research) |
| Abstract: | Because of the global commons nature of climate change, international cooperation among nations will likely be necessary for meaningful action at the global level. At the same time, it will inevitably be up to the actions of sovereign nations to put in place policies that bring about meaningful reductions in the emissions of greenhouse gases. Due to the ubiquity and diversity of emissions of greenhouse gases in most economies, as well as the variation in abatement costs among individual sources, conventional environmental policy approaches, such as uniform technology and performance standards, are unlikely to be sufficient to the task. Therefore, attention has increasingly turned to market-based instruments in the form of carbon-pricing mechanisms. We examine the opportunities and challenges associated with the major options for carbon pricing: carbon taxes, cap-and-trade, emission reduction credits, clean energy standards, and fossil fuel subsidy reductions. |
| Keywords: | : Global Climate Change, Market-Based Instruments, Carbon Pricing, Carbon Taxes, Cap-and-Trade, Emission Reduction Credits, Energy Subsidies, Clean Energy Standards |
| JEL: | Q54 Q58 Q40 Q48 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.82&r=env |
| By: | Joseph E. Aldy (Assistant Professor of Public Policy, Harvard Kennedy School, Nonresident Fellow, Resources for the Future, and Faculty Research Fellow, National Bureau of Economic Research); Robert N. Stavins (Albert Pratt Professor of Business and Government, Harvard Kennedy School, University Fellow, Resources for the Future, and Research Associate, National Bureau of Economic Research) |
| Abstract: | Emissions of greenhouse gases linked with global climate change are affected by diverse aspects of economic activity, including individual consumption, business investment, and government spending. An effective climate policy will have to modify the decision calculus for these activities in the direction of more efficient generation and use of energy, lower carbon-intensity of energy, and – more broadly – a more carbon-lean economy. The only approach to doing this on a meaningful scale that would be technically feasible and cost-effective is carbon pricing, that is, market-based climate policies that place a shadow-price on carbon dioxide emissions. We examine alternative designs of three such instruments – carbon taxes, cap-and-trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been and will continue to be largely a function of issues and structural factors that transcend the scope of environmental and climate policy. |
| Keywords: | Global Climate Change, Market-Based Instruments, Carbon Pricing, Carbon Taxes, Cap-And-Trade, Clean Energy Standards |
| JEL: | Q54 Q58 Q40 Q48 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.73&r=env |
| By: | Jones, Benjamin; Keen, Michael; Strand, Jon |
| Abstract: | This paper provides a primer on the fiscal implications of climate change, in particular the policies for responding to it. Many of the complicated challenges that arise in limiting climate change (through greenhouse gas emissions mitigation), and in dealing with the effects that remain (through adaptation to climate change impacts), are of a fiscal nature. While mitigation has the potential to raise substantial public revenue (through charges on greenhouse gas emissions), adaptation largely leads to fiscal outlays. Policies may unduly favor public spending (on technological solutions to limit emissions, and on adaptation), over policies that lead to more public revenue being raised (emissions charges). The pervasive uncertainties that surround climate change make the design of proper policy responses even more complex. This applies especially to policies for mitigation of emissions, since agreement on and international enforcement of cooperative abatement policies are exceedingly difficult to achieve, and there is as yet no common view on how to compare nearer-term costs of mitigation to longer-term benefits. |
| Keywords: | Climate Change Mitigation and Green House Gases,Climate Change Economics,Carbon Policy and Trading,Energy Production and Transportation,Environment and Energy Efficiency |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5956&r=env |
| By: | Maria José Gil-Moltó; Dimitrios Varvarigos |
| Abstract: | We model a market with environmentally conscious consumers and a duopoly in which firms consider the adoption of a clean technology. We show that as pollution increases, consumers shift more resources to the environmental activities, thereby affecting negatively the demand faced by the duopoly. This effect generates incentives for firms to adopt the clean technology even in the absence of emissions taxes. When such taxes are considered, our results indicate that the benefit of adopting the clean technology is initially increasing and then decreasing in the emission tax. The range of values for which the emission tax increases this benefit becomes narrower when the consumers’ environmental awareness is stronger. |
| Keywords: | Environmentally Conscious Consumers; Technology Choice; Environmental Taxation |
| JEL: | L13 Q55 Q58 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:11/49&r=env |
| By: | Jesse Matheson |
| Abstract: | We model a market with environmentally conscious consumers and a duopoly in which firms consider the adoption of a clean technology. We show that as pollution increases, consumers shift more resources to the environmental activities, thereby affecting negatively the demand faced by the duopoly. This effect generates incentives for firms to adopt the clean technology even in the absence of emissions taxes. When such taxes are considered, our results indicate that the benefit of adopting the clean technology is initially increasing and then decreasing in the emission tax. The range of values for which the emission tax increases this benefit becomes narrower when the consumers’ environmental awareness is stronger. |
| Keywords: | Aboriginal Canadians; smoking; tobacco tax; social interactions |
| JEL: | D12 I10 I38 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:11/50&r=env |
| By: | ZhongXiang Zhang (East-West Center) |
| Abstract: | Paragraph 31(iii) of the Doha Ministerial Declaration mandates to the liberalization of environmental goods and services. This mandate offers a good opportunity to put climate-friendly goods and services on a fast track to liberalization. Agreement on this paragraph should represent one immediate contribution that the WTO can make to fight against climate change. This paper presents the key issues surrounding the liberalization of trade in climate-friendly goods and technologies in WTO environmental goods negotiations. It begins with discussing what products to liberalize and how. Given that WTO Members are divided by this key issue, the paper explores options to move current negotiations on the liberalization of trade in environmental goods and technologies forward, both within and outside the WTO. Recognizing that there is no one-size-fits-all strategy for tariff liberalization for all countries and for all environmental goods, the paper suggests the need for a high degree of flexibility to accommodate different situations and stakes in the liberalization of trade in environmental goods. Given that there are simply not enough environmental markets or these markets are weak in many developing countries, the paper emphasizes that creating markets for environmental goods in developing countries is far more important than just improving market-access conditions for associated goods, and discusses how to best serve the interests and concerns of developing countries. |
| Keywords: | Environmental Goods and Services, Low-Carbon Goods and Technologies, Market Access, Doha Round, WTO, Renewable Energy Technologies |
| JEL: | F18 F13 P28 Q42 Q48 Q56 Q54 Q58 Q48 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.77&r=env |
| By: | Valentina Bosetti (Fondazione Eni Enrico Mattei); Sergey Paltsev (Massachusetts Institute of Technology (MIT)); John Reilly (Massachusetts Institute of Technology (MIT)); Carlo Carraro (University of Venice) |
| Abstract: | In the absence of significant greenhouse gas (GHG) mitigation, many analysts project that atmospheric concentrations of species identified for control in the Kyoto protocol could exceed 1000 ppm (carbon-dioxide-equivalent) by 2100 from the current levels of about 435 ppm. This could lead to global average temperature increases of between 2.5 and 6°C by the end of the century. There are risks of even greater warming given that underlying uncertainties in emissions projections and climate response are substantial. Stabilization of GHG concentrations that would have a reasonable chance of meeting temperature targets identified in international negotiations would require significant reductions in GHG emissions below “business-as-usual” levels, and indeed from present emissions levels. Nearly universal participation of countries is required, and the needed investments in efficiency and alternative energy sources would entail significant costs. Resolving how these additional costs might be shared among countries is critical to facilitating a wide participation of large-emitting countries in a climate stabilization policy. The 2°C target is very ambitious given current atmospheric concentrations and inertia in the energy and climate system. The Copenhagen pledges for 2020 still keep the 2°C target within reach, but very aggressive actions would be needed immediately after that. |
| Keywords: | Emissions Pricing, Climate Stabilization |
| JEL: | Q54 Q58 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.80&r=env |
| By: | Maria J. Gil-Molto; Bouwe Dijkstra |
| Abstract: | In this paper we model an oligopoly where .rms invest in abatement technologies and emissions are taxed by the government. We show that a stricter environmental policy does not necessarily lead to an increase in .rms.R&D investment into cleaner production methods. In fact, the emission-to-output ratio may be a U-shaped function of the environmental damage parameter. This result holds both when the government can commit and in the social optimum. When the government cannot commit, this relationship is ambiguous except in markets with few .rms. Our results further suggest that if the emission-to-output ratio is decreasing throughout, output is a U-shaped function of the environmental damage. |
| Keywords: | Environmental innovation; environmental taxation; commitment; oligopoly |
| JEL: | L12 Q55 Q58 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:11/35&r=env |
| By: | Aldy, Joseph E. (Harvard University); Pizer, William A. (Duke University) |
| Abstract: | The pollution haven hypothesis suggests that unilateral domestic emission mitigation policies could cause adverse "competitiveness" impacts on domestic manufacturers as they lose market share to foreign competitors and relocate production activity--and emissions--to unregulated economies. We construct a precise definition of competitiveness impacts appropriate for climate change regulation that can be estimated exclusively with domestic production and net import data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate the effects of energy prices, which is in turn used to simulate the impacts of carbon pricing policy. We find that a U.S.-only $15 per ton CO2 price will cause competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among the most energy-intensive manufacturing industries. This amounts to roughly one-third of the total impact of a carbon pricing policy on these firms' economic output. |
| JEL: | F18 Q52 Q54 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-047&r=env |
| By: | Oskar Lecuyer (EDF R&D - EFESE and CIRED); Ruben Bibas (CIRED) |
| Abstract: | In addition to the already present Climate and Energy package, the European Union (EU) plans to include a binding target to reduce energy consumption. We analyze the rationales the EU invokes to justify such an overlapping and develop a minimal common framework to study interactions arising from the combination of instruments reducing emissions, promoting renewable energy (RE) production and reducing energy demand through energy efficiency (EE) investments. We find that although all instruments tend to reduce emissions and a price on carbon tends to give the right incentives for RE and EE too, the combination of more than one instrument leads to significant antagonisms regarding major objectives of the policy package. The model allows to show in a single framework and to quantify the antagonistic effects of the joint promotion of RE and EE. We also show and quantify the effects of this joint promotion on ETS permit price, on wholesale market price and on energy production levels. |
| Keywords: | Renewable Energy, Energy Efficiency, Energy Policy, Climate Policy, Policy Interaction |
| JEL: | Q28 Q41 Q48 Q58 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.98&r=env |
| By: | Dimitrios Varvarigos; Intan Zanariah Zakaria |
| Abstract: | We incorporate health-damaging pollution into a three period overlapping generations model in which life expectancy, fertility and economic growth are all endogenous. We show that environmental factors can cause significant changes to the economy’s demographics. In particular, the entrepreneurial choice of less polluting production processes, induced by environmental policy, can account for such demographic changes as higher longevity and lower fertility rates. |
| Keywords: | Economic growth; Pollution; Demography |
| JEL: | J10 O41 Q56 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:11/46&r=env |
| By: | Adamos Adamou (University of Cyprus); Sofronis Clerides (University of Cyprus and CEPR); Theodoros Zachariadis (Cyprus University of Technology) |
| Abstract: | Vehicle taxation based on CO2 emissions is increasingly being adopted worldwide in order to shift consumer purchases to low-carbon cars, yet little is known about the effectiveness and overall economic impact of these schemes. We focus on feebate schemes, which impose a fee on high-carbon vehicles and give a rebate to purchasers of low-carbon automobiles. e estimate a discrete choice model of demand for automobiles in Germany and simulate the impact of alternative feebate schemes on emissions, consumer welfare, public revenues and firm profits. The analysis shows that a well-designed scheme can lead to emission reductions without reducing overall welfare. |
| Keywords: | CO2 emissions, German Automobile Market, Feebates, Carbon Taxation |
| JEL: | Q5 Q53 Q58 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.96&r=env |
| By: | Valentina Bosetti (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC)); Enrica De Cian (Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC)) |
| Abstract: | In this paper we argue that when a subgroup of countries cooperate on emission reduction, the optimal response of non-signatory countries reflects the interaction between three potentially opposing factors, the incentive to free-ride on the benefits of cooperation, the incentive to expand the demand of fossil fuels, and the incentive to adopt cleaner technologies introduced by the coalition. Using an Integrated Assessment Model with a game theoretic structure we find that cost-benefit considerations would lead OECD countries to undertake a moderate, but increasing abatement effort (in line with the pledges subscribed in Copenhagen). Even if emission reductions are moderate, OECD countries find it optimal to allocate part of their resources to energy R&D and investments in cleaner technologies. International spillovers of knowledge and technology diffusion then lead to the deployment of these technologies in non-signatory countries as well, reducing their emissions. When the OECD group follows more ambitious targets, such as 2050 emissions that are 50% below 2005 levels, the benefits of technology externalities do not compensate the incentives deriving from the lower fossil fuels prices. This suggests that, when choosing their unilateral climate objective, cooperating countries should take into account the possibility to induce a virtuous behaviour in non-signatory countries. By looking at a two-phase negotiation set-up, we find that free-riding incentives spurred by more ambitious targets can be mitigated by means of credible commitments for developing countries in the second phase, as they would reduce lock-in in carbon intensive technologies. |
| Keywords: | Technology Spillovers, Climate Change, Partial Cooperation |
| JEL: | Q54 Q55 C72 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.81&r=env |
| By: | Jean-Charles Hourcade (CIRED, Centre International de Recherche sur l'Environnement et le Développement); Antonin Pottier (CIRED, Centre International de Recherche sur l'Environnement et le Développement); Etienne Espagne (CIRED, Centre International de Recherche sur l'Environnement et le Développement) |
| Abstract: | This paper discusses the growth model with environmental constraints recently presented in (Acemoglu et al., 2011) which focuses on the redirection of technical change by climate policies with research subsidies and a carbon tax. First, Acemoglu et al.'s model and chosen parameters yield numerical results that do not support the conclusion that ambitious climate policies can be conducted “without sacrificing (much or any) long-run growth”. Second, they select unrealistic key parameters for carbon sinks and elasticity of substitution. We find that more realistic parameters lead to very different results. Third, the model leads to an unrealistic conclusion when used to analyse endogenous growth, suggesting specification problems. |
| Keywords: | Technological Change, Endogenous Growth, Climate, Energy Substitutability |
| JEL: | O30 O33 Q43 Q54 Q56 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.95&r=env |
| By: | Massimiliano Mazzanti; Roberto Zoboli |
| Abstract: | We present conceptual and empirical insights on the issue of resource taxation, an intrinsic regional environmental policy. It deals with the implementation of environmental taxes and environmental planning at regional level, as tools aimed at achieving weak sustainability for non renewable resources like aggregates, extracted for a diverse set of economic aims. We frame the discussion in the spirit of refreshing the need of ecological and resource tax reforms at national and regional level-. We do note and discuss the intrinsic peculiarities of resource taxes with respect to emission taxes, namely the integration with regional planning, the use of revenue for weak sustainability objectives, the different role by played technology and efficiency. Factors that are to be taken into account in any specific implementation. We empirically investigate resource taxation issues by focusing on aggregate extraction management and policy of two large Northern Italian regions, Lombardy and Emilia-Romagna. We conclude that the possible effects of extraction charges for the aggregate market development in Italy can be very limited. The level of charges is generally too low to be expected to have an effect on demand (through aggregate prices) and supply of aggregates. The environmental objectives of planning are, at least for the moment, other than reducing extraction, and they generally consist of minimising external impacts, to support sustainable management of landscapes, and to provide multi-value public goods within the local area. The evidence shows that even more for resource taxes a political economy analysis that encompasses institutional and planning issues is needed to effectively shape environmental policies. The complementarity of land use planning and economic instruments is a key driver of sustainability performances and witness reciprocal influences. The unintended effects of economic instruments are also a crucial thing for evaluating effectiveness and efficiency. Those include positive effects of ‘institutional kind’ on the governance and organizational performance of the integrated policy-planning framework. |
| Keywords: | Resource tax reforms; Aggregates; environmental charges; regional planning; sustainability; ex post compensations; Political economy; unintended effects; environmental federalism |
| JEL: | Q32 R11 R52 |
| Date: | 2012–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:udf:wpaper:201202&r=env |
| By: | Alexander Brauneis (Institute of Financial Management, Alpen-Adria-University Klagenfurt); Michael Loretz (Institute of Banking and Finance, Karl-Franzens-University Graz); Roland Mestel (Institute of Banking and Finance, Karl-Franzens-University Graz); Stefan Palan (Institute of Banking and Finance, Karl-Franzens-University Graz) |
| Abstract: | Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, this uncertainty increases the cost of capital for investors and might deter invest-ments into new technologies at the company level. We apply a real options-based approach to assess the impact of climate change policy in the form of a constant or growing price floor on investment decisions of a single firm in a competitive environment. This firm has the opportunity to switch from a high-carbon “dirty” technology to a low-carbon “clean” technology. Using Monte Carlo simulation and dynamic programming techniques for real market data, we determine the optimal CO2 price floor level and growth rate in order to induce investments into the low-carbon technology. We show these findings to be robust to a large variety of input parameter settings. |
| Keywords: | Carbon price, price floor, technological change, investment decision, real option approach |
| JEL: | D81 O38 Q55 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.74&r=env |
| By: | Qin Bao (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences); Ling Tang (Institute of Policy and Management, Chinese Academy of Sciences, Graduate University of Chinese Academy of Sciences); ZhongXiang Zhang (Institute of Policy and Management, Chinese Academy of Sciences, Center for Energy Economics and Strategy Studies; and Research Institute for the Changing Global Environment, Fudan University, Research Program, East-West Center); Han Qiao (College of Economics, Qingdao University, Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences); Shouyang Wang (Institute of Systems Science, Academy of Mathematics and Systems Science, Chinese Academy of Sciences) |
| Abstract: | Carbon-based border tax adjustments (BTAs) have recently been proposed by some OECD countries to level the carbon playing field and target major emerging economies. This paper applies a multi-sector dynamic computable general equilibrium (CGE) model to estimate the impacts of the BTAs implemented by US and EU on China’s sectoral carbon emissions. The results indicate that BTAs will cut down export prices and transmit the effects to the whole economy, reducing sectoral output-demands from both supply side and demand side. On the supply side, sectors might substitute away from exporting toward domestic market, increasing sectoral supply; while on the demand side, the domestic income may be strikingly cut down due to the decrease in export price, decreasing sectoral demand. Furthermore, such shrinkage of demand may similarly reduce energy prices, which leads to energy substitution effect and somewhat stimulates carbon emissions. Depending on the relative strength of the output-demand effect and energy substitution effect, sectoral carbon emissions and energy demands will vary across sectors, with increasing, decreasing or moving in a different direction. These results suggest that an incentive mechanism to encourage the widespread use of environment-friendly fuels and technologies will be more effective. |
| Keywords: | Border Carbon Tax Adjustments, Computable General Equilibrium Model, Carbon Emissions |
| JEL: | D58 F18 Q43 Q48 Q52 Q54 Q56 Q58 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.93&r=env |
| By: | Valentina Bosetti (Fondazione Eni Enrico Mattei and CMCC); Carlo Carraro (Fondazione Eni Enrico Mattei, University of Venice, CEPR, CESifo and CMCC); Enrica De Cian (Fondazione Eni Enrico Mattei and CMCC); Emanuele Massetti (Fondazione Eni Enrico Mattei and CMCC); Massimo Tavoni (Fondazione Eni Enrico Mattei and CMCC) |
| Abstract: | This paper analyses the incentives to participate in and the stability of international climate coalitions. Using the integrated assessment model WITCH, the analysis of coalitions’ profitability and stability is performed under alternative assumptions concerning the pure rate of time preference, the social welfare aggregator and the extent of climate damages. We focus on the profitability, stability, and “potential stability” of a number of coalitions which are “potentially effective” in reducing emissions. We find that only the grand coalition under a specific sets of assumptions finds it optimal to stabilise GHG concentration below 550 ppm CO2-eq. However, the grand coalition is found not to be stable, not even “potentially stable” even through an adequate set of transfers. However, there exist potentially stable coalitions, but of smaller size, which are also potentially environmentally effective. Depending on the assumptions made, they could achieve up to 600 ppm CO2-eq. More ambitious targets lead to the collapse of the coalition. |
| Keywords: | Climate Policy, Climate Coalition, Game Theory, Free Riding |
| JEL: | C68 C72 D58 Q54 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.97&r=env |
| By: | Patrick Criqui (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II); Silvana Mima (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : FRE3389 - Université Pierre Mendès-France - Grenoble II) |
| Abstract: | In this research, we provide an overview of the climate-security nexus in the European energy sector, through a model based analysis of scenarios produced with the POLES model. The scenarios describe the consequences of different degrees of GHG emission constraint, at world level, but also for a case where Europe adopts an ambitious climate policy, while the rest of the world sticks to much more modest abatement policies. The analysis shows that under such stringent climate policies, Europe may benefit of a significant double dividend, first in its capacity to develop a new cleaner and climate-friendlier energy model, and second in a lower vulnerability to potential price or supply shocks on the international energy markets. |
| Keywords: | climate policy ; scenarios ; energy security |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00661043&r=env |
| By: | Jean-Marie Grether (University of Neuchâtel); Nicole A. Mathys (Swiss Federal Office of Energy, Bern and University of Neuchâtel); Jaime de Melo (University of Geneva and CEPR) |
| Abstract: | This paper tackles the “pollution haven” argument by estimating the pollution content of imports (PCI). The PCI is then decomposed into three components: (i) a “deep” component (i.e. traditional variables unrelated to the environmental debate); (ii) a factor endowment component and (iii) a “pollution haven” component reflecting the impact of differences in environmental policies. The estimation is carried out for 1987 for an extensive data set covering 10 pollutants, 48 countries and 79 ISIC 4-digit sectors. Decompositions based on cross-section econometric estimates suggest a significant pollution haven effect which increases the PCI of the North because of stricter environmental regulations in the North. At the same time, the factor endowment effect lowers the PCI of the North, as the North is relatively well-endowed in capital and pollution-intensive activities are capital intensive. On a global scale, because the bulk of trade is intra-regional with a high North-North share, these effects are small relative to the “deep” determinants of the worldwide PCI. In sum, differences in factor endowments and environmental policies have only marginally affected the PCI of world trade at the end of the eighties. |
| Keywords: | Trade and The Environment, Pollution Haven Effect, Factor Endowment Effect |
| JEL: | F18 Q56 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.75&r=env |
| By: | Elena Verdolini (Fondazione Eni Enrico Mattei); Nick Johnstone (OECD Environment Directorate); Ivan Hašcic (OECD Environment Directorate) |
| Abstract: | This paper provides an empirical analysis of the determinants of energy efficiency in fossil fuel electricity generation across 28 OECD countries over the period 1981-2006, with particular attention to the role played by technological development and the availability of energy efficient technologies in the market. This contribution is novel in three respects: first, empirically assess the effects of different determinants of energy efficiency, which include the input mix in electricity generation, the capacity ratio at which power plants are run, as well as the characteristics of the production technology. Second, we focus on the role of technological availability: using patent data for carefully selected innovations in fossil-fuel technologies, we build an indicator which proxies for technological developments in fuel-efficient electricity generation. Third, by formalizing the relationship between fuel efficiency and carbon intensity, we assess the impact of changes in the input mix and in technological availability on CO2 emissions in the electricity sector. Results show that input mix, capacity utilization and new investment in capacity play a significant role in increasing energy efficiency. Increasing the stock of available technologies (or stock of knowledge) is also associated with higher efficiency levels. Given the link between increased efficiency and lower CO2 emissions, we conclude that technological change has a negative and significant effect on carbon intensity, while the changing input mix affects CO2 intensity both through an increase in efficiency as well as by lowering the input-weighted emission factor. |
| Keywords: | Fossil Fuel Electricity Generation, Energy Efficiency, Carbon Intensity, Technological Change, Patents |
| JEL: | Q40 O33 O13 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.92&r=env |
| By: | Mohammad Shahjahan Chowdhury (Department of Public Administration, Shahjalal University of Science and Technology (SUST)); Purnendu Deb (Department of Public Administration, Shahjalal University of Science and Technology (SUST)) |
| Abstract: | Urban local government is a vital part for the delivery of services to people. Along with other responsibilities, urban local government in Bangladesh is also responsible for environmental management. This study aims to identify the role of Paurashavas (which are administrative units at every municipality composed of elected members) in protecting a healthy and clean environment. Examining Chunarughat Paurashava, the study finds that Paurashavas have an important role in environmental management such as garbage collection, waste disposal, sewerage construction, public park protection, and so on. However, the provision of these kinds of services is hindered by various lacks, like infrastructure, logistic support, trained manpower, and funds, as well as peoples’ participation. The study makes various recommendations to overcome these problems. |
| Keywords: | local government, environmental management, Bangladesh, Paurashava, Chunarughat |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:bnr:wpaper:14&r=env |
| By: | Luca Di Corato (Department of Economics, SLU); Michele Moretto (Department of Economics, University of Padova, Fondazione Eni Enrico Mattei and Centro Studi Levi-Cases); Sergio Vergalli (Department of Economics, University of Brescia, and Fondazione Eni Enrico Mattei) |
| Abstract: | In this paper stochastic dynamic programming is used to investigate land conversion decisions taken by a multitude of landholders under uncertainty about the value of environmental services and irreversible development. We study land conversion under competition on the market for agricultural products when voluntary and mandatory measures are combined by the Government to induce adequate participation in a conservation plan. We study the impact of uncertainty on the optimal conversion policy and discuss conversion dynamics under different policy scenarios on the basis of the relative long-run expected rate of deforestation. Interestingly, we show that uncertainty, even if it induces conversion postponement in the short-run, increases the average rate of deforestation and reduces expected time for total conversion in the long run. Finally, we illustrate our findings through some numerical simulations. |
| Keywords: | Optimal Stopping, Deforestation, Payments for Environmental Services, Natural Resources Management |
| JEL: | C61 D81 Q24 Q58 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.84&r=env |
| By: | Luca Di Corato (Department of Economics, SLU) |
| Abstract: | In this paper we study the optimal forest conservation policy by a hyperbolically discounting society. Society comprises a series of non-overlapping imperfectly altruistic generations each represented by its own government. Under uncertainty about future pay-offs we determine, as solution of an intergenerational dynamic game, the optimal timing of irreversible harvest. Earlier harvest occurs and the option value attached to the forest clearing decision is eroded under both the assumptions of naïve and sophisticated belief about future time-preferences. This results in a bias toward the current generation gratification which affects the intergenerational allocation of benefits and costs from harvesting and conserving a natural forest. |
| Keywords: | Imperfect Altruism, Real Options, Hyperbolic Discounting, Time Inconsistency, Natural Resources Management |
| JEL: | D81 C70 Q23 Q58 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.89&r=env |
| By: | María Elena Gutierrez; Xavier Mommens |
| Abstract: | The purpose of this study is to show how microfinance services may undergo the impacts of climate change, to analyze the opportunities available for MFIs and to propose concrete actions. This paper was commissioned by the Inter-American Development Bank (IDB) in coordination with the Sustainable Energy and Climate Change Unit (ECC) and the Multilateral Investment Fund (MIF), and it was prepared on the basis of bibliographic reviews, experience in the Latin American region, and interviews that were carried out during missions in Peru and Guatemala. |
| Keywords: | Environment & Natural Resources :: Climate Change, Private Sector :: Microbusinesses & Microfinance, Social Development :: Poverty, Financial Sector :: Financial Services, MFI, microfinance sector, CC, microfinance institutions, microcredits |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:62058&r=env |
| By: | John Hassler; Per Krusell |
| Abstract: | This paper develops a model that integrates the climate and the global economy---an integrated assessment model---with which different policy scenarios can be analyzed and compared. The model is a dynamic stochastic general-equilibrium setup with a continuum of regions. Thus, it is a full stochastic general-equilibrium version of RICE, Nordhaus's pioneering multi-region integrated assessment model. Like RICE, our model features traded fossil fuel but otherwise has no markets across regions---there is no insurance nor any intertemporal trade across them. The extreme form of market incompleteness is not fully realistic but arguably not a decent approximation of reality. Its major advantage is that, along with a set of reasonable assumptions on preferences, technology, and nature, it allows a closed-form model solution. We use the model to assess the welfare consequences of carbon taxes that differ across as well as within oil-consuming and -producing regions. We show that, surprisingly, only taxes on oil producers can improve the climate: taxes on oil consumers have no effect at all. The calibrated model suggests large differences in views on climate policy across regions. |
| JEL: | H23 O44 Q0 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17757&r=env |
| By: | Céline Guivarch (Centre International de Recherche sur l’Environnement et le Développement); Stéphane Hallegatte (Centre International de Recherche sur l’Environnement et le Développement and Ecole Nationale de la Météorologie, Météo-France) |
| Abstract: | Political attention has increasingly focused on limiting warming to 2°C. However, to date the only mitigation commitments accompanying this target are the so-called Copenhagen pledges, and these pledges appear to be inconsistent with the 2°C objective. Diverging opinions on whether this inconsistency can or should be resolved have been expressed. This paper clarifies the alternative assumptions underlying these diverging view points and explicits their implications. It first gives simple visualizations of the challenge posed by the 2°C target. It then proposes a “decision tree”, linking different beliefs on climate change, the achievability of different policies, and current international policy dynamics to various options to move forward on climate change. |
| Keywords: | Feasibility of 2°C Target, Climate Change Negotiations |
| JEL: | Q5 Q58 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.87&r=env |
| By: | William Nikolakis (Crawford School of Economics and Government, The Australian National University); Quentin Grafton (Crawford School of Economics and Government, The Australian National University) |
| Abstract: | The aim of this work is to understand what incentives exist to encourage integration in land and water management across northern Australia. Integration is seen as important in improving planning and management of resources in the context of climate change and development pressure. The north Australian region is made up of three jurisdictions, the two states of Queensland and Western Australia, and the Northern Territory. It is a sparsely populated region, with over a quarter of the Australian estate and only 2% of the nation’s population. However, the region makes a significant contribution to national exports and is recognized for its ecological values, and its prominent Indigenous population who have customary rights to land and water. The region produces over half the nation’s annual runoff during the wet season.Increasingly there is a focus on northern Australia as the next frontier for irrigation development. A report by the North Australian Land and Water Taskforce in 2009 suggested irrigation could expand by up to 200% in the region, though in a form that is distinct from southern Australia given soil, hydrological and biophysical characteristics of the region. Population is increasing and climate change projections point to increased temperatures and evapotranspiration, as well as more intense rainfall and cyclonic events, and in coastal areas storm surges and erosion, while in inland areas there is predicted greater incidence of drought and bushfire (CSIRO, BOM and BRS 2010a, b). The linear and non linear forces that may shape northern Australia’s landscape highlight the need for integrated land and water management as a tool for adaptation. Integration can improve the coordination of government adaptation programs, as well as efforts between government and non government actors (vertical integration), and encourage coordination between sectors (horizontal integration). |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:een:eenhrr:10109&r=env |
| By: | Francesca Ponenti (Department of Quantitative Methods, University of Brescia); Giorgia Oggioni (Department of Quantitative Methods, University of Brescia,); Elisabetta Allevi (Department of Quantitative Methods, University of Brescia,); Giacomo Marangoni (Fondazione Eni Enrico Mattei) |
| Abstract: | In this paper we investigate the economic impacts of the European Emission Trading Scheme (EU-ETS) on the Italian electricity market by a power generation expansion model. In particular, we assume that generators make their capacity expansion decisions in a Cournot or in a perfect competition manner. This model is used to measure the effects of the EU-ETS Directives on electricity prices and demand, investments and generators' profits both in an oligopolistic and in a perfectly competitive organization of the power market. We adopt a technological representation of the energy market which is discretized into six geographical zones (North, Center-North, Center-South, South, Sicily, Sardinia) and five virtual poles (Monfalcone, Foggia, Brindisi, Rossano, Priolo) with limited production for a total of eleven zones. We assume that generators operate in different zones connected by interconnections with limited capacity and produce energy by running existing or new plants in which they directly invest. We consider several investment scenarios under the CO2 regulation with and without incentives to renewables. The scenarios also include simulations on future effects of the third EU-ETS phase on the system. Our analysis shows that perfect competition induces generators to invest more than in an oligopolistic framework, but in both market configurations, investments are mainly concentrated in fossil-red plants (CCGT and coal), leaving a small proportion to new wind plants. This happens also in presence of incentives given to renewable technologies. We can thus conclude that investments in a secure and efficient technology like CCGT are preferable compared to those in renewables that cannot be used with continuity. This investment policy affects electricity prices that significantly increase in 2020 compared to their 2009 levels. The raise of electricity prices in 2020 is particularly favorable for generators operating as Cournot players which are able to increase their profits compared to 2009, despite the full auctioning system foreseen for the allocation of CO2 allowance to the power sector in the third EU-ETS phase. The solution of the overall system is found by exploiting the mixed complementarity theoretical framework and solution algorithms. The developed model is implemented as complementarity problems and solved in GAMS using the PATH solver. |
| Keywords: | Complementarity Conditions, General Equilibrium Models, EU-ETS, Italian Electricity Market |
| JEL: | Q4 Q48 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.99&r=env |
| By: | Rademaker, Claudia A. (Department of Marketing and Strategy, Center for Media and Economic Psychology) |
| Abstract: | <p>Previous research has shown that consumer trust in advertising is low and continues to diminish. Researchers have also found that a big share of advertising investments is placed in less favorable media which can contribute to consumers’ increasing disbelief towards advertising. The results of the present study add to these previous findings by showing that the consumers’ trust levels in advertising vary among the 11 different media studied and that the marketing managers’ beliefs about consumers are not consistent with the consumers’ attitudes toward and usage of advertising media. Ignoring this phenomenon may have consequences for companies investing in less favorable media and thereby adding to consumers’ increasing disbelief towards advertising.<P> The greatest discrepancy was found for ads on TV. The marketing managers seem to believe incorrectly that ads on TV are not only more trusted but also more used by consumers than the consumers claim. The consumers were found to have more negative attitudes toward TV advertising than what the marketing managers believe about consumers. TV is also perceived by the consumers as more harmful for the green environment than the marketing managers believe about consumers.<P> The results show that the consumers have more positive attitudes toward direct marketing than the marketing managers believe about them. The consumers perceive direct marketing as better, less irritating and less harmful for the environment compared to the marketing managers’ beliefs about them. In addition, the consumers claim to make more use of ads in many of the paper-based media than TV advertising when they want to buy different products. This was found to be not consistent with the marketing managers’ beliefs about consumers. The consumers were found to have more negative attitudes toward advertising through the mobile phone than the marketing managers believe about consumers. Advertising through the mobile phone is considered by the consumers as one of the worst, most irritating and least trusted medium among the 11 advertising media studied. Moreover, the consumers consider the mobile phone to be more harmful for the green environment compared to the marketing managers’ beliefs about consumers.<P> The results also show that the marketing managers feel more personal responsible towards caring for the green environment than the consumers. In addition, both the marketing managers and the consumers were found to have equally high demands and expectations of organizations to act responsibly toward the green environment. This contradicts previous findings that showed that the green environmental aspect is among the factors that are the least considered when marketing managers work with marketing communication in general and advertising media selection in particular. Furthermore, this study found that green environmental responsibility attitude (GERA) is weakly related to the perception on the green environmental aspect of advertising media. Thus, the discrepancies found in this study between the consumers and marketing managers regarding their green environmental perceptions on the 11 different advertising media should be explained by other factors.<P> |
| Keywords: | Advertising Media; Attitudes; Consumers; Marketing Managers; Green Environment; Green Environmental Responsibility Attitude (GERA); |
| Date: | 2011–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:hastba:2011_008&r=env |
| By: | Gustav Engstrom; William Brock; Anastasios Xepapadeas |
| Abstract: | We develop a one-dimemsional energy balance climate model with heat transportation across locations. We introduce the concept of po- tential world GDP at time t, and we introduce, through the temper- ature function, spatial characteristics into the damage function which make damages latitude dependent. We solve the social planner��s prob- lem and characterize the competitive equilibrium. We de��ne optimal taxes on fossil fuels and pro��t taxes on ��rms that extract fossil fuels. Our results suggest that if the implementation of international trans- fers across latitudes is not possible, then optimal taxes are spatially non homogeneous and tend to be lower at the poor latitudes. The degree of spatial di�¤erentiation of optimal taxes depend on heat trans- portation. We also locate su�¢ cient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time. By employing the properties of the spatial model and approximating solutions, we show how to study the impact of thermal transport across latitudes on welfare inequality. |
| Keywords: | Energy Balance Climate Models, Heat Di¤usion, Tem- perature Distribution, Spatial Optimal Taxes |
| JEL: | Q54 Q58 |
| Date: | 2012–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:aue:wpaper:1202&r=env |
| By: | Aldy, Joseph E. (Harvard University) |
| Abstract: | The American Recovery and Reinvestment Act included more than $90 billion in strategic clean energy investments intended to promote job creation and promote deployment of low-carbon technologies. In terms of spending, the clean energy package has been described as the nation's "biggest energy bill in history." To provide a preliminary assessment of the Recovery Act's clean energy package, this paper reviews the rationale, design, and implementation of the act. The paper surveys the policy principles for clean energy stimulus and describes the process of crafting the clean energy package during the 2008-2009 Presidential Transition. Then, the paper reviews the initial employment, economic activity, and energy outcomes associated with these energy investments and provides a more detailed case study on the Recovery Act's support for renewable power through grants and loan guarantees. The paper concludes with lessons learned. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-048&r=env |
| By: | Rademaker, Claudia A. (Department of Marketing and Strategy, Center for Media and Economic Psychology) |
| Abstract: | <p>This study shows that, despite organizations claiming to care for the green environment through documented environmental policies, marketing communication such as advertising media selection does not seem to be much guided by green environmental concerns. Problems with consistency and control thus seem to exist between companies’ ideas/decisions (documented environmental policies) and their actions (advertising media selection), causing the need for justification and/or hypocrisy.<P> This study adds to prior research on the non-use of models in practice by showing that the non-use of models also exists among marketing managers when selecting advertising media for marketing communication purposes. It was found that 64 percent of the marketing managers do not make use of media selection models. In the attempt to investigate differences in the factors guiding media selection between marketing managers who use media selection models (users) and those who do not use any model (non-users), it was found that the users take a medium’s eco-friendly characteristics less into consideration than the non-users.<P> The paper discusses that the use of models can be viewed as attempts for making more rational decisions. The findings thus suggest that rational decision-making (users) may hinder eco-friendly media selection while non-rationality (non-users) may develop more powerful organizational ideologies such as acting responsibly towards the green environment. However, this study points out a link between the use of media selection models, previous experience and rules of thumb, i.e. the users tend to make more use of previous experience and rules of thumb than the non-users. Thus, the author argues that a new approach to model use may be needed and that the media selection should not be too much influenced by the marketing managers’ previous experience and rules of thumb. Otherwise, new factors may be overlooked such as consumers’ increasing concern for the green environment in relation to consumer advertising media attitudes.<P> Previous studies have found that current approaches to marketing planning pay too little attention to the impact of technological advances on changes in consumer media habits. Thereby the risk may exist for focusing on mainly conventional media and not selecting “new media”. The present study seems to contradict these previous findings by showing that the selection of “new media” such as media using the Internet was found among the most selected advertising media by both the users and non-users for the two communication objectives studied, i.e. brand-building and to increase sales. Thus, the results indicate that while the marketing managers adapt their media selection to changes in technological media advances they tend to overlook consumers’ increasing concern for the green environment and the environmental aspect of advertising media.<P> The results also show differences among the marketing managers in their selection of advertising media. At the same time as the non-users tend to be more precise with the recycling of paper, they are more inclined to select paper-based media such as catalogues and brochures than the users. The users on the other hand, tend to select more electronic media such as TV, radio and cinema than the non-users. In the attempt to explain the factors guiding media selection and in particular to what extent the environmental aspect of advertising media is considered, green environmental responsibility attitudes (GERA) of the users and non-users are assessed.<P> |
| Keywords: | Media Selection; Advertising; Green Environment; Marketing Managers; Models; Green Environmental Responsibility Attitude (GERA); Rationality; Non-rationality |
| Date: | 2011–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:hastba:2011_007&r=env |
| By: | Ardjan Gazheli (Department of Economics, SLU); Luca Di Corato (Department of Economics, SLU) |
| Abstract: | In this paper a real option model is developed to examine the critical factors affecting the decision to lease agricultural land to a company installing a PV power plant. The leasing payment is certain while the net revenues from agriculture are uncertain. We identify the profit values at which the farmer decides to lease his plot vs. continue farming it. By applying the model to the province of Bologna (Italy), we illustrate the possible land-use change scenarios in this area. We conclude by discussing the importance of PV energy production as a source of income for farmers and its implications from a social perspective. |
| Keywords: | Land Allocation, Real Options, Renewable Energy, Solar farm, Uncertainty |
| JEL: | C61 D81 Q24 Q42 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2011.90&r=env |
| By: | Christie, Mike; Colombo, Sergio; Hanley, Nick |
| Abstract: | This paper investigates the sensitivity of choice experiment values for ecosystem services to "attribute non-attendance". We consider three cases of attendance, namely that people may always, sometimes or never pay attention to a given attribute in making their choices. This allows a series of models to be estimated which address the following questions: To what extent do respondents attend to attributes in choice experiments? What is the impact of alternative strategies for dealing with attribute non-attendance? Can respondents self-report non-attendance? Do respondents partially attend to attributes, and what are the implications of this for willingness to pay estimates? Our results show that allowing for the instance of "sometimes attending" to attributes in making choices offers advantages over methods employed thus far in the literature. |
| Keywords: | stated preference; ecosystem services; Biodiversity; attribute non-attendance; Choice experiments |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2011-20&r=env |
| By: | Lauriane MOUYSSET (CERSP, UMR 7204, CNRS-MNHN-UPMC, SADAPT, INRA, UMR 1048); Luc DOYEN (CERSP, UMR 7204, CNRS-MNHN-UPMC, GREThA, CNRS, UMR 5113); Fréderic JIGUET (CERSP, UMR 7204, CNRS-MNHN-UPMC) |
| Abstract: | The present paper analyses the role played by risk aversion in the reconciling of agricultural income and biodiversity. A bio-economic mode which articulates bird community dynamics and representative farmers selecting land uses within an uncertain macro-economic context is developed. It is spatialized and calibrated at a regional scale for France through national databases. The impact of risk aversion is assessed on economic, agricultural and ecological outputs through projections at the 2050 horizon. A high enough aversion proves sufficient to promote global bio-economic performance and multi-functional agriculture. This occurs through a diversification mechanism on regional land-uses. Spatial disparities however suggest that public incentives could be necessary to reinforce the diversification and bio-economic effectiveness. |
| Keywords: | Agriculture, Aversion, Bio-economic modeling, Bird, Biodiversity, Diversification, Public good, Spatial |
| JEL: | Q15 Q20 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2012-03&r=env |