nep-env New Economics Papers
on Environmental Economics
Issue of 2013‒03‒30
thirteen papers chosen by
Francisco S.Ramos
Federal University of Pernambuco

  1. Leakage, Welfare, and Cost-Effectiveness of Carbon Policy By Kathy Baylis; Don Fullerton; Daniel H. Karney
  2. A Nonlinear Analysis of CO2-Income Relation for Advanced Countries By Massimiliano Mazzanti; Antonio Musolesi
  3. Sustainability and Competitiveness in Evolutionary Perspectives. Environmental Innovations, Structural Change and Economic Dynamics in the EU By Massimiliano Mazzanti; Francesco Nicolli; Marianna Gilli
  4. Measuring The Impact Of The Toxics Release Inventory: Evidence From Manufacturing Plant Births By Nicholas E. Powers
  5. Taxing Pollution: Agglomeration and Welfare Consequences By Berliant, Marcus; Peng, Shin-Kun; Wang, Ping
  6. Introducing CO2 Allowances, Higher Prices For All Consumers; Higher Revenues For Whom? By Gurkan, G.; Langestraat, R.; Ozdemir, O.
  7. The energy transition of the transition economies : an empirical analysis By Zhang, Fan
  8. Investigation of the Effects of Emission Market Design on the Market-Based Compliance Mechanism of the California Cap on Greenhouse Gas Emissions By Charles A. Holt; William M. Shobe
  9. The Impact of Individual Risk Preferences on Valuing Preservation of Threatened Species: an Application to Lynx Populations in Poland By Anna Bartczak; Susan Chilton; Jürgen Meyerhoff
  10. Integrated Assessment of Natural Hazards and Climate Change Adaptation: I. The KULTURisk Methodological Framework By Carlo Giupponi; Vahid Mojtahed; Animesh K. Gain; Stefano Balbi
  11. Integrated Assessment of Natural Hazards and Climate-Change Adaptation: II. The SERRA Methodology By Vahid Mojtahed; Carlo Giupponi; Claudio Biscaro; Animesh K. Gain; Stefano Balbi
  12. The Long-term Effects of Early Lead Exposure: Evidence from a case of Environmental Negligence By Tomás Rau; Loreto Reyes; Sergio S. Urzúa
  13. Transboundary pollution, R&D spillovers, absorptive capacity and international trade By Dinar, Zeineb

  1. By: Kathy Baylis; Don Fullerton; Daniel H. Karney
    Abstract: We extend the model of Fullerton, Karney, and Baylis (2012 working paper) to explore cost-effectiveness of unilateral climate policy in the presence of leakage. We ignore the welfare gain from reducing greenhouse gas emissions and focus on the welfare cost of the emissions tax or permit scheme. Whereas that prior paper solves for changes in emissions quantities and finds that leakage may be negative, we show here that all cases with negative leakage in that model are cases where a unilateral carbon tax results in a welfare loss. With positive leakage, however, a unilateral policy can improve welfare.
    JEL: Q27 Q28 Q56 Q58
    Date: 2013–03
  2. By: Massimiliano Mazzanti; Antonio Musolesi
    Abstract: We study long run carbon emissions - income relationships for advanced countries grouped in policy relevant groups - North America and Oceania, South Europe, North Europe. By relying on recent advances on Generalized Additive Models and adopting interaction models, we handle simultaneously three main econometric issues, named here as functional form bias, heterogeneity bias and omitted time related factors bias, which have been proved to be relevant but have been addressed separately in previous papers. We consider a model which includes both country-specific nonparametric time effects and country-specic nonparametric income effects. We find that country-specic time related factors weight more than income in driving the northern EU Environmental Kuznets Curves, that cross country heterogeneity is high and that only two countries - Finland and Sweden - show bell shapes for both income and time relationships to CO2. Overall, the countries differ more on their carbon-time relation than on the carbon-income relation which is in almost all cases monotonic positive. The former may represent idiosyncratic innovation, energy and policy features of the countries under study.
    Keywords: Semi parametric models; GAM; interaction models; environmental Kuznets curve
    JEL: C14 C23 Q53
    Date: 2013–02–14
  3. By: Massimiliano Mazzanti; Francesco Nicolli; Marianna Gilli
    Abstract: We take a sector based perspective to investigate the EU economic, environmental and innovation performances. We correlate the various sector performances taking into account the role of changing specialization. In addition, we examine sector environmental performances related factors through shift-share decomposition analysis. We show that vivid divergences in environmental, economic and innovation performances exist between EU countries. The leading role of Germany emerges, with strong underpinnings in its economic specialization rooted on manufacturing. France excels in some services, while Italy suffers. Germany and Sweden more than others present win win economic-environmental sector performances. On the basis of our investigation economic and environmental performances are effectively potentially interrelated. Examples of integrated innovation-economic-environmental performances appear. Nevertheless, the sector view highlights that the underpinnings of macro performance rely on various structural change and innovation elements. Further research could investigate how composition effects and innovation changes correlate towards the achievement of sustainable economic development.
    Keywords: Environmental innovation; economic performance; decomposition; meso economics
    JEL: Q53 Q55
    Date: 2013–01–04
  4. By: Nicholas E. Powers
    Abstract: The Toxics Release Inventory was the first major initiative to take a disclosurebased approach to environmental regulation and has served as the model for several other disclosure-based environmental policies. Yet the magnitude of its direct impacts on industrial manufacturing outcomes has not been established. I use Census Bureau micro-data to estimate the impacts of the Toxics Release Inventory on the opening of new manufacturing plants. I find that on average, counties that were found to be among the dirtiest in the country, in terms of toxic emissions, experienced a decrease in “dirty” plant births and an even larger increase in “clean” plant births. Furthermore, the magnitude of this shift is closely related to per capita income in the affected coun- ties - the effect is strongest in high-income communities and is reversed in low-income communities. I discuss the implications for information-based environmental policies.
    Keywords: Firm heterogeneity, microdata, quality, trade, unit value.
    Date: 2013–03
  5. By: Berliant, Marcus; Peng, Shin-Kun; Wang, Ping
    Abstract: This paper demonstrates that a pollution tax with a fixed cost component may lead, by itself, to stratification between clean and dirty firms without heterogeneous preferences or increasing returns. We construct a simple model with two locations and two industries (clean and dirty) where pollution is a by-product of dirty good manufacturing. Under proper assumptions, a completely stratified configuration with all dirty firms clustering in one city emerges as the only equilibrium outcome when there is a fixed cost component of the pollution tax. Moreover, a stratified Pareto optimum can never be supported by a competitive spatial equilibrium with a linear pollution tax that encompasses Pigouvian taxation as a special case. To support such a stratified Pareto optimum, however, an effective but unconventional policy prescription is to redistribute the pollution tax revenue from the dirty to the clean city residents.
    Keywords: Pollution Tax; Agglomeration of Polluting Producers; Endogenous Stratification
    JEL: D62 H23 R13
    Date: 2013–03–25
  6. By: Gurkan, G.; Langestraat, R.; Ozdemir, O. (Tilburg University, Center for Economic Research)
    Abstract: Abstract Introducing a ceiling on total carbon dioxide (CO2) emissions and allowing polluting industries to buy and sell permits to meet it (known as a cap-and-trade system) affects investment strategies, generation quantities, and prices in electricity markets. In this paper we analyze these effects under the assumption of perfect competition and make a comparison with another potential way of reducing CO2 emissions, namely a fixed carbon tax charged per unit emission. We deal with an energy only market and model it as a two-stage game where capacities are installed in the first stage and production takes place in the future spot market. For a stylized version of this model (with no network effects and deterministic demand), we show that at the equilibrium either one or a mixture of two technologies is used. Such a mixture consists of a relatively clean and a relatively dirty technology. In the absence of a ceiling on total emissions, marginal operating costs of different technologies form a fixed merit order; that is, the marginal costs are ordered in an ascending fashion. Based on the observed demand, this fixed merit order is used to determine the total number of technologies used so that all demand is satisfied. We show that, as long as there is enough capacity in the system, when a fixed maximum allowance level is introduced, different demand levels impose different prices for a unit of emission allowance, and consequently there is no fixed merit order on the technologies. Therefore, for different levels of observed demand one can find a different optimal mixture. We develop an algorithm for finding the induced optimal mixture in a systematic way. We show that the price of electricity and the price of allowances increase as the maximum allowance level decreases. When, in comparison, a fixed tax is charged for the emissions, the merit order is fixed for all demand levels and the first technology in the merit order is the only generating unit. By means of a numerical study, we consider a more general version of the model with stochastic demand and observe that a broader mixture of technologies is used to satisfy the uncertain demand. We show that if there is a shortage of transmission capacity in the system, only introducing financial incentives and instruments (such as taxation or a cap-and-trade system) neither is sufficient to curb CO2 levels nor 1 necessarily induces investment in cleaner technologies.
    Keywords: investment modeling in electricity markets;energy policy;carbon tax;emission allowances;perfect competition equilibrium
    JEL: C61 C63 H23 Q58
    Date: 2013
  7. By: Zhang, Fan
    Abstract: The aggregate manufacturing energy intensity of 28 countries in Eastern Europe and Central Asia had declined by 35 percent during 1998-2008. This study reveals strong evidence of convergence: less efficient countries improved more rapidly and the cross-country variance in energy productivity narrowed over time. An index decomposition analysis indicates that energy intensities declined largely because of more efficient energy use rather than shifts from energy intensive to less intensive manufacturing activities. Income growth and energy price increases were the main drivers of the convergence. They dominated the impact of trade, which led to specialization in energy intensive industries.
    Keywords: Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment,Energy Demand,Climate Change Economics
    Date: 2013–03–01
  8. By: Charles A. Holt (University of Virginia); William M. Shobe (University of Virginia)
    Abstract: The state of California has implemented an economy-wide program to regulate its greenhouse gas emissions. A significant share of the emission reductions will be obtained via a cap and trade program with a mix of auctioning and free allocation of allowances. This program has a number of novel design features including, among other things, a price containment reserve, a limit on ownership of allowances, and the forced consignment to auction of some of the share of freely allocated allowances. We use a series of laboratory experiments to test the influence of two of these design features on the performance of the emissions market. We test the effect of holding limits and of the new three-tier price containment sale mechanism. We find that tight holding limits used to prevent market dominance reduce liquidity and appear to harm market efficiency and price discovery. The price containment sale mechanism reduces price spikes during periods of high allowance demand and has different effects on market performance than releasing the price containment reserve as part of the auction of allowances. We discuss the implications for the design of price containment reserves.
    Keywords: Emission markets; experiments; cap and trade; greenhouse gas emissions; market design
    Date: 2013–02–18
  9. By: Anna Bartczak (Faculty of Economic Sciences, University of Warsaw); Susan Chilton (Newcastle University Business School); Jürgen Meyerhoff (Technische Universität Berlin, Institute for Landscape and Environmental Planning)
    Abstract: A recent innovation in environmental valuation surveys has been to acknowledge the inherent uncertainties surrounding the provision of environmental goods and services and to incorporate it into non-market survey designs. So far, little is known about how people assimilate and respond to such uncertainty, particularly in terms of how it affects their stated valuations. In this paper we focus on the impact of risk preferences on people’s investments in environment. Individual risk preferences are elicited through a standard, incentivized multiple price list mechanism and used as a independent variable in the analysis of a choice experiment valuing the preservation of two threatened lynx populations in Poland. We find that risk-seeking respondents were more likely to choose the status quo option, which was the riskiest option in terms of the survival of the two distinct lynx populations. Risk seekers revealed also a significantly lower willingness to pay for lynx preservations.
    Keywords: choice experiment, environmental good, lottery experiment, lynx preservation, risk preferences, status quo effect
    JEL: Q23 Q51 Q56 Q57
    Date: 2013
  10. By: Carlo Giupponi (Department of Economics, University Of Venice Cà Foscari); Vahid Mojtahed (Department of Economics, University Of Venice Cà Foscari); Animesh K. Gain (Department of Economics, University Of Venice Cà Foscari); Stefano Balbi (Basque Centre for Climate Change)
    Abstract: A conceptual framework integrating different disciplines has been developed to comprehensively evaluate the benefits of risk prevention. Three main innovations are proposed with regards to the state of the art: (1) to include the social capacities of reducing risk, (2) to go beyond the estimation of direct tangible costs, and (3) to provide an operational solution to assess risks, impacts and the benefits of plausible risk reduction measures. The traditional risk metric in the physical sciences is the expected damage (direct tangible costs), which is defined as a function of hazard, vulnerability (physical) and exposure. The last element, exposure, provides the information to convert results into monetary terms. In the development of the KULTURisk Framework (KR-FWK), we considered several different pre-existing proposals, and we designed a new one as a conceptual model and also a flow-chart for the elaboration of information. The proposed KR-FWK is thus expected to provide: 1) an operational basis for multidisciplinary integration; 2) a flexible reference to deal with heterogeneous case studies and potentially various types of hazards; and 3) a means to support the assessment of alternative risk prevention measures including consideration of social and cultural dimensions. The project case studies of the process are expected to provide a quite diversified set of situations, allowing to consolidate the framework itself and to develop ad hoc tailored solutions for most common implementation cases.
    Keywords: Natural disasters, Integrated Risk Assessment, Climate change adaptation
    JEL: Q51 Q54 D81
    Date: 2013
  11. By: Vahid Mojtahed (Department of Economics, University Of Venice Cà Foscari); Carlo Giupponi (Department of Economics, University Of Venice Cà Foscari); Claudio Biscaro (Department of Management, University Of Venice Cà Foscari); Animesh K. Gain (Department of Economics, University Of Venice Cà Foscari); Stefano Balbi (Basque Centre for Climate Change (BC3))
    Abstract: We propose an integrated methodology to evaluate the four possible socio-economic costs namely direct/indirect and tangible/intangible costs due to adverse consequences of flood. Although SERRA is based on full monetization of costs and benefits of risk, it can allow for other methods of economic appraisal such as cost-effectiveness when controversial or unethical. By considering social aspect of vulnerability, meaning adaptive and coping capacities of the affected society, we arrive at a more accurate estimation of risk. This further allows us to evaluate the set of risk reduction measures with a focus on non-structural ones, which consequently helps the decision-maker to select the optimal measure given her constraints. Our methodology attempts to be comprehensive with respect to the set of receptors that is an enhancement compared to Regional Risk Assessment that is the mainstream method in the literature.
    Keywords: Adaptive/coping capacities, Indirect costs, Intangible costs, Vulnerability, Total Cost Matrix
    JEL: Q51 Q54 D81
    Date: 2013
  12. By: Tomás Rau; Loreto Reyes; Sergio S. Urzúa
    Abstract: This paper estimates the effect of early lead exposure on academic achievement and adult earnings. We analyze longitudinal information from individuals attending primary and secondary schools in the city of Arica (in northern Chile). Between 1984 and 1989, Arica received more than 20,000 tons of toxic chemicals containing high concentrations of lead. Initially, the chemical waste was located several kilometers from the city. However, Arica's rapid expansion, which included the construction of housing projects just meters away from the waste deposit, put a large number of families at risk. Our data include information on residential proximity to the polluted area, levels of lead exposure, comprehensive demographic information, nationally representative academic test scores and administrative data on adult earnings. We document a strong relationship between blood lead levels and student academic performance. We find that an increase of one microgram of lead per deciliter of blood reduces math and language scores by 0.15 and 0.21 standard deviations, respectively. For earnings, we estimate that for each extra microgram of lead, monthly earnings decrease by CLP 11,458 (or USD 22.92). This translates into a reduction of USD 6,000 in lifetime earnings per microgram of lead per deciliter of blood.
    JEL: I15 I18 I25 J17 O1 Q5 Q51 Q53 Q56
    Date: 2013–03
  13. By: Dinar, Zeineb
    Abstract: In this paper, we consider a non-cooperative and symmetric three-stage game model composed by two regulator-firm hierarchies. By means of adequate emission taxes, original and absorptive research and development (R&D) subsidies we prove that regulators can reach the non-cooperative social optimum. In the presence of free R&D spillovers between countries, as well as the investment in absorptive research, the competition of firms on a common market helps non-cooperating countries to better internalize transboundary pollution. We find that in autarky and common market cases the investment in absorptive R&D leads to multiple non-cooperative equilibria, which may necessitate competing regulators to coordinate an equilibrium. Interestingly, opening markets to international trade increases the per-unit emission-tax and the per-unit original research subsidy. It causes a higher investment in original research and production, and a lower emission ratio. --
    Keywords: Transboundary pollution,R&D spillovers,absorptive capacity,international trade
    JEL: C72 H21 O32 D62
    Date: 2013

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