nep-env New Economics Papers
on Environmental Economics
Issue of 2017‒06‒18
seventeen papers chosen by
Francisco S. Ramos
Universidade Federal de Pernambuco

  1. Non-Cooperative and Cooperative Climate Policies with Anticipated Breakthrough Technology By Niko Jaakkola; Frederick van der Ploeg
  2. Climate Policies Under Climate Model Uncertainty: Max-Min and Min-Max Regret By Armon Rezai; Frederick van der Ploeg
  3. The Role of TTIP on the Environment. By Pascalau, Razvan; Qirjo, Dhimitri
  4. Economics of limiting cumulative CO2 emissions By Ashwin K Seshadri
  5. How does urbanization affect energy and CO2 emission intensities in Vietnam? Evidence from province-level data By Nguyen Quan; Makoto Kakinaka; Koji Kotani
  6. Willingness to Pay for Low Water Footprint Food Choices During Drought By Hannah Krovetz; Rebecca Taylor; Sofia Villas-Boas
  7. Volatility spillovers and causality of carbon emissions, oil and coal spot and futures for the EU and USA By Chia-Lin Chang; Michael McAleer; Guangdong Zuo
  8. Investment in renewable energy, fossil fuel prices and policy implications for Latin America and the Caribbean By Griffith-Jones, Stephany; Spratt, Stephen; Andrade, Rodrigo; Griffith-Jones, Edward
  9. Should pollution taxes be targeted at income redistribution? By Bas Jacobs; Frederick van der Ploeg
  10. Strengthening cooperation between telecommunications operators and national disaster offices in Caribbean countries By Williams, Robert Crane; Bissessar, Shiva
  11. On-Grid Solar PV versus Diesel Electricity Generation in Sub-Saharan Africa: Economics and GHG Emissions By Saule Baurzhan; Glenn P. Jenkins
  12. Management of invasive species: Should we prevent introduction or mitigate damages? By Jesper S. Schou; Frank Jensen
  13. Federal Tax Policies, Congressional Voting, and the Fiscal Advantage of Natural Resources By Fidel Perez-Sebastian; Ohad Raveh
  14. Las bioenergías en España. Una serie de producción, consumo y stocks entre 1860 y 2010 By Juan Infante-Amate; Iñaki Iriarte-Goñi
  15. Deutschlands Klimapolitik: Höchste Zeit für einen Strategiewechsel By Frondel, Manuel
  16. Green Agricultural Productivity Growth and Convergence in sub-Saharan Africa By F. Djoumessi, Yannick
  17. Renewable Energy Sources and Investment in European Power Transmission Networks By Kaloud, Tobias

  1. By: Niko Jaakkola; Frederick van der Ploeg
    Abstract: Global warming can be curbed by pricing carbon emissions and thus substituting fossil fuel with renewable energy consumption. Breakthrough technologies (e.g., fusion energy) can reduce the cost of such policies. However, the chance of such a technology coming to market depends on investment. We model breakthroughs as an irreversible tipping point in a multi-country world, with different degrees of international cooperation. We show that international spill-over effects of R&D in carbon-free technologies lead to double free-riding, strategic over-pollution and underinvestment in green R&D, thus making climate change mitigation more difficult. We also show how the demand structure determines whether carbon pricing and R&D policies are substitutes or complements.
    Keywords: global warming, carbon pricing, renewable R&D, tipping point, international cooperation, non-cooperative policies, feedback Nash equilibrium
    JEL: D2 D90 H23 Q35 Q38 Q54 Q58
    Date: 2017
  2. By: Armon Rezai; Frederick van der Ploeg
    Abstract: Temperature responses and optimal climate policies depend crucially on the choice of a particular climate model. To illustrate, the temperature responses to given emission reduction paths implied by the climate modules of the well-known integrated assessments models DICE, FUND and PAGE are described and compared. A dummy temperature module based on President Trump’s climate sceptic view is added. Using a simple growth model of the global economy, the sensitivity of the optimal carbon price, renewable energy subsidy and energy transition to each of these climate models is discussed. The paper then derives max-min, max-max and min-max regret policies to deal with this particular form of climate uncertainty and with climate scepticism. The max-min or min-max regret climate policies rely on a non-sceptic view of global warming and lead to a substantial and moderate amount of caution, respectively. The max-max leads to no climate policies in line with the view of climate sceptics.
    Keywords: carbon price, renewable energy subsidy, temperature models, climate model uncertainty, climate sceptics, max-min, max-max, min-max regret
    JEL: H21 Q51 Q54
    Date: 2017
  3. By: Pascalau, Razvan; Qirjo, Dhimitri
    Abstract: The current study empirically investigates and shows that on average, the possible implementation of the Transatlantic Trade and Investment Partnership (TTIP) would generally help in the fight against global warming. In particular, the study finds that a one percent increase in the bilateral trade between the U.S. and the typical EU member would reduce annual per capita emissions of CO2 and GHGs in the typical TTIP member by about 2.7 and 2.4 percent, respectively. However, results also show that TTIP may increase annual per capita emissions of GHGs in the U.S. by about 2.5 percent per year. These results stand because the factor endowment hypothesis (FEH) and the pollution haven hypothesis based on population density variations (PHH2) appear to dominate the pollution haven hypothesis based on national income differences (PHH1).
    Keywords: Free Trade; Environmental Economics; TTIP.
    JEL: F18 F53 F64
    Date: 2017–06–12
  4. By: Ashwin K Seshadri
    Abstract: Global warming from carbon dioxide (CO2) is known to depend on cumulative CO2 emissions. We introduce a model of global expenditures on limiting cumulative CO2 emissions, taking into account effects of decarbonization and rising global income and making an approximation to the marginal abatement costs (MAC) of CO2. Discounted mitigation expenditures are shown to be a convex function of cumulative CO2 emissions. We also consider minimum-expenditure solutions for meeting cumulative emissions goals, using a regularized variational method yielding an initial value problem in the integrated decarbonization rate. A quasi-stationary solution to this problem can be obtained for a special case, yielding decarbonization rate that is proportional to annual CO2 emissions. Minimum-expenditure trajectories in scenarios where CO2 emissions decrease must begin with rapid decarbonization at rate decreasing with time. Due to the shape of global MAC the fraction of global income spent on CO2 mitigation ("burden") generally increases with time, as cheaper avenues for mitigation are exhausted. Therefore failure to rapidly decarbonize early on reduces expenditures by a small fraction (on the order of 0.01 %) of income in the present, but leads to much higher burden to future generations (on the order of 1 % of income).
    Date: 2017–06
  5. By: Nguyen Quan (The 1st authorã ¯Ministry of Energy, Vietnam); Makoto Kakinaka (Graduate School for International Development and Cooperation, Hiroshima University); Koji Kotani (School of Economics and Management, Kochi University of Technology)
    Abstract: Given the argument that urbanization is closely related to the economic growth with improved the quality of life, the role of urbanization on energy consumption and pollution emission has received attention from regulators and researchers. Recently, Vietnam, as one of the rapid growth emerging countries, has been undergoing a massive urbanization with massive increase in energy consumption and pollution. The purpose of this study is to discuss how urbanization affects energy and CO2 emission intensities in Vietnam by using the province-level data over the period from 2010 to 2013. Our empirical analysis presents clear evidences supportive of the regional disparity of the effect of urbanization. For provinces with the low income level, urbanization would intensify energy and CO2 emission intensities. In contrast, for provinces with the high income level, urbanization would mitigate energy and CO2 emission intensities. This study also discusses related issues for three sectors of the Vietnamese economy: agricultural, industrial, and service sectors.
    Keywords: urbanization, income level, energy and CO2 emission intensities, Vietnam economy
    Date: 2017–06
  6. By: Hannah Krovetz; Rebecca Taylor; Sofia Villas-Boas
    Abstract: In the context of recent California drought years, we investigate empirically whether consumers are willing to pay for more efficient water usage in the production of four California agricultural products. We implement an internet survey choice experiment for avocados, almonds, lettuce, and tomatoes to elicit consumer valuation for water efficiency via revealed choices. We estimate a model of consumer choices where a product is defined as a bundle of three attributes: price, production method (conventional or organic), and water usage (average or efficient). Varying the attribute space presented to consumers in the experimental choice design gives us the data variation to estimate a discrete choice model—both conditional logit specifications and random coefficient mixed logit specifications. We find that on average consumers have a significant positive marginal utility towards water-efficiency and estimate that there is an implied positive willingness to pay (WTP) of about 12 cents per gallon of water saved on average. Moreover, informing consumers about the drought severity increases the WTP for low water footprint options, but not significantly. We find that there is heterogeneity in the WTP along respondents' education, race, and also with respect to stated environmental concern. Our findings have policy implications in that they suggest there to be a market based potential to nudge consumers who want to decrease their water footprint and follow a more sustainable diet, namely, by revealing information on the product's water footprint in a form of a label. Simulations of removing low water footprint labels from the choice set attributes imply significant consumer surplus losses, especially for the more educated, white, and more environmentally concerned respondents.
    JEL: Q18 Q25 Q54 Q51 Q21 M30
    Date: 2017–06
  7. By: Chia-Lin Chang (Department of Applied Economics Department of Finance National Chung Hsing University, Taiwan.); Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan And Discipline of Business Analytics University of Sydney Business School, Australia And Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain and Institute of Advanced Sciences Yokohama National University, Japan.); Guangdong Zuo (Department of Quantitative Finance National Tsing Hua University, Taiwan.)
    Abstract: Recent research shows that efforts to limit climate change should focus on reducing emissions of carbon dioxide over other greenhouse gases or air pollutants. Many countries are paying substantial attention to carbon emissions to improve air quality and public health. The largest source of carbon emissions from human activities in some countries in Europe and elsewhere is from burning fossil fuels for electricity, heat, and transportation. The price of fuel influences carbon emissions, but the price of carbon emissions can also influence the price of fuel. Owing to the importance of carbon emissions and their connection to fossil fuels, and the possibility of Granger (1980) causality in spot and futures prices, returns and volatility of carbon emissions, it is not surprising that crude oil and coal have recently become a very important research topic. For the USA, daily spot and futures prices are available for crude oil and coal, but there are no daily spot or futures prices for carbon emissions. For the EU, there are no daily spot prices for coal or carbon emissions, but there are daily futures prices for crude oil, coal and carbon emissions. For this reason, daily prices will be used to analyse Granger causality and volatility spillovers in spot and futures prices of carbon emissions, crude oil, and coal. A likelihood ratio test is developed to test the multivariate conditional volatility Diagonal BEKK model, which has valid regularity conditions and asymptotic properties, against the alternative Full BEKK model, which has valid regularity conditions and asymptotic properties under the null hypothesis of zero off-diagonal elements. Dynamic hedging strategies using optimal hedge ratios will be suggested to analyse market fluctuations in the spot and futures returns and volatility of carbon emissions, crude oil and coal prices.
    Keywords: Carbon emissions, Fossil fuels, Crude oil, Coal, Low carbon targets, Green energy, Spot and futures prices, Granger causality and volatility spillovers, Likelihood ration test, Diagonal BEKK, Full BEKK, Dynamic hedging.
    JEL: C58 L71 O13 P28 Q42
    Date: 2017–05
  8. By: Griffith-Jones, Stephany; Spratt, Stephen; Andrade, Rodrigo; Griffith-Jones, Edward
    Abstract: This paper examines if recent sharp declines in the price of oil and other fossil fuels will discourage private investment in renewable energy, which is key for climate change mitigation. The increase in private renewables investment in the Latin America and the Caribbean (LAC) region have been driven by sharp declines in costs alongside supportive policies. The sharp fall in the price of oil and other fossil fuels since 2014 risks disrupting continued private investment in renewables if they becomes insufficiently profitable. The decline in oil and other fossil fuel prices presents an opportunity for governments to reduce subsidies to them. For countries without such large subsidies, governments could increase taxes on them. This would alleviate their negative effects on climate change.
    Date: 2017–05
  9. By: Bas Jacobs; Frederick van der Ploeg
    Abstract: This paper analyses optimal corrective taxation and optimal income redistribution. The Pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages. Moreover, optimal pollution taxes should be set below the Pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods if preferences for commodities are not of the Gorman (1961) polar form. However, optimal pollution taxes should follow the first-best rule for the Pigouvian corrective tax if preferences for commodities are of the Gorman polar form even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods. The often-used quasi-linear, CES and Stone-Geary utility functions all belong to the Gorman polar class. If pollution taxes are not optimized, Pareto-improving green tax reforms exist that move the pollution tax closer to the Pigouvian tax if preferences are Gorman polar. Simulations demonstrate that optimal corrective taxes should be Pigouvian if the demand for polluting goods is derived from a LES demand system, but optimal corrective taxes deviate from the Pigouvian taxes if demand for polluting goods demand is derived from a PIGLOG demand system.
    Keywords: redistributive taxation, corrective pollution taxation, Gorman polar form, Stone-Geary preferences, PIGLOG preferences, green tax reform
    JEL: H21 H23 Q54
    Date: 2017
  10. By: Williams, Robert Crane; Bissessar, Shiva
    Abstract: In Caribbean countries, modern telecommunications infrastructure is vulnerable to an array of natural disasters, as exemplified by the impacts of Tropical Storm Erika in Dominica, Hurricane Joaquin in the Bahamas, and Hurricane Earl in Belize. At the same time, telecommunications service —especially mobile telephony and data services— can provide invaluable support to disaster management efforts by facilitating communication, coordination, and intelligence collection during emergency situations. Thus, as a matter of public safety, ensuring the resilience of telecommunications infrastructure in the face of natural hazards is of national importance. One way this resilience can be enhanced is by strengthening the relationship between operators of telecommunications services and national disaster offices. This paper suggests numerous areas for engagement between these entities and recommends the development of more formalized frameworks for mutual support. Among other issues, it considers needs for improvements to information sharing practices, collaboration on public early warning systems, and the inclusion of telecommunications operators in disaster drilling exercises.
    Date: 2017–05
  11. By: Saule Baurzhan (Department of Economics, Eastern Mediterranean University, Famagusta, TRNC via Mersin 10, Turkey); Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Ontario K7L 3N6, Canada on)
    Abstract: Many power utilities in sub-Saharan Africa (SSA) have inadequate generation capacity, unreliable services and high costs. They also face capital constraints that restrict them from making necessary investments needed for capacity expansion. Capacity shortages have compelled power utilities to use leased emergency power generating units, mainly oil-fired diesel generators, as a short-term solution. An economic analysis is carried that compares the economic net present value (ENPV) of fuel savings as well as greenhouse gas (GHG) savings, from investing capital in solar PV power generation plants as compared to investing the same amount of funds into diesel power plants. The results show that economic net present value is negative for solar PV plant, whereas it is a large positive value for the diesel plant. In addition, the diesel plant would be almost three times as effective in reducing GHG as the same value of investment in solar PV plant. Even with solar investment costs falling, it will take 12 to 24 years of continuous decline before solar PV will become cost-effective for SSA. The capital cost of solar PV would need to drop to US$ 1058.4 per KW to yield the same level of ENPV as the diesel plant.
    Keywords: : Solar PV, Diesel Electricity Generation; Greenhouse Gas Mitigation; Cost–Benefit Analysis; sub-Saharan Africa.
    JEL: Q42 O55
    Date: 2017
  12. By: Jesper S. Schou (Department of Food and Resource Economics, University of Copenhagen); Frank Jensen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: In this paper, we conduct a number of cost-benefit analyses to clarify whether the establishment of invasive species should be prevented or the damage of such species should be mitigated after introduction. We use the potential establishment of ragweed in Denmark as an empirical case. The main impact of the establishment of this invasive species is a substantial increase in the number of allergy cases, which we use as a measure of the physical damage. As valuation methods, we use both the cost-of-illness method and the benefit transfer method to quantify the total gross benefits of the two policy actions. Based on the idea of an invasion function, we identify the total and average net benefit under both prevention and mitigation. For both policy actions, the total and average net benefits are significantly positive irrespective of the valuation method used; therefore, both prevention and mitigation are beneficial policy actions. However, the total and average net benefits under mitigation are larger than the benefits under prevention, implying that the former policy action is more beneficial. Despite this result, we conclude that prevention, not mitigation, shall be used because of information externalities, altruistic preferences, possible catastrophic events and ethical considerations.
    Keywords: cost-benefit analysis, invasive species, prevention, mitigation
    JEL: D61 Q51 Q58
    Date: 2017–06
  13. By: Fidel Perez-Sebastian; Ohad Raveh
    Abstract: What determines legislatorsvoting behavior over federal tax policies? Conventional wisdom points primarily at party a¢ liation. This paper presents a novel mechanism of voting patterns across state-levels of scal advantage. We construct a political economy model of scal federalism with state scal asymmetries that originate in heterogeneity in natural resource abundance, representing a non-mobile source of income that provides a scal advantage in the inter-state scal competition. The model shows that representatives of natural resource rich states are more willing to vote in favor of federal tax increases, despite the lower net scal bene ts their states receive. This occurs because these states can reduce their tax rates as a response to an increase in the federal tax rate, and hence attract capital from the rest of the nation to the extent of increasing their pre-shock tax base. Data on roll-call votes in the U.S. Congress over major changes in federal tax bills in the post WW-II period support the predicted voting patterns. Speci cally, we nd that elected o¢ cials of resource rich states are more (less) supportive of capital-related federal tax increases (decreases), controlling for their party a¢ liation, ideology, federal transfers, and economic conditions. Our results indicate that the scal advantage channel is as dominant as party a¢ liation in driving legislatorsvoting decisions over federal tax policies.
    Keywords: Federal tax changes, voting behaviour, federalism, natural resources
    JEL: D72 H77 Q32
    Date: 2017
  14. By: Juan Infante-Amate; Iñaki Iriarte-Goñi
    Abstract: This paper presents the methodological and statistical basis of a new data series of Spain's bioenergy consumption between 1860 and 2010. We have estimated the primary production, appropriation, and the type of final use of all woody biomass, which represents the most consumed bioenergy. The series distinguishes the production source, including forests, olives, vineyards, and the rest of woody fruit orchards, as well as regional disaggregation at partido judicial level (425 in Spain) between 1860 and 1960. The bioenergy consumption series is represented both in primary (by energy source) and final (by energy carrier) energy. Our findings point out that i) consumption was higher than traditionally assumed in the previous literature; ii) there are four major phases in the period, including a slow decline from 1860 to 1914, a return to firewood with a small increase until 1955, a rapid decline from then to 1980, and finally, a return to bioenergies (with modern uses) from 1980 to the present; iii) there are strong regional disparities in firewood consumption between 1860 and 1960, ranging from 1 to 5 kg hab-1 día-1; iv) in the supply of bioenergies, geography also explains the type of product consumed: in Mediterranean provinces, woody crop-based consumption gained prominence, as they expanded over traditional forest areas; and v) stock of woody biomass has multiplied unprecedently since the mid-20th Century due to the abandonment of forestlands, the introduction of fast-growing species, and the optimal geographical allocation.
    Keywords: Energy Transition, Bioenergies, Firewood, Forestry History, Environmental History, Carbon Stocks
    JEL: N50 O13 Q42 Q57
    Date: 2017–06
  15. By: Frondel, Manuel
    Abstract: Deutschlands Klimaschutzbemühungen beruhen vor allem auf der Subventionierung der Verbreitung alternativer Energietechnologien. Eine solche Art von Treibhausgasminderungspolitik dürfte nahezu wirkungslos sein, solange es kein globales Abkommen gibt, mit dem der Ausstoß an Treibhausgasemissionen auf internationaler Ebene effektiv gesenkt werden kann. Wie in diesem Beitrag erläutert wird, bestehen die besten Aussichten auf ein wirksames weltweites Abkommen darin, dass man sich dafür auf einen global einheitlichen Preis für Treibhausgasvermeidung einigt. Ohne eine solche Einigung ist zu befürchten, dass das Pariser Abkommen mit seinem wenig überschaubaren System an unkoordinierten Minderungszusagen einzelner Staaten, mit deren Nichteinhaltung keinerlei Sanktionen verbunden sind, scheitert. Deutschland sollte daher einen gravierenden Strategiewechsel in seiner Klimapolitik vornehmen und sollte auf den Abschluss eines effektiven internationalen Klimaschutz-Abkommens drängen, statt weiterhin mit hohen Subventionen den Ausbau der erneuerbaren Energietechnologien als primäre Klimaschutzstrategie zu forcieren.
    Keywords: Emissionshandel,Klimaabkommen
    JEL: Q54
    Date: 2017
  16. By: F. Djoumessi, Yannick
    Abstract: This study analyzes the dynamics of green agricultural productivity growth through SSA countries. As subsidiary objectives: (i) to estimate efficiency levels of agricultural production system in SSA countries (ii) to estimate green agricultural productivity index through SSA countries (iii) and then to determine path nature of the green agricultural productivity index trough time and SSA countries. The methodology used to assess the degree of convergence in output per worker is based on the cointégration analysis, which recognizes that labour productivity is generally a non-stationary time series and convergence is a gradual process. First of all, we consider a decomposition of the growth in labour (green) productivity in terms of (1) efficiency change (2) technical change (3) (physical) capital accumulation and (4) growth in human capital. Then, a semi-parametric approach will be used to construct the best production practice frontier for a sample of SSA, and compute Malmquist productivity indexes and their decomposition into the underlying productivity components for each country. Finally, we will assess the individual contribution of the various components to the convergence in labour productivity.
    Keywords: convergence, green productivity, Malmquist index, Sub-Saharan Africa
    JEL: Q16
    Date: 2016–08–11
  17. By: Kaloud, Tobias
    Abstract: During the past decade, renewable energy sources have become an indispensable pillar in European electricity generation. This paper aims at examining if the increasing importance of renewables stimulates investment in European power transmission networks. The question of interest is addressed by an error correction investment model that builds on Neoclassical theory and is further augmented by recent literary findings. Under the proposed threefold estimation strategy, the share of renewables is not found to significantly influence investment spending when the full set of transmission system operators are considered. However, a slight and justified sample restriction leads to the conclusion that a rising share of renewable energy sources substantially increases investment in power transmission networks.
    Keywords: Renewables, Investment, Transmission Network, Electricity
    Date: 2017–06

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