nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2011‒12‒19
five papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Infrastructure investment and incentives with supranational funding By Socorro, M. Pilar.; De Rus, Ginés
  2. Incentives and Adaptation: Evidence from Highway Procurement in Minnesota By Gregory Lewis; Patrick Bajari
  3. Carbon Credit Payment Options for Agroforestry Projects in Africa By Allwardt, Jennifer
  4. A review of recent infrastructure investment in Latin America and the role of private pension funds By Enestor Dos Santos; Diego Torres; David Tuesta
  5. Combining cap-and-trade with offsets: Lessons from CER use in the EU ETS in 2008 and 2009 By Raphael Trotignon

  1. By: Socorro, M. Pilar.; De Rus, Ginés
    Abstract: Public infrastructure investment is usually co-financed by supranational organizations. The selection of projects is supposed to be decided using the information provided by conventional cost-benefit analysis. Nevertheless, we show that the type of institutional design regarding the financing mechanism affects the incentives of national governments to reduce costs and increase revenues, affecting project selection, the infrastructure capacity, the choice of technology, and the type of contract used for the construction and operation of projects. With a total cost-plus financing mechanism there is no incentive in being efficient and the price charged for the use of the new infrastructure is zero, the market quantity excessive, and the level of supranational financing disproportionate. In contrast, with a sunk cost-plus financing mechanism social optimal pricing is always implemented, though there is no incentive in being efficient. Finally, with a fixed-price financing mechanism the maximal efficiency may be achieved, and the socially optimal pricing is always implemented.
    Date: 2011–11
  2. By: Gregory Lewis; Patrick Bajari
    Abstract: Procurement projects often encounter unanticipated problems. Deadlines and penalties are one important instrument used to incentivize contractors to adapt their plans. We develop a theory of highway procurement in which contractors must modify their construction rate following a productivity shock. We model how time incentives affect the work rate and time taken, characterizing the efficient contract design. Using new micro-level data from Minnesota that includes day-by-day information on work plans, actual outcomes and delays, we find strong evidence supporting the theory. As an application, we build an econometric model that endogenizes adaptation, and simulate how different incentive structures affect outcomes and the variance of contractor payments. Accounting for the traffic delays caused by construction, switching to a more efficient design would substantially increase welfare without substantially increasing risk.
    JEL: D86 H57 L92
    Date: 2011–12
  3. By: Allwardt, Jennifer
    Abstract: The potential of using carbon offset credits from agroforestry projects for farmers in developing areas has become more prevalent in both Clean Development Mechanism and voluntary carbon markets. Since the implementation of the Kyoto Protocol, many international development organizations have been interested in using the Clean Development Mechanism (CDM) to help both mitigate CO2 emissions through agroforestry projects offsets and as a poverty reduction tool. Few organizations that have begun talking with farmers about planting trees for carbon offset credits have been able to tell the farmers how much money they would receive from their new tree growth or the costs they will incur in doing so. For this study, a whole farm budget toolkit was designed to help fill this gap and to help evaluate payment methods for carbon offset credits in agroforestry projects. This toolkit is intended to be used by development assistance organizations and farmers starting carbon credit programs. It gives a rough estimate of payments based on a farmerâs or groupâs unique situation. For testing purposes, previous agroforestry projects were entered into the toolkit to evaluate the benefits accruing to farmers using data on carbon credit payment methods for two previous agroforestry projects in Africa. The toolkit was also field tested in Kenya with individual farmers and a farmersâ group.
    Keywords: agroforestry, budget toolkit, carbon credits, Clean Development Mechanism, payment methods, smallholder farmers, Agricultural Finance, Community/Rural/Urban Development, International Development, Land Economics/Use, O13, O22, R30, Q54,
    Date: 2011
  4. By: Enestor Dos Santos; Diego Torres; David Tuesta
    Abstract: Latin America is enjoying a period of extensive growth. If this trend is to continue into the coming years, the key insufficiencies that could limit total factor productivity will have to be dealt with in order to prevent bottlenecks. One of these insufficiencies is the infrastructure gap. The sources of finance required for infrastructure projects could include a more intensive use of the major resources accumulated by private pension funds. These funds have already been participating in a number of ways in financing projects of this kind through a variety of financial vehicles. Giving more scope to this source of finance means ensuring an appropriate framework, which includes: making substantial changes in the process of socioeconomic cost-benefit analysis; transparent, effective and efficient auctions; a more effective bureaucracy; laws and regulatory processes that ensure appropriate management of the risks of the project at all its stages; and regulation that adapts to the pension funds' investment regime, which has a strict fiduciary role in favor of the savings of the pension savers who will receive pensions in their old age. This is the only way of ensuring a virtuous circle between infrastructure investment by pension funds and economic growth, which will lead to greater benefits for the country involved.
    Keywords: Infrastructure, Private Pensions, Pension Funds
    JEL: O18 J32 G23
    Date: 2011–11
  5. By: Raphael Trotignon (PhD Student at Paris-Dauphine University (CGEMP/LEDa) and researcher at the Climate Economics Chair.)
    Abstract: The EU ETS is the first full scale example of a cap and trade system linked to project based mechanisms. While most papers on the subject focus on the policy design point of view, few have analyzed the facts. Offsets have been used by European industrial installations in 2008 and 2009. If the linking with an offset mechanism is successful, one should find evidence that offsets are used on a large scale, i.e. that significant volumes of credits go from a large number of projects to a large number of installations, independently from their sector, size or position, and that the limit of import is fully used at the end of the phase. This paper is an ex-post analysis of offsets used in the EU ETS in terms of intensity, frequency, and efficiency. This allows us to answer partially those questions and to identify possible explaining factors.
    Keywords: EU ETS, Clean Development Mechanism, Linking
    JEL: Q49 Q50 K32
    Date: 2011–03

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