nep-res New Economics Papers
on Resource Economics
Issue of 2005‒06‒27
two papers chosen by
Maximo Rossi
Universidad de la República

  1. Estimation of environmental efficiencies of economies and shadow prices of pollutants in countries in transition By Salnykov Mykhaylo; Zelenyuk Valentin
  2. Shifting Trade Patterns as a Means to Reduce Global CO2 Emissions: Implications for the Aluminium Industry By Anders Hammer Strømman; Edgar G. Hertwich; Faye Duchin

  1. By: Salnykov Mykhaylo; Zelenyuk Valentin
    Abstract: Various measures of technical efficiency, such as output distance function, input distance function and directional distance function can be used as sustainability indicators in the case when some outputs produced are undesirable, such as pollution. Shadow prices of environmental pollution asses short run perspectives of increase in pollution when desirable output is increased and may serve as a reference value for environmental taxes and prices for international emission trade. We make an attempt to estimate environmental efficiencies of countries (based on the output distance function with general directional vector) as well as shadow prices for selected pollutants (CO2, SO2 and NOx). Two alternative estimation approaches are employed: parametric (Translog specification) and nonparametric (DEA). Statistical characteristics of the obtained parametric estimates are assessed using the smooth homogeneous bootstrap technique. Our results indicate that, on average, countries value pollutants proportionally to their direct impact on human health (i.e. the most hazardous pollutants have the highest shadow prices). We find that in general both rich and poor countries can be fully environmentally efficient, while most of the countries in transition (CITs) turned out to be inefficient. Our findings imply that under emission permit trade agreements CITs will generally be permit sellers. By selling permits they will hamper their future ability of economic growth, thus some restrictions (which we propose) must be made in such agreements to limit their unsustainability for CITs. Our estimates show that currently global wealth and pollution are allocated inefficiently. We determine that different estimation techniques provide with statistically different estimates. The work provides with illustrative examples of using the estimates to draw forecasts on environmental effect of economic growth; to determine price range on international pollution permit markets and to estimate economically justified rates of environmental taxation. Finally, we provide policy implications and outline potential directions for the future studies in the field.
    Keywords: Russia, pollution, environmental efficiency, shadow prices, bootstrap, countries in transition, parametric and nonparametric techniques, bootstrap
    JEL: Q56 H23 C67 D24 C15
    Date: 2005–06–22
  2. By: Anders Hammer Strømman (Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program H¿yskoleringen 5, 7491 Trondheim, Norway); Edgar G. Hertwich (Norwegian University of Science & Technology Department of Energy and Process Technology, Industrial Ecology Program Høyskoleringen 5, 7491 Trondheim, Norway); Faye Duchin (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA)
    Abstract: This paper investigates how changes in the international division of labor can contribute to reducing CO2 emissions. The mitigation potential and costs implied by this mechanism are analyzed. Implications for the aluminium sector are assessed, including changes in the price of aluminium when global carbon emissions are constrained and the constraints are progressively tightened. The analysis makes use of the World Trade Model with Bilateral Trade (WTMBT), a linear program based on comparative advantage with any number of goods, factors, and regional trade partners. Minimizing factor use, WTMBT determines regional production, bilateral trade patterns, and region-specific prices. The model is extended for this study through the application of multi-objective optimization techniques and is used to explore efficient trade-offs between reducing CO2 emissions and increasing global factor costs. This application demonstrates how the WTMBT, with its global scope and regional and sectoral production detail, can be used to build bridges between global objectives and concerns about a specific industry in specific regions. This capability can extend the reach of more traditional studies in industrial ecology.
    JEL: F18 C61 C67 Q56
    Date: 2005–06

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