New Economics Papers
on Resource Economics
Issue of 2011‒01‒23
five papers chosen by

  1. How Emission Certificate Allocations Distort Fossil Investments: The German Example By Michael Pahle; Lin Fan; Wolf-Peter Schill
  2. Efficiency Advantages of Grandfathering in Rights-Based Fisheries Management By Gary. D. Libecap; Terry Anderson; Ragnar Arnason
  3. Water Rights and Markets in the U.S. Semi Arid West: Efficiency and Equity Issues By Gary D. Libecap
  4. Natural Resource Management: Challenges and Policy Options By Coria, Jessica; Sterner, Thomas
  5. Does Environmental Economics Produce Aeroplanes Without Engines? - On the Need for an Environmental Social Science By Folmer, Henk; Johansson-Stenman, Olof

  1. By: Michael Pahle; Lin Fan; Wolf-Peter Schill
    Abstract: Despite political activities to foster a low-carbon energy transition, Germany currently sees a considerable number of new coal power plants being added to its power mix. There are several possible drivers for this "dash for coal", but it is widely accepted that windfall profits gained through free allocation of ETS certificates play an important role. Yet the quantification of allocation-related investment distortions has been limited to back-of-the envelope calculations and stylized models so far. We close this gap with a numerical model integrating both Germany's particular allocation rules and its specific power generation structure. We find that technology specific new entrant provisions have substantially increased incentives to invest in hard coal plants compared to natural gas at the time of the ETS onset. Expected windfall profits compensated more than half the total capital costs of a hard coal plant. Moreover, a shorter period of free allocations would not have turned investors' favours towards the cleaner natural gas technology because of preexisting economic advantages for coal. In contrast, full auctioning of permits or a single best available technology benchmark would have made natural gas the predominant technology of choice.
    Keywords: Emissions trading; Allocation rules; Power markets; Investments
    JEL: Q48 Q54 Q58
    Date: 2011
  2. By: Gary. D. Libecap; Terry Anderson; Ragnar Arnason
    Abstract: We show that grandfathering fishing rights to local users or recognizing first possessions is more dynamically efficient than auctions of such rights. It is often argued that auctions allocate rights to the highest-valued users and thereby maximize resource rents. We counter that rents are not fixed in situ, but rather depend additionally upon the innovation, investment, and collective actions of fishers, who discover and enhance stocks and convert them into valuable goods and services. Our analysis shows how grandfathering increases rents by raising expected rates of return for investment, lowering the cost of capital, and providing incentives for collective action.
    Keywords: Fishing rights, property rights, allocating fishing rights, grandfathering fishing rights, auctions of fishing rights, fisheries rent
    JEL: N Q0 Q22 K11 D23
    Date: 2010–12
  3. By: Gary D. Libecap
    Abstract: There are both high resource and political costs in defining and enforcing property rights to water and in managing it with markets. In this paper, I examine these issues in the semi-arid U.S. West where many of the intensifying demand and supply problems regarding fresh water are playing out. I begin by illustrating the current state of water markets in 12 western U.S. states. There are major differences in water prices across uses (agriculture, urban, environmental) and these differences appear to persist, suggesting that water markets have not developed fully enough to narrow the gaps. Moreover, there is considerable difference in the extent and nature of water trading across the western states, suggesting that water values and transaction costs of trade vary considerably across jurisdictions. I then turn to the resource and political costs of defining water rights and expanding the use of markets. In this discussion, efficiency and equity objectives play important, often conflicting, roles. This tension reflects the very social nature of the water resource.
    Date: 2010–12
  4. By: Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Much of the improvement in living standards in developed and developing countries alike is attributable to the exploitation of nonrenewable and renewable resources. The problem is to know when the exploitation occurs at rates and with technologies that are sustainable. If they are not sustainable, this state of affairs presents a serious problem for the future. A long-term management perspective is needed in order to avoid irreversible degradation of renewable resources. This paper examines major challenges to natural resource management as well as policy options.<p>
    Keywords: Natural resources; policy instruments; property rights; environmental regulations; tradable quotas; taxes; voluntary agreements; liability; subsidies; subsidy reduction; deposit-refunds.
    JEL: Q50
    Date: 2011–01–12
  5. By: Folmer, Henk (Department of Spatial Sciences, University of Groningen); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this paper we first critically review conventional environmental economics. We conclude that the standard theory offers too narrow a perspective for many real world problems and that many theories are not empirically tested. Consequently, environmental economics is at risk of producing aeroplanes without engines. Next, we welcome and discuss some recent trends, particularly the rapid developments of behavioural and new institutional economics as well as the increased interest in empirical analysis. Yet, we conclude that more „logical duels between competing theories, more interaction between theory and empirics, and more integration between the social sciences are needed to achieve a better understanding of real world environmental problems and the development of adequate policy handles. Finally, we present an outline of steps towards the development of an environmental social science and briefly present the papers that make up this special issue as important building stones of such a discipline.<p>
    Keywords: economic methodology; environmental economics; experiments; logical duels; moral philosophy; political science; psychology; sociology; spatial sciences; surveys
    JEL: A12 B41 Q50
    Date: 2011–01–12

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.