nep-res New Economics Papers
on Resource Economics
Issue of 2011‒03‒19
three papers chosen by
Maximo Rossi
Universidad de la Republica

  1. OPTIMAL ENVIRONMENTAL POLICY DESIGN IN THE PRESENCE OF UNCERTAINTY AND TECHNOLOGY SPILLOVERS By Patrick Himmes; Christoph Weber
  2. How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks By Heutel, Garth
  3. Are compact cities environmentally friendly? By Gaigné, Carl; Riou, Stéphane; Thisse, Jacques-François

  1. By: Patrick Himmes; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen)
    Abstract: The stylized model presented in this paper extends the approach developed by Fischer and Newell (2008) by analysing the optimal policy design in a context with more than one externality while taking explicitly into account uncertainty surrounding future emission damage costs. In the presence of massive uncertainties and technology spillovers, well-designed sup-port mechanisms for renewables are found to play a major role, notably as a means for compensating for technology spillovers, yet also for reducing the investors’ risks. How-ever, the design of these support mechanisms needs to be target-aimed and well-focused. Besides uncertainty on the state of the world concerning actual marginal emission damage, we consider the technological progress through R&D as well as learning-by-doing. A portfolio of three policy instruments is then needed to cope with the existing externalities and optimal instrument choice is shown to be dependent on risk aversion of society as a whole as well as of entrepreneurs. To illustrate the role of uncertainty for the practical choice of policy instruments, an em-pirical application is considered. The application is calibrated to recent global data from IEA and thus allows identifying the main drivers for the optimal policy mix. In addition to assumptions on technology costs and uncertainty of emission damage cost, the impor-tance of technology spillover clearly plays a key role. Yet under some plausible parame-ter settings, direct subsidies to production are found to be of lower importance than very substantial R&D supports.
    Keywords: Externality, technology, learning, uncertainty, climate change, spillover, renewable energy, policy
    JEL: O38 Q21 Q28 Q48
    Date: 2011–03
    URL: http://d.repec.org/n?u=RePEc:dui:wpaper:1102&r=res
  2. By: Heutel, Garth (University of North Carolina at Greensboro, Department of Economics)
    Abstract: How should environmental policy respond to economic fluctuations caused by persistent productivity shocks? This paper answers that question using a dynamic stochastic general equilibrium real business cycle model that includes a pollution externality. I first estimate the relationship between the cyclical components of carbon dioxide emissions and US GDP and find it to be inelastic. Using this result to calibrate the model, I find that optimal policy allows carbon emissions to be procyclical: increasing during expansions and decreasing during recessions. However, optimal policy dampens the procyclicality of emissions compared to the unregulated case. A price effect from costlier abatement during booms outweighs an income effect of greater demand for clean air. I also model a decentralized economy, where government chooses an emissions tax or quantity restriction and firms and consumers respond. The optimal emissions tax rate and the optimal emissions quota are both procyclical: during recessions, the tax rate and the emissions quota both decrease.
    Keywords: Climate change; Environmental policy
    JEL: E32 Q54 Q58
    Date: 2011–03–08
    URL: http://d.repec.org/n?u=RePEc:ris:uncgec:2011_008&r=res
  3. By: Gaigné, Carl; Riou, Stéphane; Thisse, Jacques-François
    Abstract: There is a large consensus among international institutions and national governments to favor urban-containment policies - the compact city - as a way to improve the ecological performance of the urban system. This approach overlooks a fundamental fact: what matters for the ecological outcome of cities is the mix between the level of population density and the global pattern of activities. As expected, when both the intercity and intraurban distributions of activities are given, a higher population density makes cities more environmentally friendly. However, once we account for the fact that cities may be either monocentric or polycentric as well as for the possible relocation of activities between cities, the relationship between population density and the ecological performance of cities appears to be much more involved. Indeed, because changes in population density affect land rents and wages, firms and workers are incited to relocate, thus leading to new commuting and shipping patterns. We show that policies favoring the decentralization of jobs may be more environmentally desirable.
    Keywords: cities; commuting costs; greenhouse gas; transport costs; urban-containment policy
    JEL: D61 F12 Q54 Q58 R12
    Date: 2011–03
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:8297&r=res

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