nep-res New Economics Papers
on Resource Economics
Issue of 2011‒05‒14
three papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Spillovers and Taxes: What Drives Strategic Competition in Environmental Policies? By B. Andrew Chupp
  2. Pollution Control: When, and How, to be Precautious By Stergios Athanassoglou; Anastasios Xepapadeas
  3. Choice Experiments in Enviromental Impact Assessment: The Toro 3 Hydroelectric Project and the Recreo Verde Tourist Center in Costa Rica By Carías Vega , Dora; Alpízar, Francisco

  1. By: B. Andrew Chupp (Department of Economics, Illinois State University)
    Abstract: It has been widely shown in the literature that states act strategically when forming environmental policies. However, this strategic interaction could be the result of two different effects. In the hypothesis of tax competition, states strategically set environmental standards in order to attract a fixed amount of mobile capital. In a spillover model, states set environmental policies strategically in response to pollution that spills over from other states. The previous literature has been unable to separate the two effects. Using weighting matrices specifically tailored to each form of competition, I am able to separate the effects, showing that tax competition explains 38% of interaction in environmental policy while spillover competition explains 62%.
    Keywords: Tax Competition, Spillovers, Environmental Policy
    Date: 2011–04
  2. By: Stergios Athanassoglou (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center for Climate Change); Anastasios Xepapadeas (Athens University of Economics and Business and Beijer Fellow)
    Abstract: The precautionary principle (PP) applied to environmental policy stipulates that, in the presence of physical uncertainty, society must take robust preventive action to guard against worst-case outcomes. It follows that the higher the degree of uncertainty, the more aggressive this preventive action should be. This normative maxim is explored in the case of a stylized dynamic model of pollution control under Knightian uncertainty. At time 0 a decision-maker makes a one-time investment in damage-control technology and subsequently decides on a desirable dynamic emissions policy. Adopting the robust control framework of Hansen and Sargent [10], we investigate optimal damage-control and mitigation policies. We show that optimal investment in damage control is always increasing in the degree of uncertainty, thus confirming the conventional PP wisdom. Optimal mitigation decisions, however, need not always comport with the PP and we provide analytical conditions that sway the relationship one way or the other. This result is interesting when contrasted to a model with fixed damage-control technology, in which it can be easily shown that a PP vis-a-vis mitigation unambiguously holds. We conduct a set of numerical experiments to determine the sensitivity of our results to specific functional forms of damage-control cost. We find that when the cost of damage-control technology is low enough, damage-control investment and mitigation may act as substitutes and a PP with respect to the latter can be unambiguously irrational.
    Keywords: Risk, Ambiguity, Robust Control, Precautionary Principle, Pollution Control
    JEL: C61 D80 D81
    Date: 2011–02
  3. By: Carías Vega , Dora; Alpízar, Francisco
    Abstract: Choice experiments, a stated preference valuation method, are proposed as a tool to assign monetary values to environmental externalities during the ex-ante stages of environmental impact assessment. This case study looks at the impacts of the Costa Rican Institute of Electricity’s Toro 3 hydroelectric project and its affects on the Recreo Verde tourism center in San Carlos, Costa Rica. Compared to other valuation methods (e.g., travel cost and contingent valuation), choice experiments can create hypothetical but realistic scenarios for consumers and generate restoration alternatives for the affected good. Although they have limitations that must be taken into account in environmental impact assessments, incorporating economic parameters—especially resource constraints and tradeoffs—can substantially enrich the assessment process.
    Keywords: stated-preference, economic valuation, choice experiments, hydropower, tourism, Costa Rica
    JEL: Q26 Q4
    Date: 2011–05–05

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