New Economics Papers
on Resource Economics
Issue of 2012‒05‒29
eight papers chosen by

  1. The SO2 Allowance Trading System and the Clean Air Act Amendments of 1990: Reflections on Twenty Years of Policy Innovation By Stowe, Robert C; Stavins, Robert Norman; Chan, Gabriel Angelo; Sweeney, Richard Leonard
  2. The Competitiveness Impacts of Climate Change Mitigation Policies By Aldy, Joseph Edgar; Pizer, William
  3. Green Industrial policy: trade and theory By Karp, Larry; Stevenson, Megan
  4. Climate Change, Buildings and Energy Prices By Alberto Gago; Michael Hanemann; Xavier Labandeira; Ana Ramos
  5. Dynamic Models of International Environmental Agreements: A Differential Game Approach By Emilio Calvo; Santiago J. Rubio
  6. Using the Market to Address Climate Change: Insights from Theory and Experience By Aldy, Joseph Edgar; Stavins, Robert Norman
  7. Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis By Sunghoon Chung
  8. The Promise and Problems of Pricing Carbon: Theory and Experience By Stavins, Robert Norman; Aldy, Joseph Edgar

  1. By: Stowe, Robert C; Stavins, Robert Norman; Chan, Gabriel Angelo; Sweeney, Richard Leonard
    Abstract: The introduction of the U.S. SO2 allowance-trading program to address the threat of acid rain as part of the Clean Air Act Amendments of 1990 is a landmark event in the history of environmental regulation. The program was a great success by almost all measures. This paper, which draws upon a re¬search workshop and a policy roundtable held at Harvard in May 2011, investigates critically the design, enactment, implementation, performance, and implications of this path-breaking application of economic thinking to environmental regulation. Ironically, cap and trade seems especially well suited to addressing the problem of climate change, in that emitted greenhouse gases are evenly distributed throughout the world’s atmosphere. Recent hostility toward cap and trade in debates about U.S. climate legislation may reflect the broader political environment of the climate debate more than the substantive merits of market-based regulation.
    Date: 2012
  2. By: Aldy, Joseph Edgar; Pizer, William
    Abstract: The pollution haven hypothesis suggests that unilateral domestic emission mitigation policies could cause adverse “competitiveness†impacts on domestic manufacturers as they lose market share to foreign competitors and relocate production activity – and emissions – to unregulated economies. We construct a precise definition of competitiveness impacts appropriate for climate change regulation that can be estimated exclusively with domestic production and net import data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate the effects of energy prices, which is in turn used to simulate the impacts of carbon pricing policy. We find that a U.S.-only $15 per ton CO2 price will cause competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among the most energy-intensive manufacturing industries. This amounts to roughly one-third of the total impact of a carbon pricing policy on these firms’ economic output.
    Date: 2011
  3. By: Karp, Larry (University of California, Berkeley. Dept of agricultural and resource economics); Stevenson, Megan (University of California, Berkeley. Dept of agricultural and resource economics)
    Abstract: This paper studies the reality and the potential for green industrial policy. We provide a summary of the green industrial policies, broadly understood, for five countries. We then consider the relation between green industrial policies and trade disputes, emphasizing theBrazil-US dispute involving ethanol and the broader US-China dispute. The theory of public policy provides many lessons for green industrial policy. We select four of these lessons, involving the Green Paradox, the choice of quantities versus prices with endogenous investment, the coordination issues arising from emissions control, and theability of green industrial policies to promote cooperation in reducing a global public bad like carbon emissions.
    Keywords: green industrial policy, trade conflicts, green paradox, asymmetric information, coordination games, participation games
    JEL: F13 F18 H21 H23
    Date: 2012–01
  4. By: Alberto Gago (Rede (Universidade de Vigo) and Economics for Energy); Michael Hanemann (Arizona State University and University of California at Berkeley); Xavier Labandeira (Rede (Universidade de Vigo) and Economics for Energy); Ana Ramos (Rede (Universidade de Vigo) and Economics for Energy)
    Abstract: Buildings are crucial to control present and future energy demand and, therefore, greenhouse gas concentrations in the atmosphere. In this chapter we suggest that, due to a number of general and specific barriers to the implementation of energy efficiency in buildings, energy prices and conventional energy and environmental policy instruments may not achieve the desired outcomes. Instead, we suggest a novel package of complementary measures that can simultaneously tackle the problems of imperfect information, split incentives among agents, uncertainty about cost and limited access to capital. The proposed policy package is defined around energy certification of buildings, uses flexible building codes, smart metering and employs a new tax on energy inefficiency to foster continuous incentives towards energy efficiency improvements and to provide revenues for an energy efficiency fund that provides capital to firms and poor households.
    Date: 2012–03
  5. By: Emilio Calvo (ERI-CES); Santiago J. Rubio (ERI-CES)
    Abstract: This article provides a survey of dynamic models of international environmental agreements (IEAs). The focus is on environmental problems that are caused by a stock pollutant as are the cases of the acid rain and climate change. For this reason, the survey only reviews the literature that utilizes dynamic state-space games to analyze the formation of international agreements to control pollution. The survey considers both the cooperative approach and the noncooperative approach. In the case of the latter, the survey distinguishes between the models that assume binding agreements and those that assume the contrary. An evaluation of the state of the art is presented in the conclusions along with suggestions for future research.
    Keywords: Externalities; public goods; pollution; international environmental agreements; state-space dynamic games; differential games; cooperative and noncooperative games; trigger strategies
    JEL: C73 D62 H41 Q50
    Date: 2012–04
  6. By: Aldy, Joseph Edgar; Stavins, Robert Norman
    Abstract: Emissions of greenhouse gases linked with global climate change are affected by diverse aspects of economic activity, including individual consumption, business investment, and government spending. An effective climate policy will have to modify the decision calculus for these activities in the direction of more efficient generation and use of energy, lower carbon-intensity of energy, and – more broadly – a more carbon-lean economy. The only approach to doing this on a meaningful scale that would be technically feasible and cost-effective is carbon pricing, that is, market-based climate policies that place a shadow-price on carbon dioxide emissions. We examine alternative designs of three such instruments – carbon taxes, cap-and-trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been and will continue to be largely a function of issues and structural factors that transcend the scope of environmental and climate policy.
    Date: 2011
  7. By: Sunghoon Chung (Southern Methodist University)
    Abstract: This paper studies how environmental regulation plays a role in shaping the pattern of outward foreign direct investment, and thereby assesses the pollution haven hypothesis. Empirical evidence for the pollution haven hypothesis has been inconsistent in the literature, possibly due to data aggregation across industries, clean technology innovation in advanced countries, factor endowment effects, unobserved heterogeneity, or endogeneity of environmental policies. To circumvent these problems, we exploit highly disaggregated industry-level panel data from South Korea along with an identification and estimation strategy that has been rarely used in prior studies. After dealing with such issues, we find strong evidence that polluting industries tend to invest more in countries with laxer environmental regulations. As a complementary evidence, we also find that environmentally lax countries tend to specialize in polluting industries when the same strategy is applied to South Korean import data covering the same sample countries, industries, and time periods. Theoretically, our findings are in line with a chain proposition of comparative advantage, also called the Quasi-Heckscher-Ohlin prediction.
    Keywords: pollution haven hypothesis, environmental regulation, comparative advantage, foreign direct investment, South Korea.
    JEL: F18 F23 Q56
    Date: 2012–05
  8. By: Stavins, Robert Norman; Aldy, Joseph Edgar
    Abstract: Because of the global commons nature of climate change, international cooperation among nations will likely be necessary for meaningful action at the global level. At the same time, it will inevitably be up to the actions of sovereign nations to put in place policies that bring about meaningful reductions in the emissions of greenhouse gases. Due to the ubiquity and diversity of emissions of greenhouse gases in most economies, as well as the variation in abatement costs among individual sources, conventional environmental policy approaches, such as uniform technology and performance standards, are unlikely to be sufficient to the task. Therefore, attention has increasingly turned to market-based instruments in the form of carbon-pricing mechanisms. We examine the opportunities and challenges associated with the major options for carbon pricing: carbon taxes, cap-and-trade, emission reduction credits, clean energy standards, and fossil fuel subsidy reductions.
    Date: 2011

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