New Economics Papers
on Resource Economics
Issue of 2012‒07‒14
nine papers chosen by

  1. Trade in a 'Green Growth' Development Strategy Global Scale Issues and Challenges By Jaime de Melo
  2. Post-Durban Climate Policy Architecture Based on Linkage of Cap-and-Trade Systems By Matthew Ranson; Robert N. Stavins
  3. Cleaner Technologies and the Stability of International Environmental Agreements By Benchekroun, H.; Ray Chaudhuri, A.
  4. The Climate Policy Dilemma By Robert S. Pindyck
  5. Economic analysis of projects in a greenhouse world By Hamilton, Kirk; Stover, Jana
  6. Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options By Kousky, Carolyn
  7. A Reexamination of Renewable Electricity Policy in Sweden By Fridolfsson, Sven-Olof; Tangerås, Thomas
  8. Rethinking Environmental Federalism in a Warming World By William Shobe; Dallas Burtraw
  9. Adaptation to Climate Change by Smallholder Farmers in Tanzania By Coretha Komba; Edwin Muchapondwa

  1. By: Jaime de Melo (University of Geneva and FERDI)
    Abstract: The paper surveys the state of knowledge about the trade-related environmental consequences of a country’s development strategy along three channels: (i) direct trade-environment linkages (overexploitation of natural resources and trade-related transport costs);(ii) ‘virtual trade’ in emissions resulting from production activities; (iii) the product mix attributes of a ‘green-growth’ strategy (environmentally preferable products and goods for environmental management). Main conclusions are the following. Trade exacerbates over-exploitation of natural resources in weak institutional environments, but there is little evidence that differences in environmental policies across countries have led to significant ‘pollution havens’. Trade policies to ‘level the playing field’ would be ineffective and result in destructive conflicts in the WTO. Lack of progress at the Doha round suggests the need to modify the current system of global policy making.
    Keywords: Environmental Goods, Natural Resources, Green Growth, Trade and Climate
    JEL: F18 Q56
    Date: 2012–06
  2. By: Matthew Ranson (Harvard University, Harvard Kennedy School); Robert N. Stavins (John F. Kennedy School of Government, Harvard University)
    Abstract: The outcome of the December 2011 United Nations climate negotiations in Durban, South Africa, provides an important new opportunity to move toward an international climate policy architecture that is capable of delivering broad international participation and significant global CO2 emissions reductions at reasonable cost. We evaluate one important component of potential climate policy architecture for the post-Durban era: links among independent tradable permit systems for greenhouse gases. Because linkage reduces the cost of achieving given targets, there is tremendous pressure to link existing and planned cap-and-trade systems, and in fact, a number of links already or will soon exist. We draw on recent political and economic experience with linkage to evaluate potential roles that linkage may play in post-Durban international climate policy, both in a near-term, de facto architecture of indirect links between regional, national, and sub-national cap-and-trade systems, and in longer-term, more comprehensive bottom-up architecture of direct links. Although linkage will certainly help to reduce long-term abatement costs, it may also serve as an effective mechanism for building institutional and political structure to support a future climate agreement.
    Keywords: Global Climate Change, Market-Based Instruments, Cap-and-Trade, Carbon Pricing, Carbon Taxes, Linkage, International Climate Policy Architecture
    JEL: Q54 Q58 Q40 Q48
    Date: 2012–05
  3. By: Benchekroun, H.; Ray Chaudhuri, A. (Tilburg University, Tilburg Law and Economics Center)
    Abstract: Abstract: This paper shows that, if countries are farsighted when deciding whether to defect from a coalition, then the implementation of cleaner technologies may jeopardize the chances of reaching an international environmental agreement. The grand coalition may be destabilized by the implementation of cleaner technologies, ultimately resulting in higher global emissions and lower global welfare. We further show that the higher the stock of pollution at the instant when the cleaner technology is implemented, the more likely that the above mechanism unfolds. We examine a reduction in the emission per output ratio as well as measures that enhance the natural rate of decay of stock pollutants.
    Keywords: transboundary pollution;renewable resource;clean technologies;coalition formation;differential games.
    JEL: Q20 Q54 Q55 Q58 C73
    Date: 2012
  4. By: Robert S. Pindyck
    Abstract: Climate policy poses a dilemma for environmental economists. The economic argument for stringent GHG abatement is far from clear. There is disagreement among both climate scientists and economists over the likelihood of alternative climate outcomes, over the nature and extent of the uncertainty over those outcomes, and over the framework that should be used to evaluate potential benefits from GHG abatement, including key policy parameters. I argue that the case for stringent abatement cannot be based on the kinds of modeling exercises that have permeated the literature, but instead must be based on the possibility of a catastrophic outcome. I discuss how an analysis that incorporates such an outcome might be conducted.
    JEL: D81 Q51 Q54
    Date: 2012–07
  5. By: Hamilton, Kirk; Stover, Jana
    Abstract: Recent carbon market prices are substantially lower than mean or median estimates of the social cost of carbon in the literature. Intuition would therefore suggest that'investment errors'are being made, in the sense that markets favor higher carbon-emitting projects, while global welfare would be larger with lower carbon-emitting projects. This intuition is correct in specific circumstances, but not others. For any comparison of two alternative projects, there is a carbon switching price that equalizes their net social benefits. From the perspective of maximizing global welfare, investment errors only occur when this switching price lies between the carbon market price and the social cost of carbon. Data on the costs of high-carbon and low-carbon electric generation projects suggest that there is no financing gap using mean or median published figures, but for precautionary (95th percentile) choices of the social cost of carbon, there is a financing gap between carbon market prices and the switching price that would trigger investment in the global welfare-maximizing low-carbon project. A global carbon fund to finance this gap could be conceived, but stricter emission caps and reforms of carbon markets are likely to be a more efficient solution to the problem.
    Keywords: Climate Change Mitigation and Green House Gases,Climate Change Economics,Markets and Market Access,Carbon Policy and Trading,Energy Production and Transportation
    Date: 2012–07–01
  6. By: Kousky, Carolyn (Resources for the Future)
    Abstract: This paper reviews the empirical literature on the economic impacts of natural disasters to inform both climate adaptation policy and the estimation of potential climate damages. It covers papers that estimate the short- and long-run economic impacts of weather-related extreme events as well as studies regarding the determinants of the magnitude of those damages (including fatalities). The paper also includes a discussion of risk reduction options and the use of such measures as an adaptation strategy for predicted changes in extreme events with climate change.
    Keywords: natural disaster damages, climate adaptation, risk mitigation
    JEL: Q54 D1 E2 O1
    Date: 2012–07–05
  7. By: Fridolfsson, Sven-Olof (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: Green certificates are the main instrument for promoting renewable electricity (RES-E) in Sweden. But certificates cover only a limited share of total RES-E production. Under partial coverage, crowding out may arise whereby costly new RES-E replaces inexpensive old RES-E. Granting certificates to all of RES-E production improves efficiency, but leaves windfall rent to otherwise profitable facilities. We also analyze transaction costs in the permit process for new RES-E in Sweden. Municipalities veto socially desirable projects because of asymmetrically distributed investment costs and benefits. We propose market-based permit fees rather than limited veto rights as a solution to this NIMBY problem.
    Keywords: Crowding out; Green certificates; NIMBY; Transaction costs; Windfall rent
    JEL: D23 Q48 Q52 Q54
    Date: 2012–06–18
  8. By: William Shobe (University of Virginia); Dallas Burtraw (Resources for the Future)
    Abstract: Climate change policy analysis has focused almost exclusively on national policy and even on harmonizing climate policies across countries, implicitly assuming that the harmonization of climate policies at the subnational level would be mandated or guaranteed. We argue that the design and implementation of climate policy in a federal union will diverge in important ways from policy design in a unitary government. National climate policies built on the assumption of a unitary model of governance are unlikely to achieve the expected outcome due to interactions with policy choices made at the subnational level. In a federal system, the information and incentives generated by a national policy must pass through various levels of subnational fiscal and regulatory policy. Effective policy design must recognize both the constraints and opportunities presented by a federal structure of government. Furthermore, policies that take advantage of the federal structure of government can improve climate governance outcomes.
    Keywords: climate change, subsidiarity, states, federalism, climate governance
    JEL: Q54 Q58 H7
    Date: 2012–01–18
  9. By: Coretha Komba; Edwin Muchapondwa
    Abstract: In Sub-Saharan Africa, climate change is set to hit the agricultural sector the most and cause untold suffering particularly for smallholder farmers. To cushion themselves against the potential welfare losses, smallholder farmers need to recognize the changes already taking place in their climate and undertake appropriate investments towards adaptation. This study investigates whether smallholder farmers in Tanzania recognize climate change and consequently adapt to it in their agricultural activities. The study also investigates the factors influencing their choice of adaptation methods to climate change To do this, the study collected and analyzed data from 556 randomly selected households in a sample of districts representing the six agro-ecological regions of the country. The data shows that Tanzanian smallholder farmers have observed changes in mean and variance precipitation and temperature and responded to it The farmers have generally used shortseason crops, drought-resistant crops, irrigation, planting dates and tree planting to adapt to the potential negative impacts of climate change on their agricultural yields. A binary logit model is used to investigate the factors influencing a famer's decision to undertake any adaptation at all to climate change while a multinomial logit model is used to investigate the factors influencing farmers' choice of specific adaptation methods. The Tanzanian government needs to help smallholder farmers overcome constraints they face in taking up adaptation to climate change. Furthermore, the government can play a significant role by promoting adaptation methods appropriate for particular circumstances e.g. particular crops or agro-ecological zones
    Keywords: Adaptation methods, smallholder farmers, agro-ecological zones, climate change, Tanzania.
    JEL: Q10 Q12 Q51 Q54 Q57
    Date: 2012

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