nep-res New Economics Papers
on Resource Economics
Issue of 2012‒11‒03
twelve papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Green industrial policy : trade and theory By Karp, Larry; Stevenson, Megan
  2. The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment By Richard Schmalensee; Robert N. Stavins
  3. Tools for assessing the costs and benefits of green growth : the U.S. and Mexico By Harrington, Winston; Morgenstern, Richard; Velez-Lopez. Daniel
  4. The role of technological change in green growth By Popp, David
  5. Tax Evasion and Optimal Environmental Taxes By Liu, Antung Anthony
  7. The cost of adjustment to green growth policies : lessons from trade adjustment costs By Porto, Guido
  8. Psychology and behavioral economics lessons for the design of a green growth strategy By Weber, Elke U.; Johnson, Eric J.
  9. Fiscal Incentives and Environmental Infrastructure in China By Liu, Antung Anthony; Zhang, Junjie
  10. US Status on Climate Change Mitigation By Burtraw, Dallas; Woerman, Matt
  11. Food for fuel: The price of ethanol By Dominic K. Albino; Karla Z. Bertrand; Yaneer Bar-Yam
  12. Development of biofuels in China : technologies, economics and policies By Shiyan, Chang; Lili, Zhao; Timilsina, Govinda R.; Xiliang, Zhang

  1. By: Karp, Larry; Stevenson, Megan
    Abstract: This paper studies the reality and the potential for green industrial policy. It provides a summary of the green industrial policies, broadly understood, for five countries. It then considers the relation between green industrial policies and trade disputes, emphasizing the Brazil-United States dispute involving ethanol and the broader United States-China dispute. The theory of public policy provides many lessons for green industrial policy. The authors highlight 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 the ability of green industrial policies to promote cooperation in reducing a global public bad like carbon emissions.
    Keywords: Climate Change Economics,Environmental Economics&Policies,Climate Change Mitigation and Green House Gases,Energy Production and Transportation,Economic Theory&Research
    Date: 2012–10–01
  2. By: Richard Schmalensee (Howard W. Johnson Professor of Economics and Management, Emeritus at the Massachusetts Institute of Technology, and a Research Associate of the National Bureau of Economic Research); Robert N. Stavins (Albert Pratt Professor of Business and Government at the Harvard Kennedy School, a University Fellow of Resources for the Future, and a Research Associate of the National Bureau of Economic Research)
    Abstract: Two decades have passed since the Clean Air Act Amendments of 1990 launched a grand experiment in market-based environmental policy: the SO2 cap-and-trade system. That system performed well but created four striking ironies. First, by creating this system to reduce SO2 emissions to curb acid rain, the government did the right thing for the wrong reason. Second, a substantial source of this system’s cost-effectiveness was an unanticipated consequence of earlier railroad deregulation. Third, it is ironic that cap-and-trade has come to be demonized by conservative politicians in recent years, since this market-based, cost-effective policy innovation was initially championed and implemented by Republican administrations. Fourth, court decisions and subsequent regulatory responses have led to the collapse of the SO2 market, demonstrating that what the government gives, the government can take away.
    Keywords: Market-based Instruments, Cap-and-trade, Clean Air Act Amendments of 1990, Sulfur Dioxide, Acid Rain
    JEL: Q54 Q58 Q40 Q48
    Date: 2012–09
  3. By: Harrington, Winston; Morgenstern, Richard; Velez-Lopez. Daniel
    Abstract: This paper examines the processes used in the United States and Mexico to assess the economic costs and benefits of environmental improvement, the kinds of information obtained from these procedures, and the additional knowledge that is needed about both elements to improve understanding of the problems and prospects of advancing a green growth agenda. Because environmental and other development needs are large and resources are limited, it is important to choose the best projects, those with the highest returns on both public investments and private resources harnessed by regulation. The United States is well-established as a world leader in the use of quantitative methods to evaluate options for environmental regulation and policy. Mexico represents a case where a developing country has made clear advances in reforming its economy and in introducing transparency in its regulatory processes for environmental and other policy areas.
    Keywords: Environmental Economics&Policies,Regulatory Regimes,Public Sector Regulation,Transport Economics Policy&Planning,Climate Change Economics
    Date: 2012–10–01
  4. By: Popp, David
    Abstract: By reducing the costs of environmental protection, technological change is important for promoting green growth. This entails both the creation of new technologies and more widespread deployment of existing green technologies. This paper reviews the literature on environmentally friendly technological change, with a focus on lessons relevant to developing countries. It begins with a discussion of the data available for measuring the various steps of technological change. It continues with a discussion of sources of environmental innovation. Given that most innovation is concentrated in a few rich countries, this leads to a discussion of the remaining role for lower-income countries, followed by a discussion of technology transfer. Because of the importance of market failures, the paper discusses the role of both technology policy and environmental policy for promoting environmentally friendly technological change. The review concludes with a discussion of what environmental economists can learn from other fields.
    Keywords: Environmental Economics&Policies,ICT Policy and Strategies,Technology Industry,E-Business,Climate Change Mitigation and Green House Gases
    Date: 2012–10–01
  5. By: Liu, Antung Anthony (Resources for the Future)
    Abstract: This paper introduces a new argument to the debate about the role of environmental taxes in modern tax systems. Some environmental taxes, particularly taxes on gasoline or electricity, are more difficult to evade than taxes on labor or income. When the tax base is shifted in a revenue-neutral manner toward these environmental taxes, the result is a net reduction in the amount of tax evasion. Using a carbon tax as a motivating example, the "tax evasion effect" is shown to sharply reduce the welfare cost of controlling emissions. A simple computable general equilibrium model suggests that the impact of considering tax evasion can be large: costs are lowered by 28 percent in the United States, by 89 percent in China, and by 97 percent in India. In countries with high levels of pre-existing tax evasion, a carbon tax will pay for itself through improvements in the efficiency of the tax system.
    Keywords: environmental regulation, Pigouvian tax, tax evasion, green tax swap, tax interactions
    JEL: H21 H26 Q53 Q54
    Date: 2012–09–14
  6. By: Kirchner, Mathias; Schmid, Erwin
    Abstract: It is still difficult to derive general findings and conclusions from either economic theory or empirical studies on the relationship between trade and environment. Consequently, we aim to analyse environmental effects of agricultural trade policies in the Austrian Marchfeld region by applying an integrated modelling framework that accounts for heterogeneity in agricultural production and emission. Monte-Carlo simulations have been performed in order to assess the uncertainty of model parameters and policy impacts. The model results indicate that changes in trade policies have statistically significant but small effects on the environment in Marchfeld. Policy makers should rather concentrate on identifying efficient domestic environmental policies, which are in accordance with WTO trade rules.
    Keywords: Agricultural trade policies, agri-environmental payments, integrated assessment modelling, Monte-Carlo simulations, nitrate pollution, soil organic carbon, Agrarhandelspolitik, Agrarumweltmaßnahmen, Integrierte Modelanalyse, Monte-Carlo- Simulationen, Nitratverschmutzung, Organischer Bodenkohlenstoff, Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2012
  7. By: Porto, Guido
    Abstract: Green growth policies confront firms and workers with adjustments that may create welfare costs for different segments of the population and cause reductions in near-term actual versus potential gross domestic product. There is little evidence on the cost of adjustment to climate change measures, and only limited evidence for more general environmental policies, especially in developing countries. Therefore, this paper canvasses the research on adjustment costs to trade policies to draw analogies and highlight differences compared with the potential impacts of green growth policies. Trade policies affect prices and work directly on technology choice. In the presence of adjustment costs, firms may experience impacts on wages, employment, and incentives to adopt alternative technologies. Both types of trade policy impacts may be amplified by technology availability and credit constraints. Many green growth policies are likely to work via the same mechanisms, that is, taxes on emissions or changes in technology requirements. However, trade liberalization is typically seen as offering higher total incomes, albeit with winners and losers. Green growth policies are thought of as welfare-enhancing at the collective level but may not be income-enhancing at the individual level. This implies much more difficulty in measuring the potential gains associated with green growth policies.
    Keywords: Economic Theory&Research,Environmental Economics&Policies,Labor Markets,Labor Policies,Emerging Markets
    Date: 2012–10–01
  8. By: Weber, Elke U.; Johnson, Eric J.
    Abstract: A green growth agenda requires policy makers, from local to supranational levels, to examine and influence behavior that impacts economic, social, and environmental outcomes on multiple scales. Behavioral and social change, in addition or conjunction with technological change, is thus a crucial component of any green growth strategy. A better understanding of how and why people consume, preserve, or exploit resources or otherwise make choices that collectively impact the environment has important and far-reaching consequences for the predictive accuracy of more sophisticated models, both of future states of the world and of the likely impact of different growth strategies and potential risk management strategies. The prevailing characterization of human decision making in policy circles is a rational economic one. Reliance on the assumptions of rational choice excludes from consideration a wide range of factors that affect how people make decisions and therefore need to be considered in predictions of human reactions to environmental conditions or proposed policy initiatives. In addition, a more complete and more fully descriptive understanding of decision processes provide powerful tools for policy design that complement legal or economic instruments or may lead to more effective implementation of such policy instruments.
    Keywords: Environmental Economics&Policies,Economic Theory&Research,Knowledge for Development,Climate Change Economics,Climate Change Mitigation and Green House Gases
    Date: 2012–10–01
  9. By: Liu, Antung Anthony (Resources for the Future); Zhang, Junjie
    Abstract: This paper provides evidence that China's system of tax revenue sharing is an important explanation for differences in the rate of sewage treatment plant construction among its cities. As a result of the 1994 tax reform, Chinese cities retained different shares of their value-added tax (VAT). Exploiting the persistence of this sharing system, we use the VAT share in 1995 as an instrument for the present fiscal incentives. We find that a 10 percentage point increase in the VAT sharing rate resulted in a 13.8 percent increase in the construction of sewage treatment capacity. This result suggests that fiscal incentives can play an important role in the provision of pollution-reducing infrastructure.
    Keywords: sewage, water pollution, China pollution, fiscal federalism, tax sharing, tax federalism, China VAT sharing
    JEL: H4 H54 H77 Q53 Q56
    Date: 2012–09–21
  10. By: Burtraw, Dallas (Resources for the Future); Woerman, Matt (Resources for the Future)
    Abstract: In 2009, President Obama pledged that, by 2020, the United States would achieve reductions in greenhouse gas emissions of 17 percent from 2005 levels. With the failure of Congress to adopt comprehensive climate legislation in 2010, the feasibility of the pledge was put in doubt. However, we find that the United States is near to reaching this goal; currently, the country is on course to achieve reductions of 16.3 percent from 2005 levels in 2020. Three factors contribute to this outcome: greenhouse gas regulations under the Clean Air Act, secular trends including changes in relative fuel prices and energy efficiency, and subnational efforts. Perhaps even more surprising, domestic emissions are probably less than would have occurred if the Waxman–Markey cap-and-trade proposal had become law in 2010. However, at this point the United States is expected to fail to meet its financing commitments under the Copenhagen Accord for 2020.
    Keywords: greenhouse gases, additionality, emissions cap and trade, Clean Air Act, carbon dioxide
    JEL: Q54 Q58 H77
    Date: 2012–10–16
  11. By: Dominic K. Albino; Karla Z. Bertrand; Yaneer Bar-Yam
    Abstract: Conversion of corn to ethanol in the US since 2005 has been a major cause of global food price increases during that time and has been shown to be ineffective in achieving US energy independence and reducing environmental impact. We make three key statements to enhance understanding and communication about ethanol production's impact on the food and fuel markets: (1) The amount of corn used to produce the ethanol in a gallon of regular gas would feed a person for a day, (2) The production of ethanol is so energy intensive that it uses only 20% less fossil fuel than gasoline, and (3) The cost of gas made with ethanol is actually higher per mile because ethanol reduces gasoline's energy per gallon.
    Date: 2012–10
  12. By: Shiyan, Chang; Lili, Zhao; Timilsina, Govinda R.; Xiliang, Zhang
    Abstract: China promulgated the Medium and Long-Term Development Plan for Renewable Energy in 2007, which included targets of 2010 and 2020 for various renewable energy technologies including biofuels. The 2010 biofuel targets were met and even surpassed except for non-grain fuel ethanol; however, there is debate on whether and how the country will be able to meet the 2020 biofuels target. This paper provides a resource and technological assessment of biofuel feedstocks, compares biofuel production costs from various feddstocks and technologies, and evaluates policies introduced in the country for the development of biofuels. The paper also presents the projections on the production of biofuels under various policy scenarios. The study shows that China can potentially satisfy its non-grain fuel ethanol target by 2020 from the technology perspective. But it will probably fall far short of this target without additional fiscal incentives as production costs of non-grain feedstock based biofuels are expected to remain relatively high. By contrast, the 2020 target of biodiesel production has a high probability of being achieved because the target itself is relatively small. With additional support policies, it could develop even further.
    Keywords: Energy Production and Transportation,Renewable Energy,Climate Change Mitigation and Green House Gases,Energy and Environment,Environment and Energy Efficiency
    Date: 2012–10–01

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