nep-res New Economics Papers
on Resource Economics
Issue of 2013‒06‒09
six papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Environmental Policy to Foster a Green Differentiated Energy Market By Gutierrez-Hita, Carlos; Martinez-Sanchez, Francisco
  2. Emissions trading in China: Principles, design options and lessons from international practice By Frank Jotzo
  3. Evolution of the Global Distribution of Carbon Dioxide: A Finite Mixture Analysis By Michele Battisti; Michael S. Delgado; Christopher F. Parmeter
  4. Optimal Emission Pricing in the Presence of International Spillovers: Decomposing Leakage and Terms-of-Trade Motives By Christoph Böhringer; Andreas Lange; Thomas F. Rutherford
  5. Efficiency and Equity Implications of Alternative Instruments to Reduce Carbon Leakage By Christoph Böhringer; Jared C. Carbone; Thomas F. Rutherford
  6. The Effect of Transport Policies on Car Use: A Bundling Model with Applications By Francisco Gallego; Juan-Pablo Montero; Christian Salas

  1. By: Gutierrez-Hita, Carlos; Martinez-Sanchez, Francisco
    Abstract: Many products are made by technological processes that cause environmental damage. Current environmental concerns are affecting firms' technological processes as a result of government intervention in markets but also due to environmental awareness on the part of consumers. This paper assumes a spatial competition model where two firms sell a homogeneous product with input differentiation: the product is made by green and polluting inputs. In a two-stage game firms first decide what technology bundle to use (the ratio of green and polluting inputs) and then Bertrand competition takes place. First, it is shown that in the absence of government intervention both firms prefer to produce by using a bundle of green and polluting technologies which is not welfare maximizing. Second, the option of subsidizing green technology and the existence of a publicly-owned firm are analyzed. Overall, both policies yield a more environmentally-friendly technology bundle, except when costs of green energy technologies are high enough. Moreover, environmental social welfare is enhanced.
    Keywords: Differentiated inputs · Environmental policy · Green market · Mixed duopoly · Subsidy
    JEL: D11 D43 L11
    Date: 2013–05–29
  2. By: Frank Jotzo
    Abstract: China is considering a national emissions trading scheme, to follow several pilot schemes, as part of the suite of policies to reduce the growth of greenhouse gas emissions. A carbon tax or tax-like scheme could be an alternative. However there are special challenges in a fast-growing economy where the energy sector is heavily regulated. This paper analyses policy design options based on principles, China’s circumstances, and Australian and European experiences. The main findings are the following. (1) Features such as variable permit supple, price floor/ceiling or a fixed permit price are desirable to provide a stable price signal, especially in China’s case. A carbon tax can be a viable alternative or complement to emissions trading. (2) Any free permits or other assistance to industry should be carefully designed to preserve incentives to cut emissions, limited so that governments can use carbon revenue to support households or pay for other policy measures, and regularly reviewed to avoid lock-in of unnecessary payments. (3) Broad coverage of emissions pricing is necessary for effectiveness, including in electricity supply and demand. Carbon pricing can be partly effective in the electricity sector ahead of comprehensive energy sector reform, ultimately however market-based energy pricing is needed. (4) Carbon pricing should be seen in the broader context of economic policy reform. It offers opportunities to support broader goals of fiscal, energy and environmental policy.
    Keywords: Instrument China, emissions trading, carbon tax
    JEL: Q48 Q52 Q54 Q56 Q58 O12
    Date: 2013–05
  3. By: Michele Battisti (Department of Law, Politics and Society, University of Palermo); Michael S. Delgado (Department of Agricultural Economics, Purdue University); Christopher F. Parmeter (Department of Economics, University of Miami)
    Abstract: Economists and environmental policymakers have recently begun advocating a bottom-up approach to climate change mitigation, focusing on reduction targets for groups of nations, rather than large scale global policies. We advance this discussion by taking a quantitative perspective, focusing on econometric identification of groups of countries that have statistically similar distributions of carbon emissions using a broad range of finite mixture models. Nearly all of our results yield a consistent pattern: after 1980, there are two distinct emissions distributions, and that these distributions continue to evolve over time. We provide a rigorous analysis of these distributional differences along several important dimensions: polarization, mobility, and volatility. We discuss how this robust quantitative evidence may aid policymakers in forging a heterogeneous carbon abatement policy.
    Keywords: Carbon emissions; Emissions groups; Heterogeneity; Abatement policy; Finite mixture models
    JEL: C30 C38
    Date: 2013–05–08
  4. By: Christoph Böhringer (University of Oldenburg, Department of Economics); Andreas Lange (University of Hamburg, Department of Economics, Germany); Thomas F. Rutherford (ETH Zürich, CEPE, Switzerland)
    Abstract: Carbon leakage provides an efficiency argument for unilateral climate policy to differentiate emission prices in favor of emission-intensive and trade-exposed sectors. At the same time, differential emission pricing can be (mis-)used as a beggar-thy-neighbor policy to exploit terms of trade. Using an optimal tax framework, we propose a method to decompose the leakage motive and the terms-of-trade motive for emission price differentiation. We employ our method for a quantitative impact assessment of unilateral climate policy based on empirical data. We find that the leakage motive yields only small efficiency gains compared to uniform emission pricing. Likewise, the terms-of-trade motive has rather limited potential for strategic burden shifting. We conclude that the simple first-best rule of uniform emission pricing remains a practical guideline for unilateral climate policy design.
    Keywords: optimal taxation, emission leakage, terms of trade
    JEL: H21 Q43 R13 D58
    Date: 2012–06
  5. By: Christoph Böhringer (University of Oldenburg, Department of Economics, Germany); Jared C. Carbone (University of Calgary, Canada); Thomas F. Rutherford (University of Wisconsin, USA)
    Abstract: The cost-effectiveness of unilateral emission abatement can be seriously hampered by emission leakage. We assess three widely-discussed proposals for leakage reduction targeted at energy-intensive and trade-exposed industries: border tax adjustments, output-based allocation and industry exemptions. We find that none of these measures amounts to a “magic bullet” when both efficiency and equity criteria matter. Border tax adjustments reduce leakage and provide global cost savings but exacerbate regional inequality. Exemptions produce very little leakage reduction and run the risk of increasing efficiency cost of climate policy. Output-based allocation does no harm but also does relatively little good by our outcome measures.
    Keywords: Unilateral Climate Policy, Leakage, Efficiency, Equity
    Date: 2012–06
  6. By: Francisco Gallego; Juan-Pablo Montero; Christian Salas
    Abstract: In an effort to reduce pollution and congestion, Latin American cities have experimented with different policies to persuade drivers to give up their cars in favor of public transport. Borrowing from the bundling literature, the paper presents a novel model of vertical and horizontal differentiation applied to transport decisions: households differ in their preferences for transportation modes -cars vs public transport- and in the amount of travel. The model captures in a simple way a household's response to a policy shock, i.e., how to allocate existing car capacity, if any, to competing uses (peak vs off-peak hours) and how to adjust such capacity overtime. Using few observables, the model is then used to analyze the effects of two major transport policies: the driving restriction program introduced in Mexico-City in November of 1989 -Hoy-No-Circula (HNC)- and the public transport reform carried out in Santiago in February of 2007 -Transantiago (TS). The model's simulated effects are not only consistent with the econometric estimates in Gallego et al (2013) but also help understand the mechanisms that explain them.
    Keywords: public transport, driving restrictions, pollution, congestion
    JEL: R41 Q53 Q58
    Date: 2013

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