nep-res New Economics Papers
on Resource Economics
Issue of 2013‒11‒16
nine papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Border Carbon Adjustment and International Trade: A Literature Review By Madison Condon; Ada Ignaciuk
  2. Two World Views on Carbon Revenues By Burtraw, Dallas; Sekar, Samantha
  3. Wood Bioenergy and Land Use: A Challenge to the Searchinger Hypothesis By Sedjo, Roger A.; Sohngen, Brent; Riddle, Anne
  4. Water Resoures and Unconventional Fossil Fuel Development: Linking Physical Impacts to Social Costs By Kuwayama, Yusuke; Olmstead, Sheila; Krupnick, Alan
  5. Tax Reform and Environmental Policy: Options for Recycling Revenue from a Tax on Carbon Dioxide By Goulder, Lawrence H.; Hafstead, Marc A.C.
  6. Using the Tax System To Address Competition Issues with a Carbon Tax By Metcalf, Gilbert E.
  7. The Evolving Geography of China’s Industrial Production: Implications for Pollution Dynamics and Urban Quality of Life By Siqi Zheng; Cong Sun; Ye Qi; Matthew E. Kahn
  8. Pollution Control Effort at China’s River Borders: When Does Free Riding Cease? By Matthew E. Kahn; Pei Li; Daxuan Zhao
  9. The magnitude of the impact of a shift from coal to gas under a Carbon Price By Liam Wagner; Lynette Molyneaux; John Foster

  1. By: Madison Condon; Ada Ignaciuk
    Abstract: An important source of political opposition to measures aimed at reducing emissions of greenhouse gases (GHGs) arises from concerns over their negative effects on the competitiveness of domestic firms, especially those that are energy-intensive and exposed to competition from foreign producers. Politicians and industry representatives alike fear that imports from countries without similar regulations can gain cost-of-production advantages over domestic goods. With many of the major economies of the world contemplating unilateral action to restrict their carbon emissions (while continuing to pursue co-ordinated multilateral action), the parallel concern of carbon leakage — whereby domestic reductions in emissions are partially or wholly counterbalanced by increased emissions elsewhere in the world — has also arisen. Various adjustments have been proposed, both in the academic literature and in draft climate legislation, including levying a border tax or requiring importers to surrender a quantity of carbon permits. Collectively, these kinds of adjustments are often referred to as border carbon adjustments, or BCAs. This note reviews the existing literature on BCAs and alternatives to BCAs and discusses what various researchers have concluded about the efficacy of BCAs from both a trade and an environmental perspective.
    Keywords: trade and environment, border tax adjustment, climate change, border carbon adjustment
    JEL: F13 F18 F53 F59 H23 K32 K33 Q48 Q54 Q58
    Date: 2013–10–31
  2. By: Burtraw, Dallas (Resources for the Future); Sekar, Samantha (Resources for the Future)
    Abstract: The introduction of a price on carbon dioxide is expected to be more efficient than prescriptive regulation. It also instantiates substantial economic value. Initially programs allocated this value to incumbent firms (grandfathering), but the growing movement toward auctioning or emissions fees makes carbon revenues into a payment for environmental services. This paper asks, to whom should this payment accrue? If the atmosphere resource, as a common property resource, is viewed as the property of government, then the decision of how to use the revenue can be viewed as a fiscal problem, and efficiency considerations dominate. If the atmosphere is viewed as held in common, then the revenue might be considered compensation to owners and delivered as payment to individuals. This decision has efficiency and distributional consequences that affect the political economy and the likelihood and durability of climate policy. We summarize trends among six existing carbon-pricing programs.
    Keywords: auction, cap and trade, emissions fee, emissions tax, allocation, grandfathering, climate change, policy
    JEL: H23 N5 P48
    Date: 2013–10–10
  3. By: Sedjo, Roger A. (Resources for the Future); Sohngen, Brent; Riddle, Anne
    Abstract: A concern of many environmentalists is that the use of biomass energy will decimate the forests. Searchinger et al. (2008, 2009) examined this issue related to corn ethanol and suggested that substituting corn ethanol for petroleum would increase carbon emissions associated with the land conversion abroad necessary to offset the decline in corn availability. Associated with these concerns is the overall issue of climate change (IPCC 2006). This issue is broader than simply corn. If agricultural croplands are drawn into the production of biofuel feedstocks, commodity prices are expected to rise, triggering land conversions overseas, releasing carbon emissions, and offsetting the carbon reductions expected from bioenergy. Using a general stylized forest sector management model, our study examines the economic potential of traditional industrial forests and supplemental dedicated fuelwood plantations to produce biomass on submarginal lands. It finds that these sources can economically produce large levels of biomass without compromising crop production, thereby mitigating the land conversion and carbon emissions effects posited by the Searchinger Hypothesis.
    Keywords: biomass, forests, fuelwood, land use, land conversion, wood biomass, bioenergy, carbon emissions, feedstock, Searchinger Hypothesis, climate change
    JEL: Q1 Q16 Q23 Q24 Q42 Q54
    Date: 2013–11–05
  4. By: Kuwayama, Yusuke (Resources for the Future); Olmstead, Sheila; Krupnick, Alan (Resources for the Future)
    Abstract: The production of crude oil and natural gas from unconventional reservoirs has become a growth sector within the North American energy industry, and current projections indicate that the production of some of these unconventional fossil fuels will continue accelerating in the foreseeable future. This shift in the energy industry has been accompanied by rising concerns over potential impacts on water resources because producing these fuels is thought to require more water per unit of energy produced than conventional sources and may lead to greater degradation of water quality. In this paper, we address these emerging environmental issues by (a) providing a comprehensive overview of the existing literature on the water quantity and quality implications of producing the main unconventional fossil fuels in North America and (b) characterizing the differences in social costs that arise from the extraction and production of these fuels versus those from conventional fossil fuel production.
    Date: 2013–11–06
  5. By: Goulder, Lawrence H.; Hafstead, Marc A.C. (Resources for the Future)
    Abstract: Carbon taxes are a potential revenue source that could play a key role in major tax reform. This paper employs a numerical general equilibrium model of the United States to evaluate alternative tax reductions that could be financed by the revenues from a carbon tax. We consider a carbon tax that begins at $10 per ton in 2013 and increases at 5 percent per year to the year 2040. The net revenue from the tax is substantial, and the GDP and welfare impacts of the tax depend significantly on how this revenue is recycled to the private sector. Under our central case simulations (which do not account for beneficial environmental impacts) over the period 2013–2040, the tax reduces GDP by .56 percent when revenues are returned through lump-sum rebates to households, as compared with .33 and .24 percent when the revenues are recycled through reductions in personal and corporate tax rates, respectively. Introducing tradable exemptions to the carbon tax reduces or eliminates the negative impacts on the profits of the most vulnerable carbon-supplying or carbon-using industries. The GDP and welfare impacts are somewhat larger when such exemptions are introduced.
    Keywords: carbon tax, tax reform, climate
    JEL: Q50 Q58 H23
    Date: 2013–10–08
  6. By: Metcalf, Gilbert E.
    Abstract: This paper considers how tax reductions financed by a carbon tax could be designed to mitigate the need for specific relief for firms in select energy-intensive, trade-exposed (EITE) sectors. In particular, I consider impacts on manufacturing sectors at the six-digit North American Industry Classification System level, with a special focus on firms that would be presumptively eligible for competitiveness relief using the criteria in the Waxman–Markey bill (H.R. 2454). The paper has a number of findings. First, determination of eligibility for relief analogous to the free allowance allocation in H.R. 2454 is sensitive to energy intensity. Second, providing compensation to EITE sectors through the corporate income tax—analogous to the output-based allowance allocation in Waxman–Markey—is certainly feasible, but tax appetite within the EITE sectors is insufficient to fully use any credits that attempted to offset more than about one-quarter of their carbon tax liability. Third, certain reforms do better than others at providing disproportionate relief to EITE sectors. Finally, economic theory predicts a substantial cost to diverting carbon tax revenue toward compensation of specific sectors. Theory also suggests that firms should treat policy risk no differently from the way they treat the other risks they face as they do business. But politics may dictate otherwise; if so, the analysis here suggests that certain approaches may work better than others to ensure that relief is appropriately targeted at minimal cost.
    Keywords: carbon taxes, taxation, tax code, energy-intensive, trade-exposed industries
    JEL: H23 H25 Q54 Q58
    Date: 2013–10–07
  7. By: Siqi Zheng; Cong Sun; Ye Qi; Matthew E. Kahn
    Abstract: China’s rapid economic growth has been fueled by industrialization and urbanization. Given its export focus, this industrialization was spatially concentrated in the coastal eastern cities. Over the last decade, a spatial transformation has taken place leading to a deindustrialization of the rich coastal cities and sharp industrial growth in the inland cities. This survey examines recent work that studies the economic geography of industrial production, per-capita income, pollution and quality of life in China’s cities. We focus on the interaction between firms, local governments and the central government that together determine the new economic geography of industry and pollution within China.
    JEL: L23 L38 L6 R14 R23 R28
    Date: 2013–11
  8. By: Matthew E. Kahn; Pei Li; Daxuan Zhao
    Abstract: At political boundaries, local leaders often have weak incentives to reduce polluting activity because the social costs are borne by downstream neighbors. This paper exploits a natural experiment set in China in which the central government changed the local political promotion criteria and hence incentivized local officials to reduce border pollution along specific criteria. Using a difference in difference approach, we document evidence of pollution progress with respect to targeted criteria at river boundaries. Other indicators of water quality, not targeted by the central government, do not improve after the regime shift. Using data on the economic geography of key industrial water polluters, we explore possible mechanisms.
    JEL: H23 H4 R48
    Date: 2013–11
  9. By: Liam Wagner (School of Economics, University of Queensland); Lynette Molyneaux (School of Economics, University of Queensland); John Foster (School of Economics, University of Queensland)
    Abstract: We seek to evaluate the extent of the pass through of increased fuel and carbon costs to wholesale prices with a shift of generation from coal-fired to gas-fired plants. Modelling of Australia's National Electricity Market in 2035 is undertaken using Australian Energy Market Operator assumptions for fuel costs, capital costs and demand forecasts. An electricity market simulation package (PLEXOS), which uses deterministic linear programming techniques and transmission and generating plant data, is used to optimise the power system and determine the least cost dispatch of generating resources to meet a given demand. We find that wholesale market prices increase due to the full pass through of the increased costs of gas over coal as an input fuel and the Carbon Price. In addition, we find that wholesale prices increase by more than the pass through of fuel and carbon costs because of the fact that generators can charge infra-marginal rents and engage in strategic behaviour to maximize their profits
    Keywords: Electricity, markets, infra-marginal rent
    JEL: L94 D40 Q48
    Date: 2013–10

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