New Economics Papers
on Resource Economics
Issue of 2014‒04‒18
fifteen papers chosen by

  1. Optimal Environmental Tax-Subsidy Regime in the Presence of Increasing Returns By Wenli Cheng; Dingsheng Zhang; CEMA
  2. Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs? By Mads Greaker; Michael Hoel; Knut Einar Rosendahl
  3. Environmental Research Joint Ventures and Time-Consistent Emission Tax By Yasunori Ouchida; Daisaku Goto
  4. Product-related environmental regulation and voluntary environmental actions : impacts of RoHS and REACH in Malaysia By Arimura, Toshihide; Iguchi, Hakaru; Michida, Etsuyo
  5. Working Paper 12-13 - Is offshoring driven by air emissions? Testing the pollution haven effect for imports of intermediates By Bernhard Klaus Michel
  6. Environmental Levies, Distortionary Taxation and Increasing Returns By Wenli Cheng; Dingsheng Zhang; CEMA
  7. Taxing Carbon under Market Incompleteness By Valentina Bosetti; Marco Maffezzoli
  8. Curbing Emissions through a Carbon Liabilities Market: A note from a climate skeptic’s perspective By Etienne Billette de Villemeur; Justin Leroux
  9. Global Energy Security under Different Climate Policies, GDP Growth Rates and Fossil Resource Availabilities By Aleh Cherp; Jessica Jewell; Vadim Vinichenko; Nico Bauer; Enrica De Cian
  10. Natural Resources And Economic Growth In Russia’s Regions By Michael Alexeev; Andrey Chernyavskiy
  11. Capital Taxation under Political Constraints By Florian Scheuer; Alexander Wolitzky
  12. Implications of integrating electricity supply dynamics into life cycle assessment: a case study of renewable distributed generation By Amor, Mourad Ben; Gaudreault, Caroline; Pineau, Pierre-Olivier; Samson, Réjean
  13. Gone with the Wind: Valuing the Visual Impacts of Wind Turbines through House Prices By Stephen Gibbons
  14. Models-as-Usual for Unusual Risks? On the Value of Catastrophic Climate Change By Antoine Bommier; Bruno Lanz; Stéphane Zuber
  15. European Energy Efficiency and Decarbonization Strategies Beyond 2030 – A Sectoral Multi-model Decomposition By Hannah Förster; Katja Schumacher; Enrica De Cian; Michael Hübler; Ilkka Keppo; Silvana Mima; Ronald D. Sands

  1. By: Wenli Cheng; Dingsheng Zhang; CEMA
    Abstract: This paper develops a set of three models to study the optimal tax-subsidy regime in an economy characterised by two deviations from the perfect competition model – negative externality from pollution by the “dirty” industry, and increasing returns in the “clean” industry. Its main conclusions are: (1) the optimal single pollution tax is higher than the Pigouvian level; (2) a combination of pollution tax and quantity subsidy increases consumer welfare at a lower level of pollution tax; (3) the optimal pollution tax can be further lowered and consumer welfare further increased if the quantity subsidy is supplemented by a lump-sum subsidy.
    Keywords: optimal pollution tax, clean subsidy, increasing returns, monopolistic competition
    JEL: H23
    Date: 2014–04
  2. By: Mads Greaker (Statistics Norway); Michael Hoel (University of Oslo); Knut Einar Rosendahl (Statistics Norway)
    Abstract: Recent literature on biofuels has questioned whether biofuels policies are likely to reduce the negative effects of climate change. In this paper we make two contributions to the literature. First, we study the market effects of a renewable fuel standard in a dynamic model taking into account that oil is a non-renewable resource. Second, we model emissions from land use change explicitly when we evaluate the climate effects of the renewable fuel standard. We find that global extraction of oil is postponed as a consequence of the renewable fuel standard. Thus, if emissions from biofuels are negligible, the standard will have beneficial climate effects. Furthermore, we find that the standard also tends to reduce total fuel (i.e., oil plus biofuels) consumption initially. Hence, even if emissions from biofuels are non-negligible, a renewable fuel standard may still reduce climate costs. In fact our simulations show that even for biofuels that are almost as emissions-intensive as oil, a renewable fuel standard has beneficial climate effects.
    Keywords: Blending Mandate, Renewable Fuel Standard, Biofuels, Climate Costs
    JEL: Q27 Q41 Q54
    Date: 2014–03
  3. By: Yasunori Ouchida (Department of Economics, Hiroshima University); Daisaku Goto (Graduate School for International Development and Cooperation Hiroshima University)
    Abstract: This paper presents an examination of the socially efficient formation of environmental R&D in Cournot duopoly in a setting where a regulator has no precommitment ability for an emission tax. The results reveal that if the environmental damage is slight, alternatively, given severe environmental damage and large inefficiency in environmental R&D costs, then environmental research joint venture (ERJV) cartelization is socially efficient. However, if environmental damage is severe, and if a firm’s R&D costs are limited, then, in stark contrast to results of previous studies, environmental R&D competition is socially more efficient than the other three scenarios (i.e., environmental R&D cartelization, ERJV competition, and ERJV cartelization), although R&D competition is the case of “NO information sharing and NO R&D coordination.”
    Keywords: Environmental Research Joint Venture, Environmental R&D, Time-consistent Emission Tax, Competition Policy, Cournot Duopoly
    JEL: O32 L13 Q55 Q58
    Date: 2014–03
  4. By: Arimura, Toshihide; Iguchi, Hakaru; Michida, Etsuyo
    Abstract: Voluntary environmental actions, such as the adoption of ISO 14001, are gaining increasing attention in developing countries. This study examines the mechanism of ISO 14001 diffusion in a developing economy on the basis of a unique corporate survey of manufacturing sectors in Malaysia. Product-related environmental regulations, such as REACH, are contributing to this diffusion indirectly by promoting quality control standards such as ISO 9001. The importance of foreign direct investment and global value chains for ISO 14001 diffusion is also confirmed.
    Keywords: Malaysia, Environmental protection, Environmental policy, Industrial standards, International trade, PRERs (product-related environmental regulations), REACH, RoHS, ISO 14001, ISO 9001, Global value chain
    JEL: F18 Q56
    Date: 2014–03
  5. By: Bernhard Klaus Michel
    Abstract: Over the last couple of decades, trade liberalisation has progressed and environmental regulations have become more stringent, in particular regarding emissions of air pollution. This has raised the fear in developed countries that emission-intensive activities are increasingly carried out abroad. This paper develops an approach for testing whether emission-intensive industries have greater shares of imported intermediate materials. The test is applied to the Belgian manufacturing sector for the years 1995-2007. Emissions of three types of air pollutants are analysed: greenhouse gases, acidifying gases and tropospheric precursor gases. The results provide evidence that industries with a high intensity in acidifying gas emissions  (SO2, NOX and NH3) tend to import a greater share of intermediate materials. This is likely to be linked to the stricter enforcement of regulations for air quality, which act upon acidifying gases. There is no such evidence in the results for emissions of tropospheric precursor gases and in particular of greenhouse gases. Regarding the latter, despite stringent regulations, enforcement appears to be less strict.
    Keywords: Offshoring
    JEL: F14 F18 Q53 Q56
    Date: 2013–10–11
  6. By: Wenli Cheng; Dingsheng Zhang; CEMA
    Abstract: In this note, we introduce increasing returns to Bovenberg and Mooij’s (1994) model as generalised in Fullerton (1997) and use an example to show that (1) even with a distortionary labor tax, the optimal environmental levy is greater than the Pigouvian rate; (2) the difference between tax on the “dirty” good and the “clean” good is also greater than the Pigouvian tax; (3) under certain circumstances, the government can optimally use the environmental levy to both meet its revenue requirement and subsidize the “clean” goods with increasing returns.
    Keywords: environmental levies, distortionary taxation, increasing returns
    JEL: H23
    Date: 2014–04
  7. By: Valentina Bosetti; Marco Maffezzoli
    Abstract: This paper is the first attempt, to the best of our knowledge, to study the impact of a carbon tax by means of a heterogeneous agents model. The objectives of the paper are two: i) To assess how the results of a representative agent model compare to those coming from a model accounting for heterogeneity across agents when evaluating aggregate economic and environmental impacts of a carbon tax; ii) To assess the distributional implications of a carbon tax and how they can be mitigated through different recycling schemes. We find that heterogeneous agents models may deliver different results from those derived using a representative agent model, the main tool used to guide policy making so far. In particular, we find evidence of a double dividend for several recycling schemes and carbon taxes as high as 20% of the energy price. In addition, we find the potential for redistributive channels related to carbon policies that can only be appreciated applying this type of modeling. JEL codes: Q58, Q54, E2.
    Date: 2014
  8. By: Etienne Billette de Villemeur; Justin Leroux
    Abstract: We argue for the creation of a carbon liabilities market to address climate change. Each period, countries would be made liable for their share of responsibility in current climate damage. Because liabilities could be traded like financial debt, robustness to strategic manipulations and efficiency ensue. Moreover, this decentralizes the choice of the rate by which countries discount future benefits and damage. Rather than being based on an expected discounted sum of future marginal damage (as with a carbon tax or tradable emission permits) our proposal relies only on observed realized damage and on the well-documented emission history of countries.
    Keywords: Carbon Liabilities, Climate Policy, Market Instruments,
    JEL: Q54 H23
    Date: 2014–02–01
  9. By: Aleh Cherp (Central European University and Lund University); Jessica Jewell (International Institute for Applied Systems Analysis and Central European University); Vadim Vinichenko (Central European University); Nico Bauer (Potsdam Institute for Climate Impact Research (PIK)); Enrica De Cian (Fondazione Eni Enrico Mattei and Euro-Mediterranean Center on Climate Change (CMCC))
    Abstract: Energy security is one of the main drivers of energy policies. Understanding energy security implications of long-term scenarios is crucial for informed policy making, especially with respect to transformations of energy systems required to stabilize climate change. This paper evaluates the global energy security under several global energy scenarios, modeled in the REMIND and WITCH integrated assessment models. The paper examines the effects of long-term climate policies on energy security under different assumptions about GDP growth and fossil fuel availability. It uses a systematic energy security assessment framework and a set of global and regional indicators for risks associated with energy trade and resilience associated with diversity of energy options. The analysis shows that climate policies significantly reduce the risks and increase the resilience of energy systems in the first half of the century. Climate policies also make energy supply, energy mix, and energy trade less dependent upon assumptions of fossil resource availability and GDP growth, and thus more predictable than in the baseline scenarios.
    Keywords: Energy Security, Energy Scenarios, Long-Term Climate Policies, Fossil Resources Assumptions
    JEL: Q4 Q5 Q51
    Date: 2014–03
  10. By: Michael Alexeev (Indiana University (Bloomington); Russian Presidential Academy of National Economy and Public Administration); Andrey Chernyavskiy (National Research University Higher School of Economics)
    Abstract: We examine the impact of natural resources on economic growth in Russia’s regions since the introduction of the mineral tax in 2002. Using novel measures of natural resource rents produced in, but not necessarily appropriated by the regions (mineral tax collections), we demonstrate that mineral wealth has not significantly affected regional economic growth since 2002, although mineral-rich regions are significantly richer than the other regions. These results are contrary to the “resource curse” hypothesis. The absence of growth benefits to resource-endowed regions, however, is also at odds with the clearly beneficial impact of natural resources on the economic growth of t the country as a whole. We conclude that the Russian central government was successful in taxing away incremental regional resource rents during 2002-2011, but the regions preserved their pre-2002 benefits derived from mineral wealth.
    Keywords: natural resources, regional growth, taxation of minerals
    JEL: P28 R11 Q38
    Date: 2014
  11. By: Florian Scheuer; Alexander Wolitzky
    Abstract: This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, credible policies are those that will continue to attract enough political support in the future. If the only credible reform threat is to fully equalize consumption, we find that optimal marginal capital taxes are U-shaped, so that savings are subsidized for the middle class but are taxed for the poor and rich. If ex post the government may strategically propose a reform other than full equalization in order to secure additional political support, then optimal capital taxes are instead progressive throughout the income distribution.
    JEL: D31 D82 E62 H21
    Date: 2014–04
  12. By: Amor, Mourad Ben; Gaudreault, Caroline; Pineau, Pierre-Olivier; Samson, Réjean
    Abstract: Electricity supply is frequently cited as a significant hot spot in life cycle assessment (LCA) results. Despite its importance, however, LCA research continues to overuse simplified methodologies regarding electricity supply modeling. This work aims to demonstrate the usefulness of electricity trade analysis (proposed model) for integrating the short-term dynamics of electricity supply and refining LCA results. Distributed generation using renewable energy is applied as a case study to demonstrate how electricity trade analysis provides more refined estimates when environmental impact abatements are assessed compared with the conventional (simplified) approaches in LCA. Grid-connected photovoltaic panel (3 kWp mono- and poly-crystalline) and micro-wind turbine (1, 10 and 30 kW) environmental impact abatements are investigated by determining the displaced marginal electricity production on an hourly basis. The results indicate that environmental impact abatements calculated using the developed short-term time horizon approach can be significantly different (up to 200% difference) from those obtained using a simplified approach. Recommendations are provided to LCA practitioners to address this issue of differing results.
    Keywords: Life cycle assessment; Short-term marginal technology; Electricity dynamics; Wind; Solar.
    JEL: Q42 Q54 Q56
    Date: 2014–03–29
  13. By: Stephen Gibbons
    Abstract: This study provides quantitative evidence on the local benefits and costs of wind farm developments in England and Wales, focussing on their visual environmental impacts. In the tradition of studies in environmental, public and urban economics, housing costs are used to reveal local preferences for views of wind farm developments. Estimation is based on quasi-experimental research designs that compare price changes occurring in places where wind farms become visible, with price changes in appropriate comparator groups. These comparator groups include places close to wind farms that became visible in the past, or where they will become operational in the future and places close to wind farms sites but where the turbines are hidden by the terrain. All these comparisons suggest that wind farm visibility reduces local house prices, and the implied visual environmental costs are substantial.
    Keywords: Housing prices, environment, wind farms, infrastructure
    JEL: R Q
    Date: 2014–04
  14. By: Antoine Bommier (Chair for Integrative Risk Management and Economics - ETH Zurich); Bruno Lanz (Center for International Environmental Studies - Graduate Institute Geneva); Stéphane Zuber (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We study the role of alternative intertemporal preference representations in a model of economic growth, stock pollutant and endogenous risk of catastrophic collapse. We contrast the traditional "discounted utility" model, which assumes risk neutrality with respect to intertemporal utility, with a multiplicative choice model that displays risk aversion in that dimension. First, we show that both representations of preferences can rationalize the same "business as usual" economy for a given interest rate and no pollution externality. Second, once we introduce a collapse risk whose hazard rate is a function of the pollution stock, multiplicative preferences recommend a much more stringent policy response. An illustration in the context of climate change indicates that switching to the multiplicative preference representation has a similar effect, in terms of policy recommendations, as scaling up the schedule of the hazard rate by a factor of 100.
    Keywords: Environmental policy; climate change; catastrophic risks; risk aversion; discounting
    Date: 2014–03
  15. By: Hannah Förster (Öko-Institut e.V., Germany); Katja Schumacher (Öko-Institut e.V., Germany); Enrica De Cian (Fondazione Eni Enrico Mattei (FEEM), Italy and Centro Mediterraneo per i Cambiamenti Climatici (CMCC), Italy); Michael Hübler (Centre for European Economic Research, Mannheim, Germany); Ilkka Keppo (University College London, UCL Energy Institute, UK); Silvana Mima (PACTE-EDDEN-CNRS-UPMF, France); Ronald D. Sands (U.S. Department of Agriculture, Economic Research Service, USA)
    Abstract: Energy efficiency and decarbonization are important elements of climate change mitigation. We draw on European mitigation scenarios from the EMF28 modeling exercise to decompose economy-wide and sectoral emissions into their main components. We utilize the Logarithmic Mean Divisia Index (LMDI) to gain insights into five effects: affluence, energy intensity, carbon intensity, conversion efficiency, and structural change. Economy-wide analysis suggests that energy efficiency improvements (including end-use efficiency of economic production and structural change of the economy) determine emission reductions short to medium term while decarbonization becomes more important in the long run. Sectoral analysis suggests that electricity generation holds the largest potential for decarbonization. Mitigation in the transport and energy-intensive sectors is limited by technology availability, forcing output and energy inputs to decline to meet the given mitigation pathways. We conclude that energy efficiency improvements could bridge the time until carbon-free technologies mature, while their quick development remains essential.
    Keywords: Decomposition Analysis, Decarbonization, Model Intercomparison
    JEL: Q4 Q5 Q51
    Date: 2014–03

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