nep-res New Economics Papers
on Resource Economics
Issue of 2014‒08‒09
five papers chosen by
Maximo Rossi
Universidad de la República

  1. Towards a More Inclusive and Precautionary Indicator of Global Sustainability By John C. V. Pezzey; Paul J. Burke
  2. Do Constitutions Matter? The Effects of Constitutional Environmental Rights Provisions on Environmental Outcomes By Christopher Jeffords; Lanse Minkler
  3. The Politics of Market Linkage: Linking Domestic Climate Policies with International Political Economy By Jessica F. Green; Thomas Sterner; Gernot Wagner
  4. Green Technology and Optimal Emissions Taxation By Stuart McDonald; Joanna Poyago-Theotoky
  5. What’s the Damage? Environmental Regulation with Policy-Motivated Bureaucrats By Achim Voß; Jörg Lingens

  1. By: John C. V. Pezzey (Fenner School of Environment and Society, The Australian National University); Paul J. Burke (Crawford School of Public Policy, The Australian National University)
    Abstract: We construct a hybrid, economic indicator of the sustainability of global well-being, which is more inclusive than existing indicators and incorporates an environmentally pessimistic, physical constraint on global warming. Our methodology extends the World BankÕs Adjusted Net Saving (ANS) indicator to include the cost of population growth, the benefit of technical progress, and a much higher, precautionary cost of current CO2 emissions. Future warming damage is so highly unknowable that valuing emissions directly is rather arbitrary, so we use a novel, inductive approach: we modify damage and climate parameters in the deterministic DICE climate-economy model so it becomes economically optimal to control emissions in a way likely to limit warming to an agreed target, here 2¡C. If future emissions are optimally controlled, our ANS then suggests that current global well-being is sustainable. But if emissions remain uncontrolled, our base-case ANS is negative now and our corresponding, modified DICE model has an unsustained development path, with well-being peaking in 2065. Current ANS on an uncontrolled path may thus be a useful heuristic indicator of future unsustainability. Our inductive method might allow ANS to include other very hard-to-value, environmental threats to global sustainability, like biodiversity loss and nitrogen pollution.
    Keywords: global sustainability, optimism and pessimism, precautionary valuation of CO2 emissions, unknowability and induction, population growth, technical progress
    JEL: Q56 Q01 Q57 Q51 Q54 Q55
    Date: 2014–07
  2. By: Christopher Jeffords (Indiana University of Pennsylvania); Lanse Minkler (University of Connecticut)
    Abstract: We use a novel data set within an instrumental variables framework to test whether the presence and legal strength of constitutional environmental rights are related to environmental outcomes. The outcome variables include Yale’s Environmental Performance Index and some of its components. The analysis accounts for the possibility that a country which takes steps to protect the environment might also be more likely to constitutionalize environmental rights. Controls include: (1) gross domestic product per capita (2) whether the country is a party to the International Covenant on Economic, Social, and Cultural Rights; (3) rule of law; (4) population density; and (5) exogenous geographic effects. The inclusion of income means that our study is directly related to the Environmental Kuznets Curve literature. We find that constitutions do indeed matter for positive environmental outcomes, which suggests that we should not only pay attention to the incentives confronting polluters and resource users, but also to the incentives and constraints confronting those policymakers who initiate, monitor, and enforce environmental policies.
    Keywords: Constitutional Law, Environment, Environmental Kuznets Curve, Environmental Rights
    JEL: K10 K32 O13 Q50 Q56
    Date: 2014–07
  3. By: Jessica F. Green (Case Western Reserve University, USA); Thomas Sterner (Environmental Defense Fund and University of Gothenburg, Sweden); Gernot Wagner (Environmental Defense Fund and Columbia University’s School of International and Public Affairs, USA)
    Abstract: After twenty years of global negotiations, the world is still far from a comprehensive climate agreement. The ‘top-down’ approach embodied by the Kyoto Protocol has all but stalled, chiefly due to disagreements over levels of ambition and objections to financial transfers. To avoid those problems, many have shifted their focus on bottom-up ‘linkage’ of regional, national, and sub-national cap-and-trade systems. Decentralized architecture has its appeals, but we argue that linkage among carbon markets ultimately faces the same obstacles that are at the heart of global climate negotiations. Linkage can potentially reduce overall costs of tackling climate change by leveraging the differences in the marginal costs of emissions reductions across nations. However, as incomes, ideologies and other conditions diverge—and, thus, potential economic gains from linkage increase—political obstacles to linkage grow. We identify four obstacles to successful linkage: potential for gaming of targets; objections to financial transfers; the difficulty of close regulatory coordination; and incompatibility with other domestic policy objectives. Linkage, thus, may be an important political instrument and learning process but it provides no end run around international “global warming gridlock” (Victor 2011). A functioning global climate policy architecture still requires close international coordination with a balance of ‘bottom-up’ and ‘top-down’ elements. Only with this realization—and by employing a gradual process toward full linkage—can early carbon market linkages help facilitate a path towards a successful global climate architecture.
    Keywords: Climate Change, Global Warming, Cap and Trade, Carbon Tax, Linkage, Climate Finance, Political Economy, Kyoto, Copenhagen, Paris
    JEL: Q5 Q54 Q58
    Date: 2014–07
  4. By: Stuart McDonald (School of Economics, The Universty of Queensland); Joanna Poyago-Theotoky (School of Economics, La Trobe University Rimini Centre for Economic Analysis (RCEA))
    Abstract: We examine the impact of an optimal emissions tax on research and development of emission reducing green technology (E-R&D) in the presence of R&D spillovers. We show that the size and effectiveness of the optimal emissions tax depends on the type of the R&D spillover: input or output spillover. In the case of R&D input spillovers (where only knowledge spillovers are accounted for), the optimal emissions tax required to stimulate R&D is always higher than when there is an R&D output spillover (where abatement and knowledge spillovers exist simultaneously). We also find that optimal emissions taxation and cooperative R&D complement each other when R&D spillovers are small, leading to lower emissions.
    Keywords: Environmental R&D, Green Technology, R&D Spillover, Emissions Tax
    JEL: H23 L11 Q55
    Date: 2014–06
  5. By: Achim Voß (University of Münster, Germany); Jörg Lingens (University of Münster, Germany)
    Abstract: Many environmental-policy problems are characterized by complexity and uncertainty. Government’s choice concerning these policies commonly relies on information provided by a bureaucracy. Environmental bureaucrats often have a political motivation of their own, so they might be tempted to misreport environmental effects in order to influence policy. This transforms a problem of uncertainty into one of asymmetric information. We analyze the ensuing principal-agent relationship and derive the government’s optimal contract, which conditions policy and rewards on reported environmental effects. We find that agents who are more environmentalist than the government are rewarded for admitting that the environmental impact is low (and vice versa). With higher uncertainty, the bureaucrat has a stronger influence on policy. For some values of the environmental impact, the bureau is permitted to set its own preferred policy (optimal delegation).
    Keywords: Environmental Policy, Political Economy, Delegation, Bureaucracy, Regulatory Agency, Mechanism Design, Type-dependent Participation Constraint, Pure State Constraints in Optimal Control
    JEL: D73 D82 C61 Q52 Q58
    Date: 2014–07

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