nep-res New Economics Papers
on Resource Economics
Issue of 2015‒02‒22
five papers chosen by
Maximo Rossi
Universidad de la República

  1. Designing an Optimal 'Tech Fix' Path to Global Climate Stability: Integrated Dynamic Requirements Analysis for the 'Tech Fix' By Paul David; Adriaan van Zon
  2. Consumer misperception of eco-labels, green market structure and welfare By Dorothée Brécard
  3. Pollution havens: International empirical evidence using a shadow price measure of climate policy stringency By Hille, Erik
  4. The determinants of voluntary carbon offsetting: A micro-econometric analysis of individuals from Germany and the United States By Ziegler, Andreas; Schwirplies, Claudia
  5. The Implications of Energy Input Flexibility for a Resource Dependent Economy By Pittel, Karen; Röpke, Luise

  1. By: Paul David (Stanford University); Adriaan van Zon (SBE Maastricht University and United Nations University)
    Abstract: This paper analyzes the requirements for a social welfare-optimized transition path toward a carbon-free economy, focusing particularly on the deployment of low-carbon technologies, and the roles of engineering upgrading of extant facilities, and directed R&D to enhancing their productivity. The goal in each case is to achieve timely supply-side transformations in the global production regime that will avert catastrophic climate instability, and do so in a manner that minimizes the social welfare costs of stabilizing the level of the atmospheric concentration of greenhouse gases (GHG). This "planning-model" approach departs from conventional IAM exercises by dispensing with the need to make (generally dubious) assumptions about the macro-level consequences of behaviors of economic and political actors in response to market incentives and specific public policy instruments, such as a carbon tax. It shifts attention instead to the need for empirical research on critical technical parameters, and problems of inter-temporal coordination of investment and capacity utilization that will be required to achieve a timely, welfare-optimizing transition. A suite of heuristic integrated models is described, in which global macroeconomic growth is constrained by geophysical system with climate feedbacks, including extreme weather damages from global warming driven by greenhouse gas emissions, and the threshold level GHG concentration beyond which the climate system will be "tipped into" catastrophic runaway warming. A variety of technological options are identified, each comprising an array of specific techniques that share a distinctive instrumental role in controlling the concentration level of atmospheric CO2. The development of low-carbon technologies through investment in R&D, and their deployment embodied in new physical capital formation, is explicitly modeled; as is the implementation of known engineering techniques to "upgrade" existing fossil-fueled production facilities. The social-welfare efficient exercise of the available technological options is shown to involve sequencing different investment and production activities in separate temporal "phases" that together form a transition path to a sustainable low-carbon economy— one in which gross CO2-emissions do not exceed the Earth’s “natural” abatement capacity. Parametric variations of the "tipping point" constraint in these models will permit exploration of the corresponding modification in the required sequencing and durations of investment and production in the phases that form the optimal transition path. The preliminary solutions (using mufti-phase optimal control methods) expose important dynamic complementarities among technological options that are often presented as substitutes by current climate policy discussions.
    Keywords: global warming, tipping points, catastrophic climate instability, technology fix options, R&D investments, capital-embodied innovations, optimal sequencing, IAM and DIRAM policy design approaches, multi-phase optimal control, sustainable endogenous growth
    JEL: Q54 Q55 O31 O32 O33
    Date: 2015–02
  2. By: Dorothée Brécard (Université de Toulon, LÉAD)
    Abstract: How does consumer misperception of competing eco-labels affect environmental and economic efficiency of eco-labels? This article provides a theoretical insight into this issue by using a double-differentiation model, where three products are potentially in competition: an unlabeled product and two eco-labeled products of medium and high environmental qualities (with distinct labels). We compare the case of perfect information, where consumers can perfectly assess the environmental quality of the three products, and the case of imperfect information, where consumers cannot fully assess the environmental quality associated with each label while perceiving all eco-labels as a sign of high environmental quality and each label as a particular variety of a product. We show that consumer confusion can affect the market structure by weakening the firm that provides the greenest product. Paradoxically, consumer misperception is not always detrimental to social welfare because, when th e perceived quality of both eco-labeled products is relatively high, it can improve the quality of the environment and raise global profits and consumer surplus. Moreover, although firms would harmonize their demanding eco-labeling criteria if they face full-informed consumers, they turn to greenwashing when they know the way the consumers form their belief on environmental quality. Finally, we show that an NGO faced with consumer misperception will require less stringent standard than in the perfect information case, while conclusions on the regulator eco-labeling strategy are not clear-cut.
    Keywords: Eco-label, environmental quality, green consumer, product differentiation
    JEL: D11 D62 D83 L15 Q58
    Date: 2015–01
  3. By: Hille, Erik
    Abstract: Given the ambiguous empirical results of previous research, this paper tests whether support for a climate policy induced pollution haven effect and the pollution haven hypothesis can be found. Unlike the majority of previous studies, the analysis is based on international panel data and includes several methodological novelties: By arguing that trade flows of dirty goods to less polluting sectors may also be influenced by changes in policy stringency, trade information on primary, secondary, and tertiary sectors are included. In order to clearly differentiate between dirty sectors and sectors with high pollution abatement costs, separate measures for pollution intensity and policy stringency are implemented. For the latter an internationally comparable, sector-specific measure of climate policy stringency is derived using a shadow price approach. Endogeneity between a country s trade openness and its trade flows is addressed by estimating a gravity-based instrumental variable. The results provide evidence for a stronger pollution haven effect regarding carbon dioxide intensive and emission relevant energy intensive sectors. However, the impact of climate policy on polluting sectors seems to be rather limited as a distinct pollution haven effect for gross energy intensive sectors cannot be found. Similarly, no support for the stronger pollution haven hypothesis is revealed.
    JEL: F18 Q54 D24
    Date: 2014
  4. By: Ziegler, Andreas; Schwirplies, Claudia
    Abstract: This paper examines the determinants of voluntary individual carbon offsetting, i.e. the financial compensation of emissions from energy use. In contrast to former studies in this field, we particularly consider a comprehensive set of factors that are discussed in the context of voluntary contributions to public goods, such as psychological motives or social norms. The empirical analysis is based on unique data from representative surveys among more than 2000 citizens from Germany and the United States. These data reveal a higher extent of the past purchase of carbon offsets in the United States. In both countries, our micro-econometric analysis with discrete choice models indicates a strong positive correlation between the perceived contribution of this offsetting mechanism to climate protection and both actual carbon offsetting in the past and the planned purchase of carbon offsets in the future. In Germany, psychological motives such as the feeling of warm glow play an additional important role, while in the Unites States social motives such as expectations from the society are of a high relevance. Interestingly, a high environmental preference (measured by the membership in an environmental organization and the identification with green politics) is significantly correlated with already purchased carbon offsets in the United States, but not in Germany. These results suggest that not only the whole society in Germany has a lower average acceptance of carbon offsetting, but also that environmentally conscious people in this country obviously did not consider carbon offsetting as a measure to avoid further anthropogenic global warming so far.
    JEL: Q54 Q58 H41
    Date: 2014
  5. By: Pittel, Karen; Röpke, Luise
    Abstract: The paper analyzes resource policies in an economy in which renewable and fossil resources are realistically assumed to be essential inputs to production. Also realistically, the two types of resources are imperfect substitutes whose degree of substitutability can, however, increase over time. The focus of the - analytical as well as numerical - analysis is on the impact of this rising substitutability on the extraction of the exhaustible resource. This is especially interesting in a setting in which the use of the fossil resource induces a market failure, e.g., in the form of an environmental externality (of which climate change is the most prominent example), and in which policies are introduced to internalize this market failure. It is shown that policies which aim to slow down resource extraction but whose design is determined from political rather than optimality considerations are likely to result in even faster resource extraction. We show that this effect - often labeled a Green Paradox - can be accompanied by extraction-increasing effects of rising substitutability. More specifically, we find two types of flexibility effects that have opposing effects on the extraction path. The first effect speeds up extraction due to the expectation of higher flexibility in the future. This effect arises independently of whether the increase in substitutability is due to exogenous technological change or is endogenously driven. The second effect slows down extraction and arises when substitutability increases endogenously in accord with a changing input mix. Our results have several important implications for the design of policy measures. Specifically, a policy measure that induces flexibility-increasing technological progress must take into consideration the supply-side effects that result from the anticipation of increasing flexibility. The model also shows that for a policy to be effective, not only must flexibility effects be taken into account but the specific type of flexibility effect is also important.
    JEL: Q32 O44 O30
    Date: 2014

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