nep-res New Economics Papers
on Resource Economics
Issue of 2015‒05‒09
twelve papers chosen by
Maximo Rossi
Universidad de la República

  1. Why Finance Ministers Favor Carbon Taxes, Even if They Do not Take Climate Change into Account By Max Franks; Ottmar Edenhofer; Kai Lessmann
  2. Assessing the Energy-Efficiency Gap By Todd D. Gerarden; Richard G. Newell; Robert N. Stavins
  3. Luring Others into Climate Action: Coalition Formation Games with Threshold and Spillover Effects By Valentina Bosetti; Melanie Heugues; Alessandro Tavoni
  4. The impact of pollution abatement investments on technology: Porter hypothesis revisited By Jean Pierre Huiban; Camilla Mastromarco; Antonio Musolesi; Michel Simioni
  5. The Economics of Shale Gas Development By Charles F. Mason; Lucija A. Muehlenbachs; Sheila M. Olmstead
  6. The Unilateral Implementation of a Sustainable Growth Path with Directed Technical Change By Inge van den Bijgaart
  7. Do Industries Pollute More in Poorer Neighborhoods? Evidence From Toxic Releasing Plants in Mexico By Lopamudra Chakraborti; José Jaime Sainz Santamaría
  8. Crossing the River by Feeling the Stones: The Case of Carbon Trading in China By ZhongXiang Zhang
  9. Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework By Eftichios S. Sartzetakis; Anastasios Xepapadeas; Athanasios Yannacopoulos
  10. Time Scale Externalities and the Management of Renewable Resources By Giannis Vardas; Anastasios Xepapadeas
  11. The Effects of Emotions on Preferences and Choices for Public Goods By Christopher Boyce; Mikolaj Czajkowski; Nick Hanley; Charles Noussair; Michael Townsend; Steve Tucker
  12. Facilitating Linkage of Heterogeneous Regional, National, and Sub-National Climate Policies Through a Future International Agreement By Daniel M. Bodansky; Seth A. Hoedl; Gilbert E. Metcalf; Robert N. Stavins

  1. By: Max Franks (Potsdam Institute for Climate Impact Research and Berlin Institute of Technology); Ottmar Edenhofer (Mercator Research Institute on Global Commons and Climate Change, Berlin Institute of Technology and Potsdam Institute for Climate Impact Research); Kai Lessmann (Potsdam Institute for Climate Impact Research)
    Abstract: Fiscal considerations may shift governmental priorities away from environmental concerns: Finance ministers face strong demand for public expenditures such as infrastructure investments but they are constrained by international tax competition. We develop a multi-region model of tax competition and resource extraction to assess the fiscal incentive of imposing a tax on carbon rather than on capital. We explicitly model international capital and resource markets, as well as intertemporal capital accumulation and resource extraction. While fossil resources give rise to scarcity rents, capital does not. With carbon taxes the rents can be captured and invested in infrastructure, which leads to higher welfare than under capital taxation. This result holds even without modeling environmental damages. It is robust under a variation of the behavioral assumptions of resource importers to coordinate their actions, and a resource exporter's ability to counteract carbon policies. Further, no green paradox occurs - instead, the carbon tax constitutes a viable green policy, since it postpones extraction and reduces cumulative emissions.
    Keywords: Carbon Pricing, Green Paradox, Infrastructure, Optimal Taxation, Strategic Instrument Choice, Supply-Side Dynamics, Tax Competition
    JEL: F21 H21 H30 H73 Q38
    Date: 2015–04
  2. By: Todd D. Gerarden (Harvard University); Richard G. Newell (Duke University); Robert N. Stavins (Harvard University)
    Abstract: Energy-efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use, but these technologies appear not to be adopted by consumers and businesses to the degree that would apparently be justified, even on a purely financial basis. We present two complementary frameworks for understanding this so-called “energy paradox” or “energy-efficiency gap.” First, we build on the previous literature by dividing potential explanations for the energy-efficiency gap into three categories: market failures, behavioral anomalies, and model and measurement errors. Second, we posit that it is useful to think in terms of the fundamental elements of cost-minimizing energy-efficiency decisions. This provides a decomposition that organizes thinking around four questions. First, are product offerings and pricing economically efficient? Second, are energy operating costs inefficiently priced and/or understood? Third, are product choices cost-minimizing in present value terms? Fourth, do other costs inhibit more energy-efficient decisions? We review empirical evidence on these questions, with an emphasis on recent advances, and offer suggestions for future research.
    Keywords: Energy-Efficiency, Financial Costs, Environmental Damages
    JEL: Q4 Q48 Q5 Q55
    Date: 2015–04
  3. By: Valentina Bosetti (Fondazione Eni Enrico Mattei, Milan (Italy) and Bocconi University, Milan (Italy)); Melanie Heugues (Fondazione Eni Enrico Mattei, Milan (Italy)); Alessandro Tavoni (Grantham Research Institute, London School of Economics, London (England))
    Abstract: We study the effect of leadership in an experimental threshold public ‘bad’ game, where we manipulate both the relative returns of two investments (the more productive of which causes a negative externality) and the extent to which the gains from leadership diffuse to the group. The game tradeoffs mimic those faced by countries choosing to what degree and when to transition from incumbent polluting technologies to cleaner alternatives, with the overall commitment dictating whether they manage to avert dangerous environmental thresholds. Leading countries, by agreeing on a shared effort, may be pivotal in triggering emission reductions in non-signatories countries. In addition, the leaders’ coalition might also work as innovation and technology adoption catalyzer, thus producing a public good (knowledge) that benefits all countries. In our game, players can choose to tie their hands to a cooperative strategy by signing up to a coalition of first movers. The game is setup such that as long as the leading group reaches a pivotal size, its early investment in the externality-free project may catalyze cooperation by non-signatories. We find that the likelihood of reaching the pivotal size is higher when the benefits of early cooperation are completely appropriated by the coalition members, less so when these benefits spillover to the non-signatories. On the other hand, spillovers have the potential to entice second movers into adopting the ‘clean’ technology.
    Keywords: Climate Change, International Cooperation, R&D Spillovers, Threshold Public Goods Game, Coalition Formation Game, Climate Experiment
    JEL: Q5 Q58
    Date: 2015–03
  4. By: Jean Pierre Huiban (INRA-ALISS); Camilla Mastromarco (Dipartimento di Scienze dell'Economia, Università del Salento, Italy); Antonio Musolesi (Department of Economics and Management, University of Ferrara, Italy); Michel Simioni (Toulouse School of Economics, INRA-GREMAQ and IDEI, France)
    Abstract: This paper revisits the Porter hypothesis by pursuing two new directions. First, we compare the results obtained with two complementary approaches: parametric stochastic frontier analysis and conditional nonparametric frontier analysis. They presents relative advantages and drawbacks. Secondly, we pay attention not only on the average pollution abatement effort effect but we also focus on its variability across rms and over time. We provide new results suggesting that the traditional view about the effect of environmental regulation on productivity and the Porter hypothesis may coexist. This evidence supports the idea that a well-designed environmental regulation affects positively the rm performances in some instances.
    Keywords: Porter hypothesis, pollution abatement investment, stochastic frontier analysis, time-varying eciency, Vuong test, conditional nonparametric frontier analysis.
    JEL: C14 C23 D24 Q50
    Date: 2015–04
  5. By: Charles F. Mason (University of Wyoming, London School of Economics (Grantham Institute) and Resources for the Future); Lucija A. Muehlenbachs (University of Calgary and Resources for the Future); Sheila M. Olmstead (University of Texas at Austin and Resources for the Future)
    Abstract: In the past decade, innovations in hydraulic fracturing and horizontal drilling have fueled a boom in the production of natural gas (as well as oil) from geological formations – primarily deep shales – in which hydrocarbon production was previously unprofitable. Impacts on U.S. fossil fuel production and the U.S. economy more broadly have been transformative, even in the first decade. The boom has been accompanied by concerns about negative externalities, including impacts to air, water, and quality of life in producing regions. We describe the economic benefits of the shale gas boom, including direct market impacts and positive externalities, providing back-of-the-envelope estimates of their magnitude. The paper also summarizes the current science and economics literatures on negative externalities. We conclude that the likely scope of economic benefits is extraordinarily large, and that continued research on the magnitude of negative externalities is necessary to inform risk-mitigating policies.
    Keywords: Hydraulic Fracturing, Economic Benefits, Positive Externalities, Negative Externalities, Environmental Impacts
    JEL: Q4 Q42 Q5
    Date: 2015–03
  6. By: Inge van den Bijgaart (Tilburg University (The Netherlands))
    Abstract: We determine the core characteristics of a climate coalition’s optimal policies in a dynamic two country directed technical change framework. Unilateral policies alter the structure of production and thereby innovation incentives across countries. Whenever feasible, optimal policies implement sustainable growth by directing global innovation to the nonpolluting sector. If nonparticipants drive global innovation, this requires policies relocating clean production to nonparticipants. A calibration exercise suggests that the US or EU alone are too small to implement sustainable growth. A coalition of Annex I countries that signed the Kyoto protocol can implement sustainable growth, yet required tax rates are very high.
    Keywords: Sustainable Growth, Technical Change, Innovation
    JEL: Q5 Q56
    Date: 2015–02
  7. By: Lopamudra Chakraborti; José Jaime Sainz Santamaría (Division of Economics, CIDE)
    Abstract: Studies on industrial pollution and community pressure in developing countries are rare. We employ previously unused, self-reported toxics pollution data from Mexico to show that there exists some evidence of environmental justice concerns and community pressure in explaining industrial pollution behavior. We obtain historical data on toxic releases into water and land for the time period 2004 to 2012. We focus on 7 major pollutants including heavy metals and cyanide. To address endogeneity concerns of socioeconomic demographic variables, we use data from 2000 Census of Population and Housing and 2005 count data. Our results show that the immediate local population might be affected more by on-site land pollution than end-of-pipe discharges into waterbodies as the latter affects only downstream communities. Among our consistent results, increase in percent of households with telephone leads to lower land (and water) pollution; while increase percent of households with computer leads to increase in water pollution only. Similarly, vulnerable population as captured by percent of population over 65 years and higher unemployment rate leads to higher water pollution only. Other proxies for income and poverty have expected signs but not consistently across all models.
    Keywords: Industrial Pollution, Local Income and Unemployment Effects, Informal Regulation, Environmental Justice, Community Pressure, Toxic Releases
    Date: 2015–03
  8. By: ZhongXiang Zhang (College of Management and Economics, Tianjin University, Tianjin and School of Economics, Fudan University, Shanghai (China))
    Abstract: Putting a price on carbon is considered a crucial step for China’s endeavor of harnessing the market forces to reduce its energy consumption and carbon emissions. Indeed, aligned with China’s grand experiment with low-carbon provinces and low-carbon cities in six provinces and thirty-six cities, the Chinese central government has approved the seven pilot carbon trading schemes. These pilot trading schemes have features in common, but vary considerably in their approach to issues such as the coverage of sectors, allocation of allowances, price uncertainty and market stabilization, potential market power of dominated players, use of offsets, and enforcement and compliance. This article explains why China turns to market forces and opts for emissions trading, rather than carbon or environmental taxes at least initially, discusses the five pilot trading schemes that have to comply with their emissions obligations by June 2014, and examines a wide range of design, implementation, enforcement and compliance issues related to China’s carbon trading pilots and their first-year performance. The article ends with drawing some lessons learned and discussing the options to evolve regional pilot carbon trading schemes into a nationwide carbon trading scheme.
    Keywords: Pilot Carbon Trading Schemes, Low-carbon Development, Environmental Taxes, Market Stabilization Mechanism, Carbon Offsets, Enforcement and Compliance, China
    JEL: H23 O13 P28 Q43 Q48 Q52 Q54 Q58
    Date: 2015–03
  9. By: Eftichios S. Sartzetakis (University of Macedonia, Department of Economics); Anastasios Xepapadeas (Athens University of Economics and Business and Beijer Fellow); Athanasios Yannacopoulos (Athens University of Economics and Business)
    Abstract: Taking as given that we are consuming too much and that overconsumption leads to environmental degradation, the present paper examines the regulator's choices between informative advertisement and consumption taxation. We model overconsumption by considering individuals that care about social status apart from the intrinsic utility, derived from direct consumption. We assume that there also exist individuals that care only about their own private consumption and we examine the evolution of preferences through time by allowing individuals to alter their behavior as a result of a learning process, akin to a replicator dynamics type. We consider the regulator's choice of consumption taxation and informative advertisement both in an arbitrary and an optimal control context. In the arbitrary overconsumption control context we find that the regulator could decrease, or even eliminate, the share of status seekers in the population. In the context of optimal overconsumption control, we show that the highest welfare is attained when status seekers are completely eliminated, while the lowest in the case that the entire population consists of status seekers.
    Keywords: Status-seaking, Replicator Dynamics, Information Provision, Environmental Taxation
    JEL: Q53 Q58 D62 D82
    Date: 2015–04
  10. By: Giannis Vardas; Anastasios Xepapadeas (Athens University of Economics and Business)
    Abstract: The evolution of renewable resources is characterized in many cases by different time scales where some state variables such as biomass, may evolve relatively faster than other state variables such as carrying capacity. Ignoring this time scale separation means that a slowly changing variable is treated as constant over time. Management rules designed without accounting for time scale separation will result in inefficiencies in resource management. We call this inefficiency time scale externality and we analyze renewable resource harvesting when carrying capacity evolves slowly, either in response to exogenous forcing or in response to emissions generated by the industrial sector of the economy. We study cooperative and non-cooperative solutions under time scale separation. Using singular perturbation reduction methods (Fenichel 1979), we examine the role of different time scales in environmental management and the potential errors in optimal regulation when time scale separation is ignored.
    Keywords: Optimal Resource Harvesting, Fast Slow Dynamics, Singular Perturbation, Regulation, Open Loop, Closed Loop
    JEL: D81 Q20
    Date: 2015–03
  11. By: Christopher Boyce (University of Stirling); Mikolaj Czajkowski (University of Warsaw); Nick Hanley (University of St Andrews); Charles Noussair (Tilburg University); Michael Townsend (NZ National Institute for Water and Atmosphere); Steve Tucker (University of Waikato)
    Abstract: This paper tests whether changes in 'incidental emotions' lead to changes in economic choices. Incidental emotions are experienced at the time of an economic decision but are not part of the payoff from a particular choice. As such, the standard economic model predicts that incidental emotions should not affect behavior, yet many papers in the behavioral science and psychology literatures find evidence of such effects. In this paper, we used a standard procedure to induce different incidental emotional states in respondents, and then carried out a choice experiment on changes to an environmental good (beach quality). We estimated preferences for this environmental good and willingness to pay for changes in this good, and tested whether these were dependent on the particular emotional state induced. We also tested whether choices became more or less random when emotional states were induced, based on the notion of randomness in a standard random utility model. Contrary to our a-priori hypothesis we found no significant evidence of treatment effects, implying that economists need not worry about the effects of variations in incidental emotions on preferences and the randomness of choice, even when there is measured (induced) variation in these emotions.
    Keywords: choice experiments; behavioral economics; ecosystem services; emotions; rationality
    JEL: Q51 Q57 D03 D87
    Date: 2015–03–31
  12. By: Daniel M. Bodansky (Arizona State University); Seth A. Hoedl (Harvard University); Gilbert E. Metcalf (Tufts University); Robert N. Stavins (Harvard University)
    Abstract: Negotiations pursuant to the Durban Platform for Enhanced Action appear likely to lead to a 2015 Paris agreement that embodies a hybrid climate policy architecture, combining top-down elements, such as for monitoring, reporting, and verification, with bottom-up elements, including “nationally determined contributions” from each participating country, detailing what it intends to do to reduce emissions, based on its national circumstances. For such a system to be cost-effective—and thus more likely to achieve significant global emissions reductions—a key feature will be linkages among regional, national, and sub-national climate policies. By linkage, we mean a formal recognition by a greenhouse gas mitigation program in one jurisdiction (a regional, national, or sub-national government) of emission reductions undertaken in another jurisdiction for purposes of complying with the first jurisdiction’s mitigation program. We examine how a future international policy architecture could help facilitate the growth and operation of a robust system of international linkages of regional, national, and sub-national policies. Several design elements merit serious consideration for inclusion in the Paris agreement, either directly or by establishing a process for subsequent international elaboration. At the same time, including detailed linkage rules in the core agreement is not desirable because this could make it difficult for rules to evolve in light of experience.
    Keywords: Climate Policies, International Agreements
    JEL: Q5 Q58
    Date: 2015–03

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