nep-res New Economics Papers
on Resource Economics
Issue of 2016‒05‒28
five papers chosen by
Maximo Rossi
Universidad de la República

  1. Strategic Subsidies for Green Goods By Carolyn Fischer
  2. Economic Implications of EU Mitigation Policies: Domestic and International Effects By Francesco Bosello; Marinella Davide; Isabella Alloisio
  3. Ecological Modernisation in Japan: The Role of Interest Rate Subsidies and Voluntary Pollution Control Agreements By Robert J.R. Elliott; Toshihiro Okubo
  4. Unconditional Aid and Green Growth By Moutaz Altaghlibi; Florian Wagener
  5. Pricing Forest Carbon: Implications of Asymmetry in Climate Policy By Eriksson, Mathilda; Brännlund, Runar; Lundgren, Tommy

  1. By: Carolyn Fischer (Resources for the Future, Gothenburg University, FEEM, and CESifo Research Network)
    Abstract: Globally and locally, government support policies for green goods (like renewable energy) are much more popular internationally than raising the cost of bads (as through carbon taxes). These support policies may encourage downstream consumption (renewable energy deployment) or upstream development and manufacturing of those technologies. The use of subsidies—particularly upstream ones—is disciplined by World Trade Organization agreements, and its subsidies code lacks exceptions for transboundary externalities like human health or resource conservation, including those related to combating global climate change. The strategic trade literature has devoted little attention to the range of market failures related to green goods. This paper considers the market for a new environmental good that when consumed downstream may provide external benefits like reduced emissions. The technology is traded internationally but provided by a limited set of upstream suppliers that may operate in imperfect markets, such as with market power or external scale economies. We examine the national incentives and global rationales for offering production and consumption subsidies in producer countries, allowing that some of the downstream market may lie in nonregulating third-party countries. Although technology producer countries can benefit from restraints on upstream subsidies, global welfare is higher without them, and market failures imply that optimal subsidies are even higher. We supplement the analysis with numerical simulations of the case of renewable energy, exploring optimal subsidies for the major renewable energy producing and consuming regions and the cost of restrictions on upstream subsidies.
    Keywords: International Trade, Subsidies, Imperfect Competition, Externalities, Emissions Leakage
    JEL: F13 F18 H21 Q5
    Date: 2016–03
  2. By: Francesco Bosello (FEEM, CMCC and University of Milan); Marinella Davide (FEEM, CMCC and University of Venice); Isabella Alloisio (FEEM and CMCC)
    Abstract: The EU has a consolidated climate and energy regulation: it played a pioneering role by adopting a wide range of climate change policies and establishing the first regional Emission Trading Scheme (EU ETS). These policies, however, raise several concerns regarding both their environmental effectiveness and their potentially negative effect on the economy, especially in terms of growth and competitiveness. The paper reviews the European experience in order to understand if these concerns are supported by quantitative evidence. It thus focuses on key economic indicators, such as costs, competitiveness and carbon leakage as assessed by quantitative ex-ante and ex-post analyses. A dedicated section, extends the investigation to the potential extra-EU spillover of the EU mitigation policy with a particular attention to developing countries. The objective of the paper is to highlight both the limits and the opportunities of the EU regulatory framework in order to offer policy insights to emerging and developing countries that are on the way to implement climate change measures. Overall, the European experience shows that the worries about the costs and competitiveness losses induced by climate regulation are usually overestimated, especially in the long term. In addition, a tightening climate policy regime in the EU might in fact negatively impact developing countries via deteriorated trade relations. Nonetheless it tends to facilitate a resource relocation that if well governed could be beneficial to those countries where the poor are mainly involved in rural activities.
    Keywords: Climate Change, Climate Policy, Mitigation, Economic Impacts, GDP, Competitiveness
    JEL: F64 H23 O44 O52 Q54 R11
    Date: 2016–04
  3. By: Robert J.R. Elliott (University of Birmingham); Toshihiro Okubo (Faculty of Economics, Keio University)
    Abstract: The need for developed countries to take a lead in the global fight against climate change is generally acknowledged and was intrinsic to the recent Paris climate change agreement. An understanding of the way in which environmental policy in advanced nations has developed and which policies had a significant impact on the reduction in the emissions of various pollutants may yield important policy prescriptions relevant to the current climate change negotiations. In this paper we consider how Japan's little known environmental interest rate policy and voluntary pollution control agreements contributed to Japan's ecological modernisation and how these policies compared to the more traditional regulatory approach. Our results show that Japan's use of an environmental interest rate policy was an effective policy as a complement to the more traditional regulatory approach.
    Keywords: Environmental regulations
    JEL: O13 O31 H2 H23
    Date: 2016–03–29
  4. By: Moutaz Altaghlibi (University of Amsterdam, the Netherlands, and Université Paris 1 Panthéon-Sorbonne, France); Florian Wagener (University of Amsterdam, the Netherlands)
    Abstract: Environmentally motivated aid can help developing countries to achieve economic growth while mitigating the impact on emission levels. We argue that the usual practice of giving aid conditionally is not effective, and we therefore study aid that is given unconditionally. Our framework is a differential open-loop Stackelberg game between a developed country (leader) and a developing country (follower). The leader chooses the amount of mitigation aid given to the follower, which the follower either consumes or invests in costly nonpolluting capital or cheap high-emission capital. The leader gives unconditional mitigation aid only when sufficiently rich or caring sufficiently about the environmental quality, while the follower cares about environmental quality to some extent. If aid is given in steady state, it decreases the steady state level of high-emission capital and capital investments in the recipient country and the global pollution stock, but it has no effect on the levels of non-polluting capital and non-polluting investments. It accelerates the economic growth of the follower; this effect is however lower than what static growth theory predicts since most of the aid is consumed. Moreover, we find that the increase in growth takes place in the nonpolluting sector.
    Keywords: Development aid; Green growth; Conditionality; Open loop Stackelberg equilibrium
    JEL: Q56 O13
    Date: 2016–05–17
  5. By: Eriksson, Mathilda (CERE and the Department of Economics, Umeå University); Brännlund, Runar (CERE and the Department of Economics, Umeå University); Lundgren, Tommy (CERE and the Department of Economics, Umeå University)
    Abstract: In this paper, we use an integrated assessment model to examine the implications of not recognizing, and partially recognizing forest carbon in climate policy. Specifically, we investigate the impact of an asymmetric carbon policy that recognizes emissions from fossil fuels while ignoring emissions from forests. We additionally investigate the relative importance of not recognizing positive emissions from a reduction in the stock of forest biomass, or of not recognizing negative emissions from the growth of forest biomass. We show that asymmetric carbon policies lead to lower levels of welfare, as well as higher emissions and carbon prices. This occurs because the forest resource will be allocated inefficiently under these carbon policies. Broadly, we find that when the social planner does not account for neither positive or negative forest emissions, the planner will set bioenergy levels that are too high and afforestation and avoided deforestation levels that are too low. Our results further reveal that not recognizing forest emissions leads to larger welfare losses than not recognizing sequestration.
    Keywords: Climate change; Integrated assessment; Forest Carbon; Carbon Taxes and Subsidies
    JEL: C61 H23 Q23 Q54 Q56
    Date: 2016–04–06

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