nep-res New Economics Papers
on Resource Economics
Issue of 2016‒07‒09
eight papers chosen by
Maximo Rossi
Universidad de la República

  1. Strategic Subsidies for Green Goods By Fischer, Carolyn
  2. Environmental Protection for Sale: Strategic Green Industrial Policy and Climate Finance By Fischer, Carolyn
  3. Explaining the Interplay of Three Markets: Green Certificates, Carbon Emissions and Electricity By Schusser, Sandra; Jaraite, Jurate
  4. Institutions and the Environment: Existing Evidence and Future Directions By Shouro Dasgupta; Enrica De Cian
  5. The Green Paradox and Interjurisdictional Competition across Space and Time By Habla, Wolfgang
  6. How Green are Economists? By Stefano Carattini; Alessandro Tavoni
  7. Honor and stigma in mechanisms for environmental protection By Prasenjit Banerjee; Rupayan Pal; Jason F. Shogren
  8. Market power in interactive environmental and energy markets: The case of green certificates By Amundsen, Eirik Schrøder; Nese, Gjermund

  1. By: Fischer, Carolyn (Resources for the Future)
    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 such as 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 such as 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: 2016–04–14
  2. By: Fischer, Carolyn (Resources for the Future)
    Abstract: Industrial policy has long been criticized as subject to protectionist interests; accordingly, subsidies to domestic producers face disciplines under World Trade Organization agreements, without exceptions for environmental purposes. Now green industrial policy is gaining popularity as governments search for low-carbon solutions that also provide jobs at home. The strategic trade literature has largely ignored the issue of market failures related to green goods. I consider the market for a new environmental good (such as low-carbon technology) whose downstream consumption provides external benefits (such as reduced emissions). Governments may have some preference for supporting domestic production, such as by interest-group lobbying, introducing a political distortion in their objective function. I examine the national incentives and global rationales for offering production (upstream) and deployment (downstream) subsidies in producer countries, allowing that some of the downstream market may lie in nonregulating third-party countries. Restraints on upstream subsidies erode global welfare when environmental externalities are large enough relative to political distortions. Climate finance is an effective alternative if political distortions are large and governments do not undervalue carbon costs. Numerical simulations of the case of renewable energy indicate that a modest social cost of carbon can imply benefits from allowing upstream subsidies.
    Keywords: Green Industrial Policy, Emissions Leakage, Externalities, International Trade, Renewable Energy, Subsidies
    JEL: F13 F18 H21 Q5
    Date: 2016–04–14
  3. By: Schusser, Sandra (CERE and the Department of Forest Economics, SLU); Jaraite, Jurate (CERE and the Department of Economics, Umeå University)
    Abstract: The European Union's Emissions Trading System (EU ETS) and the Swedish-Norwegian Tradable Green Certicate System (Swedish-Norwegian TGC system) are two market-based instruments that have the overlapping goal to mitigate greenhouse gas (GHG) emissions by shifting economies to cleaner energy sources. Understanding the price signals and interactions of these two newly created markets is essential for all decisions makers, regulators and direct market participants, who aim to reach the predefined environmental policy goals in the most efficient manner. The interaction between these policy instruments has been widely examined from the theoretical perspective. This research contributes to the literature by empirically examining the interplay between the prices of three markets: (1) the price of tradable green certificates in the Swedish-Norwegian TGC system, (2) the price of carbon in the EU ETS and (3) the price of electricity in Nord Pool. We use a multivariate vector-autoregression (VAR) approach to take into account the endogenous relationships between these prices. To date, our empirical results do not support the theoretical considerations that the impacts of carbon price on green certicate prices and on renewable electricity production are negative. Contrary, we find that, to date, increases in carbon prices positively affect green certificate prices at least in the short-run.
    Keywords: Renewable energy; Electricity; Green certificates; Emissions trading; EU ETS; interactions; tradable green certificates; Sweden; VAR model
    JEL: Q28 Q41 Q42 Q48
    Date: 2016–06–01
  4. By: Shouro Dasgupta (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici); Enrica De Cian (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici)
    Abstract: In this review we synthetize the existing contributions that use econometric approaches to examine the influence of institutions and governance on environmental policy, environmental outcomes, and investments. The paper describes how the relationship between institutions and various response variables related to environmental performance and environmental policy have been conceptualized and operationalized in the literature, and it summarizes the main findings. The second part of the paper outlines avenues for future research in the specific context of energy and climate change. We identify various opportunities for empirical work that have recently emerged with the growing availability of data in the field of green investments, climate, and energy policy. Expanding the current empirical literature towards these research topics is of scientific and policy relevance, and can provide important insights on the broader field of sustainability transition and sustainable development.
    Keywords: Institutions, Environmental Performance, Environmental Policy, Investments
    JEL: O10 Q5 Q00 P16
    Date: 2016–06
  5. By: Habla, Wolfgang (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper demonstrates that unintended effects of climate policies (Green Paradox effects) also arise in general equilibrium when countries compete for mobile factors of production (capital and resources/energy). Second, it shows that countries have a rationale to use strictly positive source-based capital taxes to slow down resource extraction. Notably, this result comes about in the absence of any revenue requirements by the government, and independently of the elasticity of substitution between capital and resources in production. Third, the paper generalizes the results obtained by Eichner and Runkel (2012) by showing that the Nash equilibrium entails inefficiently high pollution.
    Keywords: Green Paradox; factor mobility; interjurisdictional competition; resource extraction; substitutability between capital and resources; capital taxation
    JEL: E22 H23 H77 Q31 Q58
    Date: 2016–06
  6. By: Stefano Carattini (Haute école de gestion de Genève, University of Applied Sciences Western Switzerland and Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science); Alessandro Tavoni (Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science)
    Abstract: The market for voluntary carbon offsets has grown steadily in the last decade, yet it remains a very small niche. Most emissions from business travel are still not offset. This paper exploits a unique dataset examining the decision to purchase carbon offsets at two academic conferences in environmental and ecological economics. We find that having the conference expenses covered by one's institution increases the likelihood of offsetting, but practical and ethical reservations as well as personal characteristics and preferences also play an important role. We draw lessons from the effect of objections on the use of offsets and discuss the implications for practitioners and policy-makers. Based on our findings, we conclude that ecological and environmental economists should be more involved in the design and use of carbon offsets.
    Keywords: Voluntary Carbon Offsetting, Public Goods, Ecological Economics, Environmental Economics
    JEL: D6 H8 Q4
    Date: 2016–06
  7. By: Prasenjit Banerjee (University of Manchester); Rupayan Pal (Indira Gandhi Institute of Development Research); Jason F. Shogren (University of Wyoming)
    Abstract: Honor and stigma play a role in environmental protection. Environmental honors are bestowed on people and firms who go out of their way to do right by the environment. Similarly, environmental stigma is put on people or firms who are publicly taken to task for their poor environmental record. We design a voluntary incentive mechanism by incorporating honor and stigma to induce heterogeneous firms to protect the environment at less cost. We encounter a motivational costs incurred by the green firm-it loses its leadership rents. Our result suggests (i) an additional social reward is needed for a green firm; and (ii) the brown firm may sacrifice information rent.
    Keywords: Mechanism, reputation, environmental risk, honor, stigma, social norm
    JEL: D03 Q52 Q58
    Date: 2016–05
  8. By: Amundsen, Eirik Schrøder (Department of Economics, University of Bergen); Nese, Gjermund (Norwegian Competition Authority.)
    Abstract: A market for Tradable Green Certificates (TGCs) is strongly interwoven in the electricity market as the producers of green electricity are also the suppliers of TGCs. Therefore, strategic interaction may result. We formulate an analytic equilibrium model for simultaneously functioning electricity and TGC markets, and focus on the role of market power (i.e. Stackelberg leadership). One result is that a certificate system faced with market power may collapse into a system of per unit subsidies. Also, the model shows that TGCs may be an imprecise instrument for regulating the generation of green electricity.
    Keywords: Renewable energy; Electricity; Green Certificates; Market power
    JEL: C70 Q28 Q42 Q48
    Date: 2016–06–27

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