nep-res New Economics Papers
on Resource Economics
Issue of 2016‒09‒25
four papers chosen by
Maximo Rossi
Universidad de la República

  1. Confronting Deep and Persistent Climate Uncertainty By Wagner, Gernot; Zeckhauser, Richard J.
  2. Does environmental regulation create merger incentives? By Anna CRETI; María-Eugenia SANIN
  3. A Conceptual Framework for Integrated Economic-Environmental Modelling By Onil Banerjee; Martin Cicowiez; Mark Horridge; Renato Vargas
  4. The economics of the European Water Framework Directive – A retrospective remark focusing on Sweden By Ek, Kristina; Persson, Lars

  1. By: Wagner, Gernot (Harvard University); Zeckhauser, Richard J. (Harvard University)
    Abstract: Deep-seated, persistent uncertainty is a pernicious feature of climate change. One key parameter, equilibrium climate sensitivity, has eluded almost all attempts at pinning it down more precisely than a 'likely' range that has stalled at 1.5-4.5 degrees C for over thirty-five years. The marginal damages due to temperature increase rise rapidly. Thus, uncertainty in climate sensitivity significantly raises the expected costs of climate change above what they would be if the temperature increases were known to be close to a mean value 3.0 degrees C. The costs of this uncertainty are compounded given that the distribution of possible temperature changes is strongly skewed toward higher values.
    JEL: D81 Q54
    Date: 2016–08
  2. By: Anna CRETI (Dauphine University and Ecole Polytechnique); María-Eugenia SANIN (EPEE, Evry-Val-d'Esssone University and Ecole Polytechnique)
    Abstract: This paper studies merger incentives for polluting Cournot firms under a competitive tradable emission permits market. Such setting is relevant to assess the observed mergers between power generators in the Regional Greenhause Gas Initiative (RGGI) allowing us to derive policy recommendations. We find that when firms are symmetric and marginal costs are constant, an horizontal merger that generates efficiency gains is welfare enhancing, but efficiency gains must be high enough with respect to the case without permits markets for the merger to take place. Secondly, the presence of a competitive (or monopolistic) outside market that also trades in the permits market makes profitable a merger that would not happen otherwise. When firms are vertically related in an input-output chain, an horizontal merger in one of the markets increases profits in that market and in the other market due to the decrease in permits price. Finally we consider an oligopoly-fringe model in which firms differ both in their marginal costs of production and in their pollution intensity. A merger between the oligopolistic firms decreases permits price and is always profitable as opposed to the symmetric Cournot case in which there is a critical size for profitability.
    Keywords: mergers, environmental externality, tradable emission permits, social welfare, Cournot competition
    JEL: L13 L41 Q51
    Date: 2016
  3. By: Onil Banerjee (Inter-American Development Bank); Martin Cicowiez (UNLP - FCE); Mark Horridge (Victoria University); Renato Vargas (World Bank)
    Abstract: Economy-wide models such as Computable General Equilibrium (CGE) Models are powerful tools that provide insights on policy impacts on standard economic indicators. With the recent publication of the System of Environmental-Economic Accounts (SEEA), the power of this approach is amplified. This paper addresses an important gap in economy-wide policy modelling applications and literature by developing a conceptual framework for the integration of the SEEA in the CGE framework, enabling for the first time the analysis of policy impacts on the economy and the environment in a quantitative, comprehensive and consistent framework. Previous integrated modelling efforts have generally focused on the interaction between the economy and one environmental resource in isolation, requiring significant data reconciliation. Integration of SEEA into a CGE circumvents this resource intense process, enhancing analytical power, obviating the need for strong assumptions in reconciling economic-environmental data, reducing start-up costs, and increasing the timeliness of evidence-based policy advice.
    Date: 2016–09
  4. By: Ek, Kristina (Economics Unit, Luleå University of Technology); Persson, Lars (CERE and the Department of Economics, Umeå University)
    Abstract: The Water Framework Directive (WFD) explicitly acknowledges the role of economics in the process of reaching the environmental quality objectives. The purpose of this paper is to discuss the implementation of the WFD in Sweden based on standard economic theory regarding instruments for cost efficient- and effective solutions to environmental problems. A lesson is that although incentive based instruments are beneficial from a cost-efficiency perspective, the complexities associated with environmental water management may somewhat challenge their implementation. Flexibility is a key issue for cost-effectiveness and, since Swedish water management mainly consists of command-and control instruments, the cost effectiveness is likely to be limited. Furthermore, the paper also points at how policy instruments relate to the economic burden aspect and the PPP – both highlighted in the Directive.
    Keywords: The economics of the Water Framework Directive; cost efficiency and effectiveness; environmental water management; Polluter Pays Principle
    JEL: H23 Q53
    Date: 2016–09–19

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