nep-res New Economics Papers
on Resource Economics
Issue of 2016‒10‒23
five papers chosen by
Maximo Rossi
Universidad de la República

  1. Second-Best Renewable Subsidies to De-Carbonize the Economy: Commitment and the Green Paradox By Rezai, Armon; van der Ploeg, Frederick
  2. The Failure of Climate Change Negotiations: Irrational Countries Exclude the Poor and the Future Generations By Sang-Chul Suh
  3. Viable Nash Equilibria in the Problem of Common Pollution By Noël Bonneuil; Raouf Boucekkine
  4. Do ‘green’ employment effects vary across industries? Implications for green growth By Christine Mee Lie
  5. Output-based allocations in pollution markets with uncertainty and self-selection By Guy Meunier; Juan-Pablo Montero; Jean-Pierre Ponssard

  1. By: Rezai, Armon; van der Ploeg, Frederick
    Abstract: Climate change must deal with two market failures: global warming and learning by doing in renewable energy production. The first-best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax. Given that global carbon taxes remain elusive, policy makers might have to rely on a second-best subsidy only. With credible commitment the second-best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first-best levels at the cost of higher fossil fuel use in the short run (weak Green Paradox). Without commitment the second-best subsidy is set to the social benefit of learning. It generates smaller weak Green Paradox effects, but the transition to the carbon-free takes longer and cumulative carbon emissions are higher. Under first best and second best with pre-commitment peak warming is 2.1 - 2.3 °C, under second best without commitment 3.5°C, and without any policy 5.1°C above pre-industrial levels. Not being able to commit yields a welfare loss of 95% of initial GDP compared to first best. Being able to commit brings this figure down to 7%.
    Keywords: carbon tax; commitment; learning by doing; Ramsey growth; renewables subsidy
    JEL: H21 Q51 Q54
    Date: 2016–10
  2. By: Sang-Chul Suh (Department of Economics, University of Windsor)
    Abstract: Despite decades of international negotiations, little progress has been made in reducing the level of the Green House Gases (GHGs) in the atmosphere. The understanding of the climate change problem in economic theory as an allocation failure of common resources is explained in "the tragedy of the commonsÉ by Hardin (1968). We start with a simple prisoners’ dilemma game (PD game) that represents the essence of Hardin’s "the tragedy of the commons". We argue that the PD game model is not adequate for explaining the failure of the climate negotiations. As an alternative explanation, we claim that countries’ irrational decision making, rather than misdirected incentives of rational countries in the PD game, is the main cause of the failure of climate negotiations. The irrationality of a government originates from ignoring the well-being of the poor and the future generations who are mostly excluded from the market activities, and hence receive the least economic benefit, contribute least to the climate problem, and yet are forced to pay most of the non-economic costs of climate change. The current paper tries to keep the resolution of the climate problem in the realm of economic discussion, while following Gardiner’s (2011) view that regards the issue of climate change as a moral problem of ignoring the wellbeing of the poor and the future generations. The immediate challenge of this approach is to measure the non-economic losses of the poor and the future generations due to climate change and to reflect them in climate change related decisions
    Keywords: Climate Change, Negotiation, Game, Irrationality, Income Inequality, Intergenerational Conflict.
    JEL: Q54 C72 D62
    Date: 2016–10
  3. By: Noël Bonneuil (EHESS - École des hautes études en sciences sociales, INED - Institut national d'études démographiques); Raouf Boucekkine (IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche, AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales)
    Abstract: Two countries produce goods and are penalized by the common pollution they generate. Each country maximizes an inter-temporal utility criterion, taking account of the pollution stock to which both contribute. The dynamic is in continuous time with possible sudden switches to less polluting technologies. The set of Nash equilibria, for which solutions also remain in the set of constraints, is the intersection of two manifolds in a certain state space. At the Nash equilibrium, the choices of the two countries are interdependent: different productivity levels after switching lead the more productive country to hasten and the less productive to delay the switch. In the absence of cooperation, efforts by one country to pollute less motivate the other to pollute more, or encourage the country that will be cleaner or less productive country after switching to delay its transition.
    Keywords: pollution,dynamic game,Nash,viability theory
    Date: 2016–06
  4. By: Christine Mee Lie (TIK Centre, University of Oslo)
    Abstract: This article investigates the impact of green innovation on employment growth, employing firm-level survey data from South Korea. We focus especially on the industry-dimension, investigating whether displacement or compensation effects vary across industries and according to subtypes of green process innovations. Results demonstrate that both green and non-green product innovations are associated with significant employment increases: a 1% increase in sales growth from new products is associated with a less than 1% increase in employment. Finally results are found to vary across industries, especially when simultaneously accounting for subtypes of green process innovations.
    Date: 2016–10
  5. By: Guy Meunier (ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique, Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique); Juan-Pablo Montero (PUC - Departamento de Economia, Pontificia Universidad Católica de Chile - Pontificia Universidad Católica de Chile); Jean-Pierre Ponssard (CNRS - Centre National de la Recherche Scientifique, Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study pollution permit markets in which a fraction of permits are allocated to firms based on their output. Output-based allocations, which are receiving increasing attention in the design of carbon markets around the world (e.g., Europe, California, New Zealand), are shown to be optimal under demand and supply volatility despite the output distortions they may create. In a market that covers multiple sectors, the optimal design combines auctioned permits with output-based allocations that are specific to each sector and increasing in its volatility. When firms are better informed about the latter or must self select, the regulator resort to some free (i.e., lump-sum) allocations to sort firms out. Numerical exercises illustrate the policy relevance of our results: the gains from considering output-based allocations can be substantial.
    Keywords: pollution markets, output-based allocations, market volatility, selfselection, climate policy
    Date: 2016–05–06

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