nep-res New Economics Papers
on Resource Economics
Issue of 2020‒03‒23
five papers chosen by
Maximo Rossi
Universidad de la República

  1. On Outsourced Abatement Services: Market Power and Efficient Regulation By Damien Sans; Sonia Schwartz; Hubert Stahn
  2. Policies, regulatory framework and enforcement for air quality management: The case of China By Chan Yang
  3. Does Pollution Hinder Urban Competitiveness ? By Kahn,Matthew Edwin; Lozano Gracia,Nancy; Soppelsa,Maria Edisa
  4. Modeling Myths: On the Need for Dynamic Realism in DICE and other Equilibrium Models of Global Climate Mitigation By Michael Grubb; Claudia Wieners
  5. Controlling for environmental conditions in regulatory benchmarking By Emil Heesche; Mette Asmild

  1. By: Damien Sans (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Sonia Schwartz (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Hubert Stahn (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, we consider competitive polluting firms that outsource their abatement activity to an upstream imperfect competitive eco-industry to comply with environmental regulation. In this case, we show that an usual environmental policy based on a Pigouvian tax or a pollution permit market reaches the first-best outcome. The main intuition is based on the idea that purchasing pollution reduction services instead of pollution abatement inputs modifies for each potential tax rate (or out of the equilibrium permit price) the nature of the arbitrage between pollution and abatement. This induces a demand for abatement services which is, at least partially, strongly elastic and therefore strongly reduces upstream market power. This argument is first illustrated with an upstream monopoly selling eco-services to a representative polluting firm under a usual Pigouvian tax. We then progressively extend the result to permit markets, heterogeneous downstream polluters and heterogeneous upstream Cournot competitors. JEL Codes: Q58, D43
    Keywords: Environmental regulation,Eco-industry,Imperfect Competition,Abatement Outsourcing
    Date: 2019–12
  2. By: Chan Yang (OECD)
    Abstract: Four decades of rapid economic expansion in China has generated enormous pressure on the environment, natural resources and public health. Alarming smog outbreaks during the 2010-13 period prompted the government to introduce a number of reforms to control air pollution, including a re-organisation of environmental institutions, improving the coordination and integrity of enforcement actions across levels of government, and the rolling out of a permit system for all stationary pollution sources. This paper reviews these recent developments, and discusses key remaining challenges. The paper complements two case studies on air quality policies in Korea and Japan, and a third case study on international regulatory cooperation on air quality in North America, Europe and North-East Asia.
    Keywords: air pollution, China, monitoring and enforcement, regulatory policy
    JEL: Q52 Q53 Q58
    Date: 2020–03–13
  3. By: Kahn,Matthew Edwin; Lozano Gracia,Nancy; Soppelsa,Maria Edisa
    Abstract: This paper surveys the recent literature exploring the causes of urban pollution in the developing world and the implications of such pollution for a city's competitiveness. Within a system of cities, cities compete for jobs and people. Those cities that specialize in heavy industrial activity will gain from a manufacturing boom but are more likely to be polluted than a city that specializes in the service economy and one that makes investments in regulations to reduce the social costs of power generation, transportation, and household services. The paper explores three main questions. First, why does pollution inhibit urban competitiveness? Second, why is this effect likely to grow in importance over time? Third, why have cities been slow to adopt cost-effective regulatory strategies?
    Date: 2019–02–13
  4. By: Michael Grubb (University College London); Claudia Wieners (Institute of Economics, Scuola Superiore Sant`Anna, Pisa, Italy.)
    Abstract: We analyze and critique how optimizing Integrated Assessment Models, and specifically the widely-used DICE model, represent abatement costs. Many such models assume temporal independence Ðabatement costs in one period are not affected by prior abatement. We contrast this with three dimensions of dynamic realism in emitting systems: inertia, induced innovation, and path dependence. We extend the DICE model with a stylized representation of such dynamic factors. By adding a transitional cost component, we characterize the resulting system in terms of its capacity to adapt in path-dependent ways, and the transitional costs of accelerating abatement. We formalize a resulting metric of the pliability of the system, and the characteristic timescales of adjustment. With the resulting DICE-PACE model, we show that in a system with high pliability, the optimal strategy involves much higher initial investment in abatement, sustained at roughly constant levels for some decades, which generates an approximately linear abatement path and emissions declining steadily to zero. This contrasts sharply with the traditional formulation. Characteristic transition timescales of 20-40 years result in an optimum path which stabilizes global temperatures around a degree below the traditional DICE behavior; with otherwise modest assumptions, a pliable system can generate optimal scenarios within the goals of the Paris Agreement, with far lower long run combined costs of abatement and climate damages. We conclude that representing dynamic realism in such models is as important as Ð and far more empirically tractable than Ð continued debate about the monetization of climate damages and `social cost of carbon`.
    Keywords: climate change, Integrated Assessment Models, DICE, path dependence, Pliable Abatement Cost Mechanisms.
    JEL: Q5 H23 Q54 Q55
    Date: 2020–01
  5. By: Emil Heesche (Department of Food and Resource Economics, University of Copenhagen); Mette Asmild (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: Data Envelopment Analysis (DEA) is often used by regulators to create a pseudo-competitive environment for sectors with natural monopolies. In addition to develop a theoretically well-behaved model, regulators need to take into account several other factors, such as the political agenda and the historical context of the regulation. This sometimes results in some unconventional approaches, which furthermore are not easily changed. In this paper, we discuss the model used for DEA-based benchmark regulation of the Danish water sector. More specifically, we look at the characteristics of the method the regulator uses to take into account differences in the companies’ environmental conditions. We show how the approach currently used to control for differences in environmental conditions seemingly does not sufficiently control for the actual differences as intended since second stage analysis still reveals significant correlations between the efficiency scores and these external factors. To explain this, we reconsider the second stage analysis, using permutation-based approaches and also accounting for the fact that only those companies that in the DEA assign weights to those output measures adjusted for environmental conditions, will benefit from the adjustments.
    Keywords: Data envelopment analysis; Second Stage Analysis; Environmental Variables; Regulation; Permutation
    JEL: C02 C14 C51 C52 C61 C67 L51
    Date: 2020–03

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