nep-res New Economics Papers
on Resource Economics
Issue of 2021‒03‒08
two papers chosen by
Maximo Rossi
Universidad de la República

  1. Cross-sectoral Externalities Related to Natural Resources and Ecosystem Services By Manuel Bellanger; Robert Fonner; Daniel S. Holland; Gary D. Libecap; Douglas W. Lipton; Pierre Scemama; Cameron Speir; Olivier Thébaud
  2. R&D in natural resource based industries: Governments should prioritize innovation which reduces environmental hazards By Mads Greaker

  1. By: Manuel Bellanger; Robert Fonner; Daniel S. Holland; Gary D. Libecap; Douglas W. Lipton; Pierre Scemama; Cameron Speir; Olivier Thébaud
    Abstract: Standard approaches to environmental and natural resource use externalities generally focus on single-sector resources and user groups. Remedies include Pigouvian-style government constraints, small group controls following Elinor Ostrom, or less frequently, bargaining across users as outlined by Ronald Coase. However, many difficult natural resource management problems involve competing uses of the same resource or multiple interdependent resources, across multiple, heterogeneous sectors. Cross-sectoral externalities are generated and impede attainment of conservation objectives. The multiplicity of resources and stakeholders, who may have different property rights, hold different use or non-use values, have different traditions, or fall under different regulatory regimes, increases the likelihood of multi-jurisdictional conflicts. We provide an institutional analysis following Oliver Williamson’s four-levels of institutions (social embeddedness, institutional environment, governance, resource allocation) to illustrate the sources of potential conflict, the costs of addressing them, and the potentials for exchange. In comparing the costs of alternative approaches, we include transaction costs associated with property rights; the costs of lobbying, implementing, and enforcing government regulation; and the costs of scaling up from small-group controls when resource problems involve multiple sectors and heterogeneous populations. In our illustrative case examples, instruments that are not formal property rights are exchanged at lower transaction costs. We close by discussing how Coasean, Pareto-improving voluntary exchange agreements may be lower cost, more effective, and more durable solutions than alternative management regimes to mitigate cross-sectoral externalities.
    JEL: D23 H23 H73 P48 Q20 Q22
    Date: 2021–02
  2. By: Mads Greaker (Oslo Business School - OsloMet)
    Abstract: Sustainable yield from a natural resource áuctuates in response to both natural conditions and harvesting practices. On the one hand, research and development (R&D) may reduce the áuctuations through more knowledge of ecosystem functioning. On the other hand, R&D may also increase the fluctuations if it results in more efficient harvesting operations with increased impact on the environment. We analyze the incentives for innovation in a natural resource based industry. The direction of technical change can either be towards profitability enhancing innovations or environmental hazard reducing innovations. We then pose the following research questions: Is the marketís ranking of profitability enhancing and environmental hazard reducing innovation projects in line with the ranking of the social planner? In order to investigate our research question, we develop a theoretical model of innovation in a natural resource based industry, which we also calibrate to the Norwegian aquaculture industry. Two key results emerge; first, the government should subsidize the adoption of environmental hazard reducing technology. Second, the private incentive for profitability enhancing innovation is likely to outperform the private incentives for environmental hazard reducing innovation. In fact, the optimal R&D subsidy to to the former type of R&D is negative, while the optimal R&D subsidy to the latter type of R&D is positive and larger the more serious the environmental hazard.
    Keywords: Renewable natural resources, innovation, environmental policy, aquaculture
    Date: 2020–10–21

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