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on Environmental Economics |
| By: | Maria,Corrado di; Werf,Edwin van der (Tilburg University, Center for Economic Research) |
| Abstract: | The increase in carbondioxide emissions by some countries in reaction to an emission reduction by countries with climate policy (carbon leakage) is seen as a serious threat to unilateral climate policy. Using a two-country model where only one of the countries enforces an exogenous cap on emissions, this paper analyzes the effect of technical change that can be directed towards the clean or dirty input, on carbon leakage. We show that, as long as technical change cannot be directed, there will always be carbon leakage through the standard terms-of-trade effect. However, once we allow for directed technical change, a counterbalancing induced technology effect arises and carbon leakage will generally be lower. Moreover, we show that when the relative demand for energy is sufficiently elastic, carbon leakage may be negative: the technology effect induces the unconstrained region to voluntarily reduce its own emissions. |
| JEL: | F18 O33 Q54 Q55 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200568&r=env |
| By: | R. Joosten |
| Abstract: | Two agents possess the fishing rights to a lake. Each period they have two options, to catch without restraint, e.g., to use a fine-mazed net, or to catch with some restraint, e.g., to use a wide-mazed net. The use of a fine-mazed net always yields a higher immediate catch than the alternative. The present catches depend on the behavior of the agents in the past. The more often the agents have used the fine-mazed net in the past, the lower the present catches are independent from the type of nets being used. We determine feasible rewards and provide (subgame perfect) equilibria for the limiting average reward criterion using methods inspired by the repeated-games literature. Our analysis shows that a `tragedy of the commons' can be averted, as sustainable Pareto-efficient outcomes can be supported by subgame perfect equilibria. |
| Keywords: | games with frequency-dependent stage payoffs, limiting average reward, equilibria, renewable common-pool resources |
| JEL: | C72 C73 Q20 Q22 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2005-06&r=env |
| By: | Helmut Karl (Ruhr-University Bochum); Antje Möller (Ruhr-University Bochum); Ximena Matus (Ruhr-University Bochum); Edgar Grande (Technical University of Munich); Robert Kaiser (Technical University of Munich) |
| Abstract: | A suitable strategy for achieving sustainable development is to foster environmental innovations. Environmental innovations, however, suffer from so-called "double externalities", because apart from innovation spillovers they also improve the quality of public environmental goods, which can be used without cost by free riders. Those innovation spillovers can be avoided through co-operation. Furthermore co-operations can be considered as advantageous because environmental innovations often depend on interaction in research and development, production, selling and disposal. This paper analyzes as to what extent institutional factors impact co-operative arrangements of innovative organizations in the development of new environmental technologies. It applies a multi-dimensional institutional analysis focusing not only on institutional arrangements which exist among organizations but also on opportunities and constraints provided by the institutional environment in which these organizations are embedded. Expanding the existing research we will conclude what kind of policy measure may support the success within networks of environmental oriented innovators. |
| Keywords: | Environmental innovation, Co-operation, Sustainability, Institutional analysis, Policy measures |
| JEL: | L14 O31 Q55 Q58 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.58&r=env |
| By: | Anastasios Xepapadeas (University of Crete); Dimitra Vouvaki (University of Crete) |
| Abstract: | We formulate two kinds of sustainability criteria by using feedback and arbitrary rules for selecting policy variables in non optimizing economies. We show that when policy variables are selected arbitrarily their accounting prices could determine sustainability in addition to the accounting prices of the economy’s assets. We use our theoretical framework to obtain estimates of sustainability conditions in real economies. Thus, the paper’s contribution consists in developing a systematic theoretical framework for determining value functions, accounting prices and sustainability criteria, under fairly general non-optimizing behavioral rules, and then showing that this framework can be used in applied work to estimate sustainability conditions. Based on our theoretical model, we examined the case of the Greek economy. When there is no binding environmental policy then migration rate, growth of capital per worker and exogenous technical change are strong positive factors for sustainability. When we introduce potential environmental damages due to sulphur dioxide (SO2) emissions, our findings indicate that these damages affect negatively the sustainability criterion. |
| Keywords: | Sustainability criteria, Non-declining social welfare, Accounting prices, Non optimizing economy, Feedback rule, Arbitrary rule |
| JEL: | Q01 O13 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.59&r=env |
| By: | Carlo Carraro (University of Venice); Carmen Marchiori (London School of Economics and Fondazione Eni Enrico Mattei); Alessandra Sgobbi (SSAV and Fondazione Eni Enrico Mattei) |
| Abstract: | The purpose of the paper is to review the applications of non-cooperative bargaining theory to water related issues – which fall in the category of formal models of negotiation. The ultimate aim is that to, on the one hand, identify the conditions under which agreements are likely to emerge, and their characteristics; and, on the other hand, to support policy makers in devising the “rules of the game” that could help obtain a desired result. Despite the fact that allocation of natural resources, especially of trans-boundary nature, has all the characteristics of a negotiation problem, there are not many applications of formal negotiation theory to the issue. Therefore, this paper first discusses the non-cooperative bargaining models applied to water allocation problems found in the literature. Particular attention will be given to those directly modelling the process of negotiation, although some attempts at finding strategies to maintain the efficient allocation solution will also be illustrated. In addition, this paper will focus on Negotiation Support Systems (NSS), developed to support the process of negotiation. This field of research is still relatively new, however, and NSS have not yet found much use in real life negotiation. The paper will conclude by highlighting the key remaining gaps in the literature. |
| Keywords: | Negotiation theory, Water, Agreeements, Stochasticity, Stakeholders |
| JEL: | C72 C78 Q25 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.65&r=env |
| By: | Pieralda FERRARI; Paola ANNONI; Silvia SALINI |
| Abstract: | Two different methodologies, Nonlinear PCA and Partial Credit ver sion of Rasch model, are applied to real data to obtain a quantit ative measure of a latent factor. Specifically the goal is to ide ntify the level of damage of a set of particurarly valuable publi c buildings. Several ordinal variables are observed on each build ing, which describe various aspects of damage severity. Scores o n each bulding are then assigned on the basis of computed 'vulner ability' level. |
| Keywords: | Nonlinear PCA; Partial Credit Rasch Model; Ordinal Variables |
| URL: | http://d.repec.org/n?u=RePEc:mil:wpdepa:2005-12&r=env |
| By: | Alessandra Casella; Andrew Gelman |
| Abstract: | This paper proposes a simple scheme designed to elicit and reward intensity of preferences in referenda: voters faced with a number of binary proposals are given one regular vote for each proposal plus an additional number of bonus votes to cast as desired. Decisions are taken according to the majority of votes cast. In our base case, where there is no systematic difference between proposals' supporters and opponents, there is always a positive number of bonus votes such that ex ante utility is increased by the scheme, relative to simple majority voting. When the distributions of valuations of supporters and opponents differ, the improvement in efficiency is guaranteed only if the distributions can be ranked according to first order stochastic dominance. If they are, however, the existence of welfare gains is independent of the exact number of bonus votes. |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11375&r=env |
| By: | David I. Stern (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) |
| Abstract: | Global anthropogenic sulfur emissions increased until the late 1980s. Existing estimates for 1995 and 2000 show a moderate decline from 1990 to 1995 or relative stability throughout the decade. This paper combines previously published data and new econometric estimates to show a 25% decline over the decade to a level not seen since the early 1960s. The decline is evident in North America, Western and Eastern Europe and in the last few years in East and South Asia. If this new trend is maintained local air pollution problems will be ameliorated but global warming may be somewhat exacerbated. |
| JEL: | Q53 Q54 Q56 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0504&r=env |
| By: | John M. Gowdy (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA) |
| Abstract: | The policy recommendations of most economists are driven by a view of economic reality embodied in Walrasian general equilibrium theory. Ironically, the Walrasian system has been all but abandoned by leading economic theorists. It has been demonstrated to be theoretically untenable, its basic assumptions about human decision making have been empirically falsified, and it consistently makes poor predictions of economic behavior. The current revolution in welfare economics offers opportunities on two related fronts for an evolutionary perspective on human behavior to reshape economic theory and policy. The first opportunity is to incorporate empirically-based information about human behavior to the study of human wants and their formation. This includes information about the evolution of the genetic component of decision making as well as the cultural dimensions of behavior. Expanding the role of economic analysis beyond stylized market behavior to focus on well-being (real utility) has far-reaching consequences for microeconomic policy. Secondly, abandoning the Walrasian model also means rethinking the microfoundations approach to the economic analysis of sustainability. This opens the door for economists to engage with the growing body of research on the evolution of whole societies. One link between the evolution of human behavior and the evolution of human societies is the psychological phenomenon of considering sunk costs. Understanding and overcoming the sunk cost fallacy may be the key to creating a sustainable society. |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0505&r=env |
| By: | Roxana Julia (Department of Economics, Rensselaer Polytechnic Institute,1403 Park Boulevard, Troy, NY, 12180,USA); Faye Duchin (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA) |
| Abstract: | This paper evaluates the role of trade as mechanism of economic adjustment to the impacts of climate change on agriculture. The study uses a model of the world economy able to reflect changes in comparative advantage; the model is used to test the hypotheses that trade can assure that, first, satisfying global agricultural demand will not be jeopardized, and, second, general access to food will not decrease. The hypotheses are tested for three alternative scenarios of climate change; under each scenario, regions adjust to the climatic assumptions by changing the land areas devoted to agriculture and the mix of agricultural goods produced, two of the major mechanisms of agricultural adaptation. We find that trade makes it possible to satisfy the world demand for agricultural goods under the changed physical conditions. However, access to food decreases in some regions of the world. Other patterns also emerge that indicate areas of concern in relying on trade as a mechanism for the adjustment of agriculture to likely future changes in climate. |
| JEL: | Q54 Q17 C61 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0507&r=env |
| By: | André SCHMITT; Sandrine SPAETER |
| Abstract: | The current international regime that regulates maritime oil transport calls for financial contributions by oil firms once an oil spill has occurred. Their percentage contribution to the International Oil Pollution Compensation Fund depends only on their level of activity. In this paper, we show that this compensation regime would be more efficient if contributing oil companies adopted financial strategies to hedge against oil pollution risks. The optimal coverage contract is such that standard insurance is useful to manage small and medium oil spills, while investments on financial markets help to cover large oil spills, less frequent but much more catastrophic for society. We also show that the prevention of oil spills increases when insurance is combined with a financial hedging strategy. This positive effect on prevention is further enhanced if firms have the opportunity to send signals about their risk-reducing activities to potential investors. |
| Keywords: | oil spill, legislation, insurance, capital markets, prevention, catastrophe. |
| JEL: | D80 G22 Q25 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2004-14&r=env |
| By: | Alban Verchère |
| Abstract: | In this article, we study the question of intergenerational equity in a framework that displays two kinds of agents distinguished by their non dynastic intergenerational altruism. The more altruist agents regarding the transmitted environment are qualified of ecologists, whereas the others, less altruists, are then qualified of consumerists. This heterogeneity integrated in a sustainable development model leads to a rather counter-intuitive or paradoxical result as compared with the homogeneous agents case: environmental quality and utility of each group equally record a U-shape evolution, but the favorable u-turn intervenes later in the heterogeneous case than when only consumerists (or less altruist agents) compound the economy. Interpreting this result in terms of free-riding give us the opportunity to reinterpret the question of intergenerational inequity that would have been excluded in a model with only one kind of altruist agents. |
| Keywords: | Intergenerational Altruism, Heterogeneity, Sustainable Development, Intergenerational Equity. |
| JEL: | O13 Q20 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2004-15&r=env |
| By: | Thomas SEEGMULLER; Alban VERCHÈRE |
| Abstract: | We consider an overlapping generations model with environment, where we introduce an elastic labor supply. In this framework, consumers have to choose between consumption, environmental quality and leisure. We establish that several steady states can coexist, even under a Cobb-Douglas technology, and we put in evidence a non monotonic relationship between pollution and per capita income, as suggested by the Environmental Kuznets Curve. Moreover studying local dynamics, we show the existence of deterministic cycles and endogenous fluctuations due to self-fulfilling expectations. In contrast to previous results, the occurrence of such fluctuations does not require a high emission rate of pollution. Finally, we discuss some welfare and policy implications of our results. Especially, we show that a government which would reduce pollution emissions can face a trade-off between an increase of steady state welfare and an intergenerational welfare inequality due to indeterminacy. |
| Keywords: | Environment, Labor supply, Overlapping generations, Multiplicity of steady states, Environmental Kuznets Curve, Indeterminacy, Endogenous cycles. |
| JEL: | C62 E32 Q20 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2005-05&r=env |
| By: | John C. Whitehead (Department of Economics, Appalachian State University) |
| Abstract: | Willingness to pay for quality change may depend on heterogeneous perceived quality levels. In these instances, contingent valuation studies should include measures of quality perceptions as covariates in the willingness to pay model in order to avoid omitted variable bias. Variation in quality perceptions across respondents leads to a potential endogeneity of quality perceptions. We address the potential for endogeneity bias using an instrumental variables approach in which a measure of quality perceptions is included as a determinant of willingness to pay and is simultaneously determined by various exogenous factors. The willingness to pay model is estimated jointly with quality perceptions allowing for correlation of the error terms. Using data on willingness to pay for water quality improvements in the Neuse River in North Carolina we reject exogeneity of perceived quality. Correcting for endogeneity improves the measurement of willingness to pay by differentiating willingness to pay among respondents with heterogeneous quality perceptions. |
| Keywords: | Willingness to Pay, Quality, Perceptions, Endogeneity |
| JEL: | Q51 Q53 |
| Date: | 2003–12 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:05-09&r=env |
| By: | Masako Ikefuji (Graduate School of Economics, Osaka University); Ryo Horii (Graduate School of Economics, Osaka University) |
| Abstract: | A mutual link between poverty and environmental degradation is examined in an overlapping generations model with environmental externality, human capital, and credit constraints. Environmental quality affects labor productivity and thus wealth dynamics, whereas wealth distribution determines the degree to which agents rely upon natural resources and therefore the evolution of environmental quality. This interaction creates a epoverty-environment trap,' where a deteriorated environment lowers income, which in turn accelerates environmental degradation. We show that greater wealth heterogeneity is the key to escaping the poverty-environment trap, although it has negative effects both on the environment and output when not in the trap. |
| Keywords: | Poverty trap, Environmental degradation, Wealth distribution, Human capital. |
| JEL: | O11 O13 O15 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0509&r=env |