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on Environmental Economics |
| By: | Fisher-Vanden, Karen; Thorburn, Karin S |
| Abstract: | Researchers debate whether environmental investments reduce firm value or can actually improve financial performance. We provide some first evidence on shareholder wealth effects of voluntary corporate environmental initiatives. Companies announcing membership in Climate Leaders and Ceres - two voluntary environmental programs related to climate change - experience significantly negative abnormal stock returns. The price decline is smaller in carbon-intensive industries, where regulatory actions are more likely, and for high book-to-market firms, suggesting that "green" expenditures crowd out growth-related investments. We also document insignificant announcement returns for portfolios of industry rivals. Overall, the environmental investments appear to conflict with shareholder value-maximization. This has far reaching implications since the U.S. government relies on voluntary initiatives to reduce the emissions of greenhouse gases. |
| Keywords: | capital expenditures; climate change; corporate social responsibility; environmentally responsible investing; shareholder wealth |
| JEL: | G31 G38 Q5 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6698&r=env |
| By: | Rose, Steven; Lee, Huey-Lin |
| Abstract: | *Chapter 5 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2604&r=env |
| By: | Sands, Ronald; Kim, Man-Keun |
| Abstract: | *Chapter 7 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol. The Agriculture and Land Use (AgLU) model was developed at Pacific Northwest National Laboratory to assess the impact of a changed climate or a climate policy on land use, carbon emissions from land use change, production of field crops, and production of biofuels. The level of analysis to date is relatively aggregate, at the global or national scale, but the model captures important interactions such as endogenous land use change in response to a climate policy and international trade in agricultural and forest products. This paper describes exploratory efforts to extend the conceptual framework, including geographical disaggregation of land within the United States, improving the dynamics of the forestry sector, valuing carbon in forests, and land requirements for biofuel crops. Conceptual development is done within a single-country, steady-state version of AgLU. Land use is simulated with carbon prices from zero to $200 per t-C, with forests, biofuels, and food crops competing simultaneously for land. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2606&r=env |
| By: | Marc Chesney (University of Zurich and Swiss Finance Institute); Luca Taschini (University of Zurich) |
| Abstract: | Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, such as air and water. Tradable permits have emerged as the most cost–effective measure leading to the emergence of both nationwide (SO2) and supranational (CO2) emission permits markets. By means of the dynamic optimization of companies which are covered by such environmental regulations, we develop an endogenous model for the emission permit spot price dynamics that also accounts for the presence of asymmetric information. In the model, the companies are characterized by exogenous pollution processes that, in the short term, are the underlying of the permit price dynamics. An extensive numerical exercise is carried out for the CO2 permit price in the European market. We introduce for the first-time in the current literature a CO2 option pricing model comparison. The option pricing method can be used for hedging purposes and for pricing CO2-linked projects and investments. |
| Keywords: | Asymmetric Information, Emission Allowances, Endogenous Price Dynamics, Environmental Finance. |
| JEL: | C02 C61 C63 C65 G13 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp0802&r=env |
| By: | Bosetti, Valentina; Carraro, Carlo; Massetti, Emanuele |
| Abstract: | Most analyses of the Kyoto flexibility mechanisms focus on the cost effectiveness of "where" flexibility (e.g. by showing that mitigation costs are lower in a global permit market than in regional markets or in permit markets confined to Annex 1 countries). Less attention has been devoted to "when" flexibility, i.e. to the benefits of allowing emission permit traders to bank their permits for future use. In the model presented in this paper, banking of carbon allowances in a global permit market is fully endogenised, i.e. agents may decide to bank permits by taking into account their present and future needs and the present and future decisions of all the other agents. It is therefore possible to identify under what conditions traders find it optimal to bank permits, when banking is socially optimal, and what are the implications for present and future permit prices. We can also explain why the equilibrium rate of growth of permit prices is likely to be larger than the equilibrium interest rate. Most importantly, this paper analyses the efficiency and distributional consequences of allowing markets to optimally allocate emission permits across regions and over time. The welfare and distributional effects of an optimal intertemporal emission trading scheme are assessed for different initial allocation rules. Finally, the impact of banking on carbon emissions, technological progress, and optimal investment decisions is quantified and the incentives that banking provides to accelerate technological innovation and diffusion are also discussed. Among the many results, we show that not only does banking reduce abatement costs, but it also increases the amount of GHG emissions abated in the short-term. It should therefore belong to all emission trading schemes under construction. |
| Keywords: | Banking; Climate Policy; Emission Trading; Flexibility |
| JEL: | C72 H23 Q25 Q28 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6652&r=env |
| By: | Reilly, John; Paltsev, Sergey |
| Abstract: | *Chapter 8 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol. We describe an approach for incorporating biomass energy production and competition for land into the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy. We examine multiple scenarios where greenhouse gas emissions are abated or not. The global increase in biomass energy use in a reference scenario (without climate change policy) is about 30 EJ/year by 2050 and about 180 EJ/year by 2100. This deployment is driven primarily by a world oil price that in the year 2100 is over 4.5 times the price in the year 2000. In the scenarios of stabilization of greenhouse gas concentrations, the global biomass energy production increases to 50-150 EJ/year by 2050 and 220-250 EJ/year by 2100. The estimated area of land required to produce 180-250 EJ/year is about 1 Gha, which is an equivalent of the current global cultivated area. In the USA we find that under a stringent climate policy biofuels could supply about 55% of USA liquid fuel demand, but if the biofuels were produced domestically the USA would turn from a substantial net exporter of agricultural goods ($20 billion) to a large net importer ($80 billion). The general conclusion is that the scale of energy use in the USA and the world relative to biomass potential is so large that a biofuel industry that was supplying a substantial share of liquid fuel demand would have very significant effects on land use and conventional agricultural markets. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2607&r=env |
| By: | Ellen Moons; Bert Saveyn; Stef Proost; Martin Hermy |
| Abstract: | This paper looks at the optimal location of new forests in a suburban region under area constraints. The GIS-based methodology takes into account use benefits such as timber, hunting, carbon sequestration and recreation, non-use benefits (both bequest and existence values), opportunity costs of converting agricultural land, as well as planting and management costs of the new forest. The recreation benefits of new forest sites are estimated using function transfer techniques. We show that the net social benefit of the total afforestation project may vary up to a factor 6, depending on the forest sites that are selected. We show that the recreation value of a forest site varies considerably with the available substitutes. |
| Keywords: | Benefit transfer, travel cost analysis, cost-benefit analysis, forest recreation, Geographical Information Systems (GIS) |
| JEL: | Q23 Q24 Q26 R14 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0612&r=env |
| By: | Eickhout, Bas; van Meijl, Hans; Tabeau, Andrzej; Stehfest, Elke |
| Abstract: | *Chapter 9 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol. The goal of this Chapter is to study the complex interaction between agriculture, economic growth and the environment, given future uncertainties. We combine economic concepts and biophysical constraints in one consistent modeling framework to be able to quantify and analyze the long-term socio-economic and environmental consequences of different scenarios. Here, we present the innovative methodology of coupling an economic and a biophysical model to combine state of the art knowledge from economic and biophysical sources. First, a comprehensive representation of the agricultural and land markets is required in the economic model. Therefore we included a land demand structure to reflect the degree of substitutability of types of land-use types and we included a land supply curve to include the process of land conversion and land abandonment. Secondly, the adapted economic model (LEITAP) is linked to the biophysical-based integrated assessment model IMAGE allowing to feed back spatially and temporarily varying land productivity to the economic framework. Thirdly, the land supply curves in the economic model are parameterized by using the heterogeneous information of land productivity from IMAGE. This link between an economic and biophysical model benefits from the strengths of both models. The economic model captures features of the global food market, including relations between world regions, whereas the bio-physical model adds geographical explicit information on crop growth within each world region. An illustrative baseline analyses shows the environmental consequences of the default baseline and a sensitivity analyses is performed with regard to the land supply curve. Results indicate that economic and environmental consequences are very dependent on whether a country is land scarce or land abundant. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2608&r=env |
| By: | Sandra Rousseau; Stef Proost |
| Abstract: | In this paper we incorporate monitoring and enforcement aspects in the choice of environmental policy instruments in a general equilibrium framework. Goulder et al. (J.Pub.Econ., 1999) look into the choice of policy instruments in the presence of distortionary taxes. We extend this model by no longer assuming full compliance from firms. A violating firm is caught with a certain probability by the inspection agency. Once a violator is detected, he always has to pay a fine. With a positive, finite expected fine and a probability of detection smaller than unity, there will always be a certain proportion of noncompliance in the economy. We calculate the gross efficiency costs of different policy instruments (emission tax, output tax, tradable permits and technology mandate). We illustrate the model for different price instruments (emission tax, output tax and tradable permits). We find that the relative inefficiency of grandfathered tradable permits vis-à-vis emission taxes found in a second-best setting with perfect compliance, is strongly decreased with imperfect compliance. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0104&r=env |
| By: | Lee, Huey-Lin; Hertel, Thomas; Rose, Steven; Avetisyan, Misak |
| Abstract: | *Chapter 4 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2603&r=env |
| By: | Monfreda, Chad; Ramankutty, Navin; Hertel, Thomas |
| Abstract: | *Chapter 2 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2601&r=env |
| By: | Bert Saveyn; Stef Proost |
| Abstract: | The paper studies a regional environmental tax reform in a federal state. A region unilaterally improves the environmental quality by increasing its energy taxes. The regional government recycles the excess tax revenues by lowering either pre-existing distorting labor or capital taxes. This regional tax reform causes a vertical tax externality in the federal budget. We show how the nature of this externality depends on the environmental goal, the tax-recycling scenario, the initial local and federal tax shares, and the relative importance of the reforming region in the federal state. Simulations illustrate the effects for Belgium and US. |
| Keywords: | Tax Reform; Vertical Tax Externality; Federalism |
| JEL: | H23 H77 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0514&r=env |
| By: | Sohngen, Brent; Golub, Alla; Hertel, Thomas |
| Abstract: | *Chapter 11 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2610&r=env |
| By: | Hertel, Thomas; Lee, Huey-Lin; Rose, Steven; Sohngen, Brent |
| Abstract: | *Chapter 6 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2605&r=env |
| By: | Bert Saveyn |
| Abstract: | This paper considers a metropolitan area where residents can commute between several jurisdictions. These residents show NIMBY behavior (Not-In-My-Backyard). They try to preserve their living quality by pushing their polluting economic activity to the neighboring jurisdictions, while keeping their labor income as commuters. This induces a race-to-the-top among jurisdictions. Fiercer competition due to a higher number of jurisdictions intensifies this race-to-the-top; commuting costs, pollution taxes, payroll taxes and bigger jurisdictions increase rather than decrease the incentive for more pollution. |
| Keywords: | Commuting, NIMBY, inter-jurisdictional competition, environmental federalism |
| JEL: | H Q R |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0604&r=env |
| By: | Golub, Alla; Hertel, Thomas; Sohngen, Brent |
| Abstract: | *Chapter 10 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol. The goal of this work is to investigate land-use change at the global scale over the long run - particularly in the context of analyzing the fundamental drivers behind land-use related GHG emissions. For this purpose, we identify the most important drivers of supply and demand for land. On the demand side, we begin with a dynamic general equilibrium (GE) model that predicts economic growth in each region of the world, based on exogenous projections of population, skilled and unskilled labor and technical change. Economy-wide growth is, in turn, translated into consumer demand for specific products using an econometrically estimated, international cross-section, demand system that permits us to predict the pattern of future consumer demands across the development spectrum. This is particularly important in the fast-growing, developing countries, where the composition of consumer demand is changing rapidly. These countries also account for an increasing share of global economic growth and greenhouse gas emissions. Consumer demand is translated into derived demands for land through a set of sectoral production functions that differentiate the demand for land by Agro-Ecological Zone (AEZ). |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2609&r=env |
| By: | Sohngen, Brent; Tennity, Colleen; Hnytka, Marc; Meeusen, Karl |
| Abstract: | *Chapter 3 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2602&r=env |
| By: | Stef Proost; Kurt Van Dender |
| Abstract: | In this paper we compare the effectiveness and welfare effects of alternative fuel efficiency, environmental and transport policies for a given urban area. The urban transport activities are represented as a set of interrelated markets, one for each mode of transport and type of vehicle. For each market, four different marginal external costs are computed in the present equilibrium: air pollution, accidents, noise and congestion. The gap between marginal social costs and prices shows that congestion and unpaid parking are the dominant sources of inefficiencies. Air pollution costs are significant as well. The effects of a typical air quality policy (regulation of car emission technology) and two typical fuel based policies (minimum fuel efficiency policy and fuel taxes) are compared with the effects of three alternative transport policies (full external cost pricing, cordon pricing, parking charges). Regulation of emission technology and of fuel efficiency do not necessarily lead to welfare gains, whereas transport pricing policies yield substantial gains for the urban area under study. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces9831&r=env |
| By: | Ronneberger, Kerstin; Berrittella, Maria; Boselle, Francesco; Tol, Richard |
| Abstract: | *Chapter 12 of the forthcoming book "Economic Analysis of Land Use in Global Climate Change Policy," edited by Thomas W. Hertel, Steven Rose, and Richard S.J. Tol. In this paper the global agricultural land use model KLUM is coupled to an extended version of the computable general equilibrium model (CGE) GTAP in order to consistently assess the integrated impacts of climate change on global cropland allocation and its implications for economic development. The methodology is innovative as it introduces dynamic economic land-use decisions based also on the biophysical aspects of land into a state-of the-art CGE; it further allows the projection of resulting changes in cropland patterns at a spatially explicit level. A convergence test and illustrative future simulations underpin the robustness analysis and serve to highlight the potential of the coupled system. Reference simulations with the uncoupled models emphasize the impact and relevance of the coupling; the results of coupled and uncoupled simulations can differ by several hundred percent. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gta:workpp:2611&r=env |
| By: | K.J. Munk |
| Abstract: | The consensus view among economists seems to be that a green tax reform is unlikely to be associated with a "double dividend" (Bovenberg 1998). However, the results derived in the present paper suggest that this view needs to be qualified. We demonstrate that a green tax reform is likely to be associated with a significant "double dividend" if the government prior to taking the environmental aspect into account has adopted a proportional tax structure due to the administrative costs involved in differentiating commodity tax rates, and if the green tax reform stimulates the labour supply and has desirable income distributional effects. |
| Keywords: | Optimal taxation, externalities, administrative costs, green tax reform, double dividend |
| JEL: | H2 H29 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces9918&r=env |
| By: | Sara Ochelen; Stef Proost; Kurt Van Dender |
| Abstract: | A partial equilibrium model for the urban transport market is described. The urban transport market is represented as a set of interrelated transport submarkets, one per type of mode or vehicle and period. This allows to represent in detail the different external costs associated with the use of different modes: congestion, accidents, air pollution and noise. The model allows to find second best optima that combine optimally given pricing and environmental regulation instruments. The model is demonstrated for Brussels. For this city the welfare effects of alternative sets of instruments are compared. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces9826&r=env |
| By: | Ellen Moons; Sandra Rousseau |
| Abstract: | This paper analyses current and alternative afforestation policy instruments in Flanders. First we select forest sites that maximize net social benefits given a constraint on the total area of new forests and then we select policy instruments that yield this optimal combination of sites. For each policy option, we calculate the associated costs for landowners and government as well as net social benefits for society. Our empirical illustration shows that the welfare gain is considerable if the afforestation subsidy is conditioned on an objective criterion rather than a case-by-case approach. Our results also show that it is worthwhile to consider alternative policy instruments, such as auctions, not previously used in Belgian legislation. |
| Keywords: | Afforestation / policy instruments / optimal location |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0701&r=env |
| By: | Simon De Jaeger; Johan Eyckmans |
| Abstract: | The purpose of this paper is to illustrate the use of statistical techniques to evaluate the effectiveness of voluntary policy instruments for waste management. The voluntary character of these instruments implies that latent characteristics, unobserved by the analyst, might influence the participation decision and might lead to biased estimates of the effectiveness of the policy instrument if standard techniques are used. We propose an extension of the Difference-in-Differences estimator to evaluate the effectiveness of voluntary policy instruments. We illustrate the technique by estimating the effectiveness of voluntary cooperation agreements between the Flemish environmental administration and individual municipalities. We focus on agreements which aim at curbing residential solid waste. Using a dataset covering all 308 Flemish municipalities for the period 2000 - 2005, our results indicate that municipalities subscribing to the agreement reduced their waste level by less than what could be expected on the basis of their own performance prior to subscription and the performance of the non-subscribers. This result might be explained by rising marginal cost of extra residential solid waste reduction policies. In addition, there are indications that subscribing municipalities refrain from additional reduction efforts once the target waste level of the program is achieved. |
| Keywords: | Residential solid waste, difference-in-differences, voluntary agreements, municipalities, endogeneity bias. |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0712&r=env |
| By: | Costa, Ionara (UNU-MERIT); Doranova, Asel (UNU-MERIT); Eenhoorn, Geert-Jan (World Wide Recycling) |
| Abstract: | This paper analyses the participation of firms without GHG emission liabilities as technology providers in CDM and JI projects, the flexibility mechanisms of the Kyoto Protocol. It argues that the motivations for those firms to engaging in CDM and JI projects is based on market stimuli beyond those related to the emission market itself. Instead, their motivations are largely associated with search for new markets where their technological resources and expertise can be exploited. The analysis is based on three firms from the Dutch waste management industry. These cases suggest that the Kyoto's mechanisms compensate to some extent the weakness of the underdeveloped waste management sector in developing and transition economies. |
| Keywords: | Waste Management Industry, Kyoto Protocol, International Expansion, Firm-specific advantages |
| JEL: | L19 L22 L59 L98 Q28 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008020&r=env |
| By: | George von Furstenberg (National Science Foundation and Indiana University Bloomington) |
| Abstract: | Overpromising remains ingrained in international agreements, clouding their expected aggregate outcomes and how to assess the Parties’ performance. This paper provides a theory-based explanation and evaluation of this regime and its consequences, with an empirical application to the Kyoto Protocol. It shows (1) overpromising to be part of a sustainable strategy for electoral success, and (2) there are common determinants of the countries’ overpromising values that characterize the group regime. (3) Targets need to be adjusted for regression-predicted overpromising to yield rationally-expected outcomes. (4) Individual countries’ performance is best identified by deviations of outcomes from their adjusted, not the agreed, targets. |
| Keywords: | Overpromising, international agreements, treaty compliance, performance measurement, politics and environment, Kyoto Protocol |
| JEL: | F53 Q54 D72 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2008-005&r=env |
| By: | Hernando Zuleta |
| Abstract: | We formulate and solve a model of factor saving technological improvement considering three factors of production: labor, capital and energy. The productive activities have three main characteristics: first, in order to use capital goods fi rms need energy; second, there are two sources of energy: non-exhaustible and exhaustible; third, capital goods can be of different qualities and the quality of these goods can be changed along two dimensions -reducing the need of energy or changing the source of energy used in the production process. The economy goes through three stages of development after industrialization. In the first, fi rms make use of exhaustible energy and the efficiency in the use of energy is constant. In the second stage, as the price of energy grows the efficiency in its use is increased. In the third stage, the price of exhaustible sources is so high that fi rms have incentives to use non-exhaustible sources of energy. During this stage the price of energy is constant. In this set up, the end of the oil age has level effects on consumption and output but it does not cause the collapse of the economic system. |
| Date: | 2008–02–29 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:004593&r=env |
| By: | William Neilson; Michael McKee; Robert P. Berrens |
| Abstract: | This paper contributes to the widespread discussion of the sources of the divergence between WTA and WTP values. The paper reports on theoretical and empirical investigations which show that value and outcome uncertainty offer an explanation for this disparity. Given a set of hypotheses generated by the theory, the paper investigates the disparity using an inducedvalue experimental laboratory setting. The incentive-compatible Becker-DeGroot-Marshak mechanism is employed to elicit the WTP and WTA values. Two conclusions can be drawn from the empirical results. First, the WTA - WTP difference is generally increasing in both value and outcome uncertainty. Second, a re-contracting option reduces the disparity when it arises from value uncertainty. Key Words: Experimental, Uncertainty, WTP-WTA disparity |
| JEL: | C9 D8 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:08-07&r=env |