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on Environmental Economics |
| By: | Lucas Bretschger ; Christos Karydas |
| Abstract: | We study the effects of greenhouse gas emissions on optimum growth and climate policy by using an endogenous growth model with polluting non-renewable resources. Climate change harms the capital stock. Our main contribution is to introduce and extensively explore the naturally determined time lag between greenhouse gas emissions and the damages due to climate change, which proves to be crucial for the trasition of the ecnomy towards its steady state. The social optimum and the optimal abatement policies are fully characterized. The inclusion of a green technology delays optimal resource extraction. The optimal tax rate on emissions is proportional to ouptut. Poor understanding of the emissions diffusion process leads to suboptimal carbon taxes and suboptimal growth and resource extraction. |
| Keywords: | Non-Renewable Resource Dynamics, Pollution Diffusion Lag, Optimum Growth, Clean Energy, Climate Policy |
| JEL: | Q54 O11 Q52 Q32 |
| Date: | 2014–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-144&r=env |
| By: | Juan Casado-Asensio ; Shannon Wang ; Katlego Moilwa ; Anna Drutschinin |
| Abstract: | Embracing green growth can secure strong, stable and sustainable development. Green growth recognises and integrates the value of natural capital into economic decision-making and development planning, which is critical to avoid natural capital depletion, the worst of climate change and social and national security risks (OECD, 2013). This is particularly true for developing countries, because of their dependence on natural assets and acute exposure and vulnerability to environmental risks, ranging from air, water and soil pollution, as well as natural resource scarcity and extreme weather events exacerbated by climate change. A green growth policy framework recognises and aims to address both micro- and macro-level pressures that countries face to grow their economies, while also managing environmental risks. In poorer developing countries, micro-level pressures may include lack of access to basic services such as shelter, fuel, water; while macro-level pressures are threats to stable livelihoods due to... |
| Date: | 2014–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envddd:2014/3-en&r=env |
| By: | Lucas Bretschger ; Alexandra Vinogradova |
| Abstract: | Climate physics predicts that the intensity of natural disasters will increase in the future due to climate change. One of the biggest challenges for economic modeling is the inherent uncertainty of climate events, which crucially affects consumption, investment, and abatement decisions. We present a stochastic model of a growing economy where natural disasters are multiple and random, with damages driven by the economy's polluting activity. We provide a closed-form solution and show that the optimal path is characterized by a constant growth rate of consumption and the capital stock until a shock arrives, triggering a downward jump in both variables. Optimum mitigation policy consists of spending a constant fraction of output on emissions abatement. This fraction is an increasing function of the arrival rate, polluting intensity of output, and the damage intensity of emissions. A sharp response of the optimum growth rate and the abatement share to changes in the arrival rate and the damage intensity justifies more stringent climate policies as compared to the expectation-based scenario. We subsequently extend the baseline model by adding climate-induced fluctuations around the growth trend and stock-pollution effects, demonstrating robustness of our results. In a quantitative assessment of our model we show that the optimal abatement expenditure at the global level may represent 0.9% of output, which is equivalent to a tax of $71 per ton carbon. |
| Keywords: | Climate policy, uncertainty, natural disasters, endogenous growth |
| JEL: | O10 Q52 Q54 |
| Date: | 2014–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-145&r=env |
| By: | Paul David (Stanford University ); Adriaan van Zon (SBE Maastricht University and United Nations University ) |
| Abstract: | This paper reports research focused on the inter-temporal resource allocation requirements of a program of technological changes that would halt global warming by completing the transition to a "green" production regime (i.e., zero net CO2-emissions) within the possibly brief finite interval that remains before Earth’s climate is driven beyond a catastrophic tipping point. We formulate a multi-phase, just-in-time transition model incorporating carbon-based and carbon-free technical options that require physical embodiment in durable production facilities, and whose performance attributes can be enhanced by investment in directed R&D. Transition paths indicating the best ordering and durations of the distinct phases during which intangible and tangible capital formation is taking place and capital stocks of different types are being utilized in production (or scrapped when replaced types embodying socially more efficient technologies) are obtained as optimal solutions for each of a trio of related models in which the global macro-economy’s dynamics are coupled with the dynamics of the climate system. The climate-integrated (annual) discrete-time endogenous growth models envisage the implementation of different technology policy options, but, for comparability of their solutions, all three are calibrated to emulate the same global settings of the "transition planning" problem. Our dynamic integrated requirements analysis modeling (DIRAM) approach exposes the sensitivity of the specifics of alternative "tech fix" transition paths to parametric variations in key exogenous specifications. Of particular interest among the latter is the conjectured location of a pair of successive climate "tipping points", the first of which initiates higher expected rates of damage to the carbon-fueled capital stock due to more frequent extreme weather events being driven by the rising mean global temperature. The second, far more dangerous tipping point (at a still higher MGT) corresponds to the lowest conjectured level of atmospheric CO2 concentration that could trigger an irreversible climate catastrophe. Having to stop short of that point, in effect sets a "minimal regret" carbon budget for the optimal transition to a sustainable phase of global economic growth. Sensitivity analysis results are displayed to show how varying the catastrophic tipping point (and its implied carbon budget) alters the transition dynamics in each of the three models. |
| Keywords: | global warming, tipping point, catastrophic climate instability, extreme weather- related damages, R&D, directed technical change, capital-embodied technologies, optimal sequencing, multi-phase optimal control, sustainable endogenous growth |
| JEL: | Q54 Q55 O31 O32 O33 O41 O44 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:sip:dpaper:15-002&r=env |
| By: | Joseph S. Shapiro ; Reed Walker |
| Abstract: | Between 1990 and 2008, emissions of the most common air pollutants from U.S. manufacturing fell by 60 percent, even as real U.S. manufacturing output grew substantially. This paper develops a quantitative model to explain how changes in trade, environmental regulation, productivity, and consumer preferences have contributed to these reductions in pollution emissions. We estimate the model's key parameters using administrative data on plant-level production and pollution decisions. We then combine these estimates with detailed historical data to provide a model-driven decomposition of the causes of the observed pollution changes. Finally, we compare the model-driven decomposition to a statistical decomposition. The model and data suggest three findings. First, the fall in pollution emissions is due to decreasing pollution per unit output within narrowly de ned products, rather than to changes in the types of products produced or changes to the total quantity of manufacturing output. Second, the implicit pollution tax that rationalizes rm production and abatement behavior more than doubled between 1990 and 2008. Third, environmental regulation explains 75 percent or more of the observed reduction in pollution emissions from manufacturing. |
| JEL: | F18 H23 Q56 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:15-03&r=env |
| By: | Meng, Bo ; Peters, Glen ; Wang, Zhi |
| Abstract: | This paper integrates two lines of research into a unified conceptual framework: trade in global value chains and embodied emissions. This allows both value added and emissions to be systematically traced at the country, sector, and bilateral levels through various production network routes. By combining value-added and emissions accounting in a consistent way, the potential environmental cost (amount of emissions per unit of value added) along global value chains can be estimated. Using this unified accounting method, we trace CO2 emissions in the global production and trade network among 41 economies in 35 sectors from 1995 to 2009, basing our calculations on the World Input–Output Database, and show how they help us to better understand the impact of cross-country production sharing on the environment. |
| Keywords: | Developing countries, China, Developed countries, International trade, Trade policy, Air pollution, Environmental problems, Environmental policy, Value-added, Embodied emissions, Global value chains |
| JEL: | E01 F1 F14 F18 Q5 Q56 |
| Date: | 2015–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper486&r=env |
| By: | Kesternich, Martin |
| Abstract: | Recent contributions to the theoretical and experimental literature suggest that minimum participation rules (MPRs) are able to reduce free-riding incentives and may facilitate cooperation (or at least coordination) at the extensive margin of international environmental agreements. Based on a dataset from a world-wide survey among delegates in international climate negotiations, this paper assesses preferences for different MPRs for a future climate treaty among key players. The empirical findings provide evidence that small countries with low bargaining power rather opt for large minimum membership requirements while industrialized countries push forward the idea of a small carbon club of the largest emitters only. In contrast, delegates from countries in transition try to keep emission thresholds rather low which would allow a future agreement to come into force without their signature. |
| Keywords: | international climate negotiations,minimum participation rules |
| JEL: | C72 C92 H41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15009&r=env |
| By: | Anna Grodecka ; Karlygash Kuralbayeva |
| Abstract: | What is the optimal instrument design and choice for a regular attempting to control emissions by private agents in face of uncertainty arising from business cycles? In applying Weitzman's result [Prices vs. quantities, Review of Economic Studies, 41 (1974), 477-491] to the problem of greenhouse gas emissions, the price-quantity literature has shown that, under uncertainty about abatement costs, price instruments (carbon taxes) are preferred to quantity restrictions (caps on emission), since the damages from climate change are relatively flat. On the other hand, another recent piece of academic literature has highlighted the importance of adjusting cabon taxes to business cycle fluctuations in a procyclical manner. In this paper, we analyze the optimal design and the relative performance of price versus quantity instruments in the face of uncertainty stemming from business cycles. Our theoretical framework is a general equilibrium real business cycle model with a climate change externality and distortionary fiscal policy. First, we find that in an infinitely flexible control environment, the carbon tax fluctuates very little and is approximately constant, whilst emissions fluctuate a great deal in response to a productivity shock. Second, we find that a fixed price instrument is advantageous over a fixed quantity instrument due to the cyclical behavior of abatement costs, which tend to increase during expansions and decline during economic downturns. Our results suggest that the cabon tax is approximately constant over business cycles due to "flat" damages in the short-run and thus procyclical behavior as suggested by other studies cannot be justified merely on the gorunds of targeting the climate externality. |
| Keywords: | carbon tax, cap-and-trade, business cycles, distortionary taxes, climate change |
| JEL: | E32 H23 Q54 Q58 |
| Date: | 2014–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-137&r=env |
| By: | David Banister ; Philippe Crist ; Stephen Perkins |
| Abstract: | “Green growth” and transport combines several different concepts that are central to sustainable mobility, including sustainable economic activity, reduced environmental impact and sustained growth in high quality jobs. It attempts to balance the importance of economic growth, with environmental damage and social priorities through assessing positive actions that can be taken by a wide variety of public and private stakeholders. It has arisen out of the concern over the use of non-renewable resources in transport, increasing emissions of carbon and other pollutants, and the expected levels of growth in mobility over the next 40 years. But it also acknowledges the importance of transport to the economy, and its role in helping to create jobs, improving levels of productivity and output, and in promoting agglomeration benefits. This means that transport should be efficient, but at the same time make less demand on the environment through less use of resources, through recycling and reuse of materials, and through embracing a life cycle perspective... |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envddd:2015/1-en&r=env |
| By: | Coria, Jessica (Department of Economics, School of Business, Economics and Law, Göteborg University ); Kyriakopoulou, Efthymia (Department of Economics, School of Business, Economics and Law, Göteborg University ) |
| Abstract: | In this paper we analyze the e¤ects of environmental policies on the size distribution of firms. We model a stationary industry where the observed size distribution is a solution to the profit maximization problem of heterogeneous firms that di¤er in terms of their energy efficiency. We compare the equilibrium size distribution under emission taxes, uniform emission standards, and performance standards. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. These asymmetries cause significant detrimental effects on total output and total welfare, yet lead to reduced emissions and help preserve small businesses. |
| Keywords: | Environmental regulations; energy efficiency; size distribution; emission taxes; emission standards; performance standards |
| JEL: | L25 Q55 Q58 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0614&r=env |
| By: | Paul Collier ; Tony Venables |
| Abstract: | Climate policy requires that much of the world's reserves of fossil fuels remain unburned. This paper makes the case for implementing this directly through policy to close the global coal industry. Coal is singled out because of its high emissions intensity, low rents per unit value, local environmental costs and sheer scale. Direct supply policy - the sequenced closure of coal mines - may lead to less policy leakage (across countries and time) than other policies based on demand or price management. It also has the advantage of involving relatively few players and leading to clear-cut and observable outcomes. Appropriately sequenced closure of the world coal industry could, we suggest, create the moral force needed to mobilize collective international action. |
| Keywords: | climate change, coal, cap and trade, supply policy |
| JEL: | Q3 Q4 Q54 |
| Date: | 2014–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-132&r=env |
| By: | Sahbi Farhani |
| Abstract: | This paper uses panel cointegration techniques to examine the causal relationship between renewable energy consumption, economic growth and CO2 emissions for a group of 12 MENA countries covering the annual period 1975-2008. The Granger-causality results indicate that there is no causal relationship between these variables in short run except a unidirectional causality running from renewable energy consumption to CO2 emissions. However, we find unidirectional causality running from economic growth and CO2 emissions to renewable energy consumption in long run. With panel FMOLS and DOLS estimates, we find that only CO2 emissions have an impact on renewable energy consumption. These results indicate that MENA countries don’t find the best policy which can control the regulation of the renewable energy prices, which can help to take into account the stability in the economic growth structure, and which can also mitigate pollutant emissions. |
| Keywords: | Renewable energy consumption, Economic growth, CO2 emissions, MENA countries |
| JEL: | C33 Q43 |
| Date: | 2015–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2015-612&r=env |
| By: | Iritie, Jean-Jacques |
| Abstract: | From the economic literature on the relationship between economic growth and environment pioneered by Grossman and Krueger (1991) and Shafik and Bandyopadhyay (1992) we first conduct a theoretical and critical reflection on the existence of a Kuznets curve for biodiversity. It appears that results are strongly contrasted. Then, we focus on the main biodiver- sity conservation policies implemented in Africa, i.e. protected areas and we discuss its effectiveness in achieving the dual objective of conservation and economic development for local communities. |
| Keywords: | Economic growth; environmental Kuznets curve; biodiversity conservations policies; proteced areas; Africa |
| JEL: | Q01 Q50 Q57 |
| Date: | 2015–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62005&r=env |
| By: | Martin L. Weitzman |
| Abstract: | This paper posits the conceptually useful allegory of a futuristic "World Climate Assembly" that votes on global carbon emissions via the basic principle of majority rule. Two variants are considered. One is to vote on a universal price (or tax) that is internationally harmonized, but the proceeds from which are domestically retained. The other is to vote on the overall quantity of total worldwide emissions, which are then distributed for free (via a pre-decided fractional subdivision formula) as individual allowance permits that are subsequently marketed in an international cap-and-trade system. The model of the paper suggests that the majority-voted price is likely to be less distortionary and easier to enact than the majority-voted total quantity of permits. While the study is centered on a formal model, the tone of the policy discussion resembles more an exploratory think piece. |
| JEL: | F51 H41 Q54 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20925&r=env |
| By: | Alain Ayong Le Kama ; Aude Pommeret |
| Abstract: | In this paper we focus on a long-term dynamic analysis of the optimal adaptation/mitigation mix in the presence of a pollution threshold above which adaptation is no longer efficient. We account for accumulation in abatement capital, greenhouse gases, and adaptation capital in order to better capture the arbitrage between abatement and adaptation investments. Pollution damages arise from the emissions due to the country consumption but also from the emissions of the rest of the world (ROW). A pollution threshold is then introduced, above which adaptation is no longer efficient. We obtain that if this threshold is lower than the steady-state level of pollution, there is no way for the modeled economy to avoid it. In particular, such a situation will appear if the ROW's emissions are high. Next step is then to introduce another type of investment allowing for lower ROW pollution ie. emissions eduction abroad through CDM for instance. We obtain that CDM may be a means to avoid a pollution threshold above which adaptation becomes of no use. |
| Keywords: | Credit Risk, Credit Scoring, Auto Loans, Logistic Regression. |
| JEL: | Q5 Q52 Q56 Q58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2015-2&r=env |
| By: | Laure Kuhfuss (Department of Geography and Sustainable Development, University of St. Andrews ); Raphaële Préget (INRA, UMR 1135 LAMETA, F-34000 Montpellier, France ); Sophie Thoyer (Montpellier SupAgro, UMR 1135 LAMETA, F-34000 Montpellier, France ); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews ) |
| Abstract: | Using a choice experiment, this paper shows that the introduction of a conditional collective bonus in an agri-environmental scheme (AES) can improve farmers’ participation and increase land enrolment for lower overall budgetary costs. This monetary bonus is paid per hectare of enrolled land in addition to the usual agri-environmental payment if a given threshold is reached in terms of farmers’ participation in the region or catchment of interest. Using a choice experiment, we estimate the preferences of wine growers in the South of France for such a bonus. We show that it contributes to increased expectations of farmers on others’ participation, therefore changing the pro-environmental social norm and initiating group dynamics towards the adoption of less pesticide-intensive farming practices over time. |
| Keywords: | payment for environmental services, choice experiment, collective incentive, agri-environmental schemes, social norm, behaviour |
| JEL: | Q15 Q18 Q25 Q28 Q53 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:sss:wpaper:2015-06&r=env |
| By: | Ali Raza Cheema (Pakistan Institute of Development Economics, Islamabad ); Attiya Yasmin Javid (Pakistan Institute of Development Economics, Islamabad ) |
| Abstract: | This study evaluates the link between disaggregate energy consumption (coal, petroleum, electricity, renewable energy consumption), economic growth and environment for Asian Developing countries. Cointegration tests verify long run relationship among energy consumption and growth, energy consumption and environment degradation along with trade openness and financial development as control variables. To find long run elasticities fully modified OLS is used, which confirms that all forms of disaggregate energy consumption explain positive and significant impact on economic growth. Results also show that all forms of disaggregate energy use more pollute environment (except coal consumption) and also validate the existence of Environmental Kuznets curve. Important policy implication is that government needs to promote renewable energy sector because its increase economic growth and its impact on environment degradation is low as compare to other sources. Investment in renewable energy sector is beneficial for private and public sector after conducting cost and benefit analysis. |
| Keywords: | Disaggregate Energy Consumption, Economic Growth, CO2 Emissions, Environmental Kuznets Curve |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pid:wpaper:2015:115&r=env |
| By: | Cortés Borda, Daniel Enrique ; Ruíz Hernández, Antonio ; Guillén Gosálbez, Gonzalo ; Llop Llop, Maria ; Guimerà Manrique, Roger ; Sales Pardo, Marta |
| Abstract: | Global warming mitigation has recently become a priority worldwide. A large body of literature dealing with energy related problems has focused on reducing greenhouse gases emissions at an engineering scale. In contrast, the minimization of climate change at a wider macroeconomic level has so far received much less attention. We investigate here the issue of how to mitigate global warming by performing changes in an economy. To this end, we make use of a systematic tool that combines three methods: linear programming, environmentally extended input output models, and life cycle assessment principles. The problem of identifying key economic sectors that contribute significantly to global warming is posed in mathematical terms as a bi criteria linear program that seeks to optimize simultaneously the total economic output and the total life cycle CO2 emissions. We have applied this approach to the European Union economy, finding that significant reductions in global warming potential can be attained by regulating specific economic sectors. Our tool is intended to aid policymakers in the design of more effective public policies for achieving the environmental and economic targets sought. |
| Keywords: | Escalfament global, Unió Europea, Països de la, Canvis climàtics -- Aspectes econòmics -- Unió Europea, Països de la, 33 - Economia, 504 - Ciències del medi ambient, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/246959&r=env |
| By: | Halkos, George ; Paizanos, Epameinondas |
| Abstract: | This paper examines the effect of economic policy on air quality using US quarterly data from 1973 to 2013. In particular, we analyze the short-run as well as the long-run interactions between fiscal and monetary policy with CO2 emissions, employing time series techniques of co-integration, Granger multivariate causality and vector error-correction modeling. To take into account possible variations of the effect of economic policy according to the sources of pollution, we distinguish between industrial and residential inflicted CO2 emissions. In addition, we construct the impulse responses to three linear combinations of fiscal shocks, corresponding to the three scenarios of deficit-spending, deficit-financed tax cuts and a balanced budget spending expansion. Policy implications from the results vary depending on the source of CO2 emissions. |
| Keywords: | Fiscal policy; monetary policy; environment. |
| JEL: | E52 E62 Q53 Q54 Q56 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62001&r=env |
| By: | Pierre-André Jouvet ; Julien Wolfersberger |
| Abstract: | We study sustainable growth in an economy with natural land endowments, specifically forests, and the need for public policies to quantify the financial value of green capital, measured by forests. Exhaustible primary forests are first depleted for agriculture and production, until a switch occurs to the renewable secondary forests. The introduction of REDD+ in the economy reduces agricultural expansion, since the social planner invests in green capital, at the expense of the physical one. We show that the optimal REDD+ national strategy highly depends on the development stage of the recipient economy. In the end, we prove our findings by calibrating our model to Indonesia and illustrate recommendations for public policies. |
| Keywords: | Deforestation, Development, Forest Transition, Green Capital, Growth |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1504&r=env |
| By: | Radoslaw (Radek) Stefanski |
| Abstract: | I develop a unique database of international fossil-fuel subsidies by examining country-specific patterns in carbon emission-to-GDP ratios, known as emission-intensities. For most but not all countries, intensities tend to be hump-shaped with income. I construct a model of structural-transformation that generates this hump-shaped intensity and then show that deviations from this pattern must be driven by distortions to sectoral-productivity and/or fossil-fuel prices. Finally, I use the calibrated model to measure these distortions for 170 countries for 1980-2010. This methodology reveals that fossil-fuel price-distortions are large, increasing and often hidden. Furthermore, they are major contributors to higher carbon-emissions and lower GDP. |
| Date: | 2014–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-134&r=env |
| By: | Rick Van der Ploeg ; Aart de Zeeuw |
| Abstract: | The global response to a catastrophic shock to productivity which becomes more imminent with global warming is to have carbon taxes to curb the risk of a calamity and to accumulate precautionary capital to facilitate smoothing of consumption. Our multi-region model of growth and climate change indicates that without international lump-sum transfers the cooperative global response to such stochastic tipping points requires converging carbon taxes for developing and developed regions. Non-cooperative responses lead to a bit more precautionary saving and lower diverging carbon taxes. Precautionary capital suffers less from international free-rider problems than the carbon taxes. We illustrate the various outcomes with a calibrated North-South model of the global economy. |
| Keywords: | global warming, tipping point, precautionay capital, growth, risk avoidance, carbon tax, free riding, international cooperation, asymmetries |
| JEL: | D81 H20 O40 Q31 Q38 |
| Date: | 2015–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-149&r=env |
| By: | Anne Nieters (GWS - Institute of Economic Structures Research ); Dr. Thomas Drosdowski (GWS - Institute of Economic Structures Research ); Dr. Ulrike Lehr (GWS - Institute of Economic Structures Research ) |
| Abstract: | This paper presents findings of a study of the economic impacts of climate change adaptation. To estimate these impacts on the German economy and its individual sectors we follow a two-step approach: firstly, we estimate the damages resulting from recurring flood events and heat waves, based on simulations performed with the macro-econometric input-output model PANTA RHEI, secondly we include adaptation measures and analyze overall impacts (for the latter see Lehr & Nieters 2015). In the literature, so far, impacts of extreme weather events were estimated by using (1) Disaster Impact Models (DIM) or (2) flood damage estimation methods, which either concentrate on the effects of single events (1, 2) or are not suited to assess economic effects in detail (2). In our approach we integrate recurring extreme weather events as “shocks” into the model to answer the question if and how a rising number of extreme weather events in the future may influence Germany’s economic development. Two scenarios – one with and one without considering extreme weather events – are compared. Simulation results reveal slightly negative effects on individual economic sectors and Germany’s economy as a whole. However, these effects are slightly intensifying over time which could be an indication that recurring events may curtail economic growth in Germany. |
| Keywords: | climate change, adaption, economic impacts, extreme weather events, macro-econometric input-output model |
| JEL: | Q54 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gws:dpaper:15-2&r=env |
| By: | Rick Van der Ploeg ; Armon Rezai |
| Abstract: | We use the Euler equation to put forward a back-on-the-envelope rule for the global carbon tax based on a two-box carbon cycle with temperature lag, and a constant elasticity of marginal damages with respect to GDP. This tax falls with time impatience and intergenerational inequality aversion and rises with population growth and prudence. It also falls with growth in living standards if inequality aversion is large enough or marginal damages do not react much to GDP. It rises in proportion with GDP if marginal climate damages are proportional to output and has a flat time profile if they are additive. The rule also allows for mean reversion in climate damages. The rule closely approximates the true optimum for our IAM of Ramsey growth, scarce fossil fuel, energy transitions and stranded assets dsepite it using the more complicated DICE carbon cycle and temperature modules. The simple rule gets close to the social optimum even if damages are much more convex than in DICE. |
| Keywords: | simple rule, SCC, Ramsey growth, optimal energy transitions, stranded assets, intergenerational inequality aversion, climate damage specification |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-150&r=env |
| By: | Mikolaj Czajkowski (University of Warsaw, Department of Economic Sciences, Poland ); Wiktor Budzinski (University of Warsaw, Department of Economic Sciences, Poland ); Danny Campbell (University of Stirling, Stirling Management School, Economics Division, UK ); Marek Giergiczny (University of Warsaw, Department of Economic Sciences, Poland ; Department of Geography and Sustainable Development, University of St. Andrews ) |
| Abstract: | The paper investigates spatial heterogeneity of the public’s preferences for the implementation of a new country-wide forest management and protection program in Poland. Spatial econometric methods and high resolution geographical information system (GIS) data related to forest characteristics are used to explain individual-specific willingness to pay (WTP) values, derived from a discrete choice experiment (DCE) study. We find that respondents’ WTP is higher the closer they live to their nearest forest, and the scarcer forests are in the area where they live. Interestingly, the more highly ecologically valuable forests in respondents’ area, the more they prefer extending areas of national forest protection. In addition, we investigate spatial patterns in individual-specific WTP scores and in latent class membership probabilities, finding that preferences are indeed spatially clustered. We argue that this clustering should be taken into account in both benefits analysis and policy-making. |
| Keywords: | discrete choice experiment, contingent valuation, willingness to pay, spatial heterogeneity of preferences, forest management, passive protection, litter, tourist infrastructure, mixed logit, Kriging, spatial-lag |
| JEL: | Q23 Q28 I38 Q51 Q57 Q58 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:sss:wpaper:2015-07&r=env |
| By: | Lucas Bretschger ; Lin Zhang |
| Abstract: | There is widespread concern that an international agreement on stringent climate policies will not be reached because it would imply too high costs for fast growing economies like China. To quantify these costs we develop a general equilibrium model with fully endogenous growth. The framework includes disaggregated industrial and energy sectors, endogenous innovation, and sector-specific investments. We find that the implementation of Chinese government carbon policies until 2020 causes a welfare reduction of 0.3 percent. For the long run up to 2050 we show that welfare costs of internationally coordinated emission reduction targets lie between 3 and 8 percent. Assuming faster energy technology development, stronger induced innovation and rising energy prices in the reference case reduces welfare losses significantly. We argue that increased urbanization raises the costs of carbon policies due to altered consumption patterns. |
| Keywords: | Carbon policy, China, Endogeneous growth, Induced innovation, Urbanization |
| JEL: | Q54 O41 O53 C68 |
| Date: | 2014–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-143&r=env |
| By: | Wei, Chu ; Löschel, Andreas ; Liu, Bing |
| Abstract: | In the context of soaring demand for electricity, mitigating and controlling greenhouse gas emissions is a great challenge for China's power sector. Increasing attention has been placed on the evaluation of energy efficiency and CO2 abatement potential in the power sector. However, studies at the micro-level are relatively rare due to serious data limitations. This study uses the 2004 and 2008 Census data of Zhejiang province to construct a non-parametric frontier in order to assess the abatement space of energy and associated CO2 emission from China's coal-fired power enterprises. A Weighted Russell Directional Distance Function (WRDDF) is applied to construct an energy-saving potential index and a CO2 emission-abatement potential index. Both indicators depict the inefficiency level in terms of energy utilization and CO2 emissions of electric power plants. Our results show a substantial variation of energy-saving potential and CO2 abatement potential among enterprises. We find that large power enterprises are less efficient in 2004, but become more efficient than smaller enterprises in 2008. State-owned enterprises (SOE) are not significantly different in 2008 from 2004, but perform better than their non-SOE counterparts in 2008. This change in performance for large enterprises and SOE might be driven by the "top-1000 Enterprise Energy Conservation Action" that was implemented in 2006. |
| Keywords: | Energy-saving potential,CO2 abatement potential,Weighted Russell Directional Distance Function,Coal-fired power enterprise |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:78&r=env |
| By: | Tomomi Miyazaki (Graduate School of Economics, Kobe University ) |
| Abstract: | This paper examines the effects of Japanese fiscal policy after the 2008 global financial crisis using a mixed vector autoregression/event study approach. We focus on the effects of stimulus packages with environmental benefits. The empirical results show that a tax break and subsidy program designed to promote the adoption of eco-friendly cars helped stimulate automobile production, while a similar program intended to promote the purchase of energy-efficient appliances had no effect on appliance production. |
| Keywords: | Fiscal policy effectiveness in Japan; Environmental stimulus package; Eco Subsidy |
| JEL: | E23 E62 H30 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1508&r=env |
| By: | Claudio Baccianti ; Andreas Löschel |
| Abstract: | The European Union has implemented demand push and technology pull policies to foster innovation on the energy and resource efficiency of capital goods. The state of the art of general equilibrium modelling applied to environmental policy rarely treats product and process innovation separately and product quality is, in the best case, exogenous. We develop a dynamic multi-sector CGE model that distinguishes between R&D-based process innovation for all firms, endogenous product innovation in the capital good sector and adoption decisions with respect to the installation of new capital vintages in the rest of the economy. Our results support the previous literature in finding that aggregate innovation declines following an energy tax but whereas process innovation is reduced, product innovation actually rises. We find that demand pull policies are less effective than product-related R&D subsidies to reduce aggregate energy intensity. |
| Keywords: | Ecological innovation, Economic growth path, Industrial policy, Innovation, Innovation policy, Intangible assets, New technologies, Sustainable growth |
| JEL: | O31 O40 O41 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:feu:wfewop:y:2015:m:2:d:0:i:85&r=env |
| By: | André, Francisco J. |
| Abstract: | Environmental protection and firms' competitiveness are typically seen as conflicting elements as firms tend to ignore the environmental consequences of their actions and any regulation forcing them to modify their policies can only make them worse-off. Contrarily to this traditional paradigm, the Porter Hypothesis suggests the existence of "low hanging fruits" in the sense that some environmental policies may simultaneously benefit the environment and domestic competitiveness. Our aim is to identify the main theoretical arguments that have been proposed in the literature to support the validity of the Porter Hypothesis and pick the most significant contributions paying special attention to the strategic and international trade aspects. After presenting some general issues and different interpretations of the Porter Hypothesis, we review different theoretical explanations such as the generation of scarcity rents, the use of environmental regulation by national governments as an instrument of strategic trade policy, the existence of externalities in technology adoption, the interaction with output quality competition and the existence of information incompleteness. |
| Keywords: | Porter Hypotesis; Strategic behavior; International trade; Game theory |
| JEL: | C72 D62 Q52 Q55 Q58 |
| Date: | 2015–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62237&r=env |
| By: | Ivan Haščič ; Miguel Cárdenas Rodríguez ; Raphaël Jachnik ; Jérôme Silva ; Nick Johnstone |
| Abstract: | This study uses a unique dataset of investment flows to analyse the role of two categories of public interventions (finance and policies) in mobilising flows of private climate finance worldwide and in the more specific context of flows to and in developing countries. The objectives are threefold. First, the paper presents ‘observed’ ratios of total private to public finance in selected climate-related sectors. Second, it seeks to understand the determinants of private climate finance flows by analysing the role of key public finance (bilateral, domestic and multilateral) and public policy instruments (feed-in tariffs, renewable energy quotas, the Clean Development Mechanism), while taking into account a number of market and country conditions. For reasons of data availability, the focus of this econometric analysis is on a subset of six renewable energy sectors (wind, solar, biomass, small hydro, marine and geothermal). Finally, the paper assesses the likely mobilisation impact of past public interventions in these six sectors, and draws a comparison with approaches that ignore the role of policy as well as country and market conditions.<P> Results suggest that both public finance and public policies have played an important role in private finance mobilisation globally. In the context of finance to and in developing countries, the results highlight the currently untapped potential of domestic public policies to increase mobilisation. The methodology proposed in this report is an initial attempt to estimate private climate finance mobilisation empirically. It should be seen as a first step towards developing more comprehensive methodologies for analysing and estimating private finance mobilisation in the global climate policy context. |
| Keywords: | renewable energy, climate change, investment, private finance, leverage, mobilisation, public interventions, estimation |
| JEL: | G3 H23 L94 O3 Q42 Q48 Q54 Q55 Q58 |
| Date: | 2015–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:80-en&r=env |
| By: | Asjad Naqvi |
| Abstract: | Economic policy in the EU faces a trilemma of solving three challenges simultaneously - growth, distribution, and the environment. In order to assess policies that address these issues simultaneously, economic models need to account for both sector-sector and sector-environment feedbacks within a single framework. This paper presents a multi-sectoral stock- flow consistent (SFC) macro model where a demand-driven economy consisting of multiple institutional sectors -firms, energy, households, government, and financial - interacts with the environment. The model is calibrated for the EU region and five policy scenarios are evaluated; low consumption, a capital stock damage function, carbon taxes, higher share of renewable energy, and technological shocks to productivity. Policy outcomes are tracked on overall output, unemployment, income and income distributions, energy, and emission levels. Results show that investment in mitigation technologies allows for absolute decoupling and ensures that the above three issues can be solved simultaneously. |
| Keywords: | Ecological macroeconomics, stock-ow consistent, growth, distribution, environment, European Union |
| JEL: | E12 E17 E23 E24 Q52 Q56 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:feu:wfeppr:y:2015:m:2:d:0:i:18&r=env |
| By: | Antoine Bommier ; Lucas Bretschger ; Francois Le Grant |
| Abstract: | The paper proves the existence of equilibrium in nonrenewable resource markets when extraction costs are non-convex and resource storage is possible. Inventories flatten the consumption path and eliminate price jumps at the end of the extraction period. Market equilibrium becomes then possible, contradicting previous claims from Eswaran, Lewis and Heaps (1983). We distinguish between two types of solutions, one with immediate and one with delayed build-up of inventories. For both cases we do not only characterize potential optimal paths but also show that equilibria actually exist under fairly general conditions. It is found that optimum resource extraction involves increasing quantities over a period of time. What is generally interpreted as an indicator of increasing resource abundance is thus perfectly compatible with constant resource stocks. |
| Keywords: | Exhaustible resources, nonconvex extraction cost, equilibrium existence, resource storage |
| JEL: | Q30 C62 D92 D41 |
| Date: | 2014–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-146&r=env |
| By: | Rodrigo Harrison ; Roger Lagunoff |
| Date: | 2015–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000001019&r=env |
| By: | Edmond Baranes (LAMETA and Labex Entreprendre, University of Montpellier 1 ); Julien Jacqmin (LAMETA, University of Montpellier 1 ); Jean-Christophe Poudou (LAMETA, University of Montpellier 1 ) |
| Abstract: | This paper studies the links between non-renewable and intermittent renewable energy sources in the production of electricity. We argue that the relationship between the price of natural gas and investments in solar and wind capacity is represented by a bell-shaped curve, as opposed to being linear. Hence, for relatively low natural gas prices, the two modes of production are substitutes. After a price threshold is reached, the two are complementary. A theoretical model explains this as the trade-off resulting from two forces: the input price differential of these two modes of production and the risks related to the unpredictable nature of renewable energy. Using U.S. state-level data from 1998 to 2012, we find that this relationship is robust to various empirical specifications. |
| Keywords: | Renewable energy production, natural gas, factor complementarity, electricity production. |
| JEL: | D22 D24 Q41 Q42 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2015.02&r=env |
| By: | Pan He (ETH Zurich ); Marcella Veronesi (Department of Economics (University of Verona) ) |
| Abstract: | Adopting renewable energy technologies has been seen as a promising way to reduce CO2 emissions and deforestation. This paper investigates how social networks may affect renewable energy technology adoption. We distinguish two channels through which social networks may play a role: (i) the diffusion of information; and (ii) the diffusion of behavior. Most empirical studies fail to quantitatively separate the diffusion of information and behavior in social networks. We conduct a survey on biogas technology adopting in rural China to identify individuals’ egocentric information networks. We find that both the diffusion of information and behavior drive farmers’ technology adoption. Farmers with larger egocentric information networks and a larger fraction of known adopters are more likely to adopt the biogas technology. In addition, we collect data on several attributes of alters to explore the composition of social networks. We find heterogeneous social network effects across different types of alters. Alters who have close relationships with egos such as friends and relatives or that are trusted by egos affect egos’ adoption through the diffusion of information, while less trusted alters such as government officials affect egos’ adoption through their adoption behavior. |
| Keywords: | Social networks, renewable energy, technology adoption, information diffusion, behavior diffusion, biogas, China |
| JEL: | D83 D85 Q55 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:06/2015&r=env |
| By: | Montaud, Jean-Marc ; Pécastaing, Nicolas |
| Abstract: | The Clean Development Mechanism (CDM) under the Kyoto Protocol constitutes a major tool in the fight against climate change; it is also an important foreign direct investment funding opportunity for Southern countries. Yet, few studies have focused on the economic impact of CDM on host countries. This study attempts such an assessment in Peru, using a computable general equilibrium (CGE) model that accounts for both the productive and regional dualism of the national economy. The numerical simulation of macroeconomic shocks generated by current and future CDM projects reveals the significant potential impact of such investments in terms of employment, growth, and regional imbalance in this developing country. |
| Keywords: | clean development mechanism,development,dualism,computable general equilibrium,Peru |
| JEL: | C68 O11 Q56 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:20156&r=env |
| By: | Anis Omri ; Nejah ben mabrouk ; Amel Sassi-Tmar |
| Abstract: | This paper investigates the causal relationship among energy consumption (i.e., nuclear energy and renewable |
| Keywords: | Nuclear energy, Renewable energy, Economic growth, Simultaneous-equation models. |
| Date: | 2015–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2015-623&r=env |
| By: | Framstad, Nils Chr. (Dept. of Economics, University of Oslo ) |
| Abstract: | A risk-neutral agent optimizes extraction of dividends or renewable natural resources modelled by a jump-diffusion stock process, where the optimal strategy is characterized as the minimal intervention required to keep the stock process inside a given region. The introduction of a small fixed cost per intervention, is shown to induce a loss at worst of order, corresponding to a minimal intervention size of order, under suitable conditions; there are degenerate cases if purely discontinuous harvesting is optimal for the frictionless problem. If extraction is reversible, at cost between half and twice the extraction cost, the exponents are 1/2 and 1/4, agreeing with the effect of fixed costs in a consumption–portfolio optimization problem for a risk-averse agent. |
| Keywords: | Optimal stochastic control; resource extraction; dividend extraction; jump-diffusion model; transaction costs |
| JEL: | D23 G11 Q20 |
| Date: | 2014–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2014_025&r=env |
| By: | Joshua K. Abbott ; H. Allen Klaiber ; V. Kerry Smith |
| Abstract: | Urban ecologists have extended the bounds of this field to incorporate both the effects of human activities on ecological processes (e.g., humans as generators of disturbances), and the ways in which the structures, functions, and processes of urban ecosystems, and human alterations to them, in turn alter people’s behavior. This feedback loop from the perspective of urban ecologists offers a natural connection to economic models for human behavior. At their core, housing markets reveal price signals that communicate to developers the tradeoffs consumers are willing to make for the private characteristics of homes and the attributes of the neighborhoods where they are located. These signals together with local land use rules guide the location of development. The characteristics of this development in turn influence the functioning and evolution of urban ecosystems. This paper describes markets as coordination mechanisms and conveyors of information from a complex adaptive systems perspective. It also discusses the way in which physical and biological processes, infrastructural boundaries, and the institutional equivalent of “barbed wire” all simultaneously act to shape the transmission of ecosystem services over the landscape. These processes alter the spatial distribution of housing prices in ways that are both continuous and discrete. |
| JEL: | Q20 Q51 Q57 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20959&r=env |
| By: | Shannon Kindornay ; Centre for the Study of Living Standards |
| Abstract: | As the Millennium Development Goals (MDGs) reach their end date in 2015, negotiations are ramping up at the United Nations for the establishment of a new set of Sustainable Development Goals (SDGs). The SDGs, to be announced in September this year, will replace the MDGs and serve as a universal framework for achieving sustainable development outcomes in all countries by 2030, including Canada. This report takes an in-depth look at what the SDGs could mean for Canada, providing a concise overview of the report in the eight areas it covers: poverty, education, employment and inequality, energy, the environment, infrastructure, governance and international cooperation in Canada. Key themes discussed include global and national sustainable development priorities, challenges and opportunities for implementation of the SDGs, and data availability for measuring progress. |
| Keywords: | MDG, Millenium Development Goals, Poverty, Education, Employment, Inequality, Energy, Environment, Infrastructure, Governance, Sustainable Development |
| JEL: | I32 N32 I10 I20 D63 N72 O13 P48 Q56 H54 Q01 Q28 Q38 Q48 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1502&r=env |
| By: | de Nicola, Francesca |
| Abstract: | Farmers in developing countries face a wide array of risks. Yet they often lack formal financial instruments to protect against risks. This paper examines the impact on consumption, investment, and welfare of the separate provision of three financial products: weather insurance, savings, and credit. The paper develops a dynamic stochastic mode to capture the essential features of the lives of West African rural households. The model is calibrated with data from farmers in Burkina Faso and Senegal, to assess quantitatively the effects of three policy interventions. For each intervention the analysis first considers a benchmark scenario that abstracts from the flaws that affect each instrument; later the assumptions are relaxed. Weather insurance offers the largest welfare gains at each level of wealth, although the gains are significantly reduced by introducing a multiple on the insurance premium. Over time, however, savings can lead to substantial gains, higher than those achievable by unsubsidized weather insurance. |
| Keywords: | Debt Markets,Climate Change Economics,Economic Theory&Research,Financial Intermediation,Banks&Banking Reform |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7187&r=env |
| By: | Ohad Raveh ; Fidel Perez-Sebastian |
| Abstract: | Previous studies imply that a positive regional fiscal shock, such as a resource boom, strengthens the desire for separation. In this paper we present a new and opposite perspective. We construct a model of endogenous fiscal decentralization that builds on two key notions: a trade-off between risk sharing and heterogeneity, and a positive assocation between resource booms and risk. The model shows that a resource windfall causes the nation to centralize as a mechanism to share risk. In addition, we provide cross country empirical evidence for the main hypotheses. Specifically, we find that resource booms: (i) decrease the level of fiscal decetralization, primarily through the risk sharing channel, and (ii) have no effect on political decentralization. |
| Keywords: | Natural resources, decentralization, risk sharing |
| Date: | 2014–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:oxcarre-research-paper-142&r=env |