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on Environmental Economics |
| By: | Helm, Dieter |
| Abstract: | Environmental issues in general, and climate change in particular, lend themselves to EU rather than national policy: many of the effects (such as acid rain and water pollution) are regional, and climate change is global. To date, the EU has had some notable successes, of which addressing the problem of acid rain is perhaps the most significant in both scale and impact. But when it comes to climate change, there has been much action but little effect. Even though the EU comprises over 20 per cent of world GDP, and despite its historical responsibility for a considerable amount of the carbon dioxide (CO2) in the atmosphere, its efforts in the last two decades have probably not made as much as one part per million difference. |
| Keywords: | Environment |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:7&r=env |
| By: | Pezzey, John C.V.; Mazouz, Salim; Jotzo, Frank |
| Abstract: | We analyse the long-term efficiency of the emissions target and of the provisions to reduce carbon leakage in the Australian Government's Carbon Pollution Reduction Scheme, as proposed in March 2009, and the nature and likely cause of changes to these features in the previous year. The target range of 5-15% cuts in national emission entitlements during 2000-2020 was weak, in that on balance it is too low to minimise Australia's long-term mitigation costs. The free allocation of outputlinked, tradable emission permits to Emissions-Intensive, Trade-Exposed (EITE) sectors was much higher than proposed earlier, or shown to be needed to deal with carbon leakage. It plausibly means that EITE emissions can rise by 13% during 2010-2020, while non-EITE sectors must cut emissions by 34-51% (or make equivalent permit imports) to meet the national targets proposed, far from a cost-effective outcome. The weak targets and excessive EITE assistance illustrate the efficiencydamaging power of collective action by the 'carbon lobby'. Resisting this requires new national or international institutions to assess lobby claims impartially, and more government publicity about the true economic importance of carbon-intensive sectors. Published in the Australian Journal of Agricultural and Resource Economics, volume 54, pages 185-202. |
| Keywords: | Environment |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:601&r=env |
| By: | Hlavac, Marek |
| Abstract: | The first half of the paper provides a brief overview of the European Union’s Emission Trading System (EU ETS), and discusses how emission allowances have been allocated during the first two phases of the trading scheme. I then discuss the effects of auctioning off more emission allowances during Phase III of the EU ETS. I conclude that such a change would reduce the windfall profits of the initial allowance holders, and provide additional revenues that participating governments could use to support a variety of policies, some of which I discuss. |
| Keywords: | environmental economics; emissions trading; European Union; windfall profits |
| JEL: | Q5 P26 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24242&r=env |
| By: | Guglielmo Caporale; Christophe Rault; Robert Sova; Anamaria Sova |
| Abstract: | According to the pollution haven hypotheses differences in environmental regulation affect trade flows and plant location. Specifically, environmental stringency should decrease exports and increase imports of “dirty” goods. This paper estimates a gravity model to establish whether the implementation of more stringent regulations in Romania has indeed affected its competitiveness and decreased exports towards its European trading partners. Our findings do not provide empirical support to the pollution haven hypothesis, i.e. environmental stringency is not found to affect significantly total trade, or its components (pollution intensive trade and pollution intensive trade related to non-resource-based trade). |
| Keywords: | environmental stringency, competiveness, gravity model |
| JEL: | F14 Q28 |
| Date: | 2010–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2010-995&r=env |
| By: | Hampf, Benjamin; Krüger, Jens |
| Abstract: | We conduct an empirical analysis of the technical efficiency of cars sold in Germany in 2010. The analysis is performed using traditional data envelopment analysis (DEA) as well as directional distance functions (DDF). The approach of DDF allows incorporating the reduction of carbon dioxide emissions as an environmental goal in the efficiency analysis. A frontier separation approach is used to gain deeper insight for different car classes and regions of origin. Natural gas driven cars and sports-utility-vehicles are also treated as different groups. The results show that the efficiency measurement is significantly influenced by the incorporation of carbon dioxide emissions. Moreover, we find that there is indeed a trade-off between technological performance and environmental performance. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:dar:vpaper:43177&r=env |
| By: | Borenstein, Severin |
| Abstract: | Human activity has disrupted the natural balance of greenhouse gases in the atmosphere and is causing climate change. Burning fossil fuels and deforestation result directly in about 9 gigatons of carbon (GtC) emissions per year against the backdrop of the natural carbon flux — emission and uptake — of about 210 GtC per year to and from oceans, vegetation, soils and the atmosphere. But scientific research now indicates that humans are also impacting the natural carbon cycle through less-direct, but very important, mechanisms that are more difficult to monitor and control. I explore the challenges this presents to market or regulatory mechanisms that might be used to reduce greenhouse gases: scientific uncertainty about these indirect processes, pricing heterogeneous impacts of similar human behaviors, and the difficulty of assigning property rights to a far larger set of activities than has previously been contemplated. While this does not undermine arguments for market mechanisms to control direct anthropogenic release of greenhouse gases, it suggests that more research is needed to determine how and whether these mechanisms can be extended to address indirect human impacts. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:607&r=env |
| By: | Olmstead, Sheila M.; Stavins, Robert N. |
| Abstract: | We describe three essential elements of an effective post-2012 international global climate policy architecture: a means to ensure that key industrialized and developing nations are involved in differentiated but meaningful ways; an emphasis on an extended time path of targets; and inclusion of flexible market-based policy instruments to keep costs down and facilitate international equity. This architecture is consistent with fundamental aspects of the science, economics, and politics of global climate change; addresses specific shortcomings of the Kyoto Protocol; and builds upon the foundation of the United Nations Framework Convention on Climate Change. |
| Keywords: | Environment |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:588&r=env |
| By: | Hahn, Robert W.; Anthoff, David |
| Abstract: | In this essay, we describe some important themes in energy and environmental policy. There are two main reasons for our interest in these policies. First, such policies will likely be important in the coming decades as issues related to climate change and energy security come to the fore. Second, there are important lessons to be learned from a careful review of the actual performance of energy and environmental policies. We undertake a selective survey of the literature to highlight what is known about the efficiency of particular kinds of policies, laws and regulations in these areas. |
| Keywords: | Environment, Regulatory Reform |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:6&r=env |
| By: | Stavins, Robert N. |
| Abstract: | The straightforward way to slow climate change is to reduce the quantity of greenhouse gases (in particular, carbon dioxide) dumped into the atmosphere, giving the planet more time to recycle the offending chemicals. But in light of our late start, chances are we’re going to need all the help we can get to prevent brutal changes in weather, widespread coastal fl ooding and perhaps even the spread of diseases now confi ned to the tropics. Hence the logic in giving nature a helping hand in sequestering atmospheric carbon. |
| Keywords: | Environment |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:13&r=env |
| By: | James Roumasset (University of Hawaii, Department of Economics; University of Hawaii Econonmic Research Organization); Christopher Wada (University of Hawaii Econonmic Research Organization) |
| Abstract: | Payments for ecosystem services should be informed by how both the providing-resource and the downstream resource are managed. We develop an integrated model that jointly optimizes conservation investment in a watershed that recharges a downstream aquifer and groundwater extraction from the aquifer. Volumetric user-fees to finance watershed investment induce inefficient water use, inasmuch as conservation projects actually lower the optimal price of groundwater. We propose a lump-sum conservation surcharge that preserves efficient incentives and fully finances conservation investment. Inasmuch as proper watershed management counteracts the negative effects of water scarcity, it also serves as adaptation to climate change. When recharge is declining, the excess burden of non-optimal watershed management increases. |
| Keywords: | Renewable resources, dynamic optimization, groundwater allocation, watershed conservation, multiple resource stocks |
| JEL: | Q25 Q28 C61 |
| Date: | 2010–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201011&r=env |
| By: | Goulder, Lawrence H.; Stavins, Robert N. |
| Abstract: | Federal action addressing climate change is likely to emerge either through new legislation or via the U.S. EPA’s authority under the Clean Air Act. The prospect of federal action raises important questions regarding the interconnections between federal efforts and state-level climate policy developments. In the presence of federal policies, to what extent will state efforts be costeffective? How does the co-existence of state- and federal-level policies affect the ability of state efforts to achieve emissions reductions? This paper addresses these questions. We find that state-level policy in the presence of a federal policy can be beneficial or problematic, depending on the nature of the overlap between the two systems, the relative stringency of the efforts, and the types of policy instruments engaged. When the federal policy sets limits on aggregate emissions quantities, or allows manufacturers or facilities to average performance across states, the emission reductions accomplished by a subset of U.S. states may reduce pressure on the constraints posed by the federal policy, thereby freeing facilities or manufacturers to increase emissions in other states. This leads to serious “emissions leakage” and a loss of cost-effectiveness at the national level. In contrast, when the federal policy sets prices for emissions or does not allow manufactures to average performance across states, these difficulties are usually avoided. Even in circumstances involving problematic interactions, there may be other attractions of state-level climate policy. We evaluate a number of arguments that have been made to support state-level climate policy in the presence of federal policies, even when problematic interactions arise. |
| Keywords: | Environment |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:589&r=env |
| By: | Girja Sharan |
| Abstract: | This paper presents the experience of using systems such as Earth Tube Heat Exchangers for environmental control in dwellings of zoo animals, and greenhouse in arid area of Kutch. Mention has also been made of the ongoing work to install more such systems in the dairy cattle housing. [W.P. No.2008-01-02] |
| Keywords: | Earth Tube Heat Exchangers, environmental control, dwellings, zoo animals, greenhouse, Kutch |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2738&r=env |
| By: | Martin, Ralf; Muûls, Mirabelle; Wagner, Ulrich J. |
| Abstract: | The criteria proposed by the EU Commission to identify industries that will receive free emission permits in the third phase of the European Union Emissions Trading System (EU ETS) are not restrictive enough. Evidence from interviews with almost 800 managers in Europe shows that most of the sectors entitled to free emission permits are not facing an increased risk of closure or relocation outside of the EU as a consequence of permit auctioning. Free permit allocation is therefore just a transfer of tax payers' money to industry without any additional social benefit. We propose a simple modification of the Commission's criteria for free permit allocation which could save European tax payers at least €7 billion annually. |
| Keywords: | Environment |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:reg:briefs:594&r=env |
| By: | Stavins, Robert N.; Hahn, Robert W. |
| Abstract: | We examine an implication of the “Coase Theorem†which has had an important impact both on environmental economics and on public policy in the environmental domain. Under certain conditions, the market equilibrium in a cap-and-trade system will be cost-effective and independent of the initial allocation of tradable rights. That is, the overall cost of achieving a given aggregate emission reduction will be minimized, and the final allocation of permits will be independent of the initial allocation. We call this the independence property. This property is very important because it allows equity and efficiency concerns to be separated in a relatively straightforward manner. In particular, the property means that the government can establish the overall pollution-reduction goal for a cap-and-trade system by setting the cap, and leave it up to the legislature – such as the U.S. Congress – to construct a constituency in support of the program by allocating the allowances to various interests without affecting either the environmental performance of the system or its aggregate social costs. Our primary objective in this paper is to examine the conditions under which the independence property is likely to hold – both in theory and in practice. A number of factors can call the independence property into question theoretically, including market power, transaction costs, non-cost-minimizing behavior, and conditional allowance allocations. We find that, in practice, there is support for the independence property in some, but not all cap-and-trade applications. |
| Keywords: | Environment |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:47&r=env |
| By: | Guglielmo Caporale; Christophe Rault; Robert Sova; Anamaria Sova |
| Abstract: | The transition process in Central and Eastern Europe was associated with growing environmental awareness. This paper analyses the determinants of Pollution Abatement and Control Expenditure (PACE) at plant level in the case of Romania using survey data and a Multilevel Regression Model (MRM). Our findings suggest that, although Romania has improved its environmental performance, formal and informal regulation are still only partially developed due to the difficulties of economic transition, and heterogeneity across regions remains considerable. |
| Keywords: | Pollution Abatement and Control Expenditure, Transition Economy, Multilevel Regression Model (MRM) |
| JEL: | Q52 C29 C40 |
| Date: | 2010–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2010-994&r=env |
| By: | Margarita Robaina Alves (Universidade de Aveiro); Miguel Rodríguez (Facultade Empresariais e Turismo, 32004 Ourense, Spain); Catarina Roseta-Palma (Department of Economics and ERC-UNIDE, ISCTE-Lisbon University Institute) |
| Abstract: | Across Europe, CO2 emission permits represent one of the main policy instruments to comply with the limits established by the European Commission to achieve the goals of the Kyoto Protocol. In this paper we use microdata to address two issues regarding the impact of the European Carbon Market (EU ETS). On the one hand, we analyse the sectoral effects of the EU ETS in Portugal. The main goal is to study the outcomes of this policy in terms of the transactions carried out between sectors, as well as the distributive consequences. On the other hand, we also look at the regional impact. The pre-existing specialization of different regions in the production of different goods and services might lead to an uneven economic impact of the new permit market. In particular, Portuguese data indicate a distribution of revenue from low income to high income regions, or rather, between installations located in those regions. We focus on the first two years of operation of the EU ETS, using data for each one of the 244 Portuguese installations regulated by this market as well as financial data for 80% of these installations |
| Keywords: | Regional impact, sectoral impact, tradable CO2 permits, European Carbon Market. |
| JEL: | Q48 Q52 R38 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0021&r=env |
| By: | Arthur van Benthem (Stanford University, Department of Economics); Suzi Kerr (Motu Economic and Public Policy Research) |
| Abstract: | As part of international climate change policy, voluntary opt-in programs to reduce emissions in unregulated sectors or countries have spurred considerable discussion. Since any regulator will make errors in predicting baselines, adverse selection will reduce efficiency since participants will self-select into the program. In contrast, pure subsidies lead to full participation but require large financial transfers; this is a particular challenge across countries. A global social planner facing costless transfers would choose such a subsidy to maximize efficiency. However, any actual policy needs to be individually rational for both the buying (industrialized) and selling (developing) country. We present a simple model to analyze this trade-off between adverse selection and infra-marginal transfers. The model leads to the following findings. First, extending the scale of voluntary programs both improves efficiency and reduces transfers. Second, the set of individually rational and Pareto efficient policies typically features a combination of credit discounting and stringent assigned baselines which reduce efficiency. Third, if the industrialized countries can be persuaded to be more generous, the feasible policy set can come close to the globally efficient policy to avoid deforestation.. |
| Keywords: | Voluntary opt-in; adverse selection; deforestation; offsets; emissions trading; REDD |
| JEL: | Q54 Q56 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:10_04&r=env |
| By: | Weisbach, David |
| Abstract: | This paper analyzes the choice between taxes and cap and trade systems (also referred to here as a permit system or a quantity restriction) as methods of controlling greenhouse gas emissions. It argues that in the domestic context, with proper design, the two instruments are essentially the same. Commonly discussed differences in the two instruments are due to unjustified assumptions about design. In the climate change context and within a single country there is sufficient design flexibility that these differences can be substantially eliminated. To the extent that there are remaining differences, there should be a modest preference for taxes, but the benefits of taxes are swamped by the benefits of good design; even though the very best tax might be better than the very best quantity restriction, the first order of business is getting the design right. |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:4&r=env |
| By: | Wichelns, Dennis |
| Abstract: | In summary, irrigation costs and prices are rising in most regions of the United States, due to a combination of increasing scarcity, changes in public preferences regarding water allocation among competing uses, increasing budget scrutiny in the national and state legislatures, rising energy prices, and increasing awareness of climate change and the potential implications for rainfall and the availability of surface water resources. These issues likely will continue encouraging public officials to utilize water pricing and other market-based incentives to motivate further improvements in water use efficiency in agriculture and other sectors. |
| Keywords: | Environment |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:46&r=env |
| By: | Borenstein, Severin |
| Abstract: | Utility regulators frequently focus as much or more on the distributional impact of electric rate structures as on their efficiency. The goal of protecting low-income consumers has become more central with recent increases in wholesale power costs and anticipation of significant costs of greenhouse gas emissions in the near future. These concerns have led to the widespread use of increasing-block pricing (IBP), under which the marginal price to the household increases as its daily or monthly usage rises. There is no cost basis for differentiating marginal price of electricity by consumption level, so perhaps nowhere is the conflict between efficiency and distributional goals greater than in the use of IBP. California has adopted some of the most steeply increasing-block tariffs in electric utility history. Combining household-level utility billing data with census data on income distribution by area, I derive estimates of the income redistribution effected by these increasing-block electricity tariffs. I find that the rate structure does redistribute income to lower-income groups, cutting the bills of households in the lowest income bracket by about 12% (about $5 per month). The effect would be about twice as large if not for the presence of another program that offers a different and lower rate structure to qualified low-income households. I find that the deadweight loss associated with IBP is likely to be large relative to the transfers. In contrast, I find that the means-tested program transfers income with much less economic inefficiency. A much larger share of the revenue redistributed by the IBP tariff, however, comes from the wealthiest quintile of households, so IBP may be a more progressive structure of redistribution. In carrying out the analysis, I also show that a common approach to studying (or controlling for) income distribution effects by using median household income within a census block group may substantially understate the potential effects. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:602&r=env |