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on Environmental Economics |
| By: | YATSENKO, Yuri (School of Business, Houston Baptist University); HRITONENKO, Natali (Department of Mathematics, Prairie View A&M University); BRECHET, Thierry (Université catholique de Louvain, CORE and Louvain School of Management, Belgium) |
| Abstract: | The paper combines analytic and numeric tools to investigate a nonlinear optimal control problem relevant to the economics of climate change. The problem describes optimal investments into pollution mitigation and environmental adaptation at a macroeconomic level. The steady-state analysis of this problem focuses on the optimal ratio between adaptation and mitigation. In particular, we analytically prove that the long- term investments into adaptation are profitable only for economies above certain efficiency threshold. Numerical simulation is provided to estimate how the economic efficiency and capital deterioration affect the optimal policy. |
| Keywords: | climate change, environmental adaptation, mitigation, optimal control, steady state analysis |
| Date: | 2014–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2014006&r=env |
| By: | Edward J. Balistreri (Division of Economics and Business, Colorado School of Mines); Daniel T. Kaffine (Department of Economics, University of Colorado, at Boulder); Hidemichi Yonezawa (Institute of the Environment, University of Ottawa) |
| Abstract: | We consider the legal and economic context for border adjustments that might be used to augment subglobal carbon abatement. Following Markusen (1975) we establish optimal border policy in the presence of cross-border environmental damages. The optimal border policy includes a strategic component that is inconsistent with legal commitments under the General Agreement on Tariffs and Trade (GATT). Incorporating GATT compliance into the theory indicates an optimal border adjustment that taxes the carbon content of trade below the domestic carbon price. This theoretic finding is in contrast to the standard advice to impose the domestic carbon price on the carbon content of trade. The wedge between the domestic carbon price and the optimal environmental border adjustment occurs in general equilibrium because border adjustments inadvertently drive up consumption of emissions intensive goods in unregulated regions. We conclude our analysis with numeric simulations of Annex-I carbon policy. We find an optimal import tariff on the carbon content of aluminum that is on the order of 50\% of the domestic carbon price. Countries that impose border carbon adjustments at the domestic carbon price will be extracting rents from unregulated regions at the expense of efficient environmental policy and consistency with international law. |
| Keywords: | climate policy, border tax adjustments, carbon leakage, trade and carbon taxes |
| JEL: | F18 Q54 Q40 K33 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201403&r=env |
| By: | Md. Al Mamun; Kazi Sohag; Md. Abdul Hannan Mia; Gazi Salah Uddin; Ilhan Ozturk |
| Abstract: | Environmental degradation measured by CO2 emissions is a significant challenge to sustainable economic development. Owing to significant differences in the empirical relationship between the economic growth and CO2 emissions and policies adopted by different countries to overcome the challenge are not decisive. This study aims to generalize our knowledge about the relationship between CO2 emissions and economic growth across the world for 1980-2009 period. Besides, it explores whether the transformation of different economies (e.g. agrarian to industrial and industrial to sophisticated service economy) over the past few decades yielded any significant positive impact towards sustainable economic development by reducing the level of CO2 emission. Empirical results suggest (i) except for high-income-countries, Environmental Kuznets Curve (EKC) is a general phenomenon across the world, and (ii) the transformation of different economies towards a service economy has produced more pollution in high income countries and less pollution in low and middle income countries. |
| Keywords: | CO2 emissions, Environmental Kuznets Curve, Sectoral output. |
| JEL: | C23 Q20 Q40 Q43 Q56 |
| Date: | 2014–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-141&r=env |
| By: | Vogt-Schilb, Adrien; Hallegatte, Stephane; de Gouvello Christophe |
| Abstract: | Decision makers facing abatement targets need to decide which abatement measures to implement, and in which order. This paper investigates the ability of marginal abatement cost (MAC) curves to inform this decision, reanalysing a MAC curve developed by the World Bank on Brazil. Misinterpreting MAC curves and focusing on short-term targets (e.g., for 2020) would lead to under-invest in expensive, long-to-implement and large-potential options, such as clean transportation infrastructure. Meeting short-term targets with marginal energy-efficiency improvements would lead to carbon-intensive lock-ins that make longer-term targets (e.g., for 2030 and beyond) impossible or too expensive to reach. Improvements to existing MAC curves are proposed, based on (1) enhanced data collection and reporting; (2) a simple optimization tool that accounts for constraints on implementation speeds; and (3) new graphical representations of MAC curves. Designing climate mitigation policies can be done through a pragmatic combination of two approaches. The synergy approach is based on MAC curves to identify the cheapest mitigation options and maximize co-benefits. The urgency approach considers the long-term objective (e.g., halving emissions by 2050) and works backward to identify actions that need to be implemented early, such as public support to clean infrastructure and zero-carbon technologies. |
| Keywords: | Climate Change Mitigation and Green House Gases,Climate Change Economics,Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment |
| Date: | 2014–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6808&r=env |
| By: | Sebastian Petrick; Ulrich J. Wagner |
| Abstract: | We estimate the causal impact of the EU Emissions Trading Scheme on manufacturing firms using comprehensive panel data from the German production census. Semiparametric matching estimators yield robust evidence that the policy caused treated firms to abate onefifth of their CO2 emissions between 2007 and 2010 relative to non-treated firms. This reduction was achieved predominantly by improving energy efficiency and by curbing the consumption of natural gas and petroleum products, but not electricity use. We find no evidence that emissions trading lowered employment, turnover or exports of treated firms |
| Keywords: | carbon trading, EU Emissions |
| JEL: | Q56 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1912&r=env |
| By: | Pierre-André Jouvet; Marie Renner |
| Abstract: | The two main hurdles to a widespread carbon capture and storage (CCS) deployment are: cost and social acceptance issues. Assessing accurately social preferences is thus interesting to determine whether CCS is socially optimal. Unlike most academic papers that have a dichotomous approach and consider either the atmospheric pollution (first source of marginal disutility) or the underground pollution (second source), we consider the problem as a whole: CCS techniques introduce a third source of disutility due to the simultaneous presence of CO2 in the atmosphere and in geological formations. The model and the numerical simulations show that there exist some configurations of social preferences for which CCS grants a higher social welfare provided that public authorities tax the carbon content of fossil fuels and subsidize carbon storage. CCS can even increase simultaneously the social welfare of the country with CCS and the one of the country without. From the perspective of minimizing the decarbonizing costs, we compare the case where each country defines its climate policy and when they are aggregated, in order to assess the transfers required to encourage CCS deployment. |
| Keywords: | Carbon Capture and Storage; Pollution; Tax; Social acceptance; Social optimum |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1403&r=env |
| By: | Ben Jebli, Mehdi; Ben Youssef, Slim; Ozturk, Ilhan |
| Abstract: | Based on the Environmental Kuznets Curve (EKC) hypothesis, this paper uses panel cointegration techniques to investigate the short and the long-run relationship between CO2 emissions, economic growth, renewable energy consumption and trade openness for a panel of 24 Sub-Saharan Africa countries over the period 1980-2010. The validity of the EKC hypothesis has not been supported for these countries. Short-run Granger causality results reveal that there is a bidirectional causality between emissions and economic growth; bidirectional causality between emissions and real exports; unidirectional causality from real imports to emissions; and unidirectional causality runs from trade (exports or imports) to renewable energy consumption. There is an indirect short-run causality running from emissions to renewable energy and an indirect short-run causality from GDP to renewable energy. In the long-run, the error correction term is statistically significant for emissions, renewable energy consumption and trade openness. The long-run estimates suggest that real GDP per capita and real imports per capita both have a negative and statistically significant impact on per capita CO2 emissions. The impact of the square of real GDP per capita and real exports per capita are both positive and statistically significant on per capita CO2 emissions. For the model with imports, renewable energy consumption per capita has a positive impact on per capita emissions. One policy recommendation is that Sub-Saharan countries should expand their trade exchanges particularly with developed countries and try to maximize their benefit from technology transfer generated by such trade relations as this increases their renewable energy consumption. |
| Keywords: | Environmental Kuznets Curve; Renewable electricity consumption; International trade; Panel cointegration; Sub-Sahara. |
| JEL: | C33 F14 O55 Q43 |
| Date: | 2014–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:54300&r=env |
| By: | Mateo Cordier; Walter Hecq; Rima Hawi; José A. Pérez Agúndez |
| Abstract: | In European environmental water legislation, costs are deemed disproportionate when the total cost of a supplementary environmental measure appreciably exceeds the total benefit generated by the measure (cost-benefit concept). Moreover when costs are lower than benefits, they are deemed disproportionate if polluters cannot afford them (affordability concept). The implication of both disproportionality concepts for ecosystem protection is important given that they condition the possibility for environmental targets to be postponed or made less stringent. But what if this twofold concept of disproportionate cost were replaced by the affordability concept alone? A first argument supporting our suggestion is that cost-benefit analysis encounters difficulties in taking into account the important ecological functions provided by biological structures and processes from which ecosystem services stem. A second argument is that there is no reason for not implementing an environmental legislation democratically decided by representatives if polluters can bear the costs. The problem is that the affordability concept strongly depends on the range of the “Polluter Pays Principle” considered. In order to improve environmental equity and reduce the number of cases where environmental targets are postponed or made less stringent, we develop two extensions of the “Polluter Pays Principle”. The extension method is based on an ecological-economic input-output model and tested on the case of natural marine habitat destroyed by harbour extension in the Seine estuary. The results suggest that disproportionate costs can be transformed into affordable ones when the “Polluter Pays Principle” is extended to economic sectors with indirect responsibilities of second order (“User Pays Principle”) and third order (“User of User Pays Principle”). To ensure that such extension is fair to the ecosystem and to economic sectors, equity issues are considered. Our results suggest that if the method developed in this paper were applied, economic feasibility would no longer be an argument to impede the implementation of policies with ambitious environmental targets offering significant improvements to ecosystem quality. |
| Keywords: | polluter pays principle; ecological-economic model; water legislation; disproportionate cost; cost-benefit analysis; equity |
| Date: | 2014–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/153380&r=env |
| By: | Shinya Kato (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University) |
| Abstract: | We conducted a computable general equilibrium analysis of a policy to regulate carbon dioxide emissions per unit of production in Japan. It is often claimed that regulations based on emission rates might lead to an increase in carbon dioxide emissions but do not suppress economic growth. This study shows that in the short run, a rate-based policy reduce firmsf emissions at a rate greater than that specified by the regulation. We also compared the rate-based policy with the cap-and-trade policy and found that the former leads to a greater reduction in the real GDP than the latter. Furthermore, the decrease in output is tend to be more evenly distributed under the rate-based policy than under with a cap-and-trade policy. Our results suggest that the rate-based policy is inferior in terms of efficiency but is favorable in terms of ensuring the burden of emission reduction is shared equally. |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1414&r=env |
| By: | F. Akpan, Usenobong; E. Abang, Dominic |
| Abstract: | The primary motivation behind this study was to search for evidence of the link between environmental quality and economic growth so as to answer the relevant question of whether economic growth alone could serve as a long-run solution to environmental damage as implied by EKC hypothesis. Here we analyze the relationship using a panel of 47 countries over the period 1970 -2008. Using Random-effect estimation and two-stage least square, our results leads to the following conclusions: relying on a quadratic model can easily mislead researchers to ratify the existence of EKC; the EKC hypothesis ceased to hold whenever an alternative functional form (cubic) is employed. At best, the relationship between economic growth and environmental quality is shown to be typified by an N-shaped curve. The paper maintained that simply waiting for an automatic arrival of a delinking point for environmental damage given long-run growth will not be a feasible solution to environmental quality. A number of feasible policy menu and critical questions to guide selection of the best instrument capable of bringing about a downturn in environmental damage have been suggested in the paper. |
| Keywords: | Economic growth, EKC hypothesis, Environmental quality, delinking |
| JEL: | C23 C26 Q43 Q57 |
| Date: | 2014–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:54461&r=env |
| By: | BUCKLE, Simon (Grantham Institute for Climate Change, Imperial College London); MUÛLS, Mirabelle (Grantham Institute for Climate Change & Imperial College Business School, Imperial College London); LEIB, Joerg (Grantham Institute for Climate Change, Imperial College London); BRECHET, Thierry (Université catholique de Louvain, CORE and Louvain School of Management, Belgium) |
| Abstract: | International negotiations have failed to achieve an ambitious outcome to limit climate risks. A Cournot outcome where countries determine their mitigation commitments in the full knowledge of those by others could be an important step. It would avoid a Stackelberg (leader-follower) outcome where one or more major emitters impose a level of climate risk on the rest of the world. This requires these countries to have sufficiently similar preferences over global cumulative emissions. We develop a novel stylised economic growth model to analyse the dynamics of international negotiations. Economies can be classified according to their committed emissions and the initial level of atmospheric CO2. We define a new metric, the desired mitigation effort, which provides an empirical methodology for comparing and evaluating countries’ mitigation commitments. A numerical calibration suggests a degree of convergence between the major emitters that might allow a Cournot-style agreement at the Paris Conference in 2015. |
| Keywords: | climate change, climate damages, economic growth, game theory, international climate negotiations, mitigation |
| Date: | 2014–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2014008&r=env |
| By: | Catherine L. Kling (Center for Agricultural and Rural Development (CARD)); Yiannis Panagopoulos; Adriana Valcu; Philip W. Gassman (Center for Agricultural and Rural Development (CARD)); Sergey Rabotyagov; Todd Campbell (Center for Agricultural and Rural Development (CARD)); Mike White; Jeffrey G. Arnold; Raghavan Srinivasan; Manoj Jha; Jeff Richardson; R. Eugene Turner |
| Abstract: | In this paper, we discuss the importance of developing integrated assessment models to support the design and implementation of policies to address water quality problems associated with agricultural pollution. We describe a new modeling system, LUMINATE, which links land use decisions made at the field scale in the Upper Mississippi, Ohio, and Tennessee basins through both environmental and hydrologic components to downstream water quality effects and hypoxia in the Gulf of Mexico. This modeling system can be used to analyze detailed policy scenarios identifying the costs of the policies and their resulting benefits for improved local and regional water quality. We demonstrate the model’s capabilities with a simple scenario where cover crops are incentivized with green payments over a large expanse of the watershed. |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:14-wp546&r=env |
| By: | Abdurrahman Aydemir (College of Arts and Social Sciences, Sabanci University); Talat Genc (Department of Economics and Finance, University of Guelph) |
| Abstract: | We use detailed data from all generators in the Ontario wholesale electricity market to investigate cross-border electricity trade and its impact on air emissions and welfare in Ontario. Using the technical characteristics of the generators and financial data we run a competition model every hour and find that the model generates actual prices and outputs with 94.4% and 96% accuracy, respectively. We show that there is a significant welfare gain from power trade. The air emissions savings are also considerable. For instance, when hourly imports double from current levels CO2 emissions decrease around 13%, and market prices reduce 5.4%. In autarky, CO2, SO2, NOx emissions increase 12%, 22%, 16%, resp., the prices go up 5.8%, and the price volatility rises 12%. However, the impact of negative wholesale prices on market outcomes is small. |
| Keywords: | Electricity trade; interconnected markets; air emissions; welfare |
| JEL: | F18 L13 L94 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2014-01&r=env |
| By: | Carlos Francisco Ortiz Paniagua y Georgina Jatzire Arévalo Pacheco (Universidad Michoacana de San Nicolás de Hidalgo) |
| Abstract: | The hot springs tourism is an economically important recreational activity that has been practiced traditionally in Zinapecuaro and Ciudad Hidalgo - Michoacán, Mexico. The economic benefit of the recreational use of this service represents a significant income for the regional economy. In this paper we estimated the economic value of recreational ecosystem services of Zinapecuaro. The results show that the benefit of thermal water use increases to two million of Mexican pesos for 2010 and, considering a discount rate of 10% for the next 20 years, future economic value of this service increases up to eighteen million pesos. From the economic point of view this justifies the implementation of a strategy of sustainable use that will allow regional projects expand on this natural resource. |
| Keywords: | Economic value, ecosystem services, spa tourism and travel cost |
| JEL: | Q51 R11 Q11 Y Q26 |
| Date: | 2014–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:cjz:ca41cj:20&r=env |
| By: | Dusan Paredes Araya (IDEAR - Department of Economics, Universidad Católica del Norte - Chile); Timothy Komarek; Scott Loveridge |
| Abstract: | New technologies combining hydraulic fracturing and horizontal drilling in oil and gas extraction are creating a sudden expansion of production. Residents of places where deep underground oil and gas deposits are found want to know about the broader economic, social, and environmental impacts of these activities that generate windfall income for some residents. We first review the literature on windfall spending patterns. Then, using the Marcellus region, the earliest area to be tapped using the new techniques, we estimate county-level employment and income effects. For robustness, we employ two methods. Using a propensity score matching approach we find no effect of fracking on income or employment. A panel-fixed effects regression approach suggests statistically significant employment effects in six out of seven alternative specifications, but significant income effects in only one out of seven specifications. In short, the income spillover effects in the Marcellus region appear to be minimal, meaning there’s little incentive at the county level to incur current or potential future costs that may be associated with this activity. We conclude with some ideas on how localities might employ policies that would allow natural gas extraction to move forward, benefitting landowners, while establishing some financial safeguards for the broader community. |
| Keywords: | : Economic growth, Marcellus shale gas, resource extraction, propensity score matching, panel data, windfall. |
| JEL: | R11 Q33 Q32 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cat:dtecon:dt201403&r=env |
| By: | Krishna, Vijesh; Qaim, Martin; Zilberman, David |
| Abstract: | Do transgenic crops cause agrobiodiversity erosion? We hypothesize that they increase productivity and reduce production risk and may therefore reduce farmer demand for on-farm varietal diversity, especially when only a few transgenic varieties are available. We also hypothesize that varietal diversity can be preserved when more transgenic varieties are supplied. These hypotheses are tested and confirmed with panel data for the case of transgenic cotton in India. Cotton varietal diversity in India, with of over 90% adoption of transgenic technology, is now at the same level than it was before the introduction of this technology. Some policy implications are discussed. |
| Keywords: | varietal diversity, biotechnology, smallholder farmers, production risk, India, Environmental Economics and Policy, Production Economics, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, D24, D81, O13, O44, Q12, Q16, Q57, |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ubzefd:164678&r=env |
| By: | Di Cosmo, Valeria; Hyland, Marie; Llop Llop, Maria |
| Abstract: | The Water Framework Directive (WFD) defines common objectives for water resources throughout the European Union (EU). Given this general approach to water preservation and water policy, the objective of this paper is to analyse whether common patterns of water consumption exist within Europe. In particular, our study uses two methods to reveal the reasons behind sectoral water use in all EU countries. The first method is based on an accounting indicator that calculates the water intensity of an economy as the sum of sectoral water intensities. The second method is a subsystem inputâ€output model that divides total water use into different income channels within the production system. The application uses data for the years 2005 and 2009 on water consumption in the production system of the 27 countries of the EU. From our analysis it emerges that EU countries are characterized by very different patterns of water consumption. In particular water consumption by the agriculture sector is extremely high in Central/Eastern Europe, relative to the rest of Europe. In most countries, the water used by the fuel, power and water sector is consumed to satisfy domestic final demand. However, our analysis shows that for some countries exports from this sector are an important driver of water consumption. Focusing on the agricultural sector, the decomposition analysis suggests that water usage in Mediterranean countries is mainly driven by final demand for, and exports of, agricultural products. In Central/Eastern Europe domestic final demand is the main driver of water consumption, but in this region the proportion of water use driven by demand for exports is increasing over time. Given these heterogeneous water consumption patterns, our analysis suggests that Mediterranean and Central/Eastern European countries should adopt specific water policies in order to achieve efficient levels of water consumption in the European Union. JEL codes: N5; C67 Keywords: Water use, Subsystem input–output model; Water intensity, European Union. |
| Keywords: | Aigua -- Consum, Anàlisi d'entrada/sortida, Unió Europea, Països de la, 33 - Economia, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/225298&r=env |
| By: | Nellinger, Ludwig |
| Abstract: | William Forster Lloyd's 1833 sketch about poor cattle on the commons and the well-fed animals on the adjacent enclosures published in his 'Two lectures on the checks to population' has hitherto been assessed as one starting point of the economics of renewable resources. In the 20th century the question of the use of common property resources has initially been treated by fisheries economists, at first in unknown publications of Jens Warming in 1911 and 1931, and after a disruption of more than 40 years starting again with the contributions of Gordon and Scott in the 1950s. Important results have been the derivation and presentation of the economic criteria for the open access equilibrium case on the one hand and the private property equilibrium case on the other hand. Garrett Hardin's well known 1968 Sciences article brought a new title and increased awareness to the 'tragedy of the commons' and Elenor Ostrom's 2009 nobel prize in economics finally underlined the importance as well as the diversity of institutional rules to achieve an efficient use of the natural resources - challenging the favored liberal concept of a privatization of scarce resources. Johann Heinrich von Thuenen's contributions on the commons - hidden in an 1831 article about urban agriculture in the journal 'Neue Annalen der Mecklenburgischen Landwirtschaftsgesellschaft' and in an unpublished manuscript - have been totally neglected until now, although he published his article about the core problem of the commons two years earlier than William Forster Lloyd and almost in the clarity of the fisheries economists 80 resp. 120 years later. He not only presented the correct allocation criteria for both property rights scenarios but additionally developed a framework a) how to gain the maximal rent of a resource through an auction system - drafting the first demand table b) how to redistribute the gains to the communal property owners - developing an adequate compensation mechanism c) and finally how to establish this institutional innovation democratically - thereby applying important elements of Elenor Ostrom's Common Property Rights Framework. Due to these contributions Johann Heinrich von Thuenen deserves the title of the founder of the economics of renewable resources. Moreover, in combination with his publications on forestry, land use, soil improvement and agricultural processing industries he should also be seen as the creator of a discipline which got its name but now, the creator of bioeconomics. -- |
| Keywords: | bioeconomics,economics of renewable resources,tragedy of commons,fisheries economics,urban agriculture,factor demand table,auction system |
| JEL: | B13 B15 B16 Q15 Q21 Q22 Q24 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:roswps:135&r=env |