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 Environmental and Resource EconomicsJournal Prestige (SJR): 1.186 Citation Impact (citeScore): 2Number of Followers: 22      Hybrid journal (It can contain Open Access articles) ISSN (Print) 1573-1502 - ISSN (Online) 0924-6460 Published by Springer-Verlag  [2570 journals]
• The Effect of Growth and Corruption on Soil Sealing in Italy: A Regional
Environmental Kuznets Curve Analysis
• Abstract: Abstract This paper analyses and looks more closely at the empirical debate regarding the Income Elasticity Hypothesis postulated in relation to the Environmental Kuznets Curve, and the impact of corruption on the relationship between growth and environmental impact, measured in terms of soil sealing, as proxied by the number of Building Permits issued by public authorities. It postulates that when current private rent is high compared to perceived social costs and a large enough minority benefits from the rules, the EKC does not emerge and public intervention fails to perceive social optimality. To validate this hypothesis, we run a panel data regression model based on data from all Italian regions. Results confirmed the hypothesis evidencing a U-shaped relationship, i.e. a detrimental relationship between income and environmental impact/quality. It also demonstrated that this is contingent on the level of corruption. The latter affects the position and the shape of the inverted EKC, speeding up the exploitation process. It shows that the higher the income, the higher the effect of corruption on the environment. Therefore, it advocates caution against any simplistic inference from EKC.
PubDate: 2019-12-01

• Treated Wastewater Reuse: An Efficient and Sustainable Solution for Water
Resource Scarcity
• Abstract: Abstract Wastewater has become a valuable resource in many regions of the world that face increased level of freshwater scarcity. Reuse of treated wastewater has high economic benefit, but it can also lead to environmental pollution. As such, explicit conditions must be defined to determine the optimality of wastewater reuse for society. In this paper, we develop a regional multi-sectoral model of water quantity–quality interaction among the urban, agricultural, and environmental sectors. Our interest lies in the feasibility of reuse, rather than the stability of the regional arrangements, therefore we apply a social planner’s approach to this regional problem. We formally construct sufficient conditions that support the superiority of infrastructure development and conveyance of treated wastewater for irrigation, when measured against other common disposal alternatives. Using a numerical illustrative example, which relies on data and results from existing literature, we were able to replicate our theoretical findings, as well as to examine their robustness, when supporting assumptions are relaxed.
PubDate: 2019-12-01

• Climate Policy Must Favour Mitigation Over Adaptation
• Abstract: Abstract In climate change policy, adaptation tends to be viewed as being as important as mitigation. In this article we present a simple yet general argument for which mitigation must be preferred to adaptation at the global level. The argument rests on the observation that mitigation is a public good while adaptation is a private one. We show that the more one teases out the public good nature of mitigation, the lower will be the incentives to invest in the private good adaptation while it increases a policy maker’s incentives to invest in the public good mitigation. Conclusively, private adaptation yields a significant loss to global welfare. We then discuss what this implies for the current state of the art literature and what should be the lesson for future research.
PubDate: 2019-12-01

• Waiting for the Courts: Effects of Policy Uncertainty on Pollution and
Investment
• Abstract: Abstract Legal challenges and transitions of political power cause the future of regulatory policies to be uncertain. In this article, I investigate how uncertainty about environmental policy affects investment and emissions at coal-fired power plants. I exploit a legal challenge to the Clean Air Interstate Rule (CAIR) that created variation in the probability that individual plants would need to comply with the new policy. I use a difference-in-differences approach to compare pollution reductions at power plants located in states subject to more uncertainty to plants in states that that were not. I find that plants with a lower probability of being regulated invested in fewer capital-intensive pollution controls and reduced pollution by 13% less on average. Many of these plants did switch to capital-intensive pollution controls after the court upheld CAIR. Policy uncertainty increased compliance costs by \$124 million by delaying efficient investments.
PubDate: 2019-12-01

• Determining the Social Cost of Carbon: Under Damage and Climate
Sensitivity Uncertainty
• Abstract: Abstract This article quantifies the impact on optimal climate policy, of both damage elasticity and equilibrium climate sensitivity uncertainty, under separable preferences for risk and intergenerational inequality. The primary findings are as follows. (1) Such preferences can depress the social cost of carbon (SCC) when calibration aims at matching actual economic outcomes, countering the prevailing view that the SCC is greater with separable than with conventional entangled preferences. (2) Damage elasticity uncertainty has larger effects on climate policy than equilibrium climate sensitivity uncertainty, even under high impact tail risk of the latter. (3) Risk aversion decisively strengthens optimal climate policy under joint damage and climate sensitivity uncertainty, than with a single source of uncertainty alone. Indeed, failing to account for the interaction between damage and climate sensitivity uncertainty underestimates the cost of climate change by more than US dollars 1 trillion.
PubDate: 2019-11-28

• Bioeconomic Modelling of Coastal Cod and Kelp Forest Interactions:
Co-benefits of Habitat Services, Fisheries and Carbon Sinks
• Abstract: Abstract Ecosystem-based fisheries management seeks to expand upon the traditional one-stock fisheries management measures by internalizing the effects of fishing on marine ecosystems, and accounting for biological interactions among marine resources. The fact that marine resources provide multiple, often competing benefits, makes the accomplishment of these ecosystem-based fisheries management objectives highly complex. In this paper, we develop a dynamic bioeconomic model to analyze the ecological and economic interactions between fisheries and renewable habitat where the habitat provides multiple ecosystem services. Specifically, a single resource manager seeks to maximize co-benefits of fishery-habitat interactions when the habitat is an exploitable marine resource, but also a dwelling place for commercial fish, enhancing the growth of the fish stock and providing regulating ecosystem services in the form of carbon sink for climate change mitigation. The optimal management rules for both fishery and habitat are derived and discussed. We also present an application of the model to analyze an integrated management of coastal cod and kelp forests in Norway, where regulations on commercial harvesting of kelp forests seek to protect fisheries. Both the theoretical model and the Norwegian application suggest substantial potential increases for both coastal cod and kelp forest stocks, with an attendant 8% increase in cod harvests, and about 1% reduction in kelp harvests. In addition, an optimal management regime that internalizes carbon sink co-benefits of kelp forests stores additional 300,000 tonnes of carbon.
PubDate: 2019-11-26

• Social Cooperation in the Context of Integrated Private and Common Land
Management
• Abstract: Abstract Several discrete choice experiment studies have investigated issues in the design of incentive programs to enhance the provision of ecosystem services. In these studies, ownership of land is usually private, and landowners make decisions independently of each other. However, the assumption of independence may be invalid when decision making involves a spatial setting and social networks. This study presents a new approach that accounts for social cooperation and preference interdependence across farmers in a land management context with mixed ownership. We formulate an econometric model of implicit choice set formation that accounts for (1) farmers’ expectations regarding mutual positive benefits from cooperation in an integrated land management system, and (2) the potential interdependence of preferences across farmers within the same socio-spatial group. We show that cooperation expectations matter for the decision of whether to engage in cooperative management and also for welfare estimates. Our model can identify sources of heterogeneities arising from cooperation expectations in ways that would not be possible using a reduced-form choice model. The assumption of independence should be checked routinely in similar settings to avoid potential endogeneity problems in discrete choice models when dealing with data that have a social-spatial dimension.
PubDate: 2019-11-25

• Building Risk into the Mitigation/Adaptation Decisions simulated by
Integrated Assessment Models
• Abstract: Abstract This paper proposes an operationally simple and easily generalizable methodology to incorporate climate change damage uncertainty into Integrated Assessment Models (IAMs). First uncertainty is transformed into a risk measure by extracting damage distribution means and variances from an ensemble of socio economic and climate change scenarios. Then a risk premium is computed under different degrees of risk aversion, quantifying what society would be willing to pay to insure against the uncertainty of the damages. Our estimates show that the premium for the risk is a potentially significant addition to the “standard average damage”, but highly sensitive to the attitudes toward risk. In the last research phase, the risk premium is incorporated into the climate change damage function of a widely used IAM which shows, consequently, a substantial increase in both mitigation and adaptation efforts, reflecting a more precautionary attitude by the social planner. Interestingly, adaptation is stimulated more than mitigation in the first half of this century, while the situation reverses afterwards.
PubDate: 2019-11-14

• Combining Risk Attitudes in a Lottery Game and Flood Risk Protection
Decisions in a Discrete Choice Experiment
• Abstract: Abstract Decision-making about flood protection is surrounded by outcome uncertainty. In this paper we look at the influence of individual risk attitudes on flood protection decisions. To this end, we combine the results of a lottery game with the findings from a discrete choice experiment focusing on flood risk reduction measures. We find that the inclusion of non-linear probability weighting increases the explanatory power of the choice model. The result is however sensitive to behavioral assumptions about decisions under uncertainty, as well as whether the lottery was played in the loss or gain domain. Including risk attitudes in the probability weighted model decreases marginal willingness to pay for measures with a low to intermediate flood risk reduction capacity and increases marginal willingness to pay for measures with a very high flood risk reduction effect. This has important implications for the social acceptability of flood reduction measures under different baseline conditions.
PubDate: 2019-11-13

• Environmental Policy Instrument Choice and International Trade
• Abstract: Abstract We develop a dynamic stochastic general equilibrium model to understand how environmental policy instrument choice affects trade. We extend the existing literature by employing an open economy model to evaluate three environmental policy instruments: cap-and-trade, pollution taxes, and an emissions intensity standard in the face of two types of exogenous shocks. We calibrate the model to Canadian data and simulate productivity and import price shocks. We evaluate the evolution of key macroeconomic variables, including the trade balance in response to the shocks under each policy instrument. Our findings for the evolution of output and emissions under a productivity shock are consistent with previous closed economy models. Our open economy framework allows us to find that a cap-and-trade policy dampens the international trade effects of the business cycle relative to an emissions tax or intensity standard. Under an import shock, pollution taxes and intensity targets are as effective as cap-and-trade policies in reducing variance in consumption and employment. The cap-and-trade policy limits the intensity of the import competition shock suggesting that particular policy instrument might serve as a barrier to trade.
PubDate: 2019-11-06

• Fuel Subsidies Versus Market Power: Is There a Countervailing Second-Best
Optimum'
• Abstract: Abstract Fuel subsidies distort end-use prices below cost, resulting in overconsumption and huge environmental cost. On the other hand, the mark-up over cost due to the exercise of market power results in the social loss of consumer surplus. We open a new line of inquiry into the potential for a market-based solution from these two countervailing forces: can the two offsetting distortions conceivably achieve a second- best optimum' Relying on dynamic panel techniques and gasoline market data for 68 developing countries, we uncover an excessive second-best subsidy offset to market power mark-up on the order of 4.5. Our results indicate that the potential for policy failure strongly exceeds the potential for market failure in our model, and gasoline prices across our sample may not be aligned with vigorous anti-climate change policy.
PubDate: 2019-11-05

• Household Demand for Water in Rural Kenya
• Abstract: Abstract To expand and maintain water supply infrastructure in rural regions of developing countries, planners and policymakers need better information on the preferences of households who might use the sources. Using data from 387 households in rural Kenya, we model source choice and water demand using a discrete-continuous (linked) demand model. We find that households are sensitive to the price, proximity, taste, and availability in choosing among sources, but are not sensitive to other source qualities including color, health risk, and risk of conflict. Estimates of the value of time implied by our model suggest that households value time spent collecting water at one third of unskilled wages. We use the linked demand framework to estimate own-price elasticities in the rural setting. These estimates range between − 0.13 and − 1.33, with a mean of − 0.56, and are consistent with other elasticity estimates from small and large cities.
PubDate: 2019-11-02

• Can Variations in Temperature Explain the Systemic Risk of European
Firms'
• Abstract: Abstract We employ a $$\varDelta CoVaR$$ model in order to measure the potential impact of temperature fluctuations on systemic risk, considering all companies from the STOXX Europe 600 Index, which covers a wide range of industries for the period from 1/1/1990 to 29/12/2017. Furthermore, in this study, we decompose temperature into 3 factors; namely (1) trend, (2) seasonality and (3) anomaly. Findings suggest that, temperature has indeed a significant impact on systemic risk. In fact, we provide significant evidence of either positive or nonlinear temperature effects on financial markets, while the nonlinear relationship between temperature and systemic risk follows an inverted U-shaped curve. In addition, hot temperature shocks strongly increase systemic risk, while we do witness the opposite for cold shocks. Additional analysis shows that deviations of temperature by $$1\,^{\circ }\hbox {C}$$ can increase the daily Value at Risk by up to 0.24 basis points. Overall, higher temperatures are highly detrimental for the financial system. Results remain robust under the different proxies that were employed to capture systemic risk or temperature.
PubDate: 2019-11-02

• Optimal Environmental Border Adjustments Under the General Agreement on
• Abstract: Abstract A country choosing to adopt border carbon adjustments based on embodied emissions is motivated by both environmental and strategic incentives. We argue that the strategic component is inconsistent with commitments under the General Agreement on Tariffs and Trade (GATT). We extend the theory of border adjustments to neutralize the strategic incentive, and consider the remaining environmental incentive in a simplified structure. The theory supports border adjustments on carbon content that are below the domestic carbon price, because price signals sent through border adjustments inadvertently encourage consumption of emissions intensive goods in unregulated regions. The theoretic intuition is supported in our applied numeric simulations. Countries imposing border adjustments at the domestic carbon price will be extracting rents from unregulated regions at the expense of efficient environmental policy and consistency with international trade law.
PubDate: 2019-11-01

• Poverty-Environment Traps
• Abstract: Abstract Remote less-favored agricultural lands (LFAL) are regions in developing countries that face severe biophysical constraints on production and are in geographical locations that have limited market access. We estimate that, across developing countries, 130 million people with high infant mortality live in such areas, and the incidence is 40%. In low-income countries, the population in remote LFAL with high infant mortality increased 25% over 2000–2010 to 57 million, and the incidence is 94%. From case study evidence, we identify the key environmental and economic characteristics that influence the ability of rural households in remote LFAL to avoid poverty. We incorporate these characteristics in a model analyzing the behavior of a representative household, which illustrates conditions that enable the household to escape subsistence-level poverty. We also show empirically for 83 developing countries that the share of rural population on remote LFAL in 2000 affects the poverty-reducing impacts of per capita income growth over 2000–2012.
PubDate: 2019-11-01

• About the Relationship Between Green Technology and Material Usage
• Abstract: Abstract This paper examines the effects of environmental innovation on material usage, using Direct Material Input (DMI) and Raw Material Input (RMI) as indicators of material usage. The analysis is conducted on European Union countries for the years 1990–2012. We utilize the Generalized Method of Moments in a dynamic panel setting. Based on patent data, we construct green knowledge stocks for specific technological domains. We find that the effect of environmental innovation differs between subdomains. Innovation in the areas of energy efficiency, and recycling and reuse is found to reduce material usage. For alternative energy production, transportation, production or processing of goods, and general green innovation no significant effect is found. We observe a distinct reducing effect of some environmental innovation areas when compared with overall innovation. The technology effects are similar for RMI and DMI. The results are discussed from the perspective of literature on the environmental effects of environmental innovation, and literature on decoupling.
PubDate: 2019-11-01

• Economic Freedom, Internal Motivation, and Corporate Environmental
Responsibility of SMEs
• Abstract: Abstract The effect of economic freedom on firms’ environmental responsible management is still unconcluded. We conjecture that the effects are conditional on a firm’s internal motivation and use a large-scale survey to run an empirical test. The sample consists of 4338 small and medium-sized enterprises from twelve European countries. Distinguishing between intrinsic (environmental) and extrinsic (profit) internal motivations, we find clear support that the effects of economic freedom and intrinsic motivation on corporate environmental performance interact with each other. Our findings explain the ambiguous results of previous empirical studies at the aggregate level.
PubDate: 2019-11-01

• On the Strategic Effect of International Permits Trading on Local
Pollution
• Abstract: Abstract We introduce a model of strategic environmental policy where two firms compete à la Cournot in a third market in the presence of multiple pollutants. Two types of pollutants are introduced: a local and a transboundary one. The regulator can only control local pollution as transboundary pollution is regulated internationally. We illustrate that when transboundary pollution is regulated through the use of tradable emission permits instead of non-tradable ones then a new strategic effect appears which has not been identified thus far. In this case, local pollution increases further. We caution that linking permit markets across regions may be welfare detrimental. We also provide evidence from the implementation of EU ETS over the pollution of particulate matters ( $$PM_{10}$$ and $$PM_{2.5})$$ .
PubDate: 2019-11-01

• Economic Growth and Environmental Degradation When Preferences are
Non-homothetic
• Abstract: Abstract We study the dynamics of pollution in an economic growth model with non-homothetic preferences. We characterize the forces that may drive the evolution of the income-pollution relationship along the development process. In particular, we disentangle the standard accumulation mechanism, which determines the intertemporal allocation of pollution, from a mechanism based on the non-homotheticity of preferences, which leads the intratemporal allocation of expenditure between consumption and pollution abatement to depend on income. As the economy develops and aggregate income grows up, the fraction of income devoted to abatement increases if the income elasticity of abatement is larger than unity. In this case, the pollution may decrease with income even when the elasticity of pollution with respect to abatement is smaller than the elasticity of pollution with respect to emissions. We numerically illustrate how this demand-based mechanism determines the dynamic relationship between pollution and aggregate income.
PubDate: 2019-11-01

• A Personal Biography of Marty Weitzman
• PubDate: 2019-10-14

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