Thomas Sterner's book is an attempt to encourage more widespread and careful use of economic policy instruments. The book compares the accumulated experiences of the use of economic policy instruments in the U.S. and Europe, as well as in rich and poor countries in Asia, Africa, and Latin America.
Twenty years ago, governments gathered for the United Nations Conference on Environment and Development in Rio de Janeiro. The “Rio Declaration” laid out several principles of sustainable development, including the central role of policy instruments. In this article, we take stock of where we stand today in implementing sound and effective environmental policy instruments throughout the world, particularly in developing and transitional economies.
The purpose of the present article is to consider optimal trade policies for biofuels, taking into account the potential for carbon leakage and the complex set of policies used or discussed for biofuels. First, the authors consider the case of optimal trade policies and find that the combination of an import standard and a border carbon adjustment welfare dominates using only a border carbon adjustment (BCA).
This article provides an interpretive survey on implications of insights from behavioral economics for environmental policy. In particular, it discusses whether, and if so how, policy implications based on conventional economic theory have to be modified when insights from behavioral economics are considered.
We study how uncertainty about climate change severity affects the relative benefits of early abatement and a portfolio of research and development (R&D) in lowering future abatement costs. Optimal early abatement depends on the curvature of the marginal benefit and marginal abatement cost (MAC) functions and how the uncertain parameter affects marginal benefits.
Stabilizing global greenhouse gas concentrations at levels to avoid significant climate risks will require massive ‘‘decarbonization’’ of all the major economies over the next few decades, in addition to the reduced emissions from other GHGs and carbon sequestration. Achieving the necessary scale of emissions reductions will require a multifaceted policy effort to support a broad array of technological and behavioral changes. Change on this scale will require sound, well-thought-out strategies.
In this article, the likely effects of an environmental fiscal reform in Namibia are examined using a Computable General Equilibrium model. We find that a triple dividend—improving the environment, increasing employment, and reducing poverty at the same time—remains elusive.
Studies have shown that there are differences in cooperative behavior across countries. Furthermore, differences in the use and the reaction on the introduction of a norm enforcement mechanism have been documented in cross-cultural studies, recently. We present data which prove that stark differences in both dimensions can exist even within the same town. For this end, a unique data set was created, based on public goods experiments conducted in Cape Town, South Africa.
This note acknowledges Jens Warming's contributions (1911, 1931) on what has since come to be known as the open access problem in fisheries. Warming, in a static framework, suggested an optimal landing tax before Pigou (1920) and described the sole owner solution later suggested by Scott (1955b). I describe these results using Warming's framework and point to his previously overlooked contribution concerning the dynamic aspect of fisheries.
Studies have shown differences in cooperative behavior across countries and in the use of (and reaction to) a norm enforcement mechanism in cross-cultural studies.
The land competition between tropical bioenergy plantations and payments for forest carbon conservation (e.g., through an international scheme for Reduced emissions from deforestation and forest degradation, REDD+) is modeled using spatially explicit data on biofuel feedstock (oil palm and sugar cane) suitability and forest biomass carbon stocks.
Any system to compensate countries for reduced emissions from deforestation and forest degradation (REDD+) requires a historical reference level against which future performance can be measured. Here we examine the possibilities Sri Lanka, a small forest country with limited data on forest carbon stocks, has to get ready for REDD+. We construct a historical reference level using available forest inventory data combined with updated 2008 and 2009 in situ carbon density data for Sri Lankan forests.
The objective of the present paper is to investigate the robustness of the well-known result that pre-set default options determine people’s choices. We do so by conducting a field experiment among environmental economists attending a large international conference on environmental economics.
This paper analyzes how fossil fuel-producing countries can counteract climate policy. We analyze the exhaustion of oil resources and the subsequent transition to a backstop technology as a strategic game between the consumers and producers of oil, which we refer to simply as ‘OECD’ and ‘OPEC’, respectively.
We use economic analysis to evaluate grandfathering, auctioning, and benchmarking approaches for allocation of emissions allowances and then discuss practical experience from European and American schemes.
Global climate change stands out from most environmental problems because it will span generations and force us to think in new ways about intergenerational fairness. It involves the delicate problem of complex coordination between countries on a truly global scale. As long as fossil fuels are too cheap, climate change policy will engage all major economies.
Much of the improvement in living standards in developed and developing countries alike is attributable to the exploitation of nonrenewable and renewable resources. The problem is to know when the exploitation occurs at rates and with technologies that are sustainable.
The paper analyses the economic impacts of climate change-induced adjustments on the performance of the Tanzanian economy, using a country-wide CGE model. The general equilibrium framework enables comparison of the effects of climate change to the overall growth of the economy, as responsiveness to shocks is likely to depend on the macroeconomic structure of the economy.
Formal microlending and adverse (or non-existent) selection: A case study of shrimp farmers in Bangladesh
Microcredit schemes have become a popular means of improving smallholders’ access to credit and making long term investment possible. However, it remains to be explored whether the current microcredit schemes are more successful than earlier formal small scale lending in identifying successful borrowers. We studied shrimp farming in a rural region in Bangladesh where formal microlending is well established, but where more expensive informal microlending coexists with the formal schemes.
This paper takes as its starting point the observation that fuel prices – and thus taxes – are important for good management of climate change and other environmental problems. To economists this should be no surprise yet it seems that the role of fuel taxation as an instrument of climate policy has not been fully appreciated. It is however one of the few policy instruments that, since several decades, has actually reduced fuel consumption appreciably.
We study dynamic labour supply using data on paua (abalone) divers in New Zealand. The divers face stable, flat prices per kilogram after each catch, but experience transitory wage changes due to varying weather and water conditions, and are free to vary their daily working hours and display an intermittent working pattern. We find nonlinear wage elasticities, rejecting the standard neo-classical prediction that these divers should work long hours during days when wages are high and quit early during days when hourly wages are low.
In this paper, we analyze the effects of the choice of price (taxes) versus quantity (tradable permits) instruments on the policy response to technological change. We show that if policy responses incur transactional and political adjustment costs, environmental targets are less likely to be adjusted under tradable permits than under emission taxes. This implies that the total level of abatement over time might remain unchanged under tradable permits while it will increase under emission taxes.
This book by Thomas Sterner and Jessica Coria is an attempt to encourage more widespread and careful use of economic policy instruments. The book compares the accumulated experiences of the use of economic policy instruments in the U.S. and Europe, as well as in rich and poor countries in Asia, Africa, and Latin America. Ambitious in scope, it discusses the design of instruments that can be employed in any country in a wide range of contexts, including transportation, industrial pollution, water pricing, waste, fisheries, forests, and agriculture.
We use survey data to investigate how urban households in Ethiopia coped with the food price shock in 2008. Qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008, and that a significant proportion of households had to adjust food consumption in response. Regression results indicate that households with low asset levels, and casual workers, were particularly adversely affected by high food prices.
What Do Respondents Bring to Contingent Valuation? A Comparison of Monetary and Labor Payment Vehicles
With contingent valuation, both the goods being valued and the payment vehicles used to value them are mostly hypothetical. However, although numerous studies have examined the impact of experience with the good on willingness to pay, less attention has been given to experience with payment vehicles.
Researchers using stated preference (SP) techniques have increasingly come to rely on what we call "hypothetical baselines".
A large part of the literature analyzing the links between biodiversity conservation and community development assumes that nature-based tourism managed by indigenous communities will result not only in conservation of natural resources but also in increased development. In practice, ecotourism has often failed to deliver the expected benefits to indigenous communities due to a combination of factors, including shortages in the endowments of human, financial and social capital within the community, lack of mechanisms for a fair distribution of the economic benefits of ecotourism, and land insecurity.
Global climate is changing. This fact is supported by robust scientific evidence, and there is no real doubt that the main reason is the increased concentration of greenhouse gases in the atmosphere caused by human activity, primarily related to the combustion of fossil fuels.
Fuel Taxes and the Poor,The Distributional Effects of Gasoline Taxation and Their Implications for Climate Policy, challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people.
Treatment effects of Climate Change risk on mitigation and adaptation behaviour in an experimental setting
The authors studied the potential tradeoff between countries’ investments in mitigation versus adaptation to climate change. Mitigating greenhouse gases may be a public good, but adaptation to climate change is a private good, benefiting only the country or individual.
Fuel Taxes and the Poor challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people.
Fuel Taxes and the Poor challenges the conventional wisdom that gasoline taxation, an important and much-debated instrument of climate policy, has a disproportionately detrimental effect on poor people.
Should we tax or let firms trade emissions? An experimental analysis with policy implications for developing countries
In this paper we use laboratory experiments to test the theoretical predictions derived by Villegas-Palacio and Coria (2010) about the effects of the interaction between technology adoption and incomplete enforcement. They show that under Tradable Emissions Permits (TEPs), and in contrast to taxes, the fall in permit price produced by adoption of environmentally friendly technologies reduces the benefits of violating the environmental regulation at the margin and leads firms to improve their compliance behavior. Moreover, when TEPs are used, the regulator can speed up the diffusion of new technologies since the benefits from adopting the new technology increase with the enforcement stringency.
Using a choice experiment, we investigated preferences for distributing the economic burden of decreasing CO2 emissions in the two largest CO2-emitting countries: the United States and China. We asked respondents about their preferences for four burden-sharing rules to reduce CO2 emissions according to their country’s 1) historical emissions, 2) income level, 3) equal right to emit per person, and 4) current emissions.
This paper analyses the economic impacts of climate change on Ethiopia’s agriculture using a countrywide computable general equilibrium model.
The objective of the report is to review the literature on the links between energy access, welfare, and gender in order to provide evidence on where gender considerations in the energy sector matter and how they might be addressed. Prepared as a background document for the 2012 World Development Report on Gender Equality and Development, as well as a part of the Social Development Department’s ongoing work on gender and infrastructure, the report describes and evaluates the evidence on the links between gender and energy focusing on the following areas: increased access to woodfuel through planting of trees and forest management; improved cooking technologies; and access to electricity and motive energy.
This is the activity report for the agreement between Sida and the Environmental Economics Unit for 2010. It is an extension of the agreement for the period 2007 – 2009 in support of programs pertaining to environmental economics activities (Sida ref: 2006-002684, Komponent:73000988). The overall development objective for the program is to improve welfare among poor people in developing countries by preventing pollution and natural resource depletion, and to promote sustainable use of natural resources and ecosystems through the use of environmental economics tools.
Does Positional Concern Matter in Poor Societies? Evidence from a Survey Experiment in Rural Ethiopia
We investigate attitudes toward positionality among rural farmers in Northern Ethiopia using a survey experiment.
We investigate risk and ambiguity attitudes among Ethiopian farmers in one of the poorest regions of the world.
The Forest Carbon Partnership Facility has recently proposed the application of strategic environmental social assessment (SESA) for incorporating environmental and social considerations in the preparation of REDD+ initiatives. This paper discusses the potential contribution of SESA to REDD+ initiatives drawing on experiences from earlier attempts to large scale forestry sector reforms and a recent World Bank pilot program on strategic environmental assessment. The paper suggests that SESA can be a useful approach for strengthening institutions and governance needed for managing diverse environmental and social impacts related to REDD+.
What do respondents bring into contingent valuation? A comparison of monetary and labour payment vehicles
In the Contingent Valuation Method (CVM), both the goods being valued and the payment vehicles used to value them are mostly hypothetical. However, although numerous studies have examined the impact of experience with the good on the willingness to pay, less attention has been given to experience with the payment vehicles. This paper examines how experience with payment vehicles influences responses to a CV scenario on the maintenance of irrigation canals. Specifically, the paper uses a split-sample survey to investigate the effects of experience with monetary and labour payment vehicles on the acceptance of a CV scenario and protest bids. Using convergent validity tests, we found that experience acquired from using both monetary and labour payment vehicles reduces the asymmetries in acceptance rates. These findings suggest that experience with payment vehicles reduces time/money response asymmetries in the CVM.
The new fertilizer subsidies in Sub-Saharan Africa are intended to increase agricultural production and ensure fertilizer market development. Fertilizer adoption requires complementary inputs such as investment in soil and water conservation for efficient and optimal nutrient uptake, and many fertilizer subsidy programmes implicitly assume that fertilizer subsidies crowd in such investments. The present study, therefore, evaluates the impact of fertilizer subsidies on the provision of soil and water conservation efforts in Ghana.
Does relative income have an impact on subjective well-being among extremely poor people? Contrary to the findings in developed countries, where relative income has shown a significant and negative impact on subjective well-being, this study (based on different definitions of reference groups) suggests that relative income does not affect subjective well-being among the very poor people in northern Ethiopia.
Using a random sample of individuals in rural Bangladesh, this paper investigates people's ethical preferences regarding relative values of lives when it comes to saving lives of individuals of different ages. By assuming that an individual has preferences concerning different states of the world, and that these preferences can be described by an individual social welfare function, the individuals' preferences for life-saving programs are elicited using a pair-wise choice experiment involving different life-saving programs.
Everyone wants to blame the undervalued Yuan for global problems. Economists have claimed it will prolong the global recession. Pundits link the export-driven economy to lax environmental regulations and low labor standards. US Treasury Secretary Timothy Geithner called it a contributing factor in a round of capital controls and currency-market interventions by emerging economies.
A review by the CO2Scorecard Group has revealed substantial discrepancies between the top publicly available global databases of CO2 emissions.
It has been widely reviewed, reported, and vociferously condemned that the World Bank Group (WBG) is investing heavily in coal. In South Africa, Botswana and India, the Bank has issued over $4 billion in loans for new coal-fired power plants since 2008. As a result, the Bank’s brand name is now tied to more than a billion tons of CO2 emissions over the next four to five decades.
Policy makers are under increasing pressure to deliver policies that not only foster employment and growth but also are environmentally sustainable. Green growth seeks for even more ambitious results where employment and growth are stimulated by technological and institutional changes arising from better environmental stewardship and adaptation to and mitigation of climate change. As green growth may become the growth paradigm for the 21st century, policy makers require policy tools for addressing this challenge. Strategic environmental assessment of policies (policy SEA) is one of these tools.
We conducted a survey in the Guangdong province in China to measure happiness among preadolescents and their parents. The objective of this study was to investigate what explains preadolescents’ happiness level and whether their happiness is related to the happiness level of their parents. We do not find any significant relationship with respect to the latter, and the factors that explain the variation in happiness among parents do not explain the variation among children. In general, children´s happiness is not explained by socio-economic factors, in fact not even by having divorced parents, which is a situation that clearly decreases the happiness level of parents. Instead, relations with parents and friends are important for the well-being of preadolescents.
A personal carbon allowance (PCA) scheme targets emissions from individual consumption and allocates allowances directly to individuals by dividing the carbon budget on a per capita basis. In this study we analyse the results of a survey sent out to a representative sample of the Swedish population regarding attitudes to a potential PCA scheme.