On the sensitivity of the value of information to risk aversion in two-action decision problems

This paper discusses the sensitivity of the value of information to the risk aversion in two-action decision problems when the initial wealth is uncertain. We demonstrate that there is no general monotonicity between information value and the Arrow–Pratt risk aversion in this setting. We then show that monotonicity exists in the sense of Rubinstein’s measure of risk aversion when the lottery is independent of the initial wealth. Finally, we show that if the lottery is dependent on the initial wealth, then Ross’s measure of risk aversion is needed to characterize this monotonic relation. Our results explain the shape of the sensitivity analysis curve of the value of information to risk aversion and interpret various measures of risk aversion based on their monotonicity with information value.     

Does environmental compliance pay?

This paper examines the relationship between environmental compliance and financial performance of large US companies. The environmental performance is measured in penalties assessed for violations of environmental regulations. The financial performance is represented by the profit margins. The regression models developed in this paper suggest that the degrees of environmental compliance have a positive influence on the profit margins. Conventional economic wisdom is that regulations impose costs and restrictions and therefore put companies at a competitive disadvantage. However, this paper is consistent with the proponents of environmental regulations who argue that tough regulations force companies to be innovative and as a result make them more productive.     

Carbon banks: an efficient means to exchange sequestered carbon

Carbon sequestration is one of the options that can be used to reduce atmospheric carbon, but its use in an offset market is complicated by the temporary nature of sequestered carbon and the risks associated with carbon release and price. In this paper a carbon bank is proposed to handle these problems. The bank is both an aggregator and a risk bearer. Sink generators deposit their credits with the bank and are paid for maintaining their "savings" with the bank. The carbon bank is also the source where large-scale emitters can come and buy either a temporary or permanent credit and pay the bank in return for the credit and services provided. The advantages of the bank over alternative institutional designs include lower transaction costs, flexible carbon credits and price, and lower risk to risk-averse parties. The carbon bank could be an effective means to deal with many of the unresolved issues within the forthcoming Canadian offset system.     

MEB's university-community partnerships foster new environmental leaders for business

As our society's environmental concerns have grown over the past 20 years, U.S. firms have struggled to find effective and inexpensive ways to meet their mushrooming environmental obligations. Many firms, recognizing the competitive advantages to be won through adroit environmental management, have begun to seek managers trained to deal with these issues. The corporate response has been hobbled by business schools'general failure to train managers to deal with crossfunctional issues, and by a specific failure to address environmental management in their curricula. In this article, the Management Institute for Environment and Business, a program of the World Resources Institute (WRI), describes its innovative University-Community Partnerships (UCP) project to address these shortcomings. Bringing new approaches and new thinking to management curricula, MEB and several like-minded organizations are breathing new life into the old MBA programs.     

“比例原则”视野下我国环境执法按日连续处罚制度的完善

"按日连续处罚"制度已经在环境执法中显示了巨大的威慑力,但"按照原处罚数额按日连续处罚"的计罚模式不符合行政法中的"比例原则"。在违法行为"先轻后重"或者"先重后轻"的情形下,都可能造成"过罚不当"的问题。对于初始违法情节类似,但复查时违法情节大相径庭的不同违法者,会出现"不同情节相同处罚"的不公平情形。在现有制度框架下,对于"先重后轻"的违法行为,可以考虑在违法者的改正行为已经取得显著成效的情形下不予按日连续处罚,同时依据《环境行政处罚办法》的规定,将该已经显著减轻的违法排污行为视为新的违法行为进行处罚。对于"先轻后重"的违法行为,可以在进行按日连续处罚时,视具体违法情节动用限产停产、查封扣押或者行政拘留等处罚措施。理想状态下,应当摒弃"按照原处罚数额"按日计罚的规定,改为数据值式的按日计罚,即规定"……拒不改正的,处每日××万元以上××万元以下的罚款",以更好地实现"过罚相当"。为了避免持续性违法行为对环境造成更大的损害,按日计罚的最长期限不宜超过三十日。违法者超过三十日仍然不改正违法行为的,应当及时采取责令限产停产、查封扣押或责令关闭等措施。     

Socially optimal and fund-balanced advanced recycling fees and subsidies in a competitive forward and reverse supply chain

Advanced recycling fees (ARFs) and government subsidy fees are important for curtailing the consumption of new products and encouraging recycling and disposal of end-of-life (EOL) products. We introduce a model consisting of a leader (the Environmental Protection Agency, EPA) and two groups of followers (MIS firms and recyclers) consisting of manufacturers, importers and sellers, and recyclers which compete in both consuming and recycling markets. The EPA determines the ARFs paid by the MIS firms and the fees subsidizing recyclers to maximize the social welfare in closed-loop supply chains where the MIS firms and recyclers attempt to maximize their respective profit functions. To compare with current practice, we describe a conceptual fund balance model to determine the ARF and subsidy fee on the basis of the balance between total collected ARFs and expenditure of subsidies. Using numerical examples for the laptop computer market in Taiwan, we demonstrate that our results outperform the current practice.     

A METHOD FOR INCORPORATING AGRICULTURAL RISK INTO A WATER RESOURCE SYSTEM PLANNING MODEL1

ABSTRACT Prior studies of water resource systems have considered risk from the point of view that only the system planners could react to the effects of the risk elements. However, users of water from a system also react to risk. When the quantity of water that a system can supply is subject to considerable variation, the reactions of the users of the water will often effect the benefits generated by the system and thus its optimal design characteristics. A simulation model of a reservoir-irrigation system is developed which incorporates the water users' reactions to risk in such a manner as to reflect their influence on the optimal design characteristics. A risk (convex) programming algorithm is incorporated into the model to reflect the water users' reactions to various levels of aversion to risk and degree of uncertainty in water deliveries. Response surfaces are generated as a result of performing the simulation at different levels of the design variables. An examination of these surfaces reveals the importance of including water users' reactions to risk in water resource system planning. The effects of different levels of risk aversion on the irrigation farmers' choice of crop enterprises are also examined.     

Are Wastewater Systems Adapting to Climate Change?

Wastewater (WW) systems are vulnerable to extreme precipitation events; storm‐induced WW system failures pollute the environment and put public health at risk. Despite these vulnerabilities, we know very little about how WW managers are responding to current climate risks or to future climate change. This study aims to fill this critical gap in the literature. Data from surveys and interviews were used to understand what WW managers are doing to adapt to the current climate, what facilitates those adaptations, and if they are adapting to future climate change. Findings show most WW managers (78%) are making changes to build resiliency to storms they have experienced in the past (e.g., extra fuel on site, extra staff on call, more training, better communication, adding generators, elevating components, adding capacity); most are not adapting to future climate change. Our work suggests organizational leadership, concern about future climate‐related impacts, and experiencing storm impacts drive resiliency changes while regulatory requirements drive adaptation to future climate change. Beyond advancing science, our work offers practical suggestions for building WW system resilience and for increasing WW system's consideration of future climate impacts in their resiliency building efforts.     

Preferences for dealing with environmental problems: an empirical study of managers in three mainland Chinese cities

This study examines managerial preferences for various policy mechanisms commonly used to address environmental problems using a sample of 653 Chinese managers from firms in Beijing, Dalian and Guangzhou. Overall, these managers appeared to favor regulatory instruments, placing somewhat less faith in market and communicative instruments. However, all measures appear to have ample support within each subgroup. In addition, the influence of two situational factors on these preferences was investigated--the immediacy of environmental impact and diffusion of responsibility. The results of the study indicate that these two factors interact in explaining managerial preferences, but only for the use of market mechanisms.     

Determinants of state mining enterprise resilience in Latin America

The performance of many state-owned mining firms in Latin America has been disappointing. There is at least one interesting exception: Chile's Codelco has been more resilient than, say, its counterparts in Bolivia and Peru. The state mining firms of Bolivia and Peru were decapitalized by low autonomy, flawed tax policies and weak macroeconomic policies - even as the importance of such firms in the economy increased. In contrast, Codelco benefited from an orthodox macroeconomic policy which sensibly, if belatedly, adopted a mineral stabilization fund. It also enjoyed a more profit related tax regime and somewhat higher commercial autonomy. Nevertheless, the Chilean experience requires some important qualifications before it can be used as a model for other developing countries.     

MODELING DRINKING WATER QUALITY VIOLATIONS WITH BAYESIAN NETWORKS1

ABSTRACT: Compliance violations at community water systems are rare but represent significant human health risks. These risks are mediated by the decision schema of human operators at water treatment facilities. However, causal uncertainty among physical and human factors involved in water quality problems complicates assessment of their probability and severity. This study uses a probabilistic Bayesian network modeling approach to explore the causes of compliance violations in a sample of water treatment systems in Pennsylvania. The model presented here is one of several created by treatment system operators during an expert elicitation process. The expert model alone predicts violations poorly, suggesting that experts make inaccurate quantitative estimates. However, Bayesian networks are capable of combining the subjective expertise of treatment system operators with the objective compliance histories of the facilities they manage, and the expert model accurately predicts violations when trained with historical compliance data. Analysis of the trained network reveals those components of the treatment process, including environmental and system characteristics as well as operator decisions, that play the greatest role in determining the likelihood of major violation types. Among operator decisions, coagulant dosing and filter backwash frequency are the most important determinants of violation likelihood.     

Farmers’ risk preference and the adoption of risk management strategies in Northern Ghana

The study used the hypothetical lottery-choice questions to measure risk aversion and a detailed survey collected data on input use, farm production and non-farm activities to specifically assess whether risk aversion, risk perceptions, and socioeconomic factors affect the risk management strategies of farm households in Northern Ghana. Risk aversion significantly increases crop diversification strategies of households but marginally reduces herbicide use by households. Market risk significantly increases the use of improved seed varieties and the application of inorganic fertiliser but reduces diversification into livestock production. Production risk largely increases diversification into livestock production. Farmers’ risk management strategies are affected by socioeconomic variables such as access to extension services, area cultivated, age and gender. Policy effort focused on building pliable on-farm crop related risk management strategies should aim at considering the risk aversion and the perception of market risk whilst those focused on livestock should focus on production risk.     

OWNERSHIP AND WATER SYSTEM OPERATION1

ABSTRACT: Two types of organizational systems provide most of the water service in the United States. The investor-owned firm operates on a profit basis generally subject to state commission regulation. The government-owned firm is generally confronted by local control. The comparative efficiency of private versus government firm provision of water services is essentially an empirical issue. Unit costs and other operating statistics are examined for water firms of each ownership form. The analysis shows that private firms tend to have higher operation costs than do government firms, possibly attributable to wage-salary differentials. The analysis also indicates that capital investment in large government firms may result in diseconomies. The analysis creates serious doubt as to whether efficient provision of water services can be better facilitated by large mergers of either ownership form.     

Balancing environmental and industry sustainability: A case study of the US gold mining industry

Mandatory insurance requirements and/or mitigation fees (royalties) for mining companies may help reduce environmental risk exposure for the federal government. Mining is examined since the Environmental Protection Agency (EPA) Toxic Release Inventory reveals that this sector produces more hazardous waste than any other industrial sector. Although uncommon, environmental expense can exceed hundreds of millions of dollars per development. Of particular concern is the potential for mines to become unfunded Superfund sites. Monte Carlo simulation of risk exposure is used to establish a plausible range of unfunded federal liabilities associated with cyanide-leach gold mining. A model is developed to assess these costs and their impact on both the federal budget and corporate profitability (i.e., industry sustainability), particularly if such costs are borne by offending firms.     

Policy and practice reviews

Environmental planners and managers may want to do their work without political interference, using rational and objective knowledge only. They may also want to serve the common good, be accountable and encourage public participation. This paper explores the tensions between the two approaches and argues that a great deal of politics goes into the very definition and selection of what is considered rational and objective. Too often policy‐makers claim to rely exclusively on objective scientific or economic knowledge, while ignoring other forms of knowledge which may be as essential for the solution or management of the problem. Difficult choices have to be made, and it may well be the political scientist, sociologist or psychologist who can help. Expertise has its own interest in the policy process—it is mainly concerned with perpetuating itself and the search for more knowledge. To be effective as well as rational, environmental managers need to be aware of a broad range of useful knowledge, as well as suspicious of claims that promise too much. They need to be in open communication with society, and this may well require institutional reform.     

Some Perspectives on the Risks and Benefits of Biological Control of Invasive Alien Plants in the Management of Natural Ecosystems

Globally, invasions by alien plants are rapidly increasing in extent and severity, leading to large-scale ecosystem degradation. Weed biological control offers opportunities to arrest or even reverse these trends and, although it is not always effective or appropriate as a management strategy, this practice has an excellent record of safety and many notable successes over two centuries. In recent years, growing concerns about the potential for unintended, non-target damage by biological control agents, and fears about other unpredictable effects on ecosystems, have created an increasingly demanding risk-averse regulatory environment. This development may be counter-productive because it tends to overemphasize potential problems and ignores or underestimates the benefits of weed biological control; it offers no viable alternatives; and it overlooks the inherent risks of a decision not to use biological control. The restoration of badly degraded ecosystems to a former pristine condition is not a realistic objective, but the protection of un-invaded or partial restoration of invaded ecosystems can be achieved safely, at low cost and sustainably through the informed and responsible application of biological control. This practice should therefore be given due consideration when management of invasive alien plants is being planned. This discussion paper provides a perspective on the risks and benefits of classical weed biological control, and it is aimed at assisting environmental managers in their deliberations on whether or not to use this strategy in preference, or as a supplement to other alien invasive plant control practices.     

Synthesis of Common Management Concerns Associated with Dam Removal

Managers make decisions regarding if and how to remove dams in spite of uncertainty surrounding physical and ecological responses, and stakeholders often raise concerns about certain negative effects, regardless of whether these concerns are warranted at a particular site. We used a dam‐removal science database supplemented with other information sources to explore seven frequently raised concerns, herein Common Management Concerns (CMCs). We investigate the occurrence of these concerns and the contributing biophysical controls. The CMCs addressed are the following: degree and rate of reservoir sediment erosion, excessive channel incision upstream of reservoirs, downstream sediment aggradation, elevated downstream turbidity, drawdown impacts on local water infrastructure, colonization of reservoir sediments by nonnative plants, and expansion of invasive fish. Biophysical controls emerged for some of the concerns, providing managers with information to assess whether a given concern is likely to occur at a site. To fully assess CMC risk, managers should concurrently evaluate site conditions and identify the ecosystem or human uses that will be negatively affected if the biophysical phenomenon producing the CMC occurs. We show how many CMCs have one or more controls in common, facilitating the identification of multiple risks at a site, and demonstrate why CMC risks should be considered in the context of other factors such as natural watershed variability and disturbance history.     

Evaluating the acceptability of recreation rationing policies used on rivers

Research shows that users and managers have different perceptions of acceptable policies that ration or limit recreational use on rivers. The acceptability of seven rationing policies was evaluated using Thurstone's method of paired comparisons, which provided a rank ordering of advance reservation, lottery, first-come/first-served, merit, priority for first time users, zoning, and price. Chi-squared tests were used to determine if users and managers have significantly different levels of acceptability for the policies. River users and managers were found to be significantly different according to their evaluation of advance reservation, zoning, and merit. The results also indicated that river users collectively divide the policies into three categories corresponding to high, moderate, and low levels of acceptability, while river managers divide the policies into two levels corresponding to acceptable and unacceptable.     

Simultaneous adoption of integrated soil fertility management technologies in the Chinyanja Triangle,Southern Africa

Empirical scientific evidence indicates that there is still room for increasing food production by improving land productivity. This study aimed at identifying the key determinants that govern farmers’ decisions to adopt multiple components of integrated soil fertility management (ISFM) in a maize mixed cropping system of the Chinyanja Triangle, Southern Africa. Revealed preferences of ISFM components were collected from 320 randomly selected households and multivariate probit (MVP) model was used to analyse the simultaneous effects on adoption based on biophysical plot and household‐level socioeconomic attributes. The results show that farmers’ choices of a set of ISFM components are determined by a mix of factors that address the trade‐offs and synergies among them. Non‐farm income, moderate land quality perception, and education influence simultaneous technology adoption, while gender and crop loss increase the likelihood of farmers’ decisions to adopt independent options. Having other sources of income supports co‐adoption of inorganic fertilizer, residue incorporation, and crop rotation. Input/output market access, access to information, financial sources, and climate variability also play pivotal role in technology adoption. These results indicate that resource availability, learning costs, finances, and risk aversion need to be considered when designing and promoting ISFM technologies as a package.