Taxing overexploited open-access fisheries: the role of demand elasticity

The paper aims at identifying the effects exerted by a tax levy on an overexploited and previously unregulated fishery. The analysis is carried out by means of a dynamic model that includes fish stock and harvesting effort as state variables. Attention is focused on the role played by demand elasticity which is shown to affect both transients and equilibria.According to the analysis, a levy induces a contraction in effort, which is sharper in the short term. As a consequence, the fish population recovers and ultimately settles at a higher equilibrium level. Therefore, a larger amount of fish is caught in the long run and sold at a lower price than in the unregulated setting. The more inelastic the demand, the smaller both the equilibrium price for fish and the tax imposed.     

Tax evasion and optimal environmental taxes

This paper introduces a new argument to the debate about the role of environmental taxes in modern tax systems. Some environmental taxes, particularly taxes on gasoline or electricity, are more difficult to evade than taxes on labor or income. When the tax base is shifted in a revenue-neutral manner toward these environmental taxes, the result is a net reduction in the amount of tax evasion. Using a carbon tax as a motivating example, the “tax evasion effect” is shown to sharply reduce the welfare cost of controlling emissions. A simple computable general equilibrium model suggests that the impact of considering tax evasion can be large: costs are lowered by 28% in the United States, by 89% in China, and by 97% in India. In countries with high levels of pre-existing tax evasion, a carbon tax will pay for itself through improvements in the efficiency of the tax system.     

Oil Exploration under Climate Treaties

In this paper we focus on how an international climate treaty will influence the exploration of oil in non-OPEC countries. We present a numerical intertemporal global equilibrium model for the fossil fuel markets. The international oil market is modelled with a cartel (OPEC) and a competitive fringe on the supply side, following a Nash–Cournot approach. An initial resource base for oil is given in the non-OPEC region. However, the resource base changes over time due to depletion, exploration, and discovery. When studying the effects of different climate treaties on oil exploration, two contrasting incentives apply. If an international carbon tax is introduced, the producer price of oil will drop compared to the reference case. This gives an incentive to reduce oil production and exploration. However, the oil price may increase less rapidly over time, which gives an incentive to expedite production and exploration. In fact, in the case of a rising carbon tax we find the last incentive to be the strongest, which means that an international climate treaty may increase oil exploration in non-OPEC countries for the coming decades and reduce OPEC's market share.     

Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns

We investigate the market equilibrium and welfare effects of a fuel tax in China relative to an alternative policy instrument that rations the number of new automobile sales through auctioned quotas. Unlike those of previous studies, our modeling approach incorporates both household car purchase and utilization decisions, the latter of which have been ignored in previous studies on China's fuel tax. Ignoring this margin of choice will underestimate the fuel tax's ability to mitigate externalities. Using detailed household-level panel data and a fixed effects econometric specification, we estimate the fuel price elasticity of vehicle miles traveled is −0.59 on average. The results of the counterfactual analysis suggest that a 51% increase in tax-inclusive gasoline prices will reduce car sales by 24.9% but increase social welfare to a degree that depends on vehicles' lifetime. We find that compared to auctioned quotas, the fuel tax results in greater car sales but higher social welfare.     

Strategic exploitation with learning and heterogeneous beliefs

We study the effect of learning with heterogeneous beliefs on the exploitation of a renewable common-pool resource. To that end, we extend the Great Fish War model of Levhari and Mirman (1980) to a learning environment in which several agents interact strategically and learn about the distribution of the stochastic evolution of the resource. We find that the effect of anticipation of learning with heterogeneous beliefs is twofold. First, the anticipation of learning makes future payoffs more uncertain, which induces the agents to decrease present exploitation due to the precautionary motive. Second, under heterogeneity of beliefs, there is a differential informational externality that induces the agents to increase or decrease present exploitation. We also perform a comparative analysis on the Cournot–Nash equilibrium with learning by studying the effect of optimism and riskiness on resource exploitation.     

A Note on Environmental Federalism: Interpreting Some Contradictory Results

This paper reconciles some conflicting interpretations of recent literature on interjurisdictional environmental regulatory competition.[6], [7]present a model in which competition to attract investment by lowering environmental standards leads to a Pareto-optimal equilibrium. [3]; and [4]describe a model in which such competition can result in a suboptimal Nash equilibrium. While it would be possible to draw opposite policy implications from the two models regarding the appropriate degree of environmental federalism, such a conclusion would be incorrect. This paper reconciles the different results by showing that they depend in large part on monopoly profits and tax exporting, not the nature of the pollution externality or environmental federalism.     

Intergenerational aspects of ecotax reforms – An application to Germany

In a model of overlapping generations and majority voting, we analyze an ecotax reform consisting of the tax rate and the budgetary rule. Revenue can be recycled through a lump-sum transfer or a reduction in pension contributions. Our theoretical results as well as the calibration of our model to the German economy show that the median voter's preferred tax rate may exceed the efficient rate. This holds whenever income of the decisive voter is sufficiently high compared to the average income, as rich individuals benefit more from a reduction in pension contributions than they are harmed by an increase in ecotaxes. The calibration confirms that the median voter prefers the earmarking of tax revenue for reductions in pension contributions to the alternative lump-sum transfer. This is quite an accurate prediction of the situation in Germany. Aging of society as expected for Germany lowers the ecotax in the political equilibrium below its optimal level.     

Derived decision rules for pollution control in a general equilibrium space economy

This paper attempts to narrow the gap between economic theory and policy inthe field of environmental pollution control by expanding the traditional general equilibrium model to include the kind of spatial detail that is important for describing pollution. This model is then used to derive theorems which provide the basis for the development of spatially differentiated, tax-based decision rules. In spite of the fact that these rules require no information on either damage costs or control costs, they maintain many of the desirable properties of the more conventional informationally intensive tax policies.     

Can pollution tax rebates protect low-wage earners?

Pollution taxes are believed to burden low-income households that spend a greater than average share of income on pollution-intensive goods. Some proposals offset that effect by returning revenue to low-income workers via reduced labor tax. We build analytical general equilibrium models with both high-skilled and low-skilled labor, and we solve for the change in real net wage of each group. Decomposition shows the separate effects of the tax rebate, higher product prices, and the changes in relative wage rates. We also include numerical examples. Even though the pollution tax injures both types of labor, in most cases we find that returning all of the revenue to low-skilled workers is still not enough to offset higher product prices. Changes in relative wage rates may further hurt low-skilled labor. Protecting low-income workers is possible in this model only if they are defined as those below a relatively low wage threshold, but we discuss many possible elaborations of this model that could affect those results.     

Pigovian taxes which work in the small-number case

An appropriately conceived pollution tax can achieve a Pareto optimal equilibrium which is (1) stable in the presence of myopia, (2) not subject to strategic manipulation even in the small-number case, and (3) resistant to inefficient cost shifting by the participants when transaction costs are low. A considerable amount of confusion in the literature exists because different authors use different tax formulas (often implicitly) and different assumptions regarding conjectural behavior. Some of this confusion is cleared up by formally presenting various Pigovian tax formulas, explicitly considering whether there is Cournot or Stackleberg behavior, and comparing the properties of the various configurations.     

Is Chinese trade policy motivated by environmental concerns?

This paper analyses whether China's export VAT rebates and export taxes are driven by environmental concerns. Since China struggles to enforce environmental regulation, trade policy can be used as a second-best environmental policy. In a general equilibrium model it is possible to show that the second-best export tax increases in a product's pollution intensity. The empirical analysis investigates whether the export tax equivalent of partial VAT rebates and export taxes are higher for products which are more pollution intensive along several dimensions. The results indicate that the VAT rebate rates are set in a way that discourages exports of water pollution intensive, SO₂ intensive and energy intensive products from 2007 on. Moreover, the conservation of natural resources such as minerals, metals, wood products and precious stones seems to be a key determinant of China's export VAT rebate rates. There is little evidence that export taxes are motivated by environmental concerns.     

Instrument Choice When Regulators and Firms Bargain

We compare outcomes with an emissions tax and an emissions standard when a firm and regulator engage in cooperative bargaining over the stringency of the regulation. Bargaining is motivated by giving the firm a choice of abatement technologies. If the firm's preferred technology differs from the regulator's, the first-best outcome is not an equilibrium of the traditional noncooperative game in which the regulator is a Stackelberg leader. The regulator may therefore choose to offer the firm a more lenient regulation if it agrees to switch technologies. We find that the resulting bargaining outcomes differ for a tax and a standard even though information is symmetric, and we identify conditions under which each instrument yields lower social costs.     

Modeling the population dynamics of capybara Hydrochaeris hydrochaeris: a first step towards a management plan

Capybara (Hydrochaeris hydrochaeris) is the largest living rodent, widely distributed in South America, with a considerable potential as an economic resource. There are large populations in the region of Esteros del Ibera that could be exploited in a sustainable manner and contribute positively to the development of the region. Such exploitation requires to be done responsibly and following a specially designed management plan. In the particular case of wildlife management, a sustainable exploitation of a given species requires knowledge of its dynamics, its density in the area, and its vital rates, as well as understanding how the natural environment will respond to the proposed manipulation. It is also important to determine which environmental variables lead the population dynamics in each region. A mathematical model is a very convenient tool for analyzing possible strategies.This work presents a matrix population model structured in five stages. Sensitivity and elasticity analyses of the model provide an understanding of the effects of differentiated class-dependent survival and growth probabilities on the life cycle. A harvest term has been included in the model with the purpose of evaluating the sustainability of a given exploitation scenario or comparing different harvest strategies. The different strategies depend on the exploitation pattern, the exploitation intensity, and the season in which the harvest takes place.The purpose is to formulate a simple tool that can be understood by a manager without specific training. Hence, the software interface was specially designed for a user with elementary knowledge of vital parameters of the species.     

The effect of dominance hierarchy on the use of alternative foraging tactics: a phenotype-limited producing-scrounging game

Group living is thought to be advantageous for animals, though it also creates opportunities for exploitation. Using food discovered by others can be described as a producer-scrounger, frequency-dependent game. In the game, scroungers (parasitic individuals) do better than producers (food finders) when scroungers are rare in the group, but they do worse when scroungers are common. When the individuals' payoffs do not depend on their phenotype (i.e. a symmetric game), this strong negative frequency dependence leads to a mixed stable solution where both alternatives obtain equal payoffs. Here, we address the question of how differences in social status in a dominance hierarchy influence the individuals' decision to play producer or scrounger in small foraging groups. We model explicitly the food intake rate of each individual in a dominance-structured foraging group, then calculate the Nash equilibrium for them. Our model predicts that only strong differences in competitive ability will influence the use of producing or scrounging tactics in small foraging groups; dominants will mainly play scrounger and subordinates will mostly use producer. Since the differences in competitive ability of different-ranking individuals likely depend on the economic defendability of food, our model provides a step towards the integration of social foraging and resource defence theories. Received: 30 July 1997 / Accepted after revision: 15 November 1997     

A free lunch in the commons

We derive conditions under which raising costs through a regulatory constraint or a fully expropriated tax can increase the profits arising from a common-pool resource. The basic model assumes a fixed number of identical agents with linear costs selling in a single period at an exogenous price. A necessary and sufficient condition for a cost increase to be profitable is that aggregate output from the resource be locally convex in aggregate effort. We also show that cost increases can be profitable even if price is endogenous, agents are heterogeneous, entry is costless, or agents are playing a Markov-perfect equilibrium of a dynamic game. We also discuss more general welfare implications of the result along with its relation to existing results for a Cournot oligopoly.     

OPEC versus the West: A robust equilibrium

Suppose that both OPEC and the West possess stocks of oil which can be extracted at constant and identical cost. Consumption takes place only in the West. Suppose, hypothetically, that the West behaves as a single agent and, more realistically, that OPEC does also. Each agent makes a strategic choice of the pattern of exploitation over time of its own reserve. The Nash equilibrium obtained is “robust” in that it is also a “Stackelberg equilibrium” in which each agent is “right for the right reason.” Further, the equilibrium obtained is equivalent to that obtained when Western oil companies constitute a competitive fringe to the OPEC monopoly.     

Dynamic resource management under the risk of regime shifts

This paper provides a framework through which a dynamic resource management problem with potential regime shifts can be analyzed both in a strategic environment and from a social planner?s perspective. Based on a fairly general model, a condition for a precautionary policy is discussed. By applying the framework to a common-property resource problem with a linear production technology, we illustrate how the qualitative as well as quantitative nature of equilibrium is altered due to the possibility of regime shifts. In particular, when the risk is endogenously affected by the players? behavior, potential regime shifts can facilitate the precautionary management of resources as long as the resource stock is in good shape. As the stock of resource becomes scarce, however, the precautionary effect vanishes and more aggressive resource exploitation emerges. The impacts of irreversibility on the equilibrium behavior are highlighted. It is also shown that there can exist a resource-depletion trap in which a regime shift, once it happens, triggers a continuous decline of resource stock no matter which regime materializes in the subsequent periods.     

Substituting pollution taxation for general taxation: Some implications for efficiency in pollutions taxation

Earlier papers have recognized that nonenvironmental benefits will be realized if pollution taxes are substituted for other taxes which impose efficiency losses on society. The purpose of this paper is to investigate the importance of these nonenvironmental benefits for the design of an efficient pollution tax. It is found that the efficient tax may be higher or lower than that conventionally defined as optimal, and that the net benefit from unrestrained pollution can have important implications for the size of the tax.     

A regional market for rights to use fertilizer as a means of achieving water quality standards

The attributes and effects of one possible arrangement of a market for rights to use fertilizer are discussed in this article. Because of some similarities in effect, this type of policy is compared with the imposition of a fixed per unit excise tax on fertilizer. Some empirical results for the establishment of a market for rights to use nitrogen fertilizer and for the imposition of a tax on nitrogen fertilizer only in Illinois are presented. These results are derived from a national spatial equilibrium model of crop production in the United States.     

An economic analysis of sardine fishing in the Gulf of Valencia (Spain)

The optimal management of a particular fishery is illustrated. Using data describing previous fishery exploitation, relevant biological and economic relationships are estimated, then the optimum levels of catches, effort, and stock are calculated. The prices that, if implemented, would ensure the current efficient exploitation of the fishery are also calculated. Finally, the welfare gains that can be achieved by a movement from the freemarket equilibrium to the socially optimum solution are demonstrated.