Carbon trading across sources and periods constrained by the Marrakesh Accords

We examine the potential effects on permit prices and abatement costs of four compliance rules governing emissions trade across sources and periods in the Kyoto Protocol: The banking rule that allows excess permits to be used later; the restoration rate rule that penalizes borrowing; the commitment period reserve rule that limits sales; and finally, the suspension rule that restricts borrowing and sales. Our framework is a two-period model where parties may be out of compliance in the Kyoto period, but are assumed to comply at a later time. Under varying assumptions about market power and US participation, we find that the rules may have pronounced effects on individual costs, but overall efficiency is not severely affected.     

Tying enforcement to prices in emissions markets: An experimental evaluation

We present results from laboratory emissions permit markets designed to investigate the transmission of abatement cost risk to firms' compliance behavior and regulatory enforcement strategies. With a fixed expected marginal penalty, abatement cost shocks produced significant violations and emissions volatility as predicted. Tying the monitoring probability to average permit prices effectively eliminated noncompliance, but transmitted abatement cost risk to monitoring effort. Tying the penalty to average prices reduced violations, but did not eliminate them. Some individuals in these treatments sold permits at low prices, presumably in an attempt to weaken enforcement. While tying sanctions directly to prevailing permit prices has theoretical and practical advantages over tying monitoring to prices, our results suggest that tying sanctions to prices may not be as effective as predicted without additional modifications.     

Enforcement and price controls in emissions trading

This paper examines how enforcement affects the structure and performance of emissions trading programs with price controls under uncertainty about firms' abatement costs. The analysis highlights how an enforcement strategy can cause abatement-cost risk to be transmitted to enforcement costs via the price of permits. When this occurs, accommodating the effect of abatement-cost risk with an optimal policy results in higher expected emissions and lower expected permit price than their second-best optimal values. However, it is possible to design an enforcement strategy that shields enforcement costs from abatement-cost risk by tying sanctions directly to permit prices. This enforcement strategy stabilizes enforcement effort, the optimal permit supply and price controls are independent of enforcement costs, and the policy produces the second-best optimal outcome.     

The case for international emission trade in the absence of cooperative climate policy

We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries’ decisions about their participation in a trading system and about their initial permit endowment are made non-cooperatively; so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains. Despite this, we find that emission trade agreements can be effective; that smaller groupings pairing developing and developed-world partners often perform better than agreements with larger rosters; and that general equilibrium responses play an important role in shaping these outcomes.     

The case for international emission trade in the absence of cooperative climate policy

We evaluate the efficacy of international trade in carbon emission permits when countries are guided strictly by their national self-interest. To do so, we construct a calibrated general equilibrium model that jointly describes the world economy and the strategic incentives that guide the design of national abatement policies. Countries’ decisions about their participation in a trading system and about their initial permit endowment are made non-cooperatively; so a priori it is not clear that permit trade will induce participation in international abatement agreements or that participation will result in significant environmental gains. Despite this, we find that emission trade agreements can be effective; that smaller groupings pairing developing and developed-world partners often perform better than agreements with larger rosters; and that general equilibrium responses play an important role in shaping these outcomes.     

Modeling the impact of uncertainty in emissions trading markets with bankable permits

The various forms of uncertainty that firms may face in bankable emission permit trading markets will affect firms’ decision making as well as their market performance. This research explores the effect of increased uncertainty over future input costs and output prices on the temporal distribution of emission. In a dynamic programming setting, the permit price is a convex function of stochastic prices of coal and electricity. Increased uncertainty about future market conditions increases the expected permit price and causes a risk neutral firm to reduce ex ante emissions in order to smooth out marginal abatement costs over time. Finally, safety valves, both low-side and high-side, are suggested to reduce the impact of uncertainty in bankable emission trading markets.     

Transferable discharge permits and economic efficiency: The fox river

Recent emphasis on reforms of environmental regulation has led to suggestions for strategies which maintain environmental standards but allow the needed flexibility and cost effectiveness. The transferable discharge permit (TDP) is one such strategy for water pollution control recently adopted in Wisconsin. In this article, the potential for substantial cost savings from trading TDPs is demonstrated using data on the Fox River in Wisconsin. A simulation model of water quality (Qual-III) and a linear programming model of abatement costs determine the optimum pattern of discharge. Reaching that optimum from proposed pollution abatement orders is shown to be feasible. Varying conditions of flow and temperature can be accommodated using trade coefficients which can be accurately estimated through interpolation. The calculations demonstrate the value and feasibility of flexible regulations governing water pollution abatement.     

Interactive pollutants and joint abatement costs: Achieving water quality standards with effluent charges

This paper extends earlier work on the standards and prices approach to pollution control by considering simultaneously spatial considerations, interactive pollutants, and joint abatement costs. The form of environmental constraints appropriate to water pollution problems is discussed in detail and the implications for the standards and prices approach to water pollution control are assessed. The presence of interactive pollutants and joint abatement costs is shown to have important implications for both the theoretical properties and the implementation of the standards and prices approach.     

An Equilibrium Framework for Global Pollution Problems

The paper analyzes global pollution problems from the point of view of the benefit approach to the allocation of public costs. Special attention is paid to the possibility that the optimum abatement vector may have negative elements. An appropriate cost-share equilibrium is defined and characterized, and conditions under which the equilibrium is beneficial to all parties are derived. An implementation mechanism whose Nash equilibrium yields positive abatement levels under appropriate conditions is described.     

Linking ecosystem services and human‐values theory

Understanding why people make the decisions they do remains a fundamental challenge facing conservation science. Ecosystem service (ES) (a benefit people derive from an ecosystem) approaches to conservation reflect efforts to anticipate people's preferences and influence their environmental behavior. Yet, the design of ES approaches seldom includes psychological theories of human behavior. We sought to alleviate this omission by applying a psychological theory of human values to a cross‐cultural ES assessment. We used interviews and focus groups with fish workers from 28 coral reef fishing communities in 4 countries to qualitatively identify the motivations (i.e., human values) underlying preferences for ES; quantitatively evaluate resource user ES priorities; and identify common patterns among ES motivations and ES priorities (i.e., trade‐offs and synergies). Three key findings are evident that align with human values theory. First, motivations underlying preferences for individual ESs reflected multiple human values within the same value domain (e.g., self‐enhancement). Second, when averaged at community or country scales, the order of ES priorities was consistent. However, the order belied significant variation that existed among individuals. Third, in line with human values theory, ESs related to one another in a consistent pattern; certain service pairs reflected trade‐off relationships (e.g., supporting and provisioning), whereas other service pairs reflected synergistic relationships (e.g., supporting and regulating). Together, these findings help improve understanding of when and why convergence and trade‐offs in people's preferences for ESs occur, and this knowledge can inform the development of suitable conservation actions.     

The optimal pricing of pollution when enforcement is costly

We consider the pricing of a uniformly mixed pollutant with a model of optimal, possibly firm-specific, emissions taxes and their enforcement under incomplete information about firms’ abatement costs, enforcement costs, and pollution damage. We argue that optimality requires an enforcement strategy that induces full compliance by every firm, except possibly when a regulator can base the probabilities of detecting individual violations on observable correlates of violators’ actual emissions. Moreover, optimality requires discriminatory taxes, except when a regulator is unable to use observable firm-level characteristics to gain some information about the variation in firms’ abatement costs or monitoring costs.     

Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey

This paper examines whether the impact of environmental regulations differs by the size of the business. We consider the net effect of statutory, enforcement, and compliance asymmetries by estimating the relationship between plant size and pollution abatement expenditures, using establishment-level data on U.S. manufacturers from the Census Bureau's Pollution Abatement Costs and Expenditures (PACE) survey and from its Annual Survey of Manufactures and Census of Manufactures. We model establishments' pollution abatement operating costs (PAOC) per unit of economic activity as a function of establishment size, industry, state, and year. Our results show that PAOC intensity increases with establishment and firm size.     

International environmental agreements with consistent conjectures

We introduce consistent conjectures into Barrett (1994) canonical model of international environmental agreements. The existing literature assumes inconsistent Nash conjectures, despite the fact that policymakers recognize that abatement levels are strategic substitutes and increases in abatement generate carbon leakage. With consistent conjectures much of the conventional wisdom is reversed. The non-cooperative abatement level is below the Nash equilibrium. The difference between Nash and consistent conjectures is greatest when benefits are large and costs are small. We find that large coalitions cannot form. However, small coalitions can result in substantial increases in abatement relative to the non-cooperative outcome.     

Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey

This paper examines whether the impact of environmental regulations differs by the size of the business. We consider the net effect of statutory, enforcement, and compliance asymmetries by estimating the relationship between plant size and pollution abatement expenditures, using establishment-level data on U.S. manufacturers from the Census Bureau's Pollution Abatement Costs and Expenditures (PACE) survey and from its Annual Survey of Manufactures and Census of Manufactures. We model establishments' pollution abatement operating costs (PAOC) per unit of economic activity as a function of establishment size, industry, state, and year. Our results show that PAOC intensity increases with establishment and firm size.     

Seasonal decline in reproductive performance varies with colony size in the fairy martin, <Emphasis Type="Italic">Petrochelidon ariel</Emphasis>

Reproductive success within populations often varies with the timing of breeding, typically declining over the season. This variation is usually attributed to seasonal changes in resource availability and/or differences in the quality or experience of breeders. In colonial species, the timing of breeding may be of particular importance because the costs and benefits of colonial breeding are likely to vary over the season and also with colony size. In this study, we examine the relationship between timing of breeding and reproductive performance (clutch size and nest success) both within and between variable sized colonies (n = 18) of fairy martins, Petrochelidon ariel. In four of these colonies, we also experimentally delayed laying in selected nests to disentangle the effects of laying date and individual quality/experience on reproductive success. Within colonies, later laying birds produced smaller clutches, but only in larger colonies. The general seasonal decline in nest success was also more pronounced in larger colonies. Late laying birds were generally smaller than earlier laying birds, but morphological differences were also related to colony size, suggesting optimal colony size also varies with phenotype. Experimentally delayed clutches were larger than concurrently produced non-delayed clutches, but only in larger colonies. Similarly, delayed clutches were more likely to produce fledglings, particularly later in the season and in larger colonies. We suggest that the reduced performance of late breeding pairs in larger colonies resulted primarily from inexperienced/low quality birds preferring to settle in larger colonies, possibly exacerbated by an increase in the costs of coloniality (e.g., resource depletion and ectoparasite infestations) with date and colony size. These findings highlight the importance of phenotype-related differences in settlement decisions and reproductive performance to an improved understanding of colonial breeding and variation in colony size.     

Externalities, Market Power, and Resource Extraction

This article analyzes the effect of market power in the presence of dynamic and biological externalities. When several countries harvest fish in international waters the evolution of fish population is affected by their joint action, thus generating a biological and a dynamic externality. If there is trade, the market-clearing prices depend on the harvesting and consumption in all countries. Therefore, market-clearing prices also generate an externality. We find a subgame perfect Cournot–Nash equilibrium and study the conditions under which it may be efficient. We also analyze the role of different externalities in generating inefficiency.     

Cost-effective unilateral climate policy design: Size matters

Given the bleak prospects for a global agreement on mitigating climate change, pressure for unilateral abatement is increasing. A major challenge is emissions leakage. Border carbon adjustments and output-based allocation of emissions allowances can increase effectiveness of unilateral action but introduce distortions of their own. We assess antileakage measures as a function of abatement coalition size. We first develop a partial equilibrium analytical framework to see how these instruments affect emissions within and outside the coalition. We then employ a computable general equilibrium model of international trade and energy use to assess the strategies as the coalition grows. We find that full border adjustments rank first in global cost-effectiveness, followed by import tariffs and output-based rebates. The differences across measures and their overall appeal decline as the abatement coalition grows. In terms of cost, the coalition countries prefer border carbon adjustments; countries outside the coalition prefer output-based rebates.     

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.     

Dealing with the Clandestine Nature of Wildlife‐Trade Market Surveys

Abstract: Illegal international trade in wildlife (excluding fisheries and timber) has been valued at more than US$20 billion. A more precise figure has not been determined in part because of the clandestine nature of the trade, and for this same reason even regional and local levels of wildlife trade are difficult to assess. The application of recent developments in wildlife field‐survey methods (e.g., occupancy) now allows for a more‐accurate estimation of wildlife trade occurrence, including its hidden components at a variety of scales (e.g., regional, local) and periods (e.g., single season, 1 year, multiple years). Occupancy models have been applied in wildlife field studies to address the problem of false absences when conducting presence–absence surveys. Occupancy surveys differ from traditional presence–absence surveys because they incorporate repeat surveys, allowing for the likelihood of detecting a species (the probability of detection) to be estimated explicitly (in contrast to traditional surveys that often incorrectly treat this probability as close to one to allow for estimation of presence). Occupancy methods can be applied to a variety of wildlife‐trade surveys, including, for example, single‐species availability, links between two illegally traded species (i.e., co‐occurrence), and disease occurrence in live trade. In addition, free user‐friendly software (i.e., PRESENCE) allows even nonstatisticians to adequately address this issue. I simulated a hypothetical wildlife‐trade market survey that resulted in an apparent 20% decline in naïve occupancy (proportion of surveyed towns engaged in the trade) over 2 years, but when I accounted for change in probability of detection over the years the difference in occupancy was not statistically significant. As more sophisticated methods, such as occupancy, are applied to wildlife‐trade market surveys, results will be more robust and defensible and therefore, theoretically, more powerful when presented to conservation policy and decision makers.