Generating spatially optimized habitat in a trade‐off between social optimality and budget efficiency

Auctions have been proposed as alternatives to payments for environmental services when spatial interactions and costs are better known to landowners than to the conservation agency (asymmetric information). Recently, an auction scheme was proposed that delivers optimal conservation in the sense that social welfare is maximized. I examined the social welfare and the budget efficiency delivered by this scheme, where social welfare represents the difference between the monetized ecological benefit and the conservation cost incurred to the landowners and budget efficiency is defined as maximizing the ecological benefit for a given conservation budget. For the analysis, I considered a stylized landscape with land patches that can be used for agriculture or conservation. The ecological benefit was measured by an objective function that increases with increasing number and spatial aggregation of conserved land patches. I compared the social welfare and the budget efficiency of the auction scheme with an agglomeration payment, a policy scheme that considers spatial interactions and that was proposed recently. The auction delivered a higher level of social welfare than the agglomeration payment. However, the agglomeration payment was more efficient budgetarily than the auction, so the comparative performances of the 2 schemes depended on the chosen policy criterion–social welfare or budget efficiency. Both policy criteria are relevant for conservation. Which one should be chosen depends on the problem at hand, for example, whether social preferences should be taken into account in the decision of how much money to invest in conservation or whether the available conservation budget is strictly limited.     

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.     

Environmental Legislation and Enforcement: A Voting Model under Asymmetric Information

This paper examines the effects of asymmetric voter information on the environmental policies of democratic governments. The model builds on the electoral signaling model of Rogoff to illustrate the possibility that democratic governments may systematically overlegislate-and yet underenforce-environmental standards in a rational expectations equilibrium. The model also offers insights into the welfare implications of "right to know" legislation, proposals to depoliticize environmental policy, and private voluntary institutions.     

Vertical fiscal externalities and the environment

We show that imposition of a state-level environmental tax in a federation crowds out pre-existing federal taxes. We explain how this vertical fiscal externality can lead unilateral state-level environmental policy to generate a welfare gain in the implementing state, at the expense of other states, even absent any environmental benefits. Using a computable general equilibrium model of the Canadian federation, we show that vertical fiscal externalities can be the major determinant of the welfare change following environmental policy implementation by a state government. Our numerical simulations indicate that – as a consequence of vertical fiscal externalities – state governments can reduce greenhouse gas emissions by over 20 percent without any net cost to themselves.     

Re-evaluating the role of energy efficiency standards: A behavioral economics approach

The economic models that prescribe Pigovian taxation as the first-best means of reducing energy-related externalities are typically based on the neoclassical model of rational consumer choice. Yet, consumer behavior in markets for energy-using durables is generally thought to be far from efficient, giving rise to the concept of the “energy-efficiency gap.” This paper presents a welfare analysis of energy policies that is based on a behavioral model of temptation and self-control, introduced by Gul and Pesendorfer 23 and 24. We find that, in the presence of temptation, (i) Pigovian taxes alone do not yield a first-best outcome, (ii) when viewed as substitutes, energy efficiency standards can dominate Pigovian taxes, and (iii) a policy combining standards with a Pigovian tax can yield higher social welfare than a Pigovian tax alone, implying that the two instruments should be viewed as complements rather than substitutes.     

The strategic use of innovation to influence regulatory standards

This paper investigates the welfare consequences of strategic behavior by firms to affect the amount of environmental regulation they face. Environmental regulation often attempts to force an industry to develop cleaner technology, but the regulator may have no means to commit to a specific standard. This lack of regulatory commitment induces firms to choose innovation strategically. It is well-known that firms have incentives to suppress innovation to induce the regulator to ratchet down the standard, and this strategic behavior lowers welfare. This paper explores a countervailing incentive. In oligopoly settings, firms have heightened incentives to innovate so as to increase regulation and raise rivals costs. In equilibrium, the incentive to raise rivals cost can mitigate the welfare loss arising from no regulatory commitment. Also, a regulator who is unable to commit ex ante to the stringency of a regulatory standard can induce more clean technology than a regulator with a commitment mechanism.     

The strategic use of innovation to influence regulatory standards

This paper investigates the welfare consequences of strategic behavior by firms to affect the amount of environmental regulation they face. Environmental regulation often attempts to force an industry to develop cleaner technology, but the regulator may have no means to commit to a specific standard. This lack of regulatory commitment induces firms to choose innovation strategically. It is well-known that firms have incentives to suppress innovation to induce the regulator to ratchet down the standard, and this strategic behavior lowers welfare. This paper explores a countervailing incentive. In oligopoly settings, firms have heightened incentives to innovate so as to increase regulation and raise rivals costs. In equilibrium, the incentive to raise rivals cost can mitigate the welfare loss arising from no regulatory commitment. Also, a regulator who is unable to commit ex ante to the stringency of a regulatory standard can induce more clean technology than a regulator with a commitment mechanism.     

Cap-and-trade, taxes, and distributional conflict

Enacting market-based environmental regulation, such as emissions taxes and cap-and-trade programs, often create rents that are contested by agents. In this paper, we create a framework that compares social welfare from alternative market-based environmental policy instruments under the presence of rent seeking. We show that, contrary to the commonly held view, non-revenue-raising instruments (NRRIs) are in many cases preferable over revenue-raising instruments (RRIs). We find that the choice of instrument depends on the size of a potential revenue-recycling effect and the level of preassigned rents.     

Alternative transportation fuel standards: Welfare effects and climate benefits

This paper develops an integrated model of the fuel and agricultural sectors to analyze the welfare and greenhouse gas emission (GHG) effects of the existing Renewable Fuel Standard (RFS), a Low Carbon Fuel Standard (LCFS) and a carbon price policy. The conceptual framework shows that these policies differ in the incentives they create for the consumption and mix of different types of biofuels and in their effects on food and fuel prices and GHG emissions. We also simulate the welfare and GHG effects of these three policies which are normalized to achieve the same level of US GHG emissions. By promoting greater production of food-crop based biofuels, the RFS is found to lead to a larger reduction in fossil fuel use but also a larger increase in food prices and a smaller reduction in global GHG emissions compared to the LCFS and carbon tax. All three policies increase US social welfare compared to a no-biofuel baseline scenario due to improved terms-of-trade, even when environmental benefits are excluded; global social welfare increases with a carbon tax but decreases with the RFS and LCFS due to the efficiency costs imposed by these policies, even after including the benefits of mitigating GHG emissions.     

Can Eco-Labels Tune a Market? Evidence from Dolphin-Safe Labeling

In this paper we test whether the dolphin-safe labels altered consumer purchases of tuna. We also provide a partial measure of the total welfare effects of the dolphin-safe labeling policy. The results confirm our hypothesis that the dolphin–tuna controversy and the subsequent implementation of dolphin-safe labeling affected consumer behavior. Further, the paper provides market-based evidence that consumers can respond to eco-labels; the dolphin-safe label increased the market share of canned tuna. The welfare analysis provides a partial measure of society's willingness to pay to avoid personally contributing to dolphin mortality as a result of tuna fishing.     

Good news for environmental self-regulation? Finding the right link

We investigate the stock market response to firm disclosure of positive environmental information and the link from that information to environmental outcomes. We classify environmental media releases by informational content and value relevance, and assess the abnormal stock returns of each type of event. While announcements of future environmental activities lead to the largest favorable stock market reactions, there is no guaranteed link from this type of information to environmental outcomes. Further analysis of the abnormal returns shows that the magnitude of the stock market reaction depends on firm financial characteristics across all event types rather than on firm environmental performance. Our results indicate that the ability for voluntary environmental information disclosure to induce environmental self-regulation is limited to the extent that firms are able to follow through with their announcements of planned environmental activities.     

Optimal resource extraction and uncertainty about new technology

The optimal extraction policy of a known resource stock in an economy which has imperfect information about existence of a new technology is discussed. The optimal program is shown to depend on the remaining stock and the current information about existence of the new technology (which is updated every period). For two special forms of social welfare function, the optimal extraction policy is shown to be more conservative than in the situation of perfect information. The effects of improved information and greater availability of the known stock on the optimal extraction policy are also investigated.     

Measuring sustainable governance in the European Union

This paper examines the problem of measuring sustainable governance in the European Union (EU-27) through the use of duality and the Slutsky equation. The proposed methodology is based on the application of a three-dimensional optimisation model, where the arguments of the objective (sustainable social welfare) function are economic goods that contribute to sustainable economic growth; environmental goods that provide for sustainable environmental protection; and social goods through which sustainable social development is achieved. The dual problem, formulated through this three-dimensional theoretical model, is solved to find the optimal solution, indicating a certain sustainability level. We suggest that this solution can be used for calculating the value of what we define here as the sustainable governmental policy indicator, which is considered to provide quantitative measurement of government policies on sustainable development within the context of ‘good governance’. Furthermore, it is suggested that the Slutsky equation can be used as a reliable method for long-term monitoring and planning of national as well as international good governance with regard to sustainable development policies. In its empirical part, the paper applies the theoretical model in an analysis of the sustainable development indicators (as set out in the Sustainable Development Strategy (SDS) of the EU) in Bulgaria for the period 2000–2010 and compares them to those of the EU-27.     

Biosafety principles for GMOs in the context of sustainable development

If genetically modified organisms are to contribute to welfare they must be considered in the context of sustainable development. Biosafety implies considering the environmental, economic and social dimensions of sustainable development. These dimensions can be interpreted through the principles of precaution, polluter pays and public participation. In this article, these key biosafety principles are operationalised and ways of implementing them in society are discussed. A comparison is made between the principles and the present EU law for deliberate release of GMOs. It is concluded that several improvements in EU policy are necessary to ensure sustainable development really is promoted.     

Behavioral Assumptions of Conservation Policy: Conserving Oak Habitat on Family-Forest Land in the Willamette Valley, Oregon

Abstract:  Designing policies that harness the motivations of landowners is essential for conserving threatened habitats on private lands. Our goal was to understand how to apply ethnographic information about family-forest owners to the design of conservation policy for Oregon white oak (Quercus garryana) in the Willamette Valley, Oregon (U.S.A.). We examined owners' knowledge, beliefs, values, and socioeconomic contexts through in-depth individual and focus-group interviews to understand their motivations to conserve oak. We then used Schneider and Ingram's (1990) policy analysis framework to compare owners' motivations to the logic of policy. Owners had complex motivations for conserving oak. Despite this complexity, all 5 categories of policy that Schneider and Ingram describe hold promise. Policies that use symbolism to inspire behavior and policies that build capacity can harness owners' stewardship ethics and moral obligations. Policies that offer tangible rewards can build on owners' utilitarian motives. Policies that permit and prohibit behavior can tap owners' concerns about rule violations. Policies that promote voluntary, collaborative efforts can accommodate owners' need for autonomy and flexibility.     

Green tax reform,endogenous innovation and the growth dividend

We study theoretically and numerically the effects of an environmental tax reform using endogenous growth theory. In the theoretical segment, mobile labor between manufacturing and R&D activities, and elasticity of substitution between labor and energy in manufacturing lower than unity allow for a growth dividend, even if we consider preexisting tax distortions. The scope for innovation is reduced when we consider direct financial investment in the lab, or elastic labor supply. We then apply the core theoretical model to a real growing economy and find that a boost in long-run economic growth following such a carbon policy is a possible outcome. Redistribution of additional carbon tax revenue by lowering capital taxation performs best in terms of effciency measured by aggregate welfare. In terms of equity among social segments the progressive character of lump-sum redistribution fails when we consider very high emissions reduction targets.     

Firm ownership structure impact on corporate social responsibility: evidence from austerity U.K.

Corporate social responsibility (CSR) has become an increasingly important sustainable development issue in U.K. The main contribution of this study is to examine how firm ownership structure impacts good corporate governance and CSR in U.K. during austerity conditions. Following the financial crisis of 2007–2008, the U.K. government introduced austerity conditions which impacted firm CSR activities. From the initial sample of more than 250 firms, 50 consistently remain listed on the FTSE4good index during 2008–2012 and are analysed. The definition of CSR distinguishes voluntary and mandatory CSR construct. Findings indicate Board ownership structure and satisfactory firm performance impact on the level of voluntary CSR. Board ownership results suggest increased institutional and non-CEO shareholdings support a higher level of voluntary CSR engagement, whilst increased CEO shareholdings lead to a lower level of investment in voluntary CSR. In terms of satisfactory firm performance, results suggest positive attainment discrepancy supports a higher level of voluntary CSR, whereas greater potential organisational slack leads to a lower level of voluntary CSR investment. Effective governance and voluntary CSR association is more pronounced under conditions of high attainment discrepancy and low organisational slack. The findings suggest implications for adapting firm decision-making latitude and government policy between austerity and prosperity conditions.     

Impacts of Marine Protected Areas on Fishing Communities

Abstract: Marine protected areas (MPAs) are a popular conservation strategy, but their impacts on human welfare are poorly understood. To inform future research and policy decisions, we reviewed the scientific literature to assess MPA impacts on five indicators of human welfare: food security, resource rights, employment, community organization, and income. Following MPA establishment, food security generally remained stable or increased in older and smaller MPAs. The ability of most fishing groups to govern MPA resources changed. Increased resource rights were positively correlated with MPA zoning and compliance with MPA regulations. Small sample sizes precluded statistical tests of the impacts of MPAs on employment, community organization, and income. Our results demonstrate that MPAs shape the social well‐being and political power of fishing communities; impacts (positive and negative) vary within and among social groups; and social impacts are correlated with some—but not all—commonly hypothesized explanatory factors. Accordingly, MPAs may represent a viable strategy for enhancing food security and empowering local communities, but current practices negatively affect at least a minority of fishers. To inform policy making, further research must better document and explain variation in the positive and negative social impacts of MPAs.     

The Economics of Household Solid Waste Generation and Disposal

We develop a household production model of waste management that explicitly incorporates many of the technical and behavioral elements germane to current regulatory and non-regulatory solid waste policy initiatives. Examination of first-order conditions shows the interaction among household preferences, these production options, and external prices and fees. A simplified simulation of our model illustrates these relationships, showing that household response elasticities can vary widely over common price ranges and that relatively large household welfare gains may be obtained by adopting curbside recycling and unit pricing programs.