Trade''s Dynamic Solutions to Transboundary Pollution

This study develops a differential game to examine the effects of trade liberalization on transboundary water pollution. Water pollution is due to wastewater emissions from countries in a shared waterway along the U.S.–Mexico border with available data of pollution abatement costs, public health damages, and trade benefits. Noncooperative and cooperative games are examined with changes in trade policy and public health damages. Results show trade liberalization leads Mexico to curtail pollution in both games. Cooperation and trade liberalization limit emissions from both countries and curtail strategic behavior of the United States from Mexico's pollution control efforts in the noncooperative game.     

The Importance of Site-Specific Information in the Design of Policies to Control Pollution

The presence and concentration of pollutants in groundwater are influenced by geophysical processes and the behavior of economic agents. The purpose of this paper is to assess the importance of spatial variability in physical parameters in the design of efficient pollution regulations. Alternative tax policies are evaluated in terms of effects on farm profit utilizing a spatially distributed, dynamic simulation model which links economic behavior with the geophysical processes that determine groundwater quality. The empirical focus is the control of groundwater nitrates arising from irrigated agriculture in Malheur County, Oregon. Results indicate that a detailed accounting of spatial variance in physical parameters had little effect on selection of a cost-minimizing tax policy to control groundwater nitrate concentration. This result implies that relatively simple tax schemes and models to evaluate these tax schemes may be adequate in some settings.     

Spatial surplus production modeling of Atlantic tunas and billfish

We formulate and simulation-test a spatial surplus production model that provides a basis with which to undertake multispecies, multi-area, stock assessment. Movement between areas is parameterized using a simple gravity model that includes a "residency" parameter that determines the degree of stock mixing among areas. The model is deliberately simple in order to (1) accommodate nontarget species that typically have fewer available data and (2) minimize computational demand to enable simulation evaluation of spatial management strategies. Using this model, we demonstrate that careful consideration of spatial catch and effort data can provide the basis for simple yet reliable spatial stock assessments. If simple spatial dynamics can be assumed, tagging data are not required to reliably estimate spatial distribution and movement. When applied to eight stocks of Atlantic tuna and billfish, the model tracks regional catch data relatively well by approximating local depletions and exchange among high-abundance areas. We use these results to investigate and discuss the implications of using spatially aggregated stock assessment for fisheries in which the distribution of both the population and fishing vary over time.     

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.     

The social and ecological determinants of common pool resource sustainability

We study a dynamic common pool resource game in which current resource stock depends on resource extraction in the previous period. Our model shows that for a sufficiently high regrowth rate, there is no commons dilemma: the resource will be preserved indefinitely in equilibrium. Lower growth rates lead to depletion. Laboratory tests of the model indicate that favorable ecological characteristics are necessary but insufficient to encourage effective CPR governance. Before the game, we elicit individual willingness to follow a costly rule. Only the presence of enough rule-followers preserves the resource given favorable ecological conditions.     

Fish wars and cooperation maintenance

In this paper, a discrete-time game model related to a bioresource management problem (fish catching) is considered. We divide a fishery into regions, which are exploited by single players. The center (referee) shares a reservoir between the competitors. The players (countries), which harvest the fish stock are the participants of this game.We assume that there are migratory exchanges between the regions of the reservoir. Therefore, the stock in one region depends not only on the previous stock and catch in the region, but also on the stock and catch in neighboring regions. We derive the Nash and cooperative equilibria for an infinite planning horizon.We consider two ways to maintain the cooperation: incentive equilibrium and time-consistent imputation distribution procedure. We investigate the cooperative incentive equilibrium in the case when the center punishes players for a deviation.Also we consider the case when the center is a player and find the Shapley value and time-consistent imputation distribution procedure. We introduce a new condition which offers an incentive to players to keep cooperating.     

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.     

‘Optimal’ pollution abatement—whose benefits matter, and how much?

We examine the determinants of environmental regulatory activity (inspections and enforcement actions) and levels of air and water pollution for 409 US pulp and paper mills, using data for 1985–1997. We focus on the benefits to the surrounding population from pollution abatement. Plants with larger benefits emit less pollution, as do those with more kids and elders nearby. Plants in poor areas emit more pollution, though (surprisingly) we find less pollution in minority areas. Out-of-state neighbors seem to count less than in-state ones, although this effect diminishes if the bordering state's Congressional delegation is strongly pro-environment. We use ‘spatially lagged’ instrumental variables to control for the potential endogeneity of which individuals choose to locate near the plant. The results for regulatory activity are noticeably less significant than the emissions results.     

Fully integrated approach: an alternative solution of coupling a GIS and diffuse pollution models

As a tool for management, query, visualization and analysis of spatially referred information, GIS has been recognized as a method to aid the modeling of diffuse pollution and visualize the results in a spatial context. A common question in integrating diffuse pollution models and GIS is to choose a suitable coupling approach, in which the feature of diffuse pollution models should be taken into account. In this paper, we report on our experience in coupling a distributed diffuse pollution model with a GIS. A prototype of fully integrated system is developed in this paper. This system has high flexibility, extendibility and great data management efficiency. Differences in applicability of loose coupling, tight coupling and fully integrated approaches are addressed. It is concluded that the fully integrated approach can avoid tanglesome data exchange and routine execution and more robust than loose and tight coupling approaches and is suitable for distributed diffuse pollution modes.     

Entry Deterrence and Signaling in a Nonrenewable Resource Model

We analyze a nonrenewable resource model in which an incumbent firm faces potential entry from a rival firm. The incumbent has private information about its stock size but the rival can observe extraction. With observable extraction and unobservable stock, the rival can use extraction as a signal about stock, from which it can infer whether entry is likely to be profitable. We characterize the necessary conditions for pooling and separating perfect Bayesian equilibria in a signaling game of resource extraction and provide examples of each. We show that the incumbent will often prefer pooling to separating even though welfare is higher in separating equilibrium.     

Fishing the line near marine reserves in single and multispecies fisheries.

Throughout the world "fishing the line" is a frequent harvesting tactic in communities where no-take marine reserves are designated. This practice of concentrating fishing effort at the boundary of a marine reserve is predicated upon the principle of spillover, the net export of stock from the marine reserve to the surrounding unprotected waters. We explore the consequences and optimality of fishing the line using a spatially explicit theoretical model. We show that fishing the line: (1) is part of the optimal effort distribution near no-take marine reserves with mobile species regardless of the cooperation level among harvesters; (2) has a significant impact on the spatial patterns of catch per unit effort (CPUE) and fish density both within and outside of the reserve; and (3) can enhance total population size and catch simultaneously under a limited set of conditions for overexploited populations. Additionally, we explore the consequences of basing the spatial distribution of fishing effort for a multispecies fishery upon the optimality of the most mobile species that exhibits the greatest spillover. Our results show that the intensity of effort allocated to fishing the line should instead be based upon more intermediate rates of mobility within the targeted community. We conclude with a comparison between model predictions and empirical findings from a density gradient study of two important game fish in the vicinity of a no-take marine-life refuge on Santa Catalina Island, California (USA). These results reveal the need for empirical studies to account for harvester behavior and suggest that the implications of spatial discontinuities such as fishing the line should be incorporated into marine-reserve design.     

Multiple receptor ambient monitoring and firm compliance with environmental taxes under budget and target driven regulatory missions

We analyze the potential for an environmental monitoring agency under different regulatory missions to use multiple measures of ambient pollution levels to induce firm compliance via endogenously determined probabilistic firm-level inspections of polluting activities. Departing from previous analyses, we consider a framework where the regulator has multiple, rather than a single, measures of ambient pollution in a setting where many firms are subject to a self-reported emissions tax that is not perfectly enforceable. Under a budget-driven mission, we show that a regulator can fruitfully utilize the added information from multiple ambient monitoring receptors to induce improved environmental compliance through the creation of strategic interactions among firms. Additionally, our results provide new evidence on the relative efficiency of budget- vs. target-driven environmental enforcement missions.     

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.     

Game theoretic analysis of environmental impact assessment system in China

Environmental impact assessment (EIA) system has been established in China since 1973. In present EIA cases, there are four participants in general: governments, enterprises, EIA organizations and the public. The public has held responsible for both social costs and social duties. The public supervises social costs produced by enterprises discharging pollutant in EIA. However public participation is mostly deputized by governments, which severely weaken the independence of the public as one participant in EIA. In this paper, EIA refers to the different attitudes of the participants whose optional strategies may be described by a proper game model. According to disfigurements in EIA, three sides (governments, enterprises, and EIA organizations) dynamic iterative game theory, dynamic game theory of incomplete information, and perfect Bayesian equilibrium theory to analyze the reciprocity relation among governments, EIA organizations and enterprises. The results show that in a short period, economic benefit is preponderant over social benefit. Governments and enterprises both do not want to take EIA to reveal social costs. EIA organizations’ income comes from enterprises and the collusions are built between them to vindicate economic benefit. In a long run, social benefit loss caused by environmental pollution must be recuperated sooner or later and environmental deterioration will influence the achievements of economic benefit, so both governments and enterprises are certain to pursue high social benefit and willing to take EIA, helpful to increase private benefit. EIA organizations will make fair assessment when their economic benefit are ensured. At present, the public as silent victims can not take actual part in EIA. The EIA system must be improved to break the present equilibrium of three sides, bringing the public to the equilibrium to exert public supervision.     

水污染对扬州市水资源存量的影响评价

将水资源分成水资源的流量和存量两部分，估算了扬州市的水资源存量，提出了评价水污染对水资源存量影响的评价方法，并利用这种方法对扬州市水污染对水资源存量的影响进行了评价，得出了扬州市的水资源存量不足，而水污染又对水资源存量产生了较大的影响的结论。     

Environmental policy for spatial and persistent pollutants

Traditional economic models of alternative pollution policies notwithstanding, all discharges are persistent to some degree (assimilation is not instantaneous), and their distributions vary spatially. Utilizing an optimal control framework to capture the dynamics of persistence, the efficiency of economic incentives and regulations are juxtaposed when the goal is to obtain arbitrary environmental standards at least social cost. For generality, the considered pollutant is regarded as spatially variant, and standards are allowed to differ among regions. Theoretically optimal policy parameters are derived. As in the case of spatial, nonpersistent discharges, the property of persistance alone is demonstrated to invalidate the typically maintained economic advantage of price-guided policies over regulatory policies.     

The optimality and feasibility of uniform air pollution controls

An optimal control problem is developed which minimizes both the social damages of pollution concentrations and the private costs of emission abatement subject to a differential equation relating emissions and concentrations. A specific use of the model is to analyze the optimality and feasibility of uniform controls on emissions and concentrations across an air shed.     

Pollution Taxes and Pollution Abatement in an Oligopoly Supergame

This paper investigates the effects of an emissions tax on the incentives for oligopolists to acquire alternative pollution abatement technologies. The analysis is conducted in terms of a repeated game and it is demonstrated that there are circumstances in which the firms may reject the option of acquiring the pollution abatement equipment, even when this lowers their production costs.     

Cost-sharing approach for air quality control implementation A case study

The objective of the study was to investigate and develop new alternative approaches to effectively meeting the federal SOx and particulate ambient air quality standards at cost savings. Since air pollution control costs would very likely be passed along to the consumer, it is in the best interests of the consumer and industry to find the least-cost alternative policies. Cost-sharing possesses advantages not shared by other control schemes, such as emissions taxes, auctioning of “pollution certificates,” or other methods. The results of this paper indicate that the cost-sharing approach is useful for particulates control in order to minimize the burden of plants already performing substantial control who may require significant added capital investment beyond their initial amount. For SO_ξ emissions control the cost-sharing analysis calculations show significant savings in nearly all situations, whether or not stack gas treatment methods were assumed available. Furthermore, the cost-sharing approach may allow further savings when the particular cost requirements of an individual firm differ substantially from the average engineering cost estimates. A cost-sharing option should thus be included in implementation plans as an option to be used by industries at their own initiative. The spatial characteristics of emissions resulting from a particular application of the cost-sharing approach are considered. A spatial airshed emissions allocation model is discussed as a useful method of evaluating cost sharing.     

Carbon taxation,OPEC and the end of oil

I develop a differential game between an oil cartel and an importer investing in research and development (R&D) to reduce the cost of a green substitute to oil. In equilibrium, the cartel is forced to deter the substitute, which thus imposes a price ceiling falling over time. Credible carbon taxes are below the Pigovian level, implying the importer cannot internalise the full pollution externality, much less capture resource rents. Without carbon pricing, the importer curtails long-run pollution using a costly R&D programme. Normatively, climate policy will be more expensive if relying on green R&D programmes only.