Does the EU ETS cause carbon leakage in European manufacturing?

Carbon leakage is of interest in both academic and policy debates about the effectiveness of unilateral climate policy, especially in Europe, where the EU Emissions Trading System (EU ETS) affects many traded sectors. We review how the literature identifies leakage and the pollution haven effect. We then evaluate whether EU ETS emission costs caused carbon leakage in European manufacturing, using trade flows in embodied carbon and value from the Global Trade Analysis Project (GTAP). We find no evidence that the EU ETS caused carbon leakage.     

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.     

Tell the truth or not? The montero mechanism for emissions control at work

We experimentally test the truth-telling mechanism proposed by Montero (2008) for eliciting firms' abatement costs. We compare this mechanism with two well-known alternative allocation mechanisms, free and costly allocation of permits at the Pigouvian price. Controlling for the number of firms and the firms' maximal emissions, we find that, in line with the theoretical predictions, firms over-report their maximal emissions under free allocation of permits and under-report these under costly allocation of permits. Under Montero's mechanism, by contrast, firms almost always report their maximal emissions truthfully. However, in terms of efficiency, the difference between Montero's mechanism and costly allocation disappears with industries including more than one firm.     

Procrastinating reform: The impact of the market stability reserve on the EU ETS

We study the impact of the market stability reserve (MSR) on price and emission paths of the EU ETS. From 2019 onwards, the MSR will adjust the number of allowances auctioned as a function of the size of the surplus, i.e. in times of a large surplus it shifts the issue date of allowances into the future. In a perfectly competitive allowance market the MSR only affects price and emission paths if the baseline equilibrium becomes unfeasible. If the MSR is binding, prices increase in the short run but drop in the medium run relative to the baseline. The MSR increases price variability if uncertainty over future allowance demand is resolved while there is a surplus. The long run cap is unaffected by both the MSR and overlapping climate policies. This contrasts the EU׳s objectives of improving the resilience of the EU ETS and increasing synergies with overlapping climate policies.     

Neighborhood effects in the Brazilian Amazônia: Protected areas and deforestation

This article investigates whether protected areas are efficient instruments against deforestation in the Brazilian Amazônia. A Dynamic Spatial Durbin Model taking into account both the location bias and the spatial spillover effects between municipalities allows to assess the impact of the different types of protected areas (integral protected areas, sustainable protected areas and indigenous lands) on deforestation. We show that deforestation decisions are strategic complements. The econometric results differ according to the type of protected area. It is shown that: i) integral protected areas and indigenous lands allow for reducing deforestation; ii) sustainable use areas do not help to reduce deforestation; and iii) the spillover effects generated by integral protected areas and indigenous lands lead a reduction in deforestation in their vicinity. A 10% increase in the surface area of integral protected areas (indigenous lands) allows an estimated 9.32 sq. km (10.08 sq. km) of avoided deforestation.     

CEO education and corporate environmental footprint

We analyze the effect of CEO education on environmental decision-making. Using a unique sample of Danish firms from 1996 to 2012, we find that CEO education significantly improves firms' energy efficiency. We seek to derive causality using health shocks: the hospitalization of highly educated CEOs induces a drop in energy efficiency, whereas the hospitalization of less educated CEOs does not have any significant effect. Exploring the mechanisms at play, we show that our results are largely driven by advanced education in business degrees. Moreover, we show that CEO education is associated with greater environmental awareness: highly educated CEOs exhibit greater concerns for climate change, as measured by a survey of social preferences, and drive more environmentally efficient cars. Taken together, our findings suggest that education shapes managerial styles giving rise to greater sustainability in corporate actions.     

Pollution Haven and Corruption Paradise

In this paper, we present a simple theoretical extension from the Economic Geography literature to characterize the main features of pollution havens (lax environmental regulation, good market access to high-income countries and corruption opportunities). Using structural and reduced-form estimations, we find that pollution havens are not a “popular myth” for European firms, laxer environmental standards significantly explain the location choice of polluting affiliates. We analyze in depth the role of trade costs (using various bilateral and multilateral measures), a 1% increase in access to the European market from a pollution haven fosters relocation there by 0.1%. We also find that corruption lowers environmental standards, which strongly attract polluting firms: a 1% increase of corruption fuels relocation by 0.28%. We test the economic significance of these empirical findings via simulations. The protection of the European market (e.g., a carbon tax on imports) to stop relocations to pollution havens must be high (a decrease of the European market for Morocco and Tunisia equivalent to 13%) not to say prohibitive (31% for China).     

Heterogeneous firms and the environment: a cap-and-trade program

Currently, cap-and-trade programs are a cornerstone of many countries' climate change policies and proposals. This paper investigates the economic and environmental effects of different climate change policy designs in a general equilibrium setting with heterogeneous firms and monopolistic competition. The analysis predicts that the cap on emissions perfectly defines the environmental quality but has no effect on firms' profits, or decisions to enter or exit the market. In contrast, increasing the share of free allocations of emission allowances, as opposed to auctions, has no effect on environmental quality but reallocates resources among firms toward the most productive ones which has an impact on firms' entry and exit decisions, the mass of firms, and the composition of the market. Firm heterogeneity magnifies these economic effects of changes in the initial allocation of allowances. The paper provides a decomposition of the change in aggregate emissions which takes account of the changes at sector level, across the firms within a sector, and at the firm level.     

‘Effortless Perfection:’ Do Chinese cities manipulate air pollution data?

This paper uses unique data on daily air pollution concentrations over the period 2001–2010 to test for manipulation in self-reported data by Chinese cities. First, we employ a discontinuity test to detect evidence consistent with data manipulation. Then, we propose a panel matching approach to identify the conditions under which irregularities may occur. We find that about 50% of cities reported dubious PM₁₀ pollution levels that led to a discontinuity at the cut-off. Suspicious data reporting tends to occur on days when the anomaly is least detectable. Our findings indicate that the official daily air pollution data are not well behaved, which provides suggestive evidence of manipulation.     

Bag leakage: The effect of disposable carryout bag regulations on unregulated bags

Leakage occurs when partial regulation of consumer products results in increased consumption of these products in unregulated domains. This article quantifies plastic leakage from the banning of plastic carryout bags. Using quasi-random policy variation in California, I find the elimination of 40 million pounds of plastic carryout bags is offset by a 12 million pound increase in trash bag purchases—with small, medium, and tall trash bag sales increasing by 120%, 64%, and 6%, respectively. The results further reveal 12–22% of plastic carryout bags were reused as trash bags pre-regulation and show bag bans shift consumers towards fewer but heavier bags. With a substantial proportion of carryout bags already reused in a way that avoided the manufacture and purchase of another plastic bag, policy evaluations that ignore leakage effects overstate the regulation's welfare gains.     

Urban afforestation and infant health: Evidence from MillionTreesNYC

This paper examines the impact of urban afforestation on infant health outcomes by exploiting a quasi-experimental setting where one million new trees were planted in New York City (NYC), but not in counties surrounding NYC over the same time period. Using a near-universal birth record of NYC and surrounding counties over 2004–2015 and employing both the synthetic control method and a difference-in-differences model, we find that an approximately 20% increase in urban forest cover decreased prematurity and low birth weight among mothers in NYC by 2.1 and 0.24 percentage points, respectively, relative to similar mothers outside of NYC. The low birth weight finding is equivalent to getting a mother smoking two cigarettes a day during pregnancy to quit. An internal validity test suggests that changes in the composition of NYC mothers cannot explain the observed effects. Additionally, we find evidence that declines in PM_2.5 concentrations and increases in outdoor walks are potential causal mechanisms. Results suggest that urban afforestation may be able to complement existing policies aimed at improving infant health.     

Bewertung der Umweltgefährlichkeit von Stoffen

By sending a questionnaire to all companies of the pulp and paper, textile finishing and leather industries in Germany a study ascertained wastewater data concerning the general situation, treatment processes and specific amounts. With these data standard figures used in the EU for the assessment of chemical substances were checked. The volume flows of the industrial sewage treatment were determined for the facilities of all three branches which discharge their wastewater directly to the receiving waters. The 10 percentile score of these facilities amounted to only a quarter of the EU standard figure of 2,000 m³/d. This value is related to a standardised waste water treatment plant within the EU, which treated the wastewater of 200 l/d from 10,000 inhabitants. The analyses of the entire branch in each case yield dilution factors of 20–70% of the EU standard value of 10. Only the full tanning leather companies yielded a dilution factor of 10. The volume flows of the sewage treatment plants of the facilities discharging to the sewer system exceeds 2,000 m³/d in call cases.     

Evaluating and expanding the European Union's protected-area network toward potential post-2020 coverage targets

The Convention on Biological Diversity's (CBD) strategic plan will expire in 2020, but biodiversity loss is ongoing. Scientists call for more ambitious targets in the next agreement. The nature-needs-half movement, for example, has advocated conserving half of Earth to solve the biodiversity crisis, which has been translated to protecting 50% of each ecoregion. We evaluated current protection levels of ecoregions in the territory of one of the CBD's signatories, the European Union (EU). We also explored the possible enlargement of the Natura 2000 network to implement 30% or 50% ecoregion coverage in the EU member states’ protected area (PA) network. Based on the most recent land-use data, we examined whether ecoregions have enough natural area left to reach such high coverage targets. We used a spatially explicit mixed integer programing model to estimate the least-cost expansion of the PA network based on 3 scenarios that put different emphasis on total conservation cost, ecological representation of ecosystems, or emphasize an equal share of the burden among member states. To realize 30% and 50% ecoregion coverage, the EU would need to add 6.6% and 24.2%, respectively, of its terrestrial area to its PA network. For all 3 scenarios, the EU would need to designate most recommended new PAs in seminatural forests and other semi- or natural ecosystems. Because 15 ecoregions did not have enough natural area left to implement the ecoregion-coverage targets, some member states would also need to establish new PAs on productive land, allocating the largest share to arable land. Thirty percent ecoregion coverage was met by protecting remaining natural areas in all ecoregions except 3, where productive land would also need to be included. Our results support discussions of higher ecoregions protection targets for post-2020 biodiversity frameworks.     

Adoption of environmental standards in Australia: focus on ISO 14001

This study aimed to explore the adoption of environmental standards in Australia, focusing on ISO 14001. The authors used purposive sampling to select a group of ISO 14001 certified and a group of ISO 14001 non-certified companies. Data were collected through a combination of website searches and content analysis. The study found that, overall, 92.9% of the ISO 14001 certified compared to 78.4% of the ISO 14001 non-certified companies promoted their environmental commitment through various methods. In addition, 33.4% of ISO 14001 non-certified companies (compared to 19.2% of certified companies) used their environmental engagement activities as a marketing tool. Second, 80.9% of ISO 14001 certified companies' and 26.7% of the non-certified companies' reports are easy to find and are clearly stated. The study concludes that Australian companies engage in similar environmental activities irrespective of whether they are ISO 14001 certified or not. Both management and research implications of the study's findings are presented.     

Respiration and physiological state in marine bacteria

The relationship between oxygen consumption (R) and respiratory electron-transport-system (ETS) activity was investigated in batch cultures of 5 species of marine bacteria, Vibrio adaptatus, V. anguillarum, a partially identified Vibrio sp. SA774, Serratia marinorubra, and Pseudomonas perfectomarinus. Although cellular levels of R and ETS varied widely among the species tested, the R:ETS ratios for growing or senescent populations were relatively constant among the species; these ratios were 5.02 in growth and 0.426 in senescence, with coefficients of variation of 29 and 20%, respectively. The lower senescent-phase R:ETS ratio was due to a depression of the respiration rates following growth termination. The regression log (R per cell) = 0.832 log (ETS per cell) + 0.727 for the growing populations was similar to that determined for marine zooplankton. The slight dependency of the R:ETS ratio on organism dry weight found for zooplankton was supported by our data. Planktonic respiration rates estimated from measured ETS-depth profiles in the eastern tropical North Pacific Ocean using the senescent-phase R:ETS ratio were similar to published oxygen consumption rates in the deep sea.Contribution No. M79-61 from the University of Washington's Department of Oceanography, and No. 79032 from the Bigelow Laboratory for Ocean Sciences.     

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.     

Challenges and Opportunities in Implementing Managed Relocation for Conservation of Freshwater Species

Abstract: The rapidity of climate change is predicted to exceed the ability of many species to adapt or to disperse to more climatically favorable surroundings. Conservation of these species may require managed relocation (also called assisted migration or assisted colonization) of individuals to locations where the probability of their future persistence may be higher. The history of non‐native species throughout the world suggests managed relocation may not be applicable universally. Given the constrained existence of freshwater organisms within highly dendritic networks containing isolated ponds, lakes, and rivers, managed relocation may represent a useful conservation strategy. Yet, these same distinctive properties of freshwater ecosystems may increase the probability of unintended ecological consequences. We explored whether managed relocation is an ecologically sound conservation strategy for freshwater systems and provided guidelines for identifying candidates and localities for managed relocation. A comparison of ecological and life‐history traits of freshwater animals associated with high probabilities of extirpation and invasion suggests that it is possible to select species for managed relocation to minimize the likelihood of unintended effects to recipient ecosystems. We recommend that translocations occur within the species’ historical range and optimally within the same major river basin and that lacustrine and riverine species be translocated to physically isolated seepage lakes and upstream of natural or artificial barriers, respectively, to lower the risk of secondary spread across the landscape. We provide five core recommendations to enhance the scientific basis of guidelines for managed relocation in freshwater environments: adopt the term managed translocation to reflect the fact that individuals will not always be reintroduced within their historical native range; examine the trade‐off between facilitation of individual movement and the probability of range expansion of non‐native species; determine which species and locations might be immediately considered for managed translocation; adopt a hypothetico‐deductive framework by conducting experimental trials to introduce species of conservation concern into new areas within their historical range; build on previous research associated with species reintroductions through communication and synthesis of case studies.     

Carbon leakage and capacity-based allocations: Is the EU right?

Competitiveness and carbon leakage are major concerns for the design of CO₂ emissions permits markets. In the absence of a global carbon tax and of border carbon adjustments, output-based allocation is a third-best solution and is actually implemented (Australia, California, New Zealand). The EU has followed a different route; free allowances are allocated to existing or new capacities in proportion to a benchmark, independent of actual production. This paper compares these two schemes in a formal setting and shows that the optimal one is in fact a combination of both schemes, or output-based allocation alone if uncertainty is limited. A key assumption of our analysis is that the short-term import pressure depends both on the existing capacities and the level of demand, which is typical in capital intensive and internationally traded sectors. A calibration of the model is used to discuss the EU scheme for the cement sector in the third phase of the EU-ETS (2013–2020). This allows for a quantification of various policies in terms of welfare, investment, production, company profits, public revenues and leakage.     

Firms' and states’ responses to laxer environmental standards

On June 1, 2017, President Trump announced the United States' withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environmental standards affects the behavior of profit-maximizing firms. It finds that a relaxation of emission standards (i) may increase firms’ incentives to adopt clean technologies, but not to pollute less; (ii) may negatively affect industry profitability if it is perceived as temporary; and, when this is the case, (iii) the unilateral adoption of stricter standards by large states may increase the expected profitability of every firm.