Hartwick's rule and maximin paths when the exhaustible resource has an amenity value

This paper studies the maximin paths of the canonical Dasgupta–Heal–Solow model when the stock of natural capital is a direct argument of well-being, besides consumption. Hartwick's rule then appears as an efficient tool to characterize solutions in a variety of settings. We start with the case without technical progress. We obtain an explicit solution of the maximin problem in the case where production and utility are Cobb–Douglas. When the utility function is CES with a low elasticity of substitution between consumption and natural capital, we show that it is optimal to preserve forever a critical level of natural capital, determined endogeneously. We then study how technical progress affects the optimal maximin paths, in the Cobb–Douglas utility case. On the long run path of the economy capital, production and consumption grow at a common constant rate, while the resource stock decreases at a constant rate and is therefore completely depleted in the very long run. A higher amenity value of the resource stock leads to faster economic growth, but to a lower long run rate of depletion. We then develop a complete analysis of the dynamics of the maximin problem when the sole source of well-being is consumption, and provide a numerical resolution of the model with resource amenity. The economy consumes, produces and invests less in the short run if the resource has an amenity value than if it does not, whereas it is the contrary in the medium and long runs. However, and without surprise, the resource stock remains for ever higher with resource amenity than without.     

The impact of economic development on environmental degradation in Qatar

This study investigates the environmental Kuznets curve (EKC) hypothesis by employing the ecological footprint (EF) as an indicator of environmental degradation in Qatar over the 1980–2011 period. The results of the Autoregressive Distributed Lag (ARDL) estimation with structural breaks reveal that there is a long run relationship among the selected variables with a significant shift in the cointegration vector in 1996. The comparison of the short and long-run income elasticities indicates that the EKC hypothesis is not valid in Qatar. In particular, the long run effect of income is greater than its short run effect, which provides evidence of a monotonic relationship between EF and real GDP per capita. Moreover, the oil price and trade openness have a positive and negative long run impact on ecological footprint, respectively. We further investigate the robustness of the results by employing the Toda–Yamamoto causality tests and the estimation with regime approach. The outcome of TY shows that income and oil price increase significantly the ecological footprint. Moreover, the results of the estimation with two regimes (1980–1996 and 1997–2011) show that the impact of real GDP on the EF in the second regime is higher than the first regime, which confirm the ARDL estimation results.     

Optimal pollution in the presence of adjustment costs

This paper explores optimal pollution control when pollution is considered a stock and costs of treating pollution are a function both of the level and rate of change of pollution control. It is shown that even if the long run optimum stock of pollution is below the initial level adjustment costs may imply an optimally increasing stock of pollution in the short run. The results obtained are contrasted with those which emerge when adjustment costs are absent and when damages are taken to be a function of the flow of pollution; the appropriate tax rates of polluting discharges are examined.     

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.     

Control theory applied to natural and environmental resources an exposition

Four control theory models of natural and environmental resource use, drawn from the existing literature, are developed in a manner to emphasize their technical and decentralized interpretive similarity. Renewable, nonrenewable, and amenity resource use are treated as closely related problems of optimal (biological, earth material, ecological, or environmental) capital allocation over time. Thus nonrenewable resources, and the problem of exhaustion, are just limiting (zero growth) cases of renewable resources, and the problem of species extinction. Just as exhaustion can be optimal, extinction can be optimal. Waste recycling is treated as part of the problem of optimal regeneration of “sclean” environmental capital; wilderness use as a problem of managing the regeneration of ecological capital.     

Optimal investment policies with exhaustible resources: An information-based model

An information-based model of the “optimal control” type is developed using concepts from information theory to explore the dynamics of fossil resource exhaustion and the phenomenon of substitution by other forms of capital and technological knowledge. All exhaustible resources stocks and forms of capital (and knowledge) are taken to be equivalent to forms of information in the physical sense. It is shown that, with optimal policies, the planning period, or cycle, has several distinct phases, with different optimal investment patterns. The model has two important qualitative implications: (1) economic growth rates are inherently discontinuous and (2) the model predicts an evolutionary structural change, viz., the creation of a new sector in response to the progressive exhaustion (or obsolescence) of previously essential resources or capital stocks. A multiperiod extension is suggested, leading to a tentative explanation for the Kondratieff long-wave phenomenon.     

The short and long run effects of tied foreign aid on pollution abatement, pollution and employment: A pilot model

There exists in the literature a presumption that tied foreign aid can be used effectively to reduce cross-border pollution. Focusing, in contrast to the received literature, on the interaction between the public and private provisions of pollution abatement in the recipient country, we question the effectiveness of tied foreign aid in reducing pollution. In this context, we obtain many novel and policy relevant insights. Allowing for changes in labour employment and distinguishing between short and long run effects, tied foreign aid is shown to crowd out the private provision for pollution abatement in the short run. In the long run, tied foreign aid raises employment and therefore may be desirable for the recipient but undesirable for the donor country because it also raises pollution. The results change drastically if only the government provides pollution abatement.     

Growth and pollution convergence: Theory and evidence

Stabilizing pollution levels in the long run is a pre-requisite for sustainable growth. We develop a neoclassical growth model with endogenous emission reduction predicting that, along optimal sustainable paths, pollution growth rates are (i) positively related to output growth (scale effect) and (ii) negatively related to emission levels (defensive effect). This dynamic law reduces to a convergence equation that is empirically tested for two major and regulated air pollutants – sulfur oxides and nitrogen oxides – with a panel of 25 European countries spanning the years 1980–2005. Traditional parametric models are rejected by the data. More flexible regression techniques confirm the existence of both the scale and the defensive effect, supporting the model predictions.     

A cultural model of private provision and the environment

This paper analyses an overlapping generations model of environmental externalities and capital accumulation where private contributions to environmental quality are motivated by a desire to socialize others into environmental attitudes. In this framework, the formation of environmental preferences is the result of a cultural transmission process depending on the extent of private contributions. In the short run, we show that three equilibria may arise: a first one where all green agents contribute to the environment, a second one where nobody contributes to the environment and a third interior one. We show that the capital-accumulation process and the change in preferences that occur in this economy lead the interior equilibrium to be selected, in which some, but not all, green agents contribute to the environment. The model thus provides an economic rationale for the gap between the number of people who care about the environment and the number who adopt pro-environmental behaviours. We also show that the fraction of contributors rises with capital, so that we explain the negative relationship between this gap and country income. Last, we show that this gap is particularly detrimental for welfare, and analyse the impact of a number of public policies.     

Assessment of drain water receiving effluent from tanneries and its impact on soil and plants with particular emphasis on bioaccumulation of heavy metals

In the present study, impact of tannery and other industrial effluents on the physico-chemical characteristics of loamy drain water and their consequent impact on soil and plants irrigated with effluent have been studied. The study reveals most of the parameter pH, BOD5 and COD at sampling station I was higher than station II. Waste water quality at both Stations I and II exceeded prescribed limits (BIS) for safe disposal of effluents into the surface water Samples of soil and vegetables from the land irrigated with loamy drain water has been collected and analyzed for Cu, Zn, Ni, Cr Pb and Cd. The different metals showed different enrichment factor for loamy drain water irrigated soil and are as follows: Cd 30% (max), Pb 26%, Zn 18%, Cr 5%, Cu 5%, Ni 2% (min). For plant samples collected at polluted sites are Ni 46% spinach (whole plant) (max), Zn 42% spinach (whole plant), Cr 39% spinach (whole plant), Cu 33% spinach (whole plant), Pb 20% potato tuber, Cd 20% potato tuber (min). The levels of Zn 145, Cu 5.25, and Ni 39.25 microg/ g in spinach, Pb 29.25, Cr 38. 25 and Cd 3.2 microg/g in potato tuber grown on polluted soil irrigated with contaminated drain water were found more than the reference value, which may create chronic health hazard problem to human and cattle through food chain in long run. Accumulation of toxic heavy metals may be build up in the agriculturally productive land where it is treated with contaminated effluent enrich with metals in turn bio-concentrated in the edible fodder/plants.     

The backward incidence of pollution control in a rigid-wage economy

The backward incidence of pollution controls onto the polluting and nonpolluting industries is examined in a two-sector, rigid-wage economy characterized by unemployment in both the short run and the long run. As expected, more restrictive pollution controls result in contraction in the polluting sector and expansion in the nonpolluting sector. Somewhat unexpectedly, national income may rise with stronger pollution controls, if the polluting industry is relatively capital intensive.     

Economic aspects of global change impacts and response strategies in the coastal zone of The Netherlands

Economic aspects of possible land use strategies and protection measures in coastal zones as a response to global environmental change are examined. First, some key elements are mentioned that are of critical importance for water and land management in coastal zones. Next, various socio-economic repercussions are discussed. In this context, research needs will be addressed. Subsequently, these issues are considered for the case of The Netherlands. It is concluded that integrated modelling and analysis is just starting and needs to receive more attention in order to study long run economic costs, benefits and changes in coastal zones.     

The dynamics of shifting cultivation captured in an extended Constrained Cellular Automata land use model

This paper presents an extension to the Constrained Cellular Automata (CCA) land use model of White et al. [White, R., Engelen, G., Uljee, I., 1997. The use of constrained cellular automata for high-resolution modelling of urban land-use dynamics. Environment and Planning B: Planning and Design 24(3), 323–343] to make it better suited for modelling the dynamics of shifting cultivation. In the extended model the time passed since the last land use transition of a location is a factor of its land use potential. The model can now account for the gradual decrease in soil fertility after an area of forest has been cleared for cultivation and also capture the process of regeneration once the plot is fallowed. The model is applied for the Ruhunupura area of Sri Lanka where chena, a particular practice of shifting cultivation, is a common land use that dominates the landscape dynamics. The model is calibrated for the period 1985–2001 and the results are assessed in terms of location to location overlap as well as structural similarity at multiple scales. These results give confidence in the representation of land use dynamics for the main land use classes. On the basis of a long term scenario run for the period 2001–2030, it is verified that the model captures stylized facts related to chena dynamics, in particular shortening fallow periods and increasingly long cultivation periods of chena, as a result of increasing land use pressure.     

Energy taxes and endogenous technological change

This paper studies the effects of a tax on energy use in a growth model where market structure is endogenous and jointly determined with the rate of technological change. Because this economy does not exhibit the scale effect (a positive relation between TFP growth and aggregate R&D), the tax has no effect on the steady-state growth rate. It has, however, important transitional effects that give rise to surprising results. Specifically, under the plausible assumption that energy demand is inelastic, there may exist a hump-shaped relation between the energy tax and welfare. This shape stems from the fact that the reallocation of resources from energy production to manufacturing triggers a temporary acceleration of TFP growth that generates a √-shaped time profile of consumption. If endogenous technological change raises consumption sufficiently fast and by a sufficient amount in the long run, and households are sufficiently patient, the tax raises welfare despite the fact that—in line with standard intuition—it lowers consumption in the short run.     

Is there really a green paradox?

In the absence of a CO₂ tax, the anticipation of a cheaper renewable backstop increases current emissions of CO₂. Since the date at which renewables are phased in is brought forward and more generally future emissions of CO₂ will decrease, the effect on global warming is unclear. Green welfare falls if the backstop is relatively expensive and full exhaustion of fossil fuels is optimal, but may increase if the backstop is sufficiently cheap relative to the cost of extracting the last drop of fossil fuels plus marginal global warming damages as then it is attractive to leave more fossil fuels unexploited and thus limit CO₂ emissions. We establish these results by analyzing depletion of non-renewable fossil fuels followed by a switch to a clean renewable backstop, paying attention to timing of the switch and the amount of fossil fuels remaining unexploited. We also discuss the potential for limit pricing when the non-renewable resource is owned by a monopolist. Finally, we show that if backstops are already used and more backstops become economically viable as the price of fossil fuels rises, a lower cost of the backstop will either postpone fossil fuel exhaustion or leave more fossil fuel in situ, thus boosting green welfare. However, if a market economy does not internalize global warming externalities and renewables have not kicked in yet, full exhaustion of fossil fuel will occur in finite time and a backstop subsidy always curbs green welfare.     

On the profitability of exhausting natural resources

Two models are treated. One deals with a mineral deposit, the other with a biological substance. It is assumed that in the deposit there exist all grades of ore, and that, the biological substance grows as long as a positive quantity is left. The course of investment, and production decisions is derived when capital is expressly built up for the purpose of exploitation of the specific resource. Within the simple linear control problem it is concluded that exhaustion is never profitable. The steady state in the biological case is discussed and compared to maximum sustainable yield.     

Is there really a green paradox?

In the absence of a CO₂ tax, the anticipation of a cheaper renewable backstop increases current emissions of CO₂. Since the date at which renewables are phased in is brought forward and more generally future emissions of CO₂ will decrease, the effect on global warming is unclear. Green welfare falls if the backstop is relatively expensive and full exhaustion of fossil fuels is optimal, but may increase if the backstop is sufficiently cheap relative to the cost of extracting the last drop of fossil fuels plus marginal global warming damages as then it is attractive to leave more fossil fuels unexploited and thus limit CO₂ emissions. We establish these results by analyzing depletion of non-renewable fossil fuels followed by a switch to a clean renewable backstop, paying attention to timing of the switch and the amount of fossil fuels remaining unexploited. We also discuss the potential for limit pricing when the non-renewable resource is owned by a monopolist. Finally, we show that if backstops are already used and more backstops become economically viable as the price of fossil fuels rises, a lower cost of the backstop will either postpone fossil fuel exhaustion or leave more fossil fuel in situ, thus boosting green welfare. However, if a market economy does not internalize global warming externalities and renewables have not kicked in yet, full exhaustion of fossil fuel will occur in finite time and a backstop subsidy always curbs green welfare.     

Adjusting to Climate Change: Implications of Increased Variability and Asymmetric Adjustment Costs for Investment in Water Reserves

In this paper we study the determination of optimal water storage capacity in a region, taking into account that the supply of the resource, the flow into the reserve, is uncertain, that a measure of the uncertainty, the variance, is likely to increase with climate change, that building capacity is costly, and that the development of water resources may entail alsoenvironmental costs. We find that water storage capacity in the long run ispositivelyrelated to increases in uncertainty if the marginal benefit of water withdrawal isconvexand that, for the case of costly reversibility of investment, a range of inaction for investment appears, and the stability of water storage capacity with respect to changes in variance increases.     

The impact of detritivorous fishes on a mangrove estuarine system

Sundarban mangrove ecosystem in India is one of the largest detritus based ecosystem of the world and it supplies the detritus and nutrients to the adjacent Hooghly-Matla estuarine complex. In this estuary a group of fish completely detritivorous in nature, belonging to the genus Mugil spp. is present. This group of fish is expected to have important effects on the trophic dynamics of ecosystems, but exact nature of these effects is not known. In order to study the impact that detritivory by fish may have on the estuarine food chain, we developed mathematical formulations. We run two models, one with phytoplankton, zooplankton, carnivorous fish, detritus and nutrient and without this group of fish and a second one after including this fish in the system. In our model this group of fish has no major impact on primary productions of the estuarine system but has extensive role in total fish production. Coexistence of detritivorous fish and carnivorous fish occurs within reasonable parameter range. We have tested different growth rates of phytoplankton, grazing rates and predation rates of zooplankton, detritivorous fish and carnivorous fish for total system equilibrium. Carnivorous fish predation rate on detritivorous fish and detritivorous fish grazing rate on detritus are very important. Different foraging ratios are also tested in this study. Foraging preference of carnivorous fish on detritivorous fish appears significant for the system equilibrium.     

Resource extraction and recycling with environmental costs

Extraction and use of a natural resource is assumed to affect the environment adversely. A perfect substitute for the resource can be supplied through a recycling process. Recycling may also have harmful effects on the environment, but to a smaller extent than extraction. The optimal path of extraction and recycling is studied under various assumptions about the environmental effects of recycling and the assimilative capacity of the environment. In particular, it is shown how the cost of recycling will affect initial resource extraction as well as the environmental quality at the time of resource exhaustion and in the long-run stationary state.