In this paper I survey and discuss recent developments on the incentives provided by environmental policy instruments for both adoption and development of advanced abatement technology. A main ...conclusion to be drawn from the literature is that under competitive conditions market based instruments usually perform better than command and control. Moreover, taxes may provide stronger long term incentives than tradable permits if the regulator is myopic. If the government can anticipate new technology or is able to react on it optimally, regulatory policies by virtue of administered prices (taxes) and policies by setting quantities (issuing tradable permits) are (almost) equivalent. The literature also shows that under competitive conditions there is no difference between auctioning permits and grandfathering. Moreover, timing and commitment of environmental policy is not crucial for adoption under competitive conditions. Commitment has positive incentive effects, however, if an R&D sector has market power. In the presence of market imperfections the ranking of the different policy instruments is ambiguous.
We show that for a broad class of technologies the relationship between policy stringency and the rate of technology adoption is inverted U-shaped. This happens when the marginal abatement cost (MAC) ...curves of conventional and new technologies intersect, which invariably occurs when emissions are proportional to output and technological progress reduces emissions per output. This outcome does not result from policy failure. On the contrary, in social optimum, the relationship between the slope of the marginal damage curve and the rate of technology adoption is also inverted U-shaped. Under more general conditions, these curves can look even more complicated (e.g., such as inverted W-shaped).
We investigate incentives through environmental policy instruments to adopt advanced abatement technology. First, we study the case where the regulator makes long-term commitments to policy levels ...and does not anticipate arrival of new technology. We show that taxes provide stronger incentives than permits, auctioned and free permits offer identical incentives, and standards may give stronger incentives than permits. Second, we investigate scenarios where the regulator anticipates new technologies. We show that with taxes and permits the regulator can induce first-best outcomes if he moves after firms have invested, whereas this does not always hold if he moves first.
The Common Fisheries Policy (CFP) of the European Union has neither lived up to its aim of enhancing the sustainability of fish stocks nor that of improving the economic competitiveness of the ...fishing industry. This paper discusses the failure of the CFP from a biological, economical, legal and political perspective.
We investigate the interplay between environmental policy, incentives to adoptnew technology, and repercussions on R&D. We study a model where a monopolistic upstream firm engages in R&D and sells ...advanced abatement technology to polluting downstream firms. We consider four different timing and commitment regimes of environmental tax and permit policies: ex post taxation (or issuing permits), interim commitment to a tax rate (a quota of permits) after observing R&D success but before adoption, and finally two types of ex antecommitment before R&D activity, one with a unique tax rate (quota of permits), the other one with a menu of tax rates (permit quotas). We study the second best tax and permit policies and rank these with respect to welfare. In particular, we find that commitment to a menu of tax rate dominates all other policy regimes. Copyright Springer 2005
Many environmental problems, notably arising from agriculture, can be classified as non-point source pollution problems. In this paper we present results of an experimental study on the performance ...of three mechanisms designed to deal with such problems: collective fining, random fining, and a tax-subsidy scheme. We find that the fining schemes induce under-abatement, a feature being enforced with experience. We further elicit the participants' risk attitude and show that the performance of collective fining is not affected by the subjects' risk preferences. Under a system based on random fining the performance of the mechanism worsens in the presence of risk seeking subjects. However, coordination on over-abatement under the tax-subsidy can be alleviated if subjects are risk averse.
We examine how refunding emission taxes to firms dependent on market shares should be designed. While refunding is harmful under perfect competition, a first-best self-financing tax/tax-refunding ...scheme exists if the marginal damage from pollution exceeds the marginal distortion in an imperfectly competitive output market with symmetric firms. Under pre-investment in cleaner technology with short-term abatement opportunities, a first-best refunding scheme exists if pollution refunding can be made dependent on both market and investment shares.
Many important environmental policies involve some combination of emission controls and ambient environmental quality standards, for instance SO2 emissions are capped under Title IV of the U.S. Clean ...Air Act Amendments while ambient SO2 concentrations are limited under National Ambient Air Quality Standards (NAAQS). This paper examines the relative performance of emissions standards and ambient standards when the natural environment provides stochastic environmental services for assimilating pollution. For receiving media characterized by greater dispersion in the distribution of environmental services, the optimal emissions policy becomes more stringent, whereas the optimal ambient policy generally becomes more lax. In terms of economic performance, emissions policies are superior to ambient policies for relatively non-toxic pollutants, whereas ambient standards welfare dominate emissions standards for sufficiently toxic pollutants. In the case of combined policies that jointly implement emissions standards and ambient standards, we show that the optimal level of each standard relaxes relative to its counterpart in a unilateral policy, allowing for greater emissions levels and higher pollution concentrations in the environmental medium.
In this paper, we make use of a unique dataset collected at the central train station of the city of Kiel, Germany. Group tickets are used by individual proposers looking for co-travelers to share ...the ride with shortly before the train departure. The shared ride is offered for a fixed price. We observe that the prevailing price offer corresponds to an equal split of the ticket cost between the maximum possible number of co-travelers. This result is remarkable, because the positions of the bargaining parties are clearly asymmetric and formation of the full group is not guaranteed.
► We investigate a naturally occurring bargaining situation ► The equal split is the clear mode of the observed bargaining outcomes. ► This result is remarkable, since the positions of participants are clearly asymmetric. ► We discuss our findings in relation to the evidence from laboratory experiments.
Fish stocks can be considered as natural capital stocks providing harvestable fish. Fishing at low stock sizes means borrowing from the natural asset. While fishing a particular quantity generates ...immediate profits and income, an interest rate has to be paid in terms of foregone future fishing income, as the fish stock's reproductive capacity remains low and fishing costs stay high. In this paper we propose to apply the concept of shadow interest rate to quantify the degree of overfishing. It incorporates the relevant biological and economic information and compares across fish stocks. We calculate the shadow interest rates for 13 major European fish stocks and find these rates to range from 10% to more than 200%. The concept of the shadow interest rate can be used to make the economic consequences of overfishing transparent and to evaluate the profitability of short-term catch reductions as investments in natural capital stocks.
Display omitted
► We propose the concept of shadow interest rate to quantify the degree of overfishing. ► Shadow interest rates incorporate the relevant biological and economic information. ► Shadow interest rates compare across fish stocks. ► We quantify shadow interest rates for 13 major European fish stocks. ► We find shadow interest rates between 10% and more than 200%.
PDF
