"A series of cross-sectional multiple regressions of 1969 and 1970 U.S. mortality rates is presented for up to 112 SMSAs, against various demographic, environmental, and lifestyle variables. The basic data set is the same as that used by L. B. Lave and E. P. Seskin...for 1969, except that many more independent explanatory variables have been added. Since not all of these variables were available for all of the SMSAs, there were several data sets analyzed, depending on the selection of independent variables. The regression coefficients for air pollution tended to be quite sensitive to both the inclusion of the new independent variables and the selection of data sets."
This paper uses firm-level data about electric utilities to develop an empirical model of how electric utilities use and bank SO2 pollution permits under the Acid Rain Program. The empirical model considers emissions, fuels, and labor as variable inputs with quasi-fixed stocks of permits and capital. Consequently, substitution possibilities between the environment and other production factors can be measured and tested. The results reveal substantial substitution between emissions, permit stocks, capital, fuel, and labor. The empirical findings also indicate that firms bank permits primarily as a hedge against uncertainty and for other firm-specific reasons. Overall, the results suggest that cap-and-trade approaches can reduce the cost of meeting environmental goals by providing a mechanism for addressing regulatory and market risks and by signaling an appropriate price for factor use, especially irreversible capital investments.
In an attempt to achieve the positive externalities from a more knowledge-intensive economy, many developing countries have emphasized improvements in their science and technology (S&T) capabilities. China, in particular, has been experiencing an acceleration in its R&D intensity, causing many to wonder whether China is undergoing an S&T takeoff. In this paper, we simulate the effects of an S&T takeoff using a model of China that incorporates econometric estimates from 1500 industrial enterprises in China. We find that an S&T takeoff will lead to lower goods prices overall, but a larger drop in energy prices due to the energy-saving bias of R&D. The outcome is higher capital investment and economic growth; a substitution of energy for other factors of production; and greater energy consumption by households. Our findings underscore the importance of considering the economy-wide implications of a technology policy, recognizing that better technology does not necessarily imply a cleaner environment.
A model of environmental regulation under uncertainty is developed to compare the effect of price versus quantity rules upon technical change. Quantity rules tend to encourage more efficient levels of technical change.
In this paper we consider whether joint bidding for oil leases in U.S. Department of the Interior Outer Continental Shelf (OCS) auctions has been compatible with the maintenance of competition in these auctions. In 1975 eight major oil companies were banned from being co-bidders on any joint bids, apparently due to concern that joint bidding was fostering collusion. Focusing on eight major companies, five of which were banned from joint bidding in 1975, we present evidence which strongly suggests that joint bidding was consistent with more competitive rather than less competitive behavior.
Motivated by the nature of U.S. laws, a model is developed for a firm that maximizes expected profit and faces imperfectly enforceable pollution standards with imperfectly enforceable reporting requirements. Some previous models of imperfectly enforceable standards and taxes are special cases of this general mode. When the fine for violating the pollution standard is linear in excess pollution, the form will equate the marginal cost of control to the marginal fine rate, and thus actual pollution will be insensitive to enforcement parameters related to under-reporting. The more complex comparative statics that exist when the fine is non-linear are analyzed, and comparisons with other models are made.
This paper tests whether adopting the international norm ISO 14001 significantly impacts environmental performance in Quebec's pulp and paper industry. Using monthly data collected from 37 plants between 1997 and 2003, we show that: (i) ISO certification does not lead to a reduction in total suspended solid emissions or in quantity of rejected process water; (ii) discharge of biological oxygen demand decreases by about 9% following certification; (iii) contrary to the group of plants that did not adopt the ISO norm, the adopting plants did not experience a significant negative trend in emissions over our sample period. Moreover, our results show that the impact of ISO is very variable across adopting plants. If some plants considerably reduce emissions following certification, we find that most adopters either maintain or even increase emissions after being ISO accredited.
We consider the effect of rent seeking costs on the design of an efficient pollution tax. Earlier work has concluded that a pollution tax levied on an otherwise unregulated monopoly should always be less than the Pigouvian rate. This study demonstrates that if rent seeking costs are present, the appropriate discharge tax for a monopoly firm can equal or exceed the marginal damage from its pollution. Calculations reveal that under a wide range of conditions the ideal corrective tax for a monopoly firm is very close to the fully internalizing Pigouvian tax.
This note argues that Stanley Jevons in his “Theory of Political Economy” defined a concept closely related to what came to be known in the literature as “option value” introduced in a seminal paper by Weisbrod (Quart. J. Econom.78, 471–477 (1964)). Although this is a matter of interpretation, their contributions are probably closer to “option price” in modern economic terminology.
This study employs a parametric input distance function that incorporates both desirable and undesirable outputs to provide a more complete representation of the production technology from which environmentally sensitive productivity and efficiency measures can be generated. This framework also generates pollution abatement cost estimates that are useful for policy making. An input-based Malmquist index of productivity growth that appropriately credits the producer not only for increases in marketable or desirable outputs but also for the production of improved environmental quality through pollution abatement activities is derived from the input distance function. The method was applied to time series data from the Canadian pulp and paper industry. Our shadow price estimates indicate that the marginal cost to producers of pollution control has been rising. The main conclusion of this study is that productivity improvement, from the social viewpoint, has been stronger than conventional measures would suggest.
This paper reviews the impact of the literature in depletable resources and energy economics over the period 1973–1998, particularly the initial period of publication of the Journal of Environmental Economics and Management, 1974–1998. A discussion of prominent policy issues in this arena is provided, along with an indication of what academic economics papers have contributed to that debate. This is followed by a citation analysis of contributions in the fields of energy and exhaustible resource economics. For each of these two fields, a list of the top papers in each five-year period from 1974 to 1998 is presented, along with a list of the top journals in each decade, based on average citations per article. The top ten cited articles in the fields in the Journal of Environmental Economics and Management are also presented.
This paper considers whether the Journal of Environmental Economics and Management (JEEM) has had impact on the development and applications of the methods used to estimate economic values for non-marketed environmental resources. Journal editors control the research dialogue in a discipline and as a result have the potential to influence its scope and direction. At least four areas of research have been influenced by JEEM, the theory and practice of contingent valuation, the use of preference restrictions in valuation, the development and application of corner solution models, and the role of substitution between environmental resources for valuation.
This paper presents a model of the collective emission permit banking behavior of electricity-generating units affected by Title IV of the Clean Air Act Amendments of 1990. A rigorous treatment of the constraint that pollution permits cannot be borrowed from future allocations is introduced. This approach enables an analysis of the impact of future changes in electricity demand, regulations, and technologies on the present permit price and emissions level. The effect of uncertainty on the banking behavior is also explored.
This paper provides a characterization of meaningful environmental indices. Based on the interpretation of environmental indices as representations of a preference ordering on multi-dimensional environmental states, a meaningful index is defined as an index whose underlying preference ordering is independent of admissible transformations of the variables which describe environmental states. Admissible types of transformation are classified into categories of measurability and comparability, and these categories determine which indices are meaningful. One major finding is that indices in the form of an arithmetic mean are mostly not meaningful because the variables do not satisfy the required property of interval-scale unit comparability. For environmental variables in the non-negative domain whose observations are strictly positive and whose admissible transformations are mere expansions meaningful indices take the form of a geometric mean.
The U.S. EPA has initiated the 33/50 program to encourage firms to voluntarily reduce releases and transfers of 17 toxic chemicals. This paper evaluates the factors leading to participation in this program to assess its potential to augment more traditional command and control regulation. The results show that large firms with substantial toxic releases in unconcentrated industries are the most likely participants. The results also indicate that public information and awareness plays an important role and that EPA and other regulators can improve environmental performance by encouraging competition in environmental quality.
We examine incentives for firm participation in the EPA's 33/50 Program and the impact of this Program on firm emissions. We use a sample of manufacturing firms from 19 industry groups that were invited to participate in the Program in 1991. We find that while the Program may have attracted some of the most polluting firms, the decline in emissions observed between 1991 and 1995 was the result of an independent trend rather than a direct consequence of the Program as argued by an earlier study published in this Journal.
This paper examines the motivations for participation in the voluntary 33/50 Program and the program's impact on the toxic releases and economic performance of firms in the U.S. chemical industry. It demonstrates that the benefits due to public recognition and the potentially avoided costs of liabilities and compliance under mandatory environmental regulations provide strong incentives for participation. After controlling for sample selection bias and the impact of other firm-specific characteristics, this paper shows that program participation led to a statistically significant decline in toxic releases over the period 1991–93. The program also had a statistically significant negative impact on the current return on investment of firms, but its impact on the expected long run profitability of firms was positive and statistically significant.
The large commitment of government resources for environmental protection has prompted concern for the ultimate fiscal incidence of environmental programs, including the federal wastewater treatment grant program. An earlier study of EPA Region VII (Iowa, Missouri, Kansas, and Nebraska) concluded that the federal grants are likely to redistribute income from the middle income classes to primarily the upper income classes. Using a similar methodology, this study shows that for the Boston metropolitan area, there is a substantial redistribution from upper to lower and middle income groups.
This paper presents a new random utility model of recreation demand that addresses the unobserved characteristics of recreation sites. Most random utility recreation demand models implicitly assume that all relevant site characteristics are observed by the researcher or allow for the possibility of unobserved characteristics in a restrictive manner. Unlike traditional approaches, the proposed model avoids the bias unobserved site characteristics can cause in welfare estimates and the travel cost parameter. Monte Carlo simulations motivate the proposed model by showing that it provides more efficient parameter estimates. In contrast, existing methods yield less efficient estimates and biased standard errors that overstate precision. An empirical application to recreational fishing in Wisconsin illustrates the potential importance of this modeling innovation. In this application, controlling for unobserved characteristics is important for a range of model specifications.
Title III of the 1990 Clean Air Act Amendments requires the Environmental Protection Agency to regulate 189 air toxics, including emissions from by-product coke ovens. Economists criticize the inefficiency of uniform standards, but Title III makes no provision for flexible regulatory instruments. Environmental health scientists suggest that population exposure, not necessarily ambient air quality, should motivate environmental air pollution policies. Using an engineering-economic model of the United States steel industry, we estimate that an exposure-based policy can achieve the same level of public health as coke oven emissions standards and can reduce compliance costs by up to 60.0%.
In this research, we evaluate the incentive effects of five environmental policy instruments to promote the development and adoption of advanced pollution abatement technology in a heterogenous industry. From most to least incentive, the policy instruments can be rank-ordered as follows: (i) auctioned permits; (ii) emissions taxes and subsidies; (iii) issued marketable permits; (iv) performance standards. Including performance standards in this list necessitates the assumption that they are differentiated between heterogeneous firms before the technology adoption in a way which replicates the initial emissions control distribution of the efficient incentive-based instruments. With the starting point normalized in this fashion, the instrument rankings are invariant with respect to the size of firms, the size of the industry, or the industry's abatement cost structure.
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
The relationship between a firm's technology and its marginal abatement cost (MAC) curve is explored. Even under the simplest specifications, the MAC curve will be kinked at some point except under a special assumption which, in reality, could easily be violated. The nondifferentiability implies that the choice of instrument under uncertainty may depend on the targeted level of emissions reduction. Also, stability conditions for dynamic tax mechanisms may be violated in the neighborhood of the kink point. A policy implication is that in some cases output restrictions are as efficient as emissions restrictions, in contrast to previous results.
This paper examines how the existence of an upstream abatement technology sector affects optimal environmental policy. We explore whether the policy should be especially stringent in order to spur a successful export industry based on abatement technology. Furthermore, we investigate if a stringent policy can be used to increase competition in the upstream sector. Our point of departure is a three-stage game between a government in a country with a polluting downstream industry, and a limited number of upstream firms supplying abatement technologies. The government moves first, and may use its environmental policy strategically to influence the behavior of the upstream technology firms. We find that an especially stringent environmental policy towards the polluting downstream sector may be well founded, as it increases competition between the technology suppliers, leading to lower abatement costs. However, to our surprise, an especially stringent environmental policy is not a particularly good industrial policy with respect to developing successful new export sectors based on abatement technology.
This paper extends earlier work on the standards and prices approach to pollution control by considering simultaneously spatial considerations, interactive pollutants, and joint abatement costs. The form of environmental constraints appropriate to water pollution problems is discussed in detail and the implications for the standards and prices approach to water pollution control are assessed. The presence of interactive pollutants and joint abatement costs is shown to have important implications for both the theoretical properties and the implementation of the standards and prices approach.
Mosquito abatement is a public good for which there is a long history of operating expenditures and measured performance. A simultaneous model of mosquito abundance and abatement response is developed. Parameters are estimated using time-series, cross-section data from 30 districts. Both insecticides and ditching have contributed to reduced mosquito populations. There is evidence that district managers may have invested in excess permanent control (ditching) relative to use of insecticides, and that present abatement expenditures for the average district are excessive.
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.
This paper estimates abatement cost functions for reduction of nitrogen oxide emissions from energy production in three industrial sectors. The analysis uses a unique plant-level data set comprising 162 abatement measures implemented by 114 combustion plants and followed annually over the period 1990–96. The analyzed plants became subject to an environmental charge on nitrogen oxide emissions in 1992. The empirical findings suggest that extensive emission reductions have taken place at a zero or very low cost and that effects of learning and technological development in abatement has been present during the analyzed period. The findings support the hypothesis that “low-hanging fruit” is abundant in NOx abatement, however, give little support for the presence of true “win–win” opportunities.
Widespread publicity of international conflict over transfrontier pollutants, such as acid deposition and the November 1986 chemical spill in the Rhine River, has increased the public's awareness of the need to devise abatement strategies appropriate for transnational pollution. This article develops a general equilibrium approach for analyzing the economic impacts of selected abatement strategies. The model includes internationally mobile goods, capital and pollution flows, and flexible output and factor prices. The general equilibrium approach provides policymakers with important information which is usually not revealed by a partial equilibrium approach. That is demonstrated by applying the model to the North American acid deposition issue.
One can say very little about the relative merits of temporary versus permanent salt marsh mosquito control from the Carlson and DeBord study (J. Environ. Econ. Manag. 3, 142–153 (1976)). Their conclusion that temporary control is more cost effective than permanent control is suspect because of their interpretation and use of the data which entered their analyses and because of their interpretation of analytical results.
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.
Two basic and competing approaches for measuring the benefits of pollution abatement have found support in the recent literature-the property value approach and the health damage function approach. The purpose of this paper is to show that conditions will often exist when the property value approach will not accurately measure all benefits and conditions will always be present that cause the health damage function approach to underestimate benefits. In general, neither approach can stand alone. It is possible, however, that the two approaches can be combined in such a way as to improve the measurement of abatement benefits. We present an approach for combining these two methods and do so by introducing an “information coefficient” that measures the degree of knowledge about pollution effects held by the public. Approaches to estimating the information coefficient are suggested.
Existing projections of the optimal share of carbon sequestration in an overall portfolio of greenhouse-gas mitigation strategies almost all assume the carbon price to be constant over time. This paper shows analytically that if the price instead increases over time—consistent with projections from integrated assessment models—it becomes optimal to delay certain sequestration projects, whereas the optimal timing of energy-based abatement projects remains unchanged. As a result, the optimal share of sequestration falls, and significantly so. Calibrating our analytical model, we find that a modest, 3% rate of price increase results in about a 60% reduction in the optimal sequestration share relative to constant-price projections. Numerical simulations based on predicted carbon-price paths from Nordhaus’ RICE01 model indicate quantitatively similar reductions under an economically efficient scenario, and much larger reductions (80–100% for up to 80 years) under a scenario that aims to limit the atmospheric CO2 concentration to double its pre-industrial level.
Emission credit trading programs have been advanced as an improvement over command-and-control pollution abatement programs. One advantage claimed for trading is that it increases firms' incentives to develop and adopt more effective pollution control technologies. Within the context of one model that has been used to support this claim, this paper shows that the introduction of trading may actually decrease some firms' incentives to adopt the new technology.
This paper reexamines the neoclassical environmental growth model of Forster to gain insights into the dynamic relationships among pollution, abatement effort, and economic development. Whereas the model has heretofore been used to examine steady-state levels of capital, consumption, and environmental quality, it also provides a theoretical basis for recent empirical research on J curves for abatement effort and inverted U curves for pollution.
This paper explores the significance of policy-induced technological change for the design of carbon-abatement policies. We derive analytical expressions characterizing optimal CO2 abatement and carbon tax profiles under different specifications for the channels through which technological progress occurs. We consider both R&D-based and learning-by-doing-based knowledge accumulation, and examine each specification under both a cost-effectiveness and a benefit-cost policy criterion. We show analytically that the presence of induced technological change (ITC) implies a lower time profile of optimal carbon taxes. The impact of ITC on the optimal abatement path varies. When knowledge is gained through R&D investments, the presence of ITC justifies shifting some abatement from the present to the future. However, when knowledge is generated through learning-by-doing, the impact on the timing of abatement is analytically ambiguous. Illustrative numerical simulations indicate that the impact of ITC upon overall costs and optimal carbon taxes can be quite large in a cost-effectiveness setting but typically is much smaller under a benefit-cost policy criterion. The impact of ITC on the timing of abatement is very weak, and the effect (applicable in the benefit-cost case) on total abatement over time is generally small as well, especially when knowledge is accumulated via R&D.
This paper uses establishment-level data from the US Census Bureau's Pollution Abatement Costs and Expenditures (PACE) survey to investigate the effects of the Clean Air Act and its amendments on the air pollution abatement (APA) capital expenditures and operating costs of manufacturing plants from 1979 to 1988. Results, based on some 90,000 observations, show that heavy emitters of the “criteria” air pollutants that were subject to more stringent regulation (due to county non-attainment of national ambient air quality standards) generally had higher APA expenditures, with estimates that imply hundreds of thousands of dollars of additional annual costs for the abatement of a specific pollutant for the average affected plant. Establishment characteristics, such as the size of the facility, appear to affect the intensity of this regulation and enforcement. While this study validates the PACE data to a certain extent, potential limitations are also revealed. The findings of this paper support those of a number of recent studies.
This paper employs analytical and numerical general equilibrium models to assess the efficiency impacts of two policies to reduce U.S. carbon emissions -- a carbon tax and a carbon quota -- taking into account the inter- actions between these policies and pre-existing tax distortions in factor markets. We show that tax interactions significantly raise the costs of both policies relative to what they would be in a first-best setting. In addition, we show that these interactions put the carbon quota at a signficant efficiency disadvantage relative to the carbon tax: the costs of reducing emissions by 10 % are more than three times higher under the carbon quota than than under the carbon tax. This disadvantage reflects the inability of the quota policy to generate revenue that can be used to reduce pre-existing dis- tortionary taxes. Indeed, second-best considerations severely limit the potential of a carbon quota to general overall efficiency gains. Under our central estimates, a non-auctioned carbon quota (or set of grandfathered carbon emissions permits) cannot increase efficiency unless the marginal benefits from avoided future climate change are at least $25 per ton of carbon abatement. Most estimates of these marginal environmental benefits are well below $25 per ton. Thus, our analysis suggests that any carbon abatement by way of a non-auctioned quota will be efficiency-reducing. In contrast, a revenue-neutral carbon tax is found to be efficiency-improving so long as marginal environmental benefits are positive.
While other contributions have analyzed environmental innovations with point of departure in the polluting firm, we introduce an upstream market for environmental innovations. A strong environmental policy may then benefit industry competitiveness through its effect on entry into the upstream market.In our analysis we hope to draw attention to an often overlooked issue. Innovation of new pollution abatement techniques requires a new market to develop. If policy is lax, few firms enter and are forced to charge a high mark-up in order to cover development costs. On the other hand, a stringent environmental policy induces higher demand and allows a lower mark-up. Consequently, even if the polluting industry in question is export oriented, an especially stringent policy may be welfare enhancing.
This paper is concerned with the control of aircraft noise. Some brief remarks are made on the relationship of aircraft noise problems to the theoretical approaches to externalities. We note in particular that an effluent charge is the most practical way to deal with the problem. A linear programming technique is used to find the bundle of noise-reducing options that minimizes the cost of achieving noise reduction goals, given an upper limit on service reduction. A rate-of-return criterion is imposed on the l.p. solution. Shadow prices are used to generate charges on the airlines. This provides a stimulus for abatement without dictating actual methods. Implicit in the cost parameters are prices of aircraft fuel. We assess the attractiveness of the abatement options with increasing fuel prices. The mechanics of the actual implementation of the charge in the airline industry is examined. We conclude that the institution of a plan such as the one proposed here will provide control of aircraft noise in a socially efficient manner.
We examine measures of environmental regulatory activity (inspections and enforcement actions) and levels of air and water pollution at approximately 300 U.S. pulp and paper mills, using data for 1985-1997. We find that levels of air and water pollution emissions are affected both by the benefits from pollution abatement and by the characteristics of the people exposed to the pollution. The results suggest substantial differences in the weights assigned to different types of people: the benefits received by out-of-state people seem to count only half as much as benefits received in-state, although their weight increases if the bordering state's Congressional delegation is strongly pro-environment. Some variables are also associated with greater regulatory activity being directed towards the plant, but those results are less consistent with our hypotheses than the pollution emissions results. One set of results was consistently contrary to expectations: plants with more nonwhites nearby emit less pollution. Some of our results might be due to endogenous sorting of people based on pollution levels, but an attempt to examine this using the local population turnover rate found evidence of sorting for only one of four pollutants.