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Economic Inequality and the Value of Nature
Abstract
Understanding what influences the value of nature is crucial for informing environmental policy. From a sustainability perspective, economic valuation should not only seek to determine a society's willingness to pay for environmental goods to devise an efficient allocation of scarce resources, but should also account for distributional effects to ensure justice. Yet, how economic inequality affects the value of non-market environmental goods remains understudied. Combining recently developed theoretical results with empirical evidence, this Commentary shows that more equal societies have a higher valuation for environmental public goods and that non-market benefits of environmental policy accrue over-proportionally to poorer households. On this ground, we discuss implications for environmental valuation, management and policy-making and identify a number of fruitful areas for future research. We conclude that environmental valuation should explicitly account for economic inequality, and that encompassing assessments of the distributional effects of environmental policies must consider the distribution of non-market environmental benefits.
... This literature has generally focused on efficiency, namely on maximizing the total net social welfare from alternative environmental policies, while treating as a second-order question the distribution of the benefits and costs of these policies across different social groups, and the resulting equity or fairness issues. This is so despite social welfare depending on both efficiency and distributional aspects (Drupp et al., 2018;Flores & Strong, 2007). According to Cai et al. (2010) the economic value of (and overall support for) an environmental policy cannot be estimated without considering the policy's distributional impacts. ...
... These studies have typically relied on a simple approach (Adler, 2016;Nyborg, 2014) based on adjusting the estimated welfare measures by applying some predetermined "distributional or equity weights" that tend to give more importance to the views of those with a low compared to a high level of income (Nurmi & Ahtiainen, 2018). Although simple, this approach has been heavily criticized for taking a strong normative stance and using some out-of-context and often arbitrary weights (Drupp et al., 2018) and applying them, only in a second step, to the calculation of social preferences, as if preference formation and distributional considerations were independent. 1 As argued in Cai et al. (2010), distributional considerations cannot be applied ex post to the estimated economic values. ...
... To the best of the authors' knowledge, the valuation literature has to date not yet explored the social preferences for the distribution of the benefits of environmental policies and decisions (Dauwalter & Harris, 2023;Hsiang et al., 2019). This is a major knowledge gap because the question of who should benefit from an environmental policy is as important as the question of who should pay for it (Drupp et al., 2018) to correctly measure welfare impacts and better inform policy making. Expectations (based on e.g., Baumgärtner et al., 2017, drawing on Frank & Schlenker, 2016 are that preferences and WTP should be higher for environmental policies that achieve a more equitable distribution of nature. ...
The literature is replete with valuations of the costs and benefits of environmental change, yet the issue of where those impacts fall across society is rarely considered. This is a significant knowledge gap given clear evidence of social preferences regarding distributional effects reflected in both policy and protest. As an initial contribution, we examine preferences regarding projects designed to more than offset the biodiversity impacts of housing developments in England, as mandated under the UK's Net Gain legislation. Employing a nationally representative sample, a Discrete Choice Experiment values options for alternative characteristics and location of both development and offset sites, including their situation relative to both the respondent's home and neighborhoods of different socio‐economic status. This defines sets of “winners” and “losers” varying across wealth levels. Results show that respondents did not necessarily prefer that the communities losing biodiversity due to development must also be the beneficiaries of the biodiversity enhancement under Net Gain rules. This is particularly the case where the communities losing biodiversity are located far from the respondent and are high wealth. Instead, our findings show that respondents are willing to pay more for Net Gain policies delivering biodiversity improvements to low or average (rather than high) wealth communities. These results highlight the importance of considering distributional concerns when measuring the welfare impacts of environmental policies and the potential role of such policies as redistributive tools to reduce social inequalities.
... Their conjecture is confirmed by Baumgärtner et al. (2017), whose theoretical development and simulations showed that if the constant income elasticity of WTP is less than one, societies with a more equal distribution of income have a higher mean WTP and therefore the possibility for more environmental good provision. Drupp et al. (2018) provided a by guest on January 23, 2024. Copyright 2024 simple but intuitive graphical analysis relating mean WTP to income inequality in which they depict the less-than-one income elasticity of WTP as an increasing but concave income-WTP curve. ...
... We combined these two aspects of the results in an extrapolation exercise to obtain the simulated concave income-WTP relationship similar to Drupp et al. (2018). That exercise demonstrated that air purifier consumption leads to an important downward bending of the concave curvature, which signifies that a reduction in income inequality by a Pigou-Dalton transfer will result in a higher societal mean WTP, while mask consumption leads to only a marginal change in the income-WTP relationship. ...
... Finally, the results obtained from these two steps were combined in a simulation exercise to obtain a similar illustration as the one provided in Drupp et al. (2018). By doing so, we hope to demonstrate how the responsiveness of the income elasticity of WTP with regard to p and M can further modify the distribution of mean WTP within a population. ...
... This is because individual economic values depend on the individual's income and wealth. As a consequence, aggregate economic values of nature depend on the distribution of income and wealth in society (Baumgärtner et al., 2017;Drupp et al., 2018;Ebert, 2003;Meya, 2020). Baumgärtner et al. (2017) show that the global economic value of biodiversity would be 16% higher if income was perfectly evenly distributed. ...
... The higher the discount rate, the higher future benefits have to be to warrant current investment. For natural goods and services, the appropriate discount rate is substantially lower than the discount rate for private consumption goods, and may well be negative, i.e., the present value of nature's benefits in the future exceeds the current value (Drupp et al., 2018;Gollier, 2012;Hoel & Sterner, 2007;Weikard & Zhu, 2005). Following this line of argument, the Ministry of Finance in the Netherlands recommends discounting natural goods and services at a one percentage point lower rate than private consumption goods (Koetse et al., 2018). ...
The chapter assesses the role of nature's diverse values in supporting social-ecological transformations towards more just and sustainable futures. This is approached as a two-fold and mutually complementing task: a) assessing the diverse values that have been considered in developing and creating visions for, and scenarios of the future, particularly those relating to more just and sustainable futures; and b) assessing how interventions to incorporate more plural valuation into decisions can serve as leverage points for enabling and governing transformation towards just and sustainable futures.
There is a substantial and well-established body of specialised literature on visions and scenarios of socio-ecological futures. A systematic review methodology was employed to assess the role of values and the types of values contained within this body of work. The protocol for this review operationalises the key concepts of
values of nature”, “justice” and “sustainability” elaborated within the wider values assessment and in this chapter. This review of published science is complemented with reviews of grey literature and creative arts.
The specialised literature on transformations and transitions to
ustainability is comparatively recent and is diverse in terms of its primary concepts and units of analysis. For this reason, a two-stage
process of literature review was adopted involving a) expert review to identify and synthesise the main concepts and relationships found in expert selected literatures followed by b) a systematic review using qualitative content analysis and c) a case study of how values are treated in National Biodiversity Strategies and Action Plans (NBSAP) interventions.
The decision-making typology and framework for the values assessment introduced in Chapter 1 is used as a basis for mapping governance forms and their associated characteristics (such as regime fit, scale and interplay, and the degree to which they - foster adaptiveness, knowledge co-production, and emergence of new actors) in the context of governing the uptake of diverse values of nature as part of a process of transformation towards just and sustainable futures.
These broader reviews and analyses are complemented by expert-led case studies exploring the role of values and valuation in four alternative pathways of transformation: green economy, degrowth,
earth stewardship, and nature protection.
... The government uses instruments to internalize externalities, such as taxes and subsidies. Properly representing the value of environmental activities or ecosystem services is a challenge for ecological and environmental economics in decision making (Drupp et al., 2018), but this action can represent a driving force towards a better environment. Moreover, the integration of environmental accounting and management tools are of paramount importance to define J o u r n a l P r e -p r o o f the best available clean production options and to support policymaking (Liu et al., 2018) PES has been introduced in various places in the world to improve environmental preservation. ...
... In this case, the introduction of incentives is a normative strategy for achieving or inducing social benefits in terms of improvements in ecosystem services. The rationale of the supposedly self-interested individual is stimulated to induce the behavior of a group in favor of the long-term collective interest (Drupp et al., 2018). Furthermore, Syrgiannis et al. ( 2019 ) affirm that in the base of any work "there must be an understanding of the relationships between one's awareness and actions through which he could participate to bring positive societal transformations‖ and Reficco et al. (2018) addthat social collaboration through cross-sector partnerships, knowledge transfer, and capacity building proved valuable for the social construction of markets, enabling economic exchanges with vulnerable groups in difficult environments‖. ...
Disorganized urban growth, deforestation, and the occupation of floodplains and riverside areas significantly alter land-use patterns and social and environmental wellbeing. This work aims to present the analysis of the feasibility of the proposal for the implementation of a Payment for Environmental Services (PES) project for flood control, related to the recovery and conservation of areas of environmental interest in a hydrographic basin and considering the river channel as a reference and its buffer areas. For the implementation of a PES project aiming at the reduction of floods downstream through the recovery of riparian forests, including their subsequent maintenance, this work proposes a flowchart of the applicable steps, develops a formulation for the definition of payment for the service, and defines a set of measures necessary for its management. Through a case study, it was possible to simulate different scenarios for different recurrence time (RT) in the study area, and thus assess the damage caused by these different events. The innovation of this work comes from the use of PES for the control of floods, with the use of an integral formula to calculate the costs of PES and to evaluate the expected damages. The application of the Poisson distribution was used to estimate the losses for different RT events expected in 50 years, estimating the losses overtime for the scenario with the implementation of the PES project and without it. The damage when reduced or avoided becomes a useful resource for the establishment of other public policies.
... The government uses instruments to internalize externalities, such as taxes and subsidies. Properly representing the value of environmental activities or ecosystem services is a challenge for ecological and environmental economics in decision making (Drupp et al., 2018), but this action can represent a driving force towards a better environment. Moreover, the integration of environmental accounting and management tools are of paramount importance to define the best available clean production options and to support policymaking (Liu et al., 2018). ...
... In this case, the introduction of incentives is a normative strategy for achieving or inducing social benefits in terms of improvements in ecosystem services. The rationale of the supposedly self-interested individual is stimulated to induce the behavior of a group in favor of the long-term collective interest (Drupp et al., 2018). Furthermore, Syrgiannis et al. (2019) affirm that in the base of any work "there must be an understanding of the relationships between one's awareness and actions through which he could participate to bring positive societal transformations" and Reficco et al. (2018) add" that social collaboration through cross-sector partnerships, knowledge transfer, and capacity building proved valuable for the social construction of markets, enabling economic exchanges with vulnerable groups in difficult environments". ...
Disorganized urban growth, deforestation, and the occupation of floodplains and riverside areas significantly alter land-use patterns and social and environmental wellbeing. This work aims to present the analysis of the feasibility of the proposal for the implementation of a Payment for Environmental Services (PES) project for flood control, related to the recovery and conservation of areas of environmental interest in a hydrographic basin and considering the river channel as a reference and its buffer areas. For the implementation of a PES project aiming at the reduction of floods downstream through the recovery of riparian forests, including their subsequent maintenance, this work proposes a flowchart of the applicable steps, develops a formulation for the definition of payment for the service, and defines a set of measures necessary for its management. Through a case study, it was possible to simulate different scenarios for different recurrence time (RT) in the study area, and thus assess the damage caused by these different events. The innovation of this work comes from the use of PES for the control of floods, with the use of an integral formula to calculate the costs of PES and to evaluate the expected damages. The application of the Poisson distribution was used to estimate the losses for different RT events expected in 50 years, estimating the losses overtime for the scenario with the implementation of the PES project and without it. The damage when reduced or avoided becomes a useful resource for the establishment of other public policies.
... Finally, we contribute to the literature on non-market valuation. With few exceptions (see, e.g., Kriström and Riera 1996, Drupp et al. 2018b, Hsiang et al. 2019, this literature does not explicitly consider effects pertaining to the distribution of income. Within this strand, we add primarily to the emerging literature on structural benefit transfer (e.g. ...
... Finally, and relatedly, aking to using ex-post equity weights for cost-benefit analysis (e.g. Dasgupta et al. 1972, Johansson-Stenman 2000, 2005, Nyborg 2014), our transfer factors for intra-and intergenerational inequality can be used to adjust WTP-estimates (Drupp et al. 2018b). In the context of natural capital management, equity might require redistributing resources within and across generations. ...
We study how income inequality affects the social value of a dynamic public good, such as natural capital. Our theory shows that both intra- and intertemporal inequality affect the social value of public natural capital. The direction and size of the effects are driven by the degree of substitutability between the public and private consumption goods. While the value of the public good increases (decreases) with intratemporal income inequality in the case of complements (substitutes), it increases (may decrease) with intertemporal income inequality for complements and Cobb-Douglas (substitutes). A problem of major relevance for the accounting of public natural capital as required by international treaties is to transfer values between study and policy contexts, or to up-scale values from study sites to the national scale. Our theory provides closed-form adjustment factors that allow controlling for differences in study and policy contexts.
... Although doubts have been expressed as to whether it is possible to reconcile development with sustainability (Bermejo, 2014;Ehrenfeld, 2005;Warner, 2007), the latter has now become a development goal for governments and institutions (Matschoss et al., 2020;UN, 2019). As a result, citizens, administrators, researchers and policy-makers are keen to find solutions for the use of resources (Costanza et al., 2016;D'Adamo et al., 2020;Drupp et al., 2018). However, this is a complex task because it involves a multitude of scale and geographical relations (Essletzbichler, 2012;Bridge et al., 2013, D'Adamo et al., 2022. ...
The Common Agricultural Policy, which is both dynamic and systemic, has aimed to adapt with its various Reforms to the environmental challenges faced by agriculture in Europe. The 2013 Reform brought the greenest CAP and, for the first time, Pillar 1 included measures that coexisted with, and complemented, those of Pillar 2. The purpose of this study is to determine which pillar is most effective in the fight against climate change because, even though the environmental effects of the CAP have been widely studied, there have not been sufficient studies in the literature that deal simultaneously with Pillars 1 and 2. We have drawn up an environmental equation for Spain, estimated using the Driscoll-Kraay technique which is the most suitable for panel data with cross-sectional and time dependence. The model shows that the best results were achieved with the second pillar, indicating that the adaptations and changes in environmental measures under the first pillar were not satisfactory for farmers and did not achieve their full potential.
... The social boundary has an economic dimension as well. Growing inequality is associated with growing inefficiencies and less productive economies, which also display increased stress, poor health, and low levels of social mobility (Stiglitz et al., 2010;Drupp et al., 2018). ...
... Um ponto importante na valoração ambiental é compreender o que influencia o valor da natureza, sendo essa informação crucial para aplicação e execução na política ambiental, onde de uma perspectiva de sustentabilidade, a valoração econômica não deve apenas procurar determinar a disposição de uma sociedade para pagar por bens ambientais para conceber uma alocação eficiente de recursos escassos, mas também deve levar em conta os efeitos distributivos para garantir a justiça, considerando que a desigualdade econômica afeta o valor dos recursos ambientais (DRUPP et al, 2018). ...
Environmental valuation has been applied since 1987. In this article, a bibliometric approach was employed between the years 1987 and 2022 using the Web of Science (WoS) and Scopus databases to examine the scientific production on this subject. The VOSviewer software was used, and a sample of 712 publications in WoS and 743 in Scopus was found. The highest number of publications in WoS was in 2018, while in Scopus it was in 2017. During the research period, the United States had the highest number of publications on environmental valuation in WoS, while the United Kingdom had the highest number in Scopus. The most frequently appearing keyword was "environmental valuation" in both platforms. The author with the highest number of publications was Nick Hanley from the University of Glasgow in Scotland, in both platforms. The topic of environmental valuation has gained importance over the years due to increased interest in the environment, as a response to the damages incurred. It aims to assist decision-making and enable the accounting of costs and benefits associated with natural capital.
... From its inception, a key tenet of scholars pursuing Ecological Economics has beenand still isthat the monetary valuation of costs and benefits is insufficient to capture key processes of society-nature interaction (Costanza, 1992) as well as environmental justice and conflicts (Martinez-Alier, 2002). Hence their critique of 'weak sustainability' concepts prevalent in environmental economics, which basically extends cost-benefit analyses by considering environmental 'externalities' (Drupp et al., 2020(Drupp et al., , 2018. Such considerations resulted in the establishment of scientific communities such as Ecological Economics, Industrial Ecology, Social Ecology and others, which rejected hegemonial claims of (neo)classical economics that environmental issues could well be addressed within their conceptual approaches. ...
Socio-metabolic research investigates societies’ extraction of raw materials and energy from the environment, their transformation into products, biophysical trade flows, the accumulation of societal material stocks (buildings, infrastructures, long-lived products), biophysical aspects of consumption, and releases of emissions and wastes to the environment. Resource flows through society are associated with pressures on ecosystems and biodiversity. Approximately three fourths of the earth’s land are more or less intensively affected by human activities related to social metabolism. While biomass extraction through agriculture and forestry require most area, other aspects of social metabolism also have substantial impacts.
... Additionally, recent discourse on MPANs has focused on the equitable distribution of benefits and costs in the process of MPAN implementation (Davis et al., 2019;Kockel et al., 2019). The low frequency of consideration for economic distribution corroborates insights from the literature suggesting that issues around economic inequality in conservation are insufficiently evaluated even though its influence on environmental values is well known (Drupp et al., 2018). Funding sustainability, an attribute added by several participants, is the subject of much research and discussion as MPAs generally struggle with budgetary and capacity constraints (Adams et al., 2019;Gill et al., 2017). ...
Abstract Marine protected area networks (MPANs) are promised as tools for protecting biodiversity and contributing to sustainable development. The variety of expected social‐ecological outcomes associated with MPANs underscores a need to consider ecological, economic, governance, and social dimensions in MPAN design, implementation, monitoring, and evaluation. However, little is known about how these four dimensions are considered or shaped by objectives. We conducted an online survey with MPAN managers, technical staff, and academics from across the globe (77 survey responses that described 48 MPANs located in 59 countries). Our findings confirmed that most MPANs have various co‐occurring, potentially conflicting objectives. MPANs with biodiversity and societal objectives considered attributes (e.g., human well‐being and economic distribution, institutional partnerships, and network‐specific ecological attributes) among all dimensions, with greater frequency than MPANs with only biodiversity objectives. Nonetheless, ecological attributes were always perceived as important irrespective of the MPAN objective. Reaching synergies between the multiple dimensions of MPANs can be challenging if dimensions get overlooked in MPAN evaluations. Identifying the important attributes considered in MPANs offers insight into the practice of MPAN design, implementation, monitoring, and evaluation and can help improve MPAN success.
... Theoretical and experimental research has indicated that income inequality may 142 affect the willingness to pay (WTP) for environmental goods (Frank and Schlenker 2016;Baumgärtner et 143 al. 2017). A society with more equal income distribution is thought to likely have higher WTP for 144 environmental goods (Drupp et al. 2018). With income redistribution, the WTP of poorer households has 145 been reported to increase, while that of the richer household to decrease (Baumgärtner et al. 2017;Drupp 146 et al. 2018). ...
Since the industrial revolution, the predominant model of economic development hasinvolved economies of scale and unsustainable exploitation of natural resources,leading to environmental degradation and the ongoing mass extinction of species. The environmental impacts of this development-for(the sake of)-development model led to biodiversity conservation efforts that can be described as conservation-for (the sake of)-conservation approach involving protected areas maintained free of humans. This approach subsequently expanded to include development-for-conservation efforts that integrated local community welfare into conservation programs. These conservation approaches helped make socio-ecological gains, but have failed to address planetary environmental degradation. Here, we outline a development approach for the earth’s last-remaining biodiversity rich areas, focusing on economies of value rather than scale, and relying on conservation of biodiversity and sustainable use of ecosystem services. This conservation-for-development model is an attempt to bring humanity and nature closer, and move away from nature–people dualism that has characterized economic development and biodiversity conservation so far.
... 1. Environmental damage: In 2007, due to the uncontrolled development of tourism, the Galapagos were even included in the Danger List of the UNESCO World Heritage Sites. 2. Lack of value-added: It is highly unlikely that ecotourism can generate sufficient skilled jobs and knowledge spillovers to act as an engine of 15 See Gatti et al. (2011) for a discussion of the failure to recognise the contributions of the South to the production of cooperative surplus; Drupp et al. (2018) and Baumgärtner et al. (2017) on the social willingness to pay for environmental public goods and distributional effects to ensure justice. 16 The Government of Ecuador initially proposed to keep almost a billion barrels of oil underground if the international community contributed with at least half of the opportunity cost of exploiting it (Larrea and Warnars, 2009). ...
One of the most important challenges of the 21st century is the quest for economic development models that respect the planet's ecosystem. Rather than imposing our industrial systems on nature, why not let nature influence our industrial and innovation systems?
From wind turbine blades to bullet trains and solar cells, many of the technologies we rely on today have been inspired by solutions found in nature. Although relatively widespread in the fields of architecture and engineering, biomimicry/biomimetics remains largely overlooked in economics, public policy, and development studies. This is paradoxical because the world's remaining biodiversity stock-a knowledge bank of solutions to both current and unknown challenges- is largely held in developing economies and can be leveraged as a source of inspiration for -and entry door to- industrial innovation. This paper, therefore, investigates the relevance of biomimicry in the formulation of sustainable development strategies in biodiverse developing countries and maps out the national policy landscapes that can advance it.
Several findings arise from this study. First, despite the exponential growth of biomimicry as a field and our understanding of its economic impact, what drives nature-inspired innovation remains elusive. Second, the biomimicry innovation landscape is dominated by industrialised economies that have relied on proactive policy interventions, while virtually no developing country has adopted biomimicry as an innovation strategy, consolidating the exploitation of the biodiversity in the developing world by firms in high-income nations. Third, by drawing on empirical evidence from a selection of Latin American countries, this paper shows that while biomimicry presents tremendous opportunities to leapfrog towards high value-added knowledge-intensive activities by using local biodiversity and related expertise as factor endowments, policy, and institutional factors have led to the persistence of important coordination failures that hinder the expansion and commercialization of biomimicry-based R&D. This paper concludes by discussing the public policies needed to support the integration of developing nations at the innovation frontier through biomimicry.
... A first transmission channel in this category is collective action dynamics (Leach et al., 2018), because a society's inequality level is closely related to its ability to manage scarce resources and conserve the natural environment (Hamann et al., 2018). This is explained by Drupp et al. (2018), who argue that poorer households benefit more from environmental public goods. Klasen (2018) adds that the rich are less negatively affected and sometimes even benefit from emissions while the poor suffer from them. ...
Deterioration of the natural environment and economic inequality are profound concerns in many societies. To avoid adverse environmental side effects when implementing policies to reduce inequality, an understanding of potential conflicts of objectives is required.
Different theoretical considerations suggest reducing effects of inequality on environmental impact, but also increasing ones. This paper provides empirical evidence on the environmental impact of inequality through a panel data set of 116 countries over 55 years. The multidimensionality of environmental impact is accounted for by relying on the six subindices of the Ecological Footprint.
Results are discussed based on an innovative, graphical approach that allows for the assessment of effects of inequality on environmental impact based on a country's initial location within the entire observed inequality and income range. They suggest that reducing inequality levels increases carbon footprints. For surface sealing and the use of forest land, a conflict of objectives exists only in relatively rich and egalitarian countries, while there is room for jointly reducing environmental impacts and inequality in relatively poor and initially unequal countries. All results are highly robust to the estimation procedure.
We conclude that, especially in richer countries, policy measures to reduce inequality need to be accompanied by policies that limit harmful environmental impacts of income redistribution in order to reduce inequality and environmental impact jointly.
... 4 For example, the review ignores the analysis by Aghion et al. (2016) reviewed in this section. 5 The results of recent research are still inconclusive regarding the question whether the poor are disproportionately burdened by environmental damage and therefore would benefit more from environmental/climate policy than the rich; see, e.g., Drupp et al. (2018) or Hsiang et al. (2019). 6 Labor tax reductions could, however, well be designed to benefit lower incomes more than higher ones in relative terms through, for example, lower income tax threshold increases. ...
In view of the challenges posed by climate change and the increasingly ambitious climate targets around the world, the search for effective climate policy instruments is gaining momentum. Carbon pricing, for example, in the form of a carbon tax, and its effects are therefore attracting increasing attention in academic as well as policy discussions. We review the empirical effects of carbon taxes with regard to several impact dimensions commonly studied in the literature: environmental effectiveness, macroeconomic effects, impacts on competitiveness and innovation, distributional implications, and public acceptance. An increasing body of empirical studies shows that carbon taxes can effectively reduce carbon emissions or at least dampen their growth while not negatively affecting economic growth, employment, and competitiveness. The existing empirical evidence suggests that the distributional impact of carbon taxes depends on the type of energy use and the indicators to capture distributional effects, as well as on household characteristics. Lump‐sum transfers are shown to be better suited to mitigate regressive effects for lower incomes, while higher incomes benefit more from a reduction of labor taxes. Public acceptance of carbon taxes can be increased by providing public information, avoiding negative distributional effects, and channeling part of the revenues into "environmental projects."
... There exists a nexus among economy, environment, inequality and quality of life. For example, environmental toxicity has disproportionate effects on low income groups in US cities (Sampson, 2017), and Drupp et al. (2018) have concluded that economic inequality affects the value that society attaches to natural capital. According to them, reduction in economic inequality increases the value that society places on natural capital, and therefore, valuation of environmental goods and distribution of incomes should be studied simultaneously. ...
The raging debate between green growth and degrowth continues. Technology is a focal point in this debate as the advocates of green growth and degrowth have contradictory views on the roles and impacts of technology on environment and society. Green growth advocates believe that technology can allow indefinite growth while simultaneously ensuring environmental and societal sustainability, whereas the degrowth advocates argue that technological progress cannot allow indefinite growth. These views are largely opinion based rather than informed by objective and systematic analyses because comprehensive tools to evaluate the roles and impacts of technology on environment and society do not yet exist. This paper develops a much-needed framework to comprehensively evaluate the roles of technology on environment and society by analysing the interactions among the dimensions of technology, environment, economy and society. Key parameters that characterise technology are proposed for its evaluation and the policy implications of technological evaluations are examined. Finally, potential future research directions are explored. The technological evaluation approach proposed in this paper has a potential to significantly advance the green growth versus degrowth debate.
... 17 Pareto-efficient levels of (environmental) public goods also depend on the distribution of attributes (again except for the special case where utility is quasi-linear). When aggregate WTP is simply the sum of individual WTPs, more equal societies have a higher societal WTP for homogenously distributed public environmental goods if the constant income elasticity of WTP, % , is below one (Baumgärtner et al. 2017;Drupp et al. 2018). For mean preserving spreads, this follows directly from Jensen's inequality (Baumgärtner et al. 2017): If the income elasticity is below one, then individual WTP increases with income, but at a decreasing rate. ...
Preserving environmental quality and addressing economic inequality both feature prominently in public discourse. Neither of these two issues can be fully understood in isolation, and policies aiming at one issue will increasingly have to consider interactions with the other. We synthesize theoretical mechanisms that underpin inequality-environment interlinkages, and take stock of the empirical evidence. Our review is structured into four main blocks, describing, first, how the distribution of environmental amenities and dis-amenities is associated with income and wealth, second, how economic inequality affects environmental outcomes, third, how the cost of environmental policy is often borne unequally, and, fourth, how both the distribution of environmental quality and economic inequality shape welfare considerations underlying public policy appraisal. We argue that it is crucial to consider inequality-environment interlinkages even if one’s primarily concern is one or other of these issues, and close by highlighting a number of areas for future research.
... Progressive direct green taxes not only generate revenues to funding nature management actions, but also promotes equality (Drupp et al., 2018). By implementing direct green taxes, individuals' contributions -and the amount of such contributions-to nature conservation depends directly on their household income, therefore each individual is expected to contribute what he/she can afford. ...
The aim of this work is to assess and understand the social drivers that determine the willingness to pay for sustainable management measures to preserve a Natura 2000 area. These social drivers of the support for nature conservation were then included in the design of economic instrument to support nature conservation. In a contingent valuation exercise, the local population in the Cabezo de la Jara and Rambla de Nogalte protected areas (SE Spain) stated their willingness to pay for sustainable management measures aimed at their conservation. Among the socio-demographics, environmental attitudes and experiential drivers, income and environmental commitment were found to be the only significant drivers in support of nature conservation, revealing preference heterogeneity. Economic instruments, specifically green taxes and user fees, are proposed, taking into account the sources of heterogeneity in order to ensure financial support for the measures and greater social acceptability. Hence, our research adds to the existing literature through the design of an economic instrument to support nature conservation, considering preference heterogeneity.
... The international distribution of resources allows all countries to take steps towards global growth [8]. The existence of scarce natural resources makes the poorest countries attractive in terms of international agreements, which play a crucial role in their conservation and sustainability [9][10][11]. ...
... CLC = CORINE Land Cover. (Drupp et al. 2018), und es ist politisch fragwürdig, ob öffentliche Güter abhängig vom Einkommen der Nutzer bewertet werden sollten. Um die geschätzten ökonomischen Werte vor falschen Interpretationen zu schützen, ist es wichtig, die den Werten zugrunde liegenden ökonomischen Annahmen klar zu beschreiben und zu kommunizieren. ...
Our economic and social activities are constantly putting pressure on our ecosystems, changing their condition and their capacity to produce the services we desire in a sustainable manner. Against this background, the integration of ecosystems and their services in the national economic accounts seems necessary since it offers considerable potential for improving governance capacities. This paper explains the theoretical setting, methodological foundations and challenges of such an 'ecosystem accounting' and outlines case studies of a corresponding German pilot study.
... Egalitarian international distribution of resources allows global growth to be fostered [1] by providing the poorest countries with incentives to invest in human capital and entrepreneurial activities [2,3]; it also foments well-being by reducing the level of poverty and food insecurity as established in the United Nations Sustainable Development Goals [4,5]. Furthermore, the distribution of scarce natural resources may be crucial to the success of the international agreements needed to ensure their conservation [6][7][8]. Ensuring more equitable distribution of resources through the establishment of property rights may threaten sustainability if exploitation of those resources is not properly regulated [9][10][11]. However, very dissimilar exploitation patterns may make it harder for countries to accept the same responsibility for preserving resources [12][13][14][15]. ...
Distribution of natural resources is considered to be a key aspect in ensuring the success of conservation policies. The Common Fisheries Policy, implemented by the European Union (EU), is an example of long-term international cooperation for sustainability of the marine environment. Nonetheless, continued enforcement of the policy is threatened by its insufficient effectiveness in restoring fish stocks and the tensions that have arisen over unequal distribution of benefits. Recent adoption of the Blue Growth Strategy represents an additional challenge for EU fisheries, since it encourages new alternative economic activities. The present analysis aims to identify ways of enhancing the sustainability of EU fisheries while achieving greater equity in resource distribution and maintaining the activity of the fishing industry, an important staple of many coastal communities in the EU. To this end, the study decomposes heterogeneity amongst per capita landing rates of EU Member States. A number of findings from the decompositions used may be highlighted. Firstly, most of the heterogeneity in per-capita landing rates between Member States occurs within the main EU fishing areas, especially FAO Areas 27 and 37. Secondly, fishing production factors affect per-capita landing heterogeneity to a different extent in Areas 27 and 37. The only exception is the number of fishers, the factor contributing most to heterogeneity in both areas. Technological factors appear to diminish heterogeneity in Area 27 whilst positively contributing to heterogeneity in Area 37. More efficient fleet adjustments could be designed taking into account these contributions by production factors to heterogeneity within fisheries.
... This is rarely done in current cost benefit appraisals, with the exception of climate change analysis. More recently an aggregate willingness to pay inequality adjustment approach has been suggested, which it is argued requires less information (Drupp et al., 2018). ...
... The issue of using distributional weights in CBA dates back to the 1950s [37], but recent literature shows that this discussion has been largely ignored in real world practice (inter alia Drupp et al. [38] and Adler [39]). Kind et al. [40] have suitably tackled the issue and proposed a social welfare approach to CBA for flood and other disaster risk management, showing with a simulation how considering income distribution can lead to different conclusions 'on who to target, what to do, how much to invest and how to share risks' (p. 1). ...
While floods and other natural disasters affect hundreds of millions of people globally every year, a shared methodological approach on which to ground impact valuations is still missing. Standard Cost-Benefit Analyses typically evaluate damages by summing individuals’ monetary equivalents, without taking into account income distribution and risk aversion. We propose an empirical application of alternative valuation approaches developed in recent literature, including equity weights and risk premium multipliers, to a case study in Ecuador. The results show that accounting for inequality may substantially alter the conclusions of a standard vulnerability approach, with important consequences for policy choices pertaining damage compensation and prioritization of intervention areas.
... Climate change has led citizens, managers, researchers and policy makers to define possible solutions for the unsustainable use of resources (Costanza et al., 2016;Drupp et al., 2018). The bioeconomy is an economy based on the use of bio-based raw materials, in which new advanced technologies are increasingly employed to create a range of innovative products (alongside the production of traditional goods), minimizing the use of fossil-based resources (Urmetzer et al., 2020) and thereby reducing carbon emissions (Vita et al., 2019). ...
... Such asymmetric effects further perpetuate social inequity. Poor farmers in rural areas abandon their farmlands and migrate to cities, where they strain water, sanitation, and hygiene services, making it even harder for water technologies to work their magic around water scarcity and pollution (see, e.g., Boyce, 2018;Drupp, Meya, Baumgärtner, & Quaas, 2018). The rural areas lose local, place-based know-how of sustainable agricul ture as many farmers migrate to cities and modify urban culture while assimilating them selves on the urban fringes. ...
Research on water governance and inequality in Chile has mostly focused on the concentration of private water rights. However, complementary devices used to address the drought crisis, like the Water Scarcity Decree (WSD), are also central to the relationship between governance and inequality. This paper discusses the redistributive effects of the WSD, a tool that allows mainly large agricultural producers to exploit underground water. Using a difference-in-differences approach, we link the WSD establishment with relative changes in employment and income across agricultural workers. Our results show the widening of the income gap between agricultural producers, as large producers are the main winners after the issuing of a WSD.
Taking governance arrangements for sustainability as an example, this chapter shows how a dialectical perspective can help understand what is going on and frame problem-solving in new ways. The external partnership arrangements we considered in Chap. 8 are overseen (led and managed) using governance arrangements of each organisation or network. In this chapter we dig more deeply into governances. As Schattschneider (1975: 71) says, all forms of political organisation have a bias in favour of the exploitation of some kinds of conflict and the suppression of others, because organisation is the mobilisation of bias. Another way of looking at governances is through the lens of trust as Six (2005) does, which invites investigation of personal relations that willingly accept vulnerability to the actions of others. Below, we also explore governance from the viewpoint of stability and change: sufficient stability to deliver reliable services, whilst having sufficient flexibility to respond to external events that demand alterations to governances. One of the big questions in relation to de-carbonising global economic activity is whether market governances or non-market governances offer the most appropriate transition instruments. Posed in this way, the governance issues closely relate to the mutuality boundary discussed in Chaps. 2 and 3.
Le développement économique, social et environnemental durable est devenu un enjeu crucial dans le monde actuel. Pour atteindre cette durabilité, une approche de résilience durable est nécessaire, notamment dans les régions vulnérables aux impacts du changement climatique et connaissant une croissance rapide. Au Maroc, la région de Tanger-Tétouan-Alhoceima est dynamique économiquement, mais est également confrontée à des défis environnementaux tels que la dégradation des ressources naturelles et les risques de catastrophes naturelles liées au changement climatique. Dans ce contexte, les entreprises de la région ont un rôle crucial à jouer dans la promotion de la résilience territoriale et du développement durable. Cette étude vise donc à examiner le rôle des entreprises dans la promotion de la résilience régionale et du développement durable dans la région de Tanger-Tétouan-Alhoceima au Maroc. Pour y parvenir, cet article se concentrera sur la définition du concept de la résilience régional et son service au développement durable, sur l'examen du rôle des entreprises dans la promotion du développement durable et de la résilience territoriale, et sur l'analyse des pratiques des entreprises installées dans la région de Tanger-Tétouan-Al Hoceima. Finalement, cet article soulignera l'importance de la collaboration entre les gouvernements, les entreprises et la société civile pour promouvoir la durabilité et la résilience des régions. Mots-clés : Résilience des régions, résilience territoriale, développement durable, secteur privé. Abstract : Sustainable economic, social, and environmental development has become a critical issue in today's world. To achieve this sustainability, a sustainable resilience approach is needed, especially in regions vulnerable to the impacts of climate change and experiencing rapid growth. In Morocco, the Tangier-Tetouan-Alhoceima region is economically dynamic, but also faces environmental challenges such as the degradation of natural resources and the risks of natural disasters related to climate change. In this context, businesses in the region have a crucial role to play in promoting territorial resilience and sustainable development. This study therefore aims to examine the role of businesses in promoting regional resilience and sustainable development in the Tangier-Tetouan-Alhoceimaregion of Morocco. To achieve this, this paper will focus on defining the concept of regional resilience and its service to sustainable development, examining the role of businesses in promoting sustainable development and territorial resilience, and analyzing the practices of businesses based in the Tangier-Tetouan-Al Hoceima region. Finally, this paper will highlight the importance of collaboration between governments, businesses and civil society to promote regional sustainability and resilience.
This chapter presents a novel view of sustainability, understood as a holistic and dynamic process linking social and natural systems—more precisely planetary health and social cooperation mediated by justice—in a social-ecological loop. This vision articulates ecological interdependence and social cooperation in a dynamic intertwining. I then detail three active principles of holistic sustainability: full health, just transition and social-ecological regeneration.
Chickenpox, the primary infection of the Varicella-zoster virus (VZV), is usually a benign, self-limiting disease and it rarely causes severe complications. Encephalitis is a rare neurological complication of VZV in previously healthy children. We report on an immunocompetent child without vaccination diagnosed with VZV encephalitis who was treated with acyclovir and methylprednisolone and recovered completely.
Efforts to incorporate measures of income inequality into current benefit transfer practices have become increasingly important. This paper evaluates Baumgärtner, Drupp, Meya, Munz, and Quaas (BDMMQ) [2017] proposed structural transfer factors as a means to account for the effects of income inequality. It uses Internal Revenue Service data on the frequency distributions for income at different spatial scales. The results suggest the most important influence to the BDMMQ adjustment for income inequality is the income elasticity of willingness to pay for the environmental services involved. Moreover, an analysis that holds the income elasticity constant at different levels and allows the income distributions to vary for the source used for the benefit measures and the target location impacted by proposed policies indicates the effects of the income inequality are more pronounced for high values of the income elasticity of WTP.
In this paper, we analyze the response of the future world’s carbon stock to a reduction in global inequality among countries, using a framework that allows countries to make their environmental policy strategically. Heterogeneity across countries is related to income, emission technology, and environmental damage costs. We show that reducing global inequality would have a mitigating effect on the path of future world’s carbon stock if the relative number of richly-endowed countries in the subgroup of high-tech countries is greater than that in the subgroup of low-tech countries. The response of the future world’s carbon stock to a reduction in global inequality depends on the relative strength of two forces working in opposite directions: the mitigating force and the aggravating force. The mitigating force is associated with a measure of both richly-endowed/high-technology countries and poorly-endowed/low-technology countries. The aggravating force is associated with a measure of both richly-endowed/low-technology countries and poorly-endowed/high-technology countries. Status-seeking motives among countries act as a multiplier of the effects of the inequality reduction on the future path of the pollution stock. Our results highlight complex interactions to scrutinize in the design of international climate change policies while taking global inequality issues into account.
This paper presents an analytical framework to help understand why some communities successfully manage their renewable natural resources and some fail to do so. We develop a finite-number-of-player, two-period non-cooperative game, where a community can impose an exogenous amount of sanctions. The model develops a nuanced view on Ostrom’s conjecture, stating that, in a common-pool resource it is easier to solve the within-period distributional issue than the between-period conservation problem. We first show that rules preventing dynamic inefficiencies may exist even though static inefficiencies still remain. Second, we show an increase in the initial value of the resource may lower the utility of all users when enforcement mechanisms are bounded. Third, we show that inequalities decrease static inefficiencies but increase dynamic ones.
I examine how inequality in the distribution of income and a quasi-fixed good (e.g. environmental quality) can affect the disparity between aggregate willingness to accept (WTA) and willingness to pay (WTP) for policies that induce joint, nonmarginal and heterogeneous changes to income and the quasi-fixed good. These disparities can generate divergent conclusions from benefit-cost analysis (BCA). With Cobb-Douglas preferences, I show that greater inequality in policy impacts to the quasi-fixed good generally increases the range of conflicting conclusions from BCA using the Kaldor criterion (compensating variation) versus the Hicks criterion (equivalent variation). In two examples, I show that for any set of impacts to the quasi-fixed good there exists a degree of inequality in which the Kaldor-Hicks tests disagree. This disagreement arises because, with inequality, seemingly marginal policy changes can become nonmarginal when concentrated among marginalized or privileged groups, which can widen the gap between aggregate WTP and WTA. With CES preferences, when the goods are complements, WTA may be infinite, and when they are substitutes, budget constraints attenuate WTP: Both effects push the Kaldor-Hicks tests in opposing directions. I conclude that greater inequality increases the relevance of questioning whether to elicit WTP or WTA in nonmarket valuation for BCA.
"10 Must Knows from Biodiversity Science”, ranging from climate stress for forests to the corona virus that has jumped from animals to humans, are now published for the first time. More than 45 experts from the German Leibniz Research Network Biodiversity and colleagues have compiled this inventory on the preservation of nature as the basis of human life. In the run-up to the UN Biodiversity Conference in Kunming, China, and parallel to the preparatory meetings currently underway in Geneva, Switzerland, this report is intended to invite dialogue. At the same time, the researchers voice clear policy demands.
Uns Autorinnen und Autoren geht es darum Wissen zu vermitteln. Wissen um Wandel, um politisches und gesellschaftliches Handeln für
einen gesunden Planeten, den Erhalt und die nachhaltige Nutzung der Biodiversität zu unterstützen. Wissenschaft und Forschung zur Begleitung eines komplexen und systemaren Prozess wird angeboten.
For us as contributors, it's all about communicating knowledge. Knowledge of change, to support political and social action for a healthy planet, conservation and a more sustainable use of biodiversity. Science and research to accompany a complex and systemic process is offered.
Prior studies show affluence and trust increases economic support for environmental protections. However, despite widespread economic prosperity over the last two decades, variation in support for environmental protections persists across countries. We contend this variation is attributable to the growth of national income inequality which “traps” societies in environmental indifference by mitigating the effects of affluence and trust on the willingness-to-pay for environmental protections. Drawing on data from 45,000 adult respondents in 51 countries from multiple waves of the World Value Survey, we find economic development, socioeconomic status, and trust are important determinants of a respondent’s willingness-to-pay for environmental protections. More importantly, we find disposable income inequality suppresses the effects of these determinants on willingness-to-pay. Overall, the study illustrates how economic inequality contextualizes the effects of affluence and trust on environmental support which creates a barrier to widespread environmental support across countries.
This volume addresses current concerns about the climate and environmental sustainability by exploring one of the key drivers of contemporary environmental problems: the role of status competition in generating what we consume, and what we throw away, to the detriment of the planet. Across time and space, humans have pursued social status in many different ways - through ritual purity, singing or dancing, child-bearing, bodily deformation, even headhunting. In many of the world's most consumptive societies, however, consumption has become closely tied to how individuals build and communicate status. Given this tight link, people will be reluctant to reduce consumption levels – and environmental impact -- and forego their ability to communicate or improve their social standing. Drawing on cross-cultural and archaeological evidence, this book asks how a stronger understanding of the links between status and consumption across time, space, and culture might bend the curve towards a more sustainable future.
How the valuation of environmental goods is related to income is a key question for economics, but the role of income inequality is often neglected. We study how income inequality affects the international transfer of the estimated value of environmental goods from a study to a policy site—a practice called value or benefit transfer. Specifically, we apply theory-driven, structural transfer factors to test whether adjusting for income inequality affects errors made in benefit transfer, drawing on a multi-country valuation study on water quality improvement. Our convergent validity analysis shows that the structural income inequality adjustment reduces benefit transfer errors by between 1.5 and 1.8 percentage points on average across all transfers. We therefore find that adjusting for income inequality offers only a minor improvement of benefit transfers as compared to adjusting for differences in mean income. Overall, our results shed light on the potential of structural approaches to benefit transfer for environmental valuation and public policy appraisal.
Ecosystem services have not market price. In Ethiopia, choke mountain wetland ecosystem has major contribution for providing water, regulating climate, and offering recreational. Valuing this natural resource helps to protect it from damage. The objective of the study is to value choke mountain wetland ecosystem by using choice experiment. To value it the attributes are biodiversity, recreational service, water availability, job opportunity, and monetary payment. Primary data was collected from 270 sample households. Both descriptive and econometrics analysis were conducted. The study found that households had good awareness about the choke mountain wetland ecosystem services. Mixed logit models were used for valuation, and all attributes are significant to affect the probability of choosing an alternative scenario. The study found that households gave higher value for biodiversity improvement than the rest and water availability is the least preferable attributes. The total WTP for the first and second alternatives was 7,133,034.216 and 7,031,211.146 respectively; it was high in the second alternative. Moreover, compensating surplus which reflect overall willingness to pay for a change from the status quo to alternative improvement scenarios were estimated. Estimated results for high improvement scenario and medium improvement scenario were ETB 2,119,457.028 and 1,955,828.606 respectively.
When large-scale accidents cause catastrophic damage to natural or cultural resources, government and industry are faced with the challenge of assessing the extent of damages and the magnitude of restoration that is warranted. Although market transactions for privately owned assets provide information about how valuable they are to the people involved, the public services of natural assets are not exchanged on markets; thus, efforts to learn about people's values involve either untestable assumptions about how other things people do relate to these services or empirical estimates based on responses to stated-preference surveys. Valuation based on such surveys has been criticized because the respondents are not engaged in real transactions. Our research in the aftermath of the 2010 BP Deepwater Horizon oil spill addresses these criticisms using the first, nationally representative, stated-preference survey that tests whether responses are consistent with rational economic choices that are expected with real transactions. Our results confirm that the survey findings are consistent with economic decisions and would support investing at least $17.2 billion to prevent such injuries in the future to the Gulf of Mexico's natural resources.
Poterba (1991a) has much influenced the literature on the distributional effects of carbon pricing. Poterba argues that the incidence of energy/environmental taxes across households is better appreciated if the relative tax burdens are measured against total expenditure, interpreted as a proxy for lifetime income, instead of annual income. This way, however, since the distribution of total expenditure is structurally more uniform, the incidence of energy price increases is always less regressive than when annual income is used. This outcome is often taken to lessen the relevance of equity concerns regarding carbon pricing. Almost twenty-five years after Poterba (1991a), Piketty (2014) revived the idea that wealth is a dimension of economic welfare constituting an increasingly important source of inequality. We show that omitting wealth in measuring ability to pay means underestimating the regressivity of carbon pricing and its inequity towards younger people. Using household-level data and statistical matching, we revisit Poterba's application and compare the distributional incidence of the US gasoline tax for different measures of ability to pay: total expenditure, income and wealth-adjusted income. Regressivity is not a reason to forgo carbon pricing as a cost-effective approach to climate mitigation, but calls for consideration and compensation of the distributional effects.
Nature is perceived and valued in starkly different and often conflicting ways. This paper presents the rationale for the inclusive valuation of nature’s contributions to people (NCP) in decision making, as well as broad methodological steps for doing so. While developed within the context of the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES), this approach is more widely applicable to initiatives at the knowledge–policy interface, which require a pluralistic approach to recognizing the diversity of values. We argue that transformative practices aiming at sustainable futures would benefit from embracing such diversity, which require recognizing and addressing power relationships across stakeholder groups that hold different values on human nature-relations and NCP.
Empirical evidence shows that low-income households spend a high share of their income on pollution-intensive goods. This fuels the concern that an environmental tax reform could be regressive. We employ a framework which accounts for the distributional effect of environmental taxes and the recycling of the revenues on both households and firms to quantify changes in the optimal tax structure and the equity impacts of an environmental tax reform. We characterize when an optimal environmental tax reform does not increase inequality, even if the tax system before the reform is optimal from a non-environmental point of view. If the tax system before the reform is calibrated to stylized data—and is thus non-optimal—we find that there is a large scope for inequality reduction, even if the government is restricted in its recycling options.
This paper examines implications of limits to substitution for estimating substitutability between ecosystem services and manufactured goods and for social discounting. Based on a model that accounts for a subsistence requirement in the consumption of ecosystem services, we provide empirical evidence on substitution elasticities. We find an initial mean elasticity of substitution of two, which declines over time towards complementarity. We subsequently extend the theory of dual discounting by introducing a subsistence requirement. The relative price of ecosystem services is non-constant and grows without bound as the consumption of ecosystem services declines towards the subsistence level. An application suggests that the initial discount rate for ecosystem services is more than a percentage-point lower as compared to manufactured goods. This difference increases by a further half percentage-point over a 300-year time horizon. The results underscore the importance of considering limited substitutability in long-term public project appraisal.
This article examines how distributional weights can be introduced into benefit–cost analysis (BCA) by using insights from recent developments in welfare economics, in particular the theory of fair social allocation and happiness studies. We argue that it is easier than commonly believed to design weights that embody the Paretian and equity properties of a well-crafted social welfare function. However, the informational requirements for such weights suggest that it may be helpful to examine the potential for simpler weights (e.g., based on simple objective indexes of well-being) to provide reasonable approximations of ideal weights for use in BCA.
We study the optimal consumption discount rate taking into account income inequality within a generation between countries. We show that if the dispersion of income decreases over time, the global consumption discount rate should under certain conditions be lower than in the case without inequality. Using actual growth predictions used in the context of climate change we find that the discount rate should be initially around twice as high than without considering inequality, but decreasing over time. Moreover, I show that these results also hold qualitatively when we extend the setting allowing aversion to spatial and intertemporal inequality to differ. In particular, empirical evidence suggests that inequality aversion should be lower than risk aversion and fluctuation aversion.
How willingness to pay for environmental quality changes as incomes rise is a central question in several areas of environmental economics. This paper explores both theoretically and empirically whether or not the willingness to pay (WTP) for pollution control varies with income. Our model indicates that the income elasticity of the marginal WTP for pollution reduction is only constant under very restrictive conditions. Our empirical analysis tests the null hypothesis that the elasticity of the WTP for pollution control with respect to income is constant, employing a multi-country contingent valuation study of eutrophication reduction in the Baltic Sea. Our findings reject this hypothesis, and estimate an income elasticity of the WTP for eutrophication control of 0.1–0.2 for low-income respondents and 0.6–0.7 for high-income respondents. Thus, our empirical results suggest that the elasticity is not constant but is always less than one. This has implications for how benefits transfer exercises, and for theoretical explanations of the environmental Kuznets curve.
We propose a representation of individual preferences with a subsistence requirement in consumption, and examine its implications for substitutability and sustainability. Specifically, we generalize the standard constant-elasticity-of-substitution (CES) utility specification for manufactured goods and environmental services, by adding a subsistence requirement for environmental services. We find that the Hicksian elasticity of substitution strictly monotonically increases with the consumption of environmental services above the subsistence requirement, and approaches the standard CES value as consumption becomes very large. Whether the two goods are market substitutes depends on the level of income. We further show that the subsistence requirement may jeopardize the existence of an intertemporally optimal and sustainable consumption path. Our results have important implications for growth, development and environmental policy.
Germany’s energy transition has been accompanied by a near doubling of power prices for private households since the outset of the new millennium. Millions of poor households and those that are close to the poverty threshold are likely to suffer from these increases in electricity cost. Focusing on low-income households, this paper illustrates the distributional implications of Germany’s energy transition by investigating their electricity cost burden between 2006 and 2012, using data from the German Residential Energy Consumption Survey (GRECS). Our estimates suggest that in 2012, on average, households at poverty risk allocated 5.5% of their income to power and, hence, paid nearly as much for covering their electricity consumption as for heating purposes. Given Germany’s ambitious targets to expand the share of costly renewable technologies in electricity consumption, which has broad support among the electorate, it is to be expected that households’ expenditure for power will increase in the upcoming years. This raises the urgent question of how to mitigate the regressive impact of further increasing electricity prices on poor households. Direct cash transfers are suggested here as a non-distortionary instrument for easing the burden of high prices, one that is directly targeted at those endangered by energy poverty.
Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed—based on a two-goods extension of the Ramsey growth model—to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9 ± 0.3 %-points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates—one for manufactured consumption goods and one for ecosystem services.
Background
A principal function of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) is to “perform regular and timely assessments of knowledge on biodiversity.” In December 2013, its second plenary session approved a program to begin a global assessment in 2015. The Convention on Biological Diversity (CBD) and five other biodiversity-related conventions have adopted IPBES as their science-policy interface, so these assessments will be important in evaluating progress toward the CBD’s Aichi Targets of the Strategic Plan for Biodiversity 2011–2020. As a contribution toward such assessment, we review the biodiversity of eukaryote species and their extinction rates, distributions, and protection. We document what we know, how it likely differs from what we do not, and how these differences affect biodiversity statistics. Interestingly, several targets explicitly mention “known species”—a strong, if implicit, statement of incomplete knowledge. We start by asking how many species are known and how many remain undescribed. We then consider by how much human actions inflate extinction rates. Much depends on where species are, because different biomes contain different numbers of species of different susceptibilities. Biomes also suffer different levels of damage and have unequal levels of protection. How extinction rates will change depends on how and where threats expand and whether greater protection counters them.
Advances
Recent studies have clarified where the most vulnerable species live, where and how humanity changes the planet, and how this drives extinctions. These data are increasingly accessible, bringing greater transparency to science and governance. Taxonomic catalogs of plants, terrestrial vertebrates, freshwater fish, and some marine taxa are sufficient to assess their status and the limitations of our knowledge. Most species are undescribed, however. The species we know best have large geographical ranges and are often common within them. Most known species have small ranges, however, and such species are typically newer discoveries. The numbers of known species with very small ranges are increasing quickly, even in well-known taxa. They are geographically concentrated and are disproportionately likely to be threatened or already extinct. We expect unknown species to share these characteristics. Current rates of extinction are about 1000 times the background rate of extinction. These are higher than previously estimated and likely still underestimated. Future rates will depend on many factors and are poised to increase. Finally, although there has been rapid progress in developing protected areas, such efforts are not ecologically representative, nor do they optimally protect biodiversity.
Outlook
Progress on assessing biodiversity will emerge from continued expansion of the many recently created online databases, combining them with new global data sources on changing land and ocean use and with increasingly crowdsourced data on species’ distributions. Examples of practical conservation that follow from using combined data in Colombia and Brazil can be found at www.savingspecies.org and www.youtube.com/watch?v=R3zjeJW2NVk .
By harnessing recent results on the relationship between biodiversity and ecosystem functioning to an assessment of the valued services that people obtain from the natural environment, the Millennium Ecosystem Assessment (MA) has brought the analysis of ecosystems into the domain of economics. Ecosystem services are defined by the MA as the benefits that people obtain from ecosystems. Since the value of any asset is simply the discounted stream of benefits that are obtained from that asset, the benefit streams associated with ecosystem services may be used to estimate the value of the underlying ecological assets. Those assets are not the traditional stocks of resource economics - minerals, water, timber and so on - but the systems that yield flows of such things. This chapter discusses the value of ecosystems and ecosystem services. It identifies the main methods for valuing different types of ecosystem service, and the role of valuation in developing sustainability indicators. The sustainability of economic development requires that the value of the assets or capital stocks supporting development be maintained over time, and since capital includes produced, human and natural capital, it is important to understand how the value of ecosystems may be changing relative to the value of other capital stocks.
Landscapes generate a wide range of valuable ecosystem services, yet land-use decisions often ignore the value of these services.
Using the example of the United Kingdom, we show the significance of land-use change not only for agricultural production
but also for emissions and sequestration of greenhouse gases, open-access recreational visits, urban green space, and wild-species
diversity. We use spatially explicit models in conjunction with valuation methods to estimate comparable economic values for
these services, taking account of climate change impacts. We show that, although decisions that focus solely on agriculture
reduce overall ecosystem service values, highly significant value increases can be obtained from targeted planning by incorporating
all potential services and their values and that this approach also conserves wild-species diversity.
Climate change not only impacts production and market consumption but also the relative scarcity of nonmarket goods, such as environmental amenities. We study fundamental drivers of the resulting relative price changes, their potential magnitude, and their implications for climate policy in Nordhaus’s Dynamic Integrated Climate-Economy (DICE) model, thereby addressing one of its key criticisms. We propose plausible ranges for these relative prices changes based on best available evidence. Our central calibration reveals that accounting for relative prices is equivalent to decreasing pure time preference by 0.6 percentage points and leads to a more than 50 percent higher social cost of carbon. (JEL D61, H43, Q51, Q54, Q58)
Concerns about intergenerational equity have led to an influential practice of setting social utility discount rates based on ethical considerations rather than to match household behavior, particularly in climate change economics (e.g., Stern, 2006). This paper formalizes the broader policy implications of this approach in general equilibrium by characterizing jointly optimal environmental and fiscal policies in a climate-economy model with differential planner-household discounting. First, I show that decentralizing the optimal allocation requires not only high carbon prices but also fundamental changes to tax policy: If the government discounts the future less than households, implementing the optimal allocation requires an effective capital income subsidy (a negative intertemporal wedge), and, in a setting with distortionary taxation, an effective labor-consumption tax wedge that is decreasing over time. Second, if the government cannot subsidize capital income, the constrained-optimal carbon tax may be up to 50% below the present value of marginal damages (the social cost of carbon) due to the general equilibrium effects of climate policy on household savings. Third, given the choice to optimize either carbon, capital, or labor income taxes, the socially discounting planner's welfare ranking is ambiguous over a standard range of parameters. Overall, in general equilibrium, a policy-maker's choice to adopt differential social discounting may thus overturn conventional recommendations for both environmental and fiscal policy.
Subsidies for renewable energy sources are increasing around the globe and amounted to more than 100 billion euro in 2013. This study aims to answer whether the subsidies only ensure that green electricity plants are profitable or whether other market participant – as, for example, landowners – benefit from the subsidy in the form of windfall gains as well. To identify the causal effect of the subsidies, we investigate the impact of the introduction of a price guarantee in the form of a feed-in tariff for wind electricity in Germany on land prices. We employ two different approaches. Both approaches exploit quasi-experimental variation in wind strength across 260 non-urban counties in combination with the introduction of the subsidies. Based on a difference-in-differences design, we find that land prices increased by roughly 1100 euro in high-wind areas after the introduction of the subsidy. Further, using an instrumental variable estimator we document that around 18% of expected wind turbine profits are capitalized into land prices. Finally, we show that wind turbine subsidies account for 4% of overall agricultural income in 2007.
We present theory and evidence highlighting the role of natural amenities in neighbourhood dynamics, suburbanization, and variation across cities in the persistence of the spatial distribution of income. Our model generates three predictions that we confirm using a novel database of consistentboundary neighbourhoods in U.S. metropolitan areas, 1880-2010, and spatial data for natural features such as coastlines and hills. First, persistent natural amenities anchor neighbourhoods to high incomes over time. Secondly, naturally heterogeneous cities exhibit persistent spatial distributions of income. Thirdly, downtown neighbourhoods in coastal cities were less susceptible to the widespread decentralization of income in the mid-twentieth century and experienced an increase in income more quickly after 1980.
We derive a simple formula for the social discount rate (SDR) that uses the median, rather than average agent of the economy to reflect the consequences of consumption growth on income inequality. Under reasonable assumptions, the difference between the growth of median and mean incomes is used to adjust the wealth-effect in the standard Ramsey rule. In a plausible special case the representative agent has the median income. With inequality aversion elasticity of 2 (1.5, 1), the U.K. and U.S. SDR would be 1% (0.5%, 0.25%) lower than the standard Ramsey rule. This reflects two decades of inequality-increasing growth and implies greater weight placed on future generations in public appraisal.
We study how the distribution of income among members of society, and income inequality in particular, affects social willingness to pay (WTP) for environmental public goods. We find that social WTP for environmental goods decreases (increases) with income inequality if and only if environmental goods and manufactured goods are substitutes (complements). We derive adjustment factors for benefit transfer to control for differences in income distributions between a study site and a policy site. For illustration, we quantify how social WTP for environmental public goods depends on the respective income distributions for empirical case studies in Sweden and the World at large. We find that the adjustment for income inequality can be substantial.
Benefit–cost analysis (BCA) evaluates policy choices by summing unweighted monetary equivalents, and is insensitive to distributional considerations. An established scholarly tradition proposes to use distributional weights in BCA—multiplying monetary equivalents by weighting factors that are inversely proportional to individuals’ incomes.
This article provides an accessible overview of the topic of distributional weights, with a special focus on environmental policy. The intellectual foundation for weights is the concept of a social welfare function (SWF). Two are considered: a utilitarian SWF and an isoelastic/Atkinson SWF, which incorporates an extra degree of inequality aversion.
The article explains the concept of an SWF, discusses in detail how to specify utilitarian and isoelastic/Atkinson weights so as to mimic the corresponding SWFs, and uses the value of statistical life (VSL) to provide an example of weighting. The article then considers two important objections to distributional weighting: that interpersonal well-being comparisons (and thus weights) are undermined by preference heterogeneity, and that distributional considerations are best handled through the tax system.
Human activities are increasingly degrading ecosystems, resulting in habitat loss and reduced biodiversity. Extinction rates, a widely used metric of biodiversity loss, are estimated to be around 1000 times as high as those historically experienced on Earth ( 1 ); even the most conservative estimate puts current extinction rates at 114 times as high as the background planetary norm ( 2 ). Simulations project that, under scenarios of increased economic growth and the accompanying land use change, critical habitat will further degrade and biodiversity will decline ( 3 , 4 ). Are economic growth and ecosystem conservation incompatible objectives?
The now dominant survey approaches to value public services remain contentious. A common explanation is that stated preferences are generally difficult to measure. I argue that the key problems of the dominant survey approaches can be explained more specifically by their ambition to measure individuals' (maximum) willingness to pay (WTP). To estimate WTP researchers need to ask questions involving counterfactual prices, to specify doubtful implementation rules, and to aggregate preferences in a way that is inconsistent with political rights. The procedures engender problems with scenario credibility, incentive compatibility, adequate information provision, and democratic legitimacy. As an alternative to the standard stated preference paradigm I propose a democratic valuation approach (DV). DV measures the exchange value of public services in the political domain in terms of the aggregate valuation implied by the median preferred expenditure level for public services. The blueprint for survey design is the public finance referendum with multiple proposals. I suggest that empirically straightforward and democratically legitimate exchange values may be a more powerful input to public policy decisions than theoretically correct but empirically problematic estimates of mean willingness to pay.
Using geographically disaggregated data and exploiting an instrumental variable strategy, we show that contrary to conventional wisdom, the benefits of the 1990 Clean Air Act Amendments (CAAA) were progressive. The CAAA created incentives for local regulators to target the initially dirtiest areas for cleanup, creating heterogeneity in the incidence of air quality improvements that favored lower-income households. Based on house price appreciation, households in the lowest quintile of the income distribution received annual benefits from the program equal to 0.3% of their income on average during the 1990s, over twice as much as those in the highest quintile. © 2015 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Conventional benefit-cost analysis incorporates the normally reasonable assumption that the policy or project under examination is marginal. Among the assumptions this entails is that the policy or project is small, so the underlying growth rate of the economy does not change. However, this assumption may be inappropriate in some important circumstances, including in climate-change and energy policy. One example is global targets for carbon emissions, while another is a large renewable energy project in a small economy, such as a hydropower dam. This paper develops some theory on the evaluation of non-marginal projects, with empirical applications to climate change and energy. We examine the conditions under which evaluation of a non-marginal project using marginal methods may be wrong, and in our empirical examples we show that both qualitative and large quantitative errors are plausible. (C) 2013 Published by Elsevier B.V.
In the past years, monetary valuation of changes to biodiversity and ecosystem services has received increased attention in the scientific community and in the policy arena. Regardless of the abundance of valuation methods, there seems to be a particular interest in obtaining monetary estimates via stated preference methods. While some experts regard these methods as useful means to recognise, demonstrate and integrate biodiversity concerns in policy design, others voice severe criticism and advocate the use of deliberative approaches to biodiversity valuation. In view of these debates, this paper outlines the rationale and characteristics of three valuation avenues: stated preference methods, deliberative institutions, and deliberative monetary valuation. We develop criteria that guide the selection of an appropriate valuation approach in different decision contexts and discuss the advantages and drawbacks of each approach against these criteria. The aim of the paper is to illuminate the portfolio of valuation methods available to guide policy design and to improve the applicability of these methods in practical biodiversity policies.
This paper is a reply to Esteve Corbera's critique of my earlier commentary on the economic valuation of nature. It seeks to clarify my motivations and objectives in writing the original piece. It highlights important distinctions between our positions and explains why acceptance of financialized approaches to conservation (in any of its guises) works to deepen the embedded nature of neoliberal ideology.
Debates about the role of economic valuation in market-based conservation have proliferated in recent years. Specifically, scholars have engaged with the justice implications of non-market valuation and the emergence of new policy instruments paying for or trading ecosystem services and biodiversity. I hereby contribute to these debates by responding to a published commentary in this journal and I shed light on what I believe should be a new agenda for critical scholarship of market-based conservation. I argue for more precision in our claims, distinguishing across market-based instruments and across types of outcomes, and for a more nuanced account of the ethical connotations of such instruments, which should involve analyzing both unequal socio-economic relations and culturally bounded conceptions of justice. Overall, I advocate for the development of a more robust empirical basis to derive generalizations on the procedural, distributive and livelihood implications of market-based instruments for conservation.
While many of the concerns over the economic valuation of nature have gained broad exposure, justice concerns remain largely peripheral. Within both scholarly debate and actual valuation exercises, the emphasis is most often on reconciling cultural and monetary valuation. Increasingly, as the valuation of nature gains momentum, proponents of the trend seek to relieve apprehensions by suggesting that economic valuation is entirely compatible with intrinsic and esthetic values. This attempt to mollify skeptics, however, misses the mark; regardless of whether or not nature may be valued simultaneously in cultural and economic terms, the social and environmental justice implications of monetary valuation remain. The purpose of this commentary is to clarify that much of the resistance to the economic valuation of nature is motivated by these justice concerns and that reassurances about the cultural value of nature do little to quell them. Several of the justice reasons to remain cautious of the economic valuation of nature are also elaborated.
Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed – based on a two-goods extension of the Ramsey growth model – to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9±0.3 %-points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates – one for manufactured consumption goods and one for ecosystem services.
European countries have increased their use of environmental tax instruments by designing new tax bases. But, many countries have to face the opposition of the public opinion, for fear of the distributive consequences of these environmental tax reforms. This paper sheds light on the distributive consequences of environmental tax policies when households are heterogeneous. The objective is to assess whether an environmental tax reform could be Pareto improving, when the revenue of the pollution tax is recycled by a change in the labor tax properties. We show that, whatever the degree of regressivity of the environmental tax alone, it is possible to design a recycling mechanism that renders the tax reform Pareto improving, by simultaneously decreasing the average rate of the wage tax and increasing its progressivity.
This article surveys recent literature on the equity impacts of environmental policy. We focus on studies that look at the distribution of costs and benefits of alternative environmental policies. We also examine potentially important trade-offs between efficiency and equity that arise in the context of environmental policy, as well as transition effects. In many of the applications surveyed here, environmental policies can be regressive. Strategies are discussed to reduce this regressivity through the use of revenues from certain policy instruments. With regard to the distribution of the benefits of environmental policy, we conclude that there is a need for more spatially disaggregated studies that simultaneously capture the spatial and socioeconomic impacts of environmental policy.
Environmental cost-benefit analysis, or CBA, refers to the economic appraisal of policies and projects that have the deliberate aim of improving the provision of environmental services or actions that might affect (sometimes adversely) the environment as an indirect consequence. Vital advances have arisen in response to the challenges that environmental problems and environmental policy pose for CBA. In this article, we review a number of these developments. Perhaps most notably this includes continuing progress in techniques to value environmental changes. Growing experience of these methods has resulted in, on the one hand, ever greater sophistication in application and, on the other hand, scrutiny regarding their validity and reliability. Distributional concerns have led to a renewal of interest in how appraisals might throw light on questions about equity as well as efficiency, and there have been substantial new insights for discounting costs and benefits in the far-off future. Uncertainty about what is lost when environmental assets are degraded or depleted has resulted in a number of distinct proposals although precaution is the watchword in each. Just as importantly, there is a need to understand when CBA is used in practice and why environmental decisions are often made in a manner apparently inconsistent with cost-benefit thinking.
This paper analyzes optimal social discount rates where people derive utility from relative consumption. We identify and compare three separate discount rates: the social rate (taking positional externalities into account), the private rate, and the conventional Ramsey rate. Two main findings resulted for the standard case with a positive growth rate: 1) the social discount rate exceeds the private discount rate if the degree of positionality increases with consumption, and 2) the social discount rate is smaller than the Ramsey rate if preferences are quasi-concave in own and reference consumption, and exhibit risk aversion with respect to reference consumption. Numerical calculations demonstrate that the latter difference may be substantial and economically important for such issues as global warming.
An improvement in the available methodology for the evaluation of environmental goods would be of considerable value to economists and public officials. The inadequate progress made in the development of this methodology is a result of the unique nature of environmental goods. It is, however, feasible to obtain direct approximations of values of environmental goods in a controlled, simulated market experiment. This paper reports such an experiment conducted at Oregon State University. The study objective was to determine trade off values for six variables: natural surroundings, various types of noises, recreation park facilities, vehicular traffic, travel time to work, and parking convenience. These variables were chosen on the basis of environmental conditions and the community interest at Oregon State University. Results are detailed in this report.