Springer Science and Business Media LLC

Environmental mandates can impose large costs on the businesses that must comply with them. Understanding the effects of those costs on production decisions may require a dynamic framework if environmental damages (and the costs of complying with mandates) depend on cumulative production or the passage of time. This paper focuses on the time dimension of general categories of fixed and variable costs arising from different types of mandates. The paper develops an optimal control model to predict how such costs may jointly affect current production rates, plant closure dates, and cumulative production. Theoretical results, derived from the comparative statics of the system of equations describing the solution to that model, identify circumstances in which the policy goals of greater production and greater environmental protection may not allways be at odds.

In this paper, we propose a new criterion for selecting efficient conjoint choice designs when the interest is in quantifying willingness to pay (WTP). The new criterion, which we call the WTP-optimality criterion, is based on the c-optimality criterion which is often used in the optimal experimental design literature. We use a simulation study to evaluate the designs generated using the WTP-optimality criterion and discuss the design of a real-life conjoint experiment from the literature. The results show that the new criterion leads to designs that yield more precise estimates of the WTP than Bayesian D-optimal conjoint choice designs, which are increasingly being seen as the state-of-the-art designs for conjoint choice studies, and to a substantial reduction in the occurrence of unrealistically high WTP estimates.

This paper investigates production license management when regulation constrains the number of production licenses to address production externalities. This is increasingly relevant for aquaculture production where disease issues threaten future seafood supply. The regulatory problem is analyzed in the context of Norwegian salmon aquaculture where a stop in issuance of new production licenses has been implemented to address social costs of parasitic sea lice. Our theoretical model shows that restricting number of licenses raises prices and shifts production efforts excessively towards greater stocking of fish per license. Hence, the policy cannot achieve a first-best welfare-maximizing allocation. Furthermore, restricting entry by limiting number of licenses can create regulatory rents, which effectively subsides rather than tax the source of the externality.

This paper examines the implications for the use of trade measures as “weapons” to address global environmental concerns. There are already proposals in the U.S. senate to impose an environmental tariff against foreign nations whose cost advantages stem from less stringent environmental standards than the U.S. The paper argues that trade policy measures typically are not the first best instruments for achieving environmental objectives. Even theoretically they could be shown to be welfare improving only under a very narrow range of circumstances. Their use in place of more efficient policy instruments may not only end up distorting the patterns of world trade but also may worsen the overall patterns of environmental quality. Simulation exercises undertaken here suggest that it is highly unlikely that countries would alter their environmental behavior because of the imposition of the proposed U.S. tariff. Hence the proposed legislation has very uncertain environmental consequences. Even if the policy has been mainly designed to protect domestic industries, it would only provide a minor margin of protection because the costs of complying with the environmental standards represent a relatively small element in the total costs. The analysis suggests that trade policy introduced in this fashion will have no significant impact on the patterns of world trade and pollution.

The “Dasgupta Review” of the economics of biodiversity (Dasgupta 2021) identifies many factors that threaten the ecological sustainability of our economies. This article examines how two policy failures - the underpricing and underfunding of nature – influence global land use change and terrestrial biodiversity loss. If natural areas are priced too cheaply, then converting them to agriculture, forestry and other land uses is less costly than protecting or preserving habitats. Underfunding nature further reduces the incentives for conservation and restoration. The current global funding gap for biodiversity is just under $900 billion annually, and especially impacts developing countries. Ending the underpricing of natural landscape requires removing environmentally harmful subsidies and adopting policies that place an additional cost on the use of land and natural resources or on pollution. Overcoming the funding gap means expanding public and private sources of financing nature, particularly for poorer countries, such as biodiversity offsets, payments for ecosystem services, debt-for-nature swaps, green bonds, sustainable supply chains and international environmental agreements. Using the example of peatlands, the article shows how such a comprehensive global strategy can be built.

This paper quantifies heterogeneity in rebound effects from policy-induced energy efficiency improvements by income and home size. We do so in a relatively understudied context: residential lighting. This context allows us to separately estimate effects for energy services (lighting hours) and electricity consumption. We identify the effect of household-level subsidy uptake using instrumental variables for program awareness. We find that rebound effects are larger for low-income households and those in smaller homes. We also show that the rebound effect is not large enough to “backfire” and all income and home-size subsamples exhibit net energy savings.

We analyze the gross welfare gains from real-time retail pricing in electricity markets where carbon taxation induces investment in variable renewable technologies. Applying a stylized numerical electricity market model, we find a U-shaped association between carbon taxation and gross welfare gains. The benefits of introducing real-time pricing can accordingly be relatively low at relatively high carbon taxes and vice versa. The non-monotonous change in welfare gains can be explained by corresponding changes in the inefficiency arising from “under-consumption” during low-price periods rather than by changes in wholesale price volatility. Our results may cast doubt on the efficiency of ongoing roll-outs of advanced meters in many electricity markets, since net benefits might only materialize at relatively high carbon tax levels and renewable supply shares.