addressing leakage in the eu ets border adjustment or output based allocation the eu ets has been criticised for threatening the competitiveness of european industry and generating carbon leakage i e increasing foreign greenhouse gas emissions two main options have been put forward to tackle these concerns border adjustments and output based allocation i e allocation of free allowances in proportion to current production we compare various configurations of these two options as well as a scenario with full auctioning and no border adjustment against this background we develop a model of the main sectors covered by the eu ets electricity steel cement and aluminium we conclude that the most efficient way to tackle leakage is auctioning with border adjustment which generally induces a negative leakage a spillover this holds even if the border adjustment does not include indirect emissions if it is based on eu rather than foreign specific emissions or for some values of the parameters if it covers only imports another relatively efficient policy is to combine auctioning in the electricity sector and output based allocation in exposed industries especially if free allowances are given both for direct and indirect emissions i e those generated by the generation of the electricity consumed although output based allocation is generally less effective than border adjustment to tackle leakage it is more effective to mitigate production losses in the sectors affected by the ets which may ease climate policy adoption c 2011 elsevier b v all rights reserved

the market valuation of ias versus us gaap accounting measures using form 20 f reconciliations abstract we investigate the market valuation of earnings and book value amounts prepared under ias and us gaap to provide evidence for the debate between the us sec and nyse on whether foreign firms should be allowed to list in the us using ias we find that the us gaap earnings reconciliation adjustment is value relevant and that us gaap amounts are valued differently for market value and return models but not a price per share model we also find that ias amounts are more highly associated with price per share than us gaap amounts and that us gaap amounts are more highly associated with security returns than ias amounts

punishment strategies in repeated games evidence from experimental markets abstract an experiment is designed to provide a snapshot of the strategies used by players in a repeated price competition game with a random continuation rule one hundred pairs of subjects played the game over the internet with subjects having a few days to make their decisions in each round occasionally subjects are asked to enter one period ahead pricing strategies instead of prices according to the elicited strategies between 90 and 95 of subjects punish less harshly in their initial response to a deviation than implied by the grim trigger strategy and do so in a way that depends on the size of the other subject s deviation future earnings are highest for subjects adopting the tit for tat strategy even after controlling for a subject s past earnings punishment strategies are generally softer and more graduated than implied by a grim trigger strategy and do better as a result

carbon leakage and capacity based allocations is the eu right competitiveness and carbon leakage are major concerns for the design of co2 emissions permits markets in the absence of a global carbon tax and of border carbon adjustments output based allocation is a third best solution and is actually implemented australia california new zealand the eu has followed a different route free allowances are allocated to existing or new capacities in proportion to a benchmark independent of actual production this paper compares these two schemes in a formal setting and shows that the optimal one is in fact a combination of both schemes or output based allocation alone if uncertainty is limited a key assumption of our analysis is that the short term import pressure depends both on the existing capacities and the level of demand which is typical in capital intensive and internationally traded sectors a calibration of the model is used to discuss the eu scheme for the cement sector in the third phase of the eu ets 2013 2020 this allows for a quantification of various policies in terms of welfare investment production company profits public revenues and leakage

frontiers of climate change economics the economics of climate change is an active field of research the contributions to a special issue are put in context of the literature and it is suggested that second best issues such as carbon leakage and the green paradox need to be complemented with a political economy analysis of why certain instruments are politically infeasible and with intra and intergenerational analyses of the impact of climate policy a case is also made for more empirical work on the gradual and catastrophic damages of global warming

an empirical assessment of the residual income valuation model abstract this paper provides an empirical assessment of the residual income valuation model proposed in ohlson ohlson j a 1995 earnings book values and dividends in security valuation contemporary accounting research 11 661 687 we point out that existing empirical research relying on ohlson s model is similar to past research relying explicitly on the dividend discounting model we establish that the key original empirical implications of ohlson s model stem from the information dynamics that link current information to future residual income our empirical results generally support ohlson s information dynamics however we find that our empirical implementation of ohlson s model provides only minor improvements over existing attempts to implement the dividend discounting model by capitalizing short term earnings forecasts in perpetuity

should a carbon tax be differentiated across sectors abstract if some but not all countries are cooperating to reduce co2 emissions one could make the following argument a high carbon tax for carbon intensive tradeable sectors in the cooperating countries will reduce the production of goods from these sectors and therefore co2 emissions in the cooperating countries however this will to a large extent be counteracted by increased production of such goods in the countries that have no climate policy and since it is only total co2 emissions from all countries that are relevant for the climate there is no point in a policy that simply relocates co2 emissions from the cooperating countries to the countries that have no climate policy according to this line of reasoning carbon intensive tradeable sectors should thus face a lower carbon tax than other sectors of the economy this paper shows that a carbon tax should not be differentiated across sectors in the economy provided one can use import and export tariffs on all traded goods it is also shown that such a differentiation of carbon taxes is optimal for the cooperating countries if they are prevented from using tariffs on the traded goods however informational or political factors constraining the use of tariffs are likely also to constrain the possibility of differentiating carbon taxes between sectors

cooperative strategies in anonymous economies an experiment we study cooperation in economies of indefinite duration participants faced a sequence of prisoner s dilemmas with anonymous opponents we identify and characterize the strategies employed at the individual level we report that i grim trigger does not describe well individual play and there is wide heterogeneity in strategies ii systematic defection does not crowd out systematic cooperation iii coordination on cooperative strategies does not improve with experience we discuss alternative methodologies and implications for theory

alternative designs for tariffs on embodied carbon a global cost effectiveness analysis in the absence of effective world wide cooperation to curb global warming import tariffs on embodied carbon have been proposed as a potential supplement to unilateral emissions pricing we consider alternative designs for such tariffs and analyze their effects on global welfare within a multi region multi sector computable general equilibrium cge model of global trade and energy our analysis suggests that the most cost efficient policy could be region specific tariffs on all products based on direct plus electricity emissions in the end however the potential cost savings through carbon tariffs must be weighed against the administrative costs as well as legal issues and political considerations

measures to enhance the effectiveness of international climate agreements the case of border carbon adjustments abstract actions on climate change which are not supported by all countries are not very effective however full participation in a global climate treaty with meaningful emission reductions is difficult to achieve the non excludability of the public good mitigation provides an incentive to abstain from global action moreover carbon leakage renders it unattractive to join a treaty without full participation we study whether and under which conditions border carbon adjustments bcas can mitigate free riding and reduce carbon leakage in a simple strategic trade model we show that bcas can lead to large stable climate agreements including full participation associated with large global welfare gains if treaties do not restrict membership open membership as this is typical for environmental agreements we caution against restricting accession to treaties exclusive membership as this is typical for trade agreements which may serve individual but not global interests

energy subsidies in california s electricity market deregulation deregulation and re regulation of california s electricity market not only failed in terms of anticipated cost reductions improved customer service and higher competition it also led to the introduction of various additional energy subsidies this paper analyzes california s electricity market deregulation process from a subsidy viewpoint under deregulation in california investor owned utilities were not allowed to pass their energy procurement costs fully on to their customers and therefore subsequently and inevitably ran into severe financial problems such retail price regulation is an energy subsidy that is both economically and environmentally unfavorable because it veils true price signals to electricity consumers and in this way discourages energy conservation other policies implemented in california that represent perverse energy subsidies are the purchase of power by the state of california the suspension of retail competition and the potential misuse of money from the recovery of stranded costs many interventions implemented by the state to smooth out the impacts of the energy crisis insulated electricity consumers from market realities supported the existing structure of california s electricity market which is predominantly based on fossil fuels and suppressed market incentives to improve energy conservation

market valuation and deregulation of electric utilities abstract this study examines the effect of ongoing deregulation in the electric utility industry on the relation between market value book value and earnings we predict that deregulation decreases increases the relative importance of book value earnings in explaining price we test this prediction by examining changes in the value relevance of book value and earnings during the 1988 1996 time period for a sample of large investor owned electric utilities we find that the regression coefficients and incremental explanatory power related to book value earnings have decreased increased over this time period these results are generally robust in sensitivity analysis

shareholder value efficiency in european banking abstract this paper advances the studies of hughes j p lang w w mester l j moon c g pagano m s 2003 do bankers sacrifice value to build empires managerial incentives industry consolidation and financial performance journal of banking and finance 27 417 447 by developing a new measure of bank performance which we refer to as shareholder value efficiency a bank producing the maximum possible economic value added eva given particular inputs and outputs is defined as shareholder value efficient this new efficiency measure is estimated using the stochastic frontier method focussing on the french german italian and uk banking systems over the period 1997 2002 and includes both listed and non listed banks we find that european banks are on average 36 shareholder value inefficient shareholder value efficiency is found to be the most important factor explaining value creation in european banking whereas cost and profit efficiency only have a marginal influence

the role of trade and competitiveness measures in us climate policy efforts of the 111th us congress to pass comprehensive climate change legislation although unsuccessful provide insights into the challenges of reaching political agreement on a package for reducing greenhouse gas ghg emissions chief among legislators concerns is the economic burden on their constituents their household energy bills and particularly their jobs perhaps the most vocal interests in the climate debate are the energy intensive manufacturing sectors they argue that the increased costs of carbon pricing will harm their ability to compete in international markets and that trading partners lack of comparable regulation would shift emissions abroad carbon leakage eroding the environmental benefits the salience of those arguments is under scored by statements by senators from industrial states in 2008 ten democratic senators laid out the principles that final legislation should address cost containment relief for working families technology investment equitable treatment of states and prominently enhanced safeguards to ensure a truly equitable and effective global effort that minimizes harm to the us economy and protects american jobs 1

distribution network prices and solar pv resolving rate instability and wealth transfers through demand tariffs 1 in 4 detached households in southeast queensland have installed rooftop solar pv amongst the highest take up rates in the world electricity distribution network capacity is primarily driven by periodic demand and household load generally peaks in the early evening whereas solar pv production peaks during the middle of the day and thus a mismatch exists compounding matters is the fact that the structure of the regulated two part network tariff is dominated by a flat rate variable charge in this article interval meter data at the customer switchboard circuit level confirms that solar households use only slightly less peak capacity than non solar households and that non trivial cross subsidies are rapidly emerging a tariff model demonstrates that a peak capacity based demand tariff is a more efficient cost reflective and equitable pricing structure that improves the stability of tariffs given a rate of return regulatory constraint

climate cooperation with technology investments and border carbon adjustment a central question in climate policy is whether early investments in low carbon technologies are a useful first step towards a more effective climate agreement in the future we introduce a climate cooperation model with endogenous r d investments where countries protect their international competitiveness via border carbon adjustments bca bca raises the scope for cooperation and leads to a non trivial relation between countries prior r d investments and participation in the coalition we find that early investments in r d render free riding more attractive therefore with delayed cooperation on emission abatement and ex ante r d investments the outcome is often characterized by high participation but inefficiently low technology investments and abatement

nuclear decommissioning costs the impact of recoverability risk on valuation abstract mounting nuclear plant decommissioning costs and utility deregulation focused attention on accounting for decommissioning liabilities fasb s exposure draft 158 b proposes balance sheet recognition of the projected future decommissioning cost liability at initial plant commission we expect market valuation of each dollar of decommissioning cost apportioned to utilities to vary with utility specific factors related to the probability of cost recovery via rates we find a more negative decommissioning cost firm value association for utilities with higher business or financial risk also equity value is significantly associated with total decommissioning cost across all nuclear units in which a utility has ownership interest

are disclosures about bank derivatives and employee stock options value relevant abstract the papers by venkatachalam 1996 and aboody 1996 provide some interesting evidence on issues that are important to accounting regulators as well as accounting academics however for econometric as well as economic reasons there are limits to what we can learn from this type of research cross sectional levels studies careful attention to methodological issues in this type of research design can reduce but likely will not eliminate these interpretational difficulties

on the design of optimal grandfathering schemes for emission allowances to meet its commitment under the kyoto protocol the eu plans to implement an emissions trading system whith grandfathering of allowances besides having distributional impacts the choice of the grandfathering scheme may affect efficiency if firms anticipate how future allocations depend on upcoming decisions in this paper we determine central design rules for optimal grandfathering within a simple two period model we find that for small open trading systems where allowance prices are exogenous first best second period grandfathering schemes must not depend on firm specific decisions in the first period second best schemes correspond to a ramsey rule of optimal tax differentiation and are generally based on both previous emissions and output however ofr closed emissions trading systems i e endogeneous allowance prices firstand second best rules coincide and must not depend on previous output levels they consist of an assignment proportional to the emissions in the first period plus a term which does not depend on firm specific decisions in either of the two periods

an experimental test of the efficacy of a simple reputation mechanism to solve social dilemmas abstract the evolution of cooperation has been the focus of intense research in the social sciences natural sciences especially biology and even computer science it has long been recognized that the possibility of future consequences is crucial to the emergence of rational cooperation it was thought that random matching was isomorphic to one shot play but kandori 1992 showed that a reputation labeling mechanism can be used to support cooperation in the random matching prisoner dilemma we designed an experiment to test this result we found that while the level of cooperation steadily declined without a reputation mechanism with our color coded reputation mechanism the level of cooperation steadily increased with experience an econometric mixture model consisting of four reputation conditioned strategies as well as a level 0 type was fitted to the data we cannot reject the hypothesis that the majority of subjects used one of these strategies and learned with experience

the market valuation implications of net periodic pension cost components abstract this paper examines whether market participants implicitly assign different coefficients to pension cost components when determining security prices the major findings are 1 the pension cost components coefficients generally differ from one another as predicted the transition asset amortization coefficient is lower than other pension coefficients and is insignificantly different from zero 2 consistent with the market viewing pension related income streams as less risky the pension coefficients are generally larger than the nonpension coefficients additional specification tests permitting nonpension coefficients to vary with risk tax payer status and industry membership generally support the basic findings although the significance levels are generally higher

efficient climate policy in the presence of free riders abstract if all countries participate in a climate agreement policies affecting the supply of fossil fuels have identical economic consequences as policies affecting the demand of fossil fuels this is no longer true when there is limited participation in an international agreement in the paper it is assumed that a group of countries commit themselves to cooperating while the remaining countries act independently and in pure self interest the paper compares supply and demand policies in this context and demonstrates that policies which affect only demand or only supply of carbon generally are inferior to policies affecting both demand and supply of carbon the optimal mix of supply and demand policies is derived in the paper with particular emphasis on carbon taxes an important result is that if the marginal environmental costs of total emissions are sufficiently high in the cooperating countries then both production and consumption of carbon should be taxed at a positive rate if on the other hand the marginal environmental costs of total emissions are sufficiently low it may be optimal to subsidize production or consumption in this case production should be subsidized if the cooperating countries are net importers of carbon while consumption should be subsidized if the cooperating countries are net exporters of carbon another important conclusion of the paper is that the cooperating countries should try to induce the non cooperating countries through appropriate transfers to tax consumption and production of carbon at the same rate as in the cooperating countries

the reliability of investment property fair value estimates abstract we investigate the reliability of mandatory annual fair value estimates for uk investment property we find that appraisal estimates understate actual selling prices and are considerably less biased and more accurate measures of selling price than respective historical costs investigations of managerial discretion over fair value reporting reveal that managers select among permissible accounting methods to report higher earnings time asset sales to smooth reported earnings changes smooth reported net asset changes and boost fair values prior to raising new debt finally we find that the reliability of appraisal estimates increases when monitored by external appraisers and big 6 auditors

accounting earnings and future economic rents an empirical analysis abstract this study reexamines competition cost structure and growth opportunities effects on earnings response coefficients and extends this literature in several ways first it presents a more refined theoretical motivation for investigating competition and cost structure effects second it introduces new economic factor proxies that confirm prior findings with respect to competition but differ from prior findings with respect to cost structure and growth opportunities overall the evidence suggests that accounting earnings reflect information about future economic rents generated by firms assets in place the evidence also suggests contrary to prior studies that accounting earnings are not very informative about firms growth opportunities

cost effective unilateral climate policy design size matters given the bleak prospects for a global agreement on mitigating climate change pressure for unilateral abatement is increasing a major challenge is emissions leakage border carbon adjustments and output based allocation of emissions allowances can increase effectiveness of unilateral action but introduce distortions of their own we assess antileakage measures as a function of abatement coalition size we first develop a partial equilibrium analytical framework to see how these instruments affect emissions within and outside the coalition we then employ a computable general equilibrium model of international trade and energy use to assess the strategies as the coalition grows we find that full border adjustments rank first in global cost effectiveness followed by import tariffs and output based rebates the differences across measures and their overall appeal decline as the abatement coalition grows in terms of cost the coalition countries prefer border carbon adjustments countries outside the coalition prefer output based rebates

accounting for changing prices the value relevance of historical cost price level and replacement cost accounting in mexico this paper investigates the value relevance of historical cost price level and replacement cost accounting using a sample of mexican firms from 1989 to 1995 it contributes to prior research by distinguishing between two distinct aspects of changing prices 1 the change in the general price level and 2 the change in the value of specific non monetary assets i select mexico to examine because it is unique in requiring and disclosing separately price level and replacement cost adjustments a sample of mexican firms also addresses a key reason cited for mixed results in previous assessments of the usefulness of price level and replacement cost accounting using united states data the effects of inflation are too weak to detect high rates of inflation in mexico ranging between 7 and 52 during the sample period mitigate that potential problem results indicate that replacement cost adjustments are relatively and incrementally relevant beyond historical cost and price level measures while price level adjustments are incrementally value relevant beyond historical measures

cooperation among strangers under the shadow of the future we study the emergence of norms of cooperation in experimental economies populated by strangers interacting indefinitely can these economies achieve full efficiency even without formal enforcement institutions which institutions for monitoring and enforcement facilitate cooperation finally what classes of strategies do subjects employ we find that first cooperation can be sustained even in anonymous settings second some type of monitoring and punishment institutions significantly promote cooperation and third subjects mostly employ strategies that are selective in punishment

discussion of revalued financial tangible and intangible assets association with share prices and non market based value estimates barth and clinch 1998 henceforth bc like easton eddey and harris 1993 henceforth eeh examine the relation between asset revaluation data in the financial statements of australian firms and various value metrics a principal difference between the two studies is the choice of value metrics and the formulation of the regression models relating the revaluation data and these metrics the value metrics used by bc are price per share and a measure of intrinsic value per share most of this discussion will focus on the possible effects of scale in regressions that have price or value per share as the dependent variable my main point is that statistical associations between price balance sheet data and income statement data in these regressions may be a spurious effect of scale other issues raised at the conference included the expected magnitudes of the coefficient estimates from the regression analyses management motives for asset revaluations econometric issues associated with pooling a time series and cross section of data and reasons for use of independent valuations versus valuations by company directors since these issues were addressed in eeh and in the discussion of eeh by bernard 1993 i pay less attention to them in this discussion

unilateral climate policy with production based and consumption based carbon emission taxes this paper characterizes a sub global climate coalition s unilateral policy of reaching a given climate damage reduction goal at minimum costs following eichner and pethig j environ econ manag 2013 we set up a two country two period model in which one of the countries represents a climate coalition that implements a binding ceiling on the world s first period emissions the other country is the rest of the world and refrains from taking action the coalition can make use of production based carbon emission taxes in both periods as in eichner and pethig j environ econ manag 2013 but here we consider consumption based carbon emission taxes as an additional instrument the central question is whether and how the coalition employs the consumption based taxes along with the production based taxes in its unilateral cost effective ceiling policy all cost effective policies identified analytically and numerically consist of a mix of both types of taxes implying that there is a tax mix which is less expensive for the coalition than stand alone consumption based or stand alone production based taxes with full cooperation both taxes are perfect substitutes in our model but in case of unilateral action they are imperfect substitutes because coalition s total welfare loss from two different but moderate distortions is smaller than that from a single but severe distortion

market valuation of employee stock options this study investigates whether investors incorporate the value of a firm s outstanding employee stock options into its stock price i estimate the outstanding options value for a sample of firms for which outstanding fixed options exceed 5 of outstanding common shares in 1988 i find a negative correlation between the value of outstanding options and a firm s share price the correlation is stronger i for the option s intrinsic value than for the option s time value ii for options that are later in their vesting stage than earlier in their vesting stage and iii for large firms than for small firms in addition the fasb s method for calculating compensation expense has no explanatory power in the presence of this paper s calculation of the options value

electric utility stranded costs valuation and disclosure issues we analyze the stock market s valuation of electric utility stranded costs i e costs that might become unrecoverable under deregulation and investigate whether stranded costs that have arisen as a result of voluntary firm business decisions are valued differently from those that are more directly linked to regulatory mandates further we study whether investor valuations differ across jurisdictions finally we examine the relation between investor valuation of stranded costs and the decision by utilities to make stranded cost related disclosures in their financial statements voluntarily we find that investors anticipate that on average approximately 10 of total stranded costs will be borne by utility shareholders stranded costs arising from voluntary operating or investing decisions made by utilities are valued more negatively than those associated with mandatory power purchase contracts consistent with investors assigning a higher recovery probability to the latter investor valuations of stranded costs associated with utility generating investments do not differ systematically across jurisdictions we find that stranded costs are valued less negatively for voluntary disclosers not just in the year of disclosure but also in the preceding two years implying that it is not disclosure per se that favorably influences valuation voluntary disclosers operate in jurisdictions that have more clearly established stranded cost recovery mechanisms suggesting that both stranded cost disclosure and valuation are prompted by reduction in uncertainty about recoverability

emission taxes and optimal refunding schemes abstract we examine how refunding emission taxes to firms dependent on market shares should be designed while refunding is harmful under perfect competition a first best self financing tax tax refunding scheme exists if the marginal damage from pollution exceeds the marginal distortion in an imperfectly competitive output market with symmetric firms under pre investment in cleaner technology with short term abatement opportunities a first best refunding scheme exists if pollution refunding can be made dependent on both market and investment shares

endogenizing the cap in a cap and trade system assessing the agreement on eu ets phase 4 in early 2018 a reform of the world s largest functioning greenhouse gas emissions cap and trade system the eu emissions trading system ets was formally approved the reform changed the main principles of the system by endogenizing the emissions cap we show that the emissions cap is now affected by the allowance demand and is therefore no longer set directly by eu policymakers as a consequence national policies that reduce allowance demand can now reduce long run cumulative emissions which is not possible in a standard cap and trade system using a newly developed dynamic model of the eu ets we show that policies that reduce allowance demand can have substantial effects on cumulative emissions after the reform model simulations also suggest that the reform reduces long run cumulative emissions and to a lesser extent reduces emissions in the short run even so the reform has a small short run impact on the currently large allowance surplus

constructing strategies in the indefinitely repeated prisoner s dilemma game abstract we propose a new approach for running lab experiments on indefinitely repeated games with high continuation probability this approach has two main advantages first it allows us to run multiple long repeated games per session second it allows us to incorporate the strategy method with minimal restrictions on the set of pure strategies that can be implemented this gives us insight into what happens in long repeated games and into the types of strategies that subjects construct we report results obtained from the indefinitely repeated prisoner s dilemma with a continuation probability of 95 we find that during such long repeated prisoner s dilemma games cooperation drops from the first period of a supergame to the last period of a supergame when analyzing strategies we find that subjects rely on strategies similar to those found in the literature on shorter repeated games specifically tit for tat grim trigger and always defect however we also identify features of strategies that depend on more than just the previous period that are responsible for the drop in cooperation within supergames but that may be overlooked when using the common strategy frequency estimation approach

on cross sectional analysis in accounting research abstract this paper examines cross sectional analysis procedures common to many market based accounting research papers both the economic and econometric properties of levels and returns studies are discussed topics covered include the relations between the accounting studies and cash flow valuation models the role of expectations of accounting variables deflators spurious inference risk adjustment and its relation to growth size and leverage residual dependence dependence among explanatory variables and the effect of scale differences across firms major conclusions are that market value is the correct deflator in returns studies and that levels and returns studies are economically but not econometrically equivalent

the relevance of the value relevance literature for financial accounting standard setting another view this paper explains that value relevance research assesses how well accounting amounts reflect information used by equity investors and provides insights into questions of interest to standard setters a primary focus of financial statements is equity investment other uses of financial statement information such as contracting do not diminish the importance of value relevance research value relevance questions can be addressed using extant valuation models value relevance studies address econometric issues that otherwise could limit inferences and can accommodate and be used to study the implications of accounting conservatism r 2001 elsevier science b v all rights reserved jel classification m41 m44 g12

fair value disclosures by bank holding companies abstract this paper examines the value relevance of fair value data disclosed under sfas 107 by banks for 1992 and 1993 collectively the evidence suggests differences between fair and book values of financial instruments are associated with market to book ratios however fair value disclosures for financial instruments other than securities are value relevant only in limited settings in addition only in 1992 are fair value variables associated with market to book ratios after incorporating existing historical cost information further analysis suggests the weaker 1993 results are not necessarily due to increased measurement error in fair value numbers

climate clubs overcoming free riding in international climate policy notwithstanding great progress in scientific and economic under standing of climate change it has proven difficult to forge inter national agreements because of free riding as seen in the defunct kyoto protocol this study examines the club as a model for international climate policy based on economic theory and empirical modeling it finds that without sanctions against non participants there are no stable coalitions other than those with minimal abatement by contrast a regime with small trade penalties on non participants a climate club can induce a large stable coalition with high levels of abatement jel q54 q58 k32 k33

collusion as public monitoring becomes noisy experimental evidence this paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners dilemma game with imperfect public monitoring we find that subjects payoffs i decrease as noise increases and ii are lower than the theoretical maximum for low noise but exceed it for high noise under the assumption that the subjects strategy uses thresholds on the public signal for transition between cooperation and punishment states we find that the best fitting strategy simply compares the most recent public signal against a single threshold

unilateral co2 reductions and carbon leakage the consequences of international trade in oil and basic materials a recursively dynamic general equilibrium model featuring six world regions with trade in energy and non energy goods is used to simulate the period from 1990 through 2100 in 10 year intervals the simulations explore the effect of unilateral action by the oecd to curb global co2 emissions unilateral cuts create incentives for free riding by non participating regions so that global emissions are reduced by less than the amount that the oecd cuts back its regional emissions carbon leakage occurs through two channels first basic materials production increases in unconstrained regions resulting in increased carbon intensity of gdp second reductions in oecd oil imports cause the world oil price to fall leading to an increased energy intensity in the non participant regions in this paper we use a general equilibrium model to assess the extent to which these two mechanisms reduce the effectiveness of oecd reductions in curbing global co2 concentrations

internet downturn finding valuation factors in spring 2000 abstract during spring 2000 the internet stock index declined 45 using a sample of internet firms this paper investigates whether this decline was associated with new disclosures such as earnings analyst forecast revisions and web traffic measures or to a reassessment by investors of pre existing information we find only modest evidence that the decline was associated with new disclosures however returns and post decline stock prices are significantly explained by 1999 annual report data when earnings are decomposed into gross profit and various expenses traditional financial information contributes significantly more in explaining the cross sectional returns and price levels than non financial information

climate change policy market structure and carbon leakage abstract the 1997 kyoto protocol on climate change obliges the industrialized countries to initiate the international effort of abating anthropogenic greenhouse gas ghg emissions if such an initiative is to be taken the associated competitive effects may lead to significant relocation of developed countries energy intensive production this paper examines this issue i adopt an oligopolistic structure combined with increasing returns to scale production technologies to represent the strategic interaction among the firms producing energy intensive products this representation is then embedded within a multi regional computable general equilibrium model which in turn is used for quantifying these relocational effects the results suggest that significant relocation of energy intensive industries away from the oecd may occur depending on the type of market structure with leakage rates as high as 130 in which case ghg control policies in the industrialized countries actually lead to higher global emissions

optimal emission pricing in the presence of international spillovers decomposing leakage and terms of trade motives abstract carbon leakage provides an efficiency argument for differentiated emission prices in favor of emission intensive and trade exposed sectors under unilateral climate policy however differential emission pricing can be used as a beggar thy neighbor policy to exploit terms of trade adopting an optimal tax framework we propose a method to decompose the leakage and terms of trade motives for emission price differentiation we employ our method for the quantitative impact assessment of unilateral climate policy based on empirical data we find that the leakage motive yields only small efficiency gains compared to uniform emission pricing likewise the terms of trade motive has rather limited potential for strategic burden shifting we conclude that in many cases the simple first best rule of uniform emission pricing remains a practical guideline for unilateral climate policy design

taxing consumption to mitigate carbon leakage this is a post print version of an article published in environmental and resource economics made available in accordance with the copyright policy of the journal publisher no commercial re distribution or re use is allowed this version may contain minor differences from the journal s pdf version

time series coefficient variation in value relevance regressions a discussion of core guay and van buskirk and new evidence abstract many claim that gaap financial information has become largely irrelevant to explaining valuations core et al compare financial information s value relevance for the new economy stocks with other stocks we supplement their analysis with new evidence on the economic determinants of the time series variation in the coefficients mapping financial information into prices we document significant variation in the coefficients related to proxies for changing market growth expectations and discount rates and additional variation consistent with time varying correlated omitted variables such findings make it difficult to draw unambiguous inferences about the relevance and reliability of financial information from value relevance regressions

some economic determinants of time series properties of earnings abstract the earnings time series literature in accounting focuses on the statistical characteristics of the processes which generate corporate earnings in order to further our understanding of earnings behavior this study investigates the question whether inter firm differences in these statistical characteristics autocorrelations and variances of earnings changes can be explained by economic factors various relationships between economic factors and earnings behavior are derived from the economic literature and examined empirically in this study findings indicate that autocorrelations and variability of annual earnings and earnings over equity changes are systematically associated with the following factors the type of product the height of industry barriers to entry a surrogate for degree of competition the degree of capital intensity operating leverage and the firm size

border adjustment for european emissions trading competitiveness and carbon leakage unilateral or sub global policies to combat climate change are potentially sensitive to free riding and carbon leakage one way of dealing with carbon leakage and competitiveness is the imposition of border adjustment measures for competing imports for example in the form of the obligation to importers of goods to purchase and surrender emissions allowances to the authorities when importing in this paper we explore some implications of border adjustment measures in the eu ets for sectors that might be subject to carbon leakage we examine the implications of two variants of these measures on the competitiveness of these sectors and on the global environment with the help of a multi sector multi region computable general equilibrium cge model of the global economy our calculations suggest that border adjustment might reduce the sectoral rate of leakage of the iron and steel industry rather forcefully but that the reduction would be less for the mineral products sector including cement the reduction of the overall or macro rate of leakage would be modest so from an environmental point of view border tax adjustments would not be a very effective policy measure but might mainly be justified by considerations of sectoral competitiveness

comparing policies to combat emissions leakage border carbon adjustments versus rebates we explore conditions determining which anti leakage policies might be more effective complements to domestic greenhouse gas emissions regulation we consider four policies that could be combined with unilateral emissions pricing to counter effects on international competitiveness a border charge on imports a border rebate for exports full border adjustment and domestic output based rebating each option faces different potential legal hurdles in international trade law each also has different economic impacts while all can support competitiveness none is necessarily effective at reducing global emissions nor is it possible to rank order the options effectiveness depends on the relative emissions rates elasticities of substitution and consumption volumes we illustrate these results with simulations for the energy intensive sectors of three different economies the united states canada and europe although most controversial full border adjustment is usually most effective but output based rebating for key manufacturing sectors can achieve many of the gains

monopoly regulation discontinuity stranded assets abstract for regulated electricity utilities if trend load growth enters a state of terminal decline through disruptive competition and costs are unable to contract at a similar rate the regulatory outcomes that follow produce strikingly different results to an equivalent episode in a competitive market where profits fall and assets are written off under economic regulation prices rise to offset volumetric losses and in the presence of disruptive competition a destructive price spiral can ensue in these circumstances some component of the regulated utility s assets meet the definition of stranded failure to deal with stranded assets will eventually and needlessly damage shareholders consumers and welfare however the regulatory compact makes this an especially complex area of economics zero recovery of stranded monopoly assets is not credible policy a normative analysis of economics and law suggests full recovery is not credible either in this article asset stranding experience from the us is reviewed and a series of policy principles are established viz asset stranding is a case by case proposition involving recovery via non bypassable pricing mechanisms quantified and packaged as a partial return of capital possibly financed by transition bonds on a time limited basis financial risk tolerances of the utility and the stability of post stranding consumer tariffs are important parameters that should guide the policy approach to asset stranding but ultimately asset stranding is a policy choice not an analytical determination

the regulation of privatized monopolies in the united kingdom this article examines the experience in the united kingdom with the regulation of privatized monopolies its conclusions are 1 that there are significant differences between rpi x or price cap and u s rate of return regulation which provides greater scope for bargaining in the former system 2 that u k regulators have taken seriously their duty to promote competition but that the existing economic literature is of limited help in this task 3 that price regulation is likely to be more effective where technology is changing slowly and or where technology is changing rapidly and 4 that the case for rpi x price cap rather than rate of return regulation is strongest in telecommunications gas supply and electricity supply and least strong in gas and electricity transmission grids

can energy price regulations smooth price fluctuations evidence from china s coal sector abstract due to the dominance of coal in china s energy mix coal prices have always been a challenging part of pricing reform the recent frequent government interventions raise the key research questions what is the actual impact of price policies on coal price fluctuations and how can forward looking pricing policies be made by proposing a novel classification of coal pricing policies and introducing an expectation and forward looking coefficient the paper examines the relationship between coal price fluctuations and pricing policies using the generalized method of moments gmm method it shows that the lagging coal price and coal demand play a positive role in regulating coal prices while coal supply and marketization have significantly negative effects on coal price fluctuations the heterogeneous impacts of price policies are due to differences in market players expectations policy instruments and the methods of policy release in addition china s coal pricing policy portfolio from 2013 to 2016 exerted synergy effects on the restraint of coal price fluctuations as the forward looking coefficient was considerably low the government s intervention behaviors were obviously biased towards ex post facto responses the paper suggests short run and long run policies to advance marketization of coal prices amid the energy transition

the evolution of cooperation in infinitely repeated games experimental evidence 1 for example in infinitely repeated prisoner s dilemma games with patient agents both cooperate and defect may be played in equilibrium even though the theory of infinitely repeated games has been used to explain cooperation in a variety of environments no definitive solution has been provided to the problem of equilibrium selection when both cooperation and defection are possible equilibrium outcomes which one should we expect to prevail previous experimental evidence has shown that subjects often fail to coordinate on a specific equilibrium when they play a small number of infinitely repeated games some subjects attempt to establish cooperative agreements while others defect but how would behavior evolve as subjects learn from previous repeated games would cooperation prevail when it can be supported in equilibrium or will subjects learn

cooperation in an overlapping generations experiment abstract recent theoretical work shows that folk theorems can be developed for infinite overlapping generations games cooperation in such games can be sustained as a nash equilibrium but of course there are other equilibria this paper investigates experimentally whether cooperation actually occurs in a simple overlapping generations game subjects both play the game and formulate strategies our main finding is that subjects fail to exploit the intertemporal structure of the game even when we provided subjects with a recommendation to play the grim trigger strategy most of the subjects still employed safe history independent strategies journal of economic literature classification numbers c72 c92 d90

sectors under scrutiny evaluation of indicators to assess the risk of carbon leakage in the uk and germany one of the central debates surrounding the design of the european union emissions trading scheme is the approach to address carbon leakage concerns correctly identifying the economic activities exposed to the risk of carbon leakage represents the first step in mitigating the risk effectively this paper assesses the robustness of the quantitative assessment criteria used by the european commission for phase 3 for example we apply the criteria to data for uk and germany and compare the results with the commissions assessment conducted at the aggregated eu level this reveals that sectors exposure risk to carbon leakage can vary across different member states due to differences in production processes technologies and fuel mix process emissions recycling rate differences product mix differences sector classification statistical boundaries activity allocation differences and finally difference in data quality overall we find that relative carbon intensity of sectors measured as cost increase relative to gross value added provides a robust metric the analysis also highlights the importance of using high quality and disaggregated data for this assessment

robust policies to mitigate carbon leakage abstract unilateral climate policy induces carbon leakage through the relocation of emission intensive and trade exposed industries to regions without emission regulation previous studies suggest that emission pricing combined with border carbon adjustment is a second best instrument and more cost effective than output based rebating we show that the combination of output based rebating and a consumption tax for emission intensive and trade exposed goods can be equivalent with border carbon adjustment moreover it is welfare improving for a region that implements emission pricing along with output based rebating to introduce such a consumption tax the welfare gain is particularly large if output based rebating is already implemented for a sector that is not much exposed to leakage e g due to uncertainty about exposure or due to lobbying activities thus supplementing output based rebating with a consumption tax constitutes robust policies to mitigate carbon leakage

pollution content tariffs environmental rent shifting and the control of cross border pollution this paper considers the optimal unilateral policy for a country that imports a good from a neighbouring country and is harmed by pollution generated during the production of that good if the foreign country has a variable abatement technology then home has an incentive to impose a tax on the pollution content of imports a pollution content tariff foreign regulation of pollution does not eliminate home s incentives to intervene but instead may create rent shifting opportunities by making the right to pollute a scarce asset foreign pollution quotas create rents that the home government can try to extract

to b ta or not to b ta on the legality and desirability of border tax adjustments from a trade perspective this paper asks two questions concerning border tax adjustments for climate purposes when viewed from a trade perspective first under what conditions are btas possible in the wto world to address this issue the paper provides a detailed discussion of the relevant law and case law we also apply our main conclusions to what we consider to be paradigmatic cases of measures to address climate change where trade concerns are raised we conclude that the wto regime is no major obstacle to those aspiring to use btas although the allocation of the burden of proof could be a concern the second issue addressed is whether the economic literature on the desirability of btas adequately reflects concerns that have been raised in the trade policy community here we conclude that it has hardly addressed these concerns at all we also point to some aspects of btas that would need to be taken into account in a more complete analysis

emissions taxes versus intensity standards second best environmental policies with incomplete regulation the best emissions tax or emissions cap may be an inferior instrument under incomplete regulation leakage without leakage an intensity standard regulating emissions per unit of output is inferior due to an implicit output subsidy this inefficiency can be eliminated by an additional consumption tax with leakage an intensity standard can dominate the optimal emissions tax since the implicit output subsidy prevents leakage the addition of a consumption tax improves an intensity standard s efficiency may prevent leakage and may be efficient comparing intensity standards to output based updating shows that the latter dominates if updating is sufficiently flexible