stabilizing inflation in the open economy optimal monetary policy in the open economy continues to be of interest to the profession as in benavie and froyen 1 and price level stabilization has been investigated by bradley and jansen 4 marquis and cunningham 13 and fischer 6 among many others price level stabilization has also been investigated in the monetary policy literature by for example black 2 or black and gavin 3 the academic literature has included analysis of price level stabilization in a variety of macroeconomic frameworks ranging from overlapping generations models to equilibrium business cycle models and keynesian contracting models what has been lacking however is a rigorous analysis of price level stabilization in the open economy this apparent omission is interesting because the most famous historical application of price level targeting occurred in the 1930s in sweden a small open economy in this paper we carefully examine the effectiveness of price level or inflation stabilization in the small open economy 2 employing an equilibrium business cycle model with differentially informed agents we find that when shocks to the economy exhibit some persistence inflation stabilization has favorable output stabilization properties relative to alternative monetary policies further these beneficial aspects of inflation stabilization exist whether or not agents contemporaneously observe the money stock the only instance in which inflation stabilization policy is not preferred is when all shocks to the economy are strictly temporary shocks and when uninformed agents can not observe the money stock contemporaneously finally in all instances we find that price level stabilization is preferred from a macroeconomic stabilization perspective to exchange

bankable permits for the control of environmental pollution abstract intertemporal trading of emission permits banking is often identified as one of three promising market mechanisms for controlling pollution along with averaging and trading surprisingly the efficiency properties of permit banking systems have not been investigated using a simple optimal control model this paper investigates firms incentives for banking or borrowing emission permits and compares the emission and output streams firms would choose with the socially optimal solution we find that in many cases firms will suboptimally choose excessive damage and output levels in early periods and correspondingly too few in later periods if given the opportunity to freely move emissions between time periods we propose a simple alternative trading scheme we term modified banking that counters this problem and should be no more difficult for an environmental authority to implement than a straigth banking system

do renewable electricity policies promote renewable electricity generation evidence from panel data using the poisson pseudo maximum likelihood estimation technique this paper evaluates the effects of renewable electricity policies on renewable electricity generation using a large panel dataset that covers 122 countries over the period of 1980 2010 the results suggest that renewable electricity policies play a crucial role in promoting renewable electricity generation but their effectiveness is subject to diminishing returns as the number of policies increases there is also evidence that the effects of renewable electricity policies are more pronounced before 1996 as well as in developed and emerging market countries and the negative policy interaction effect fades with the stage of economic development lastly policy effectiveness varies by the type of renewable electricity policy and energy source only investment incentives and feed in tariffs are found to be effective in promoting the development of all types of renewable energy sources for electricity considered in this paper

regulating stock externalities under uncertainty abstract using a simple analytical model incorporating benefits of a stock costs of adjusting the stock and uncertainty in costs we uncover several important principles governing the choice of price based policies e g taxes relative to quantity based policies e g tradable permits for controlling stock externalities as in weitzman rev econom stud 41 4 1974 477 the relative slopes of the marginal benefits and costs of controlling the externality continue to be critical determinants of the efficiency of prices relative to quantities with flatter marginal benefits and steeper marginal costs favoring prices but some important adjustments for dynamic effects are necessary including correlation of cost shocks across time discounting stock decay and the rate of benefits growth applied to the problem of greenhouse gases and climate change we find that a price based instrument generates several times the expected net benefits of a quantity instrument

optimal mix of emissions taxes and cap and trade abstract in practice different emitters of a particular pollutant are sometimes subjected to different control mechanisms this paper focuses on the situation where a part of the economy is regulated by a cap and trade program while the rest is subjected to an emissions tax using an extended version of weitzman s prices vs quantities model m l weitzman prices vs quantities revi econ stud 41 1974 477 491 we analyze the conditions under which this is superior from an efficiency point of view to subjecting the whole economy to either of these control mechanisms the paper addresses a crucial trade off between two sources of efficiency loss one due to cost effectiveness issues and another due to emissions volume this trade off determines the optimal size of each sector it is shown that the size of the taxed sector at an optimum increases with the relative steepness of the aggregate marginal abatement cost function

estimating the public s value of implementing the co2 emissions trading scheme in korea abstract the korean government set out the carbon dioxide co2 emissions reduction target as 30 below business as usual by 2020 the co2 emissions trading scheme ets was initiated in january 2015 to meet this target we attempt to estimate the public s value of implementing the ets for co2 emissions reduction we apply the contingent valuation cv method using the willingness to pay wtp data obtained from a national cv survey of 1000 randomly selected households the survey was conducted via in person interviews value judgments required of the respondents were within their abilities the mean wtp to achieve the stated target of co2 emissions reduction using ets is estimated to be krw 1873 usd 1 66 per household per month which is statistically significant at the 1 level the aggregate national value amounts to krw 409 2 billion usd 363 4 million per year thus even though korea has no obligations to cut emissions under the kyoto protocol the public is willing to bear a financial burden to implement the ets if its cost is less than this value implementing the ets can be socially profitable the results of this study can serve as a basis for further policy discussions and decisions

comparative statics in a simple class of strategic market games this paper investigates the effects of entry in two sided markets where buyers and sellers act strategically applying new tools from supermodular optimization games sufficient conditions for different comparative statics results are obtained while normality of one good is sufficient for the equilibrium price to be increasing in the number of buyers normality of both goods is required for equilibrium bids and sellers equilibrium utilities to be increasing in the number of buyers when the economy is replicated normality of both goods and gross substitutes guarantee that the equilibrium of the strategic market game converges monotonically in quantities to the competitive equilibrium simple counter examples are provided to settle other potential conjectures of interest c 2007 elsevier inc all rights reserved

trade fragmentation and coordination in strategic market games abstract this paper analyzes the incentives to trade and the validity of the law of one price in three strategic market games with multiple trading posts in bilateral oligopolies where traders have corner endowments in one commodity all agents participate in all the markets the law of one price holds in bilateral oligopolies and in the buy or sell market game where equilibrium strategies are locally unique when traders can simultaneously buy and sell on every market the law of one price fails and the set of equilibrium prices generically has the same dimension as the number of active markets journal of economic literature classification numbers d43 d51

prices vs quantities the effects on technology choice abstract it is well known that price and quantity based regulation approaches provide different investment incentives but usually only the effect on the level of investment is studied in this paper we show that under uncertainty they also lead to the adoption of different technologies due to the disparate risks that a regulated firm is exposed to different regulatory instruments induce different technologies and this effect cannot be compensated by varying the design of the instruments furthermore price based instruments lead to the adoption of a socially suboptimal technology so that the inclusion of technology choice provides a bias in favor of a quantity based regulation compared with weitzman s weitzman m l 1974 prices vs quantities review of economic studies 41 477 491 criterion

individual option prices for climate change mitigation abstract willingness to pay for climate change mitigation depends on people s perceptions about just how bad things will get if nothing is done individual subjective distributions for future climate conditions are combined with stated choices over alternative climate policies to estimate individual option prices the appropriate ex ante welfare measure in the face of uncertainty for climate change mitigation we find statistically significant sensitivity of estimated option prices to both expected future conditions and uncertainty about future conditions

exploring the price dynamics of co2 emissions allowances in china s emissions trading scheme pilots establishing regional emissions trading scheme pilots in china is a newly transformative and explorative practice in this paper we examine the spot price dynamics asymmetric clustering and regime switching behaviors of co2 emissions allowances in the new china wide emissions trading scheme cets pilots using ar garch ar tarch and mrs ar garch models the regional ets pilots design in china vary widely in their coverage thresholds sector coverage emissions allocation and caps setting methods market trading rules and price stabilization provisions our empirical results indicate that the spot prices of regional emissions allowances exhibit significant dynamic behaviors asymmetric leverage effects and regime switching behaviors in the entire period considered previous market overreactions in the beijing tianjin and guangdong pilots have stronger price clustering effects on future conditional variances than do the shanghai and hubei pilots unexpected market shocks and greater persistence in the beijing tianjin and guangdong ets pilots display stronger market volatility and higher market risks and their asymmetric leverage effects display a decreasing trend in the volatility of the bea tjea and gdea prices the bea and shea prices exhibit significant regime switching behaviors price jumps and higher volatility in addition the changes in the regime switching phases are often related to the political mechanism design and the fundamental market factors those empirical results are beneficial for government decision makers and market participants to strengthen risk management strategies support emission related investment decisions and optimize co benefits of alternative energy environmental policies

business actors political resistance and strategies for policymakers abstract existing energy policies remain well short of achieving a rapid transformation to a low carbon system of energy supply one of the principal reasons has been political resistance from incumbent fossil fuel industries while numerous studies have demonstrated the influence of business actors across multiple policy domains less work has examined the behaviour of business actors in individual energy centric industries namely the oil gas coal utility and renewable industries accordingly this paper examines the role of business actors in the us energy sector and asks what should policymakers do drawing on new empirical data primarily semi structured interviewers with business actors across the us energy sector this paper argues that there are specific strategies policymakers can employ to help overcome the resistance from incumbent fossil fuel industries specifically these are to entrench and build existing interests via targeted sector specific policies exploit inter industry and intra industry divisions and shift existing interests with policies that induce changes in industry investment and structure

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

does weather or energy prices affect carbon prices abstract this study investigates the extent that key energy prices coal gas oil and electricity and weather explain carbon prices a key feature of the european union emissions trading scheme eu ets and whether this relationship changed since full auctioning came into effect in 2013 energy prices were found to impact the carbon price in phase iii of the eu ets however modelling based solely on energy prices explained only 12 of carbon price variation weather variables did not affect the carbon price except for unanticipated temperature changes these results indicate that it is not the level of temperature that impacts the carbon price rather it is unanticipated changes in temperature that matter given that climate change is associated with increased variance in temperature this result is consistent with climate change resulting in greater carbon price volatility and higher hedging costs

investment risks under uncertain climate change policy abstract this paper describes results from a model of decision making under uncertainty using a real options methodology developed by the international energy agency iea the model represents investment decisions in power generation from the perspective of a private company the investments are subject to uncertain future climate policy which is treated as an external risk factor over which the company has no control the aims of this paper are to i quantify these regulatory risks in order to improve understanding of how policy uncertainty may affect investment behaviour by private companies and ii illustrate the effectiveness of the real options approach as a policy analysis tool the study analysed firms investment options of coal and gas fired power plants and carbon capture and storage ccs technologies policy uncertainty is represented as an exogenous event that creates uncertainty in the carbon price our findings indicate that climate policy uncertainty creates a risk premium for power generation investments in the case of gas and coal fired power generation the risk premium would lead to an increase in electricity prices of 5 10 in order to stimulate investment in the case of ccs the risk premium would increase the carbon price required to stimulate investment by 16 37 compared to a situation of perfect certainty the option to retrofit ccs acts as a hedge against high future carbon prices and could accelerate investment in coal plant this paper concludes that to minimise investment risks in low carbon technologies policy makers should aim to provide some long term regulatory certainty

stable trading structures in bilateral oligopolies abstract this paper analyzes the formation of trading groups in a bilateral market where agents trade according to a shapley shubik j polit econ 85 1977 937 968 trading mechanism the only strongly stable trading structure is the grand coalition where all agents trade on the same market other weakly stable trading structures exist and are characterized by an ordering property trading groups can be ranked by size and cannot contain very different numbers of traders of the two types journal of economic literatureclassification numbers d43 d51

a fuzzy stochastic model for carbon price prediction under the effect of demand related policy in china s carbon market abstract the establishment of china s carbon market has an obvious policy oriented feature and the carbon price is easily affected by demand related policies within a compliance period as prior models cannot help with clear simulation of the volatility of carbon price in china this paper develops a fuzzy stochastic model to predict such price under the effect of demand related policy first we quantify corporate final profit obtained from carbon trading based on different free allowance policies to measure the actual allowance demand in the carbon market second based on such demand we add the fuzzy number in each parameter of a stochastic differential equation and then develop a fuzzy stochastic model that can help to analyse the effect of demand related policy on carbon price in the immature carbon market third by analysing the demand related policy formulated in the second developing phase of the shanghai environment and energy exchange from nov 17 in 2016 through our model we predict the price trend after each demand related policy publication experimental results reveal the accurate fitting effect of the developed model that can help to estimate the supply and demand in the carbon market and evaluate the effectiveness of current carbon trading policy as well further our model can provide a robust theoretical implication for both corporate carbon trading strategies and governmental regulations on carbon demand related policy

biomass and ccs the influence of technical change the combination of bioenergy production and carbon capture and storage technologies beccs provides an opportunity to create negative emissions of co2 in biofuel production however high capture costs reduce profitability this paper investigates carbon price uncertainty and technological uncertainty through a real option approach we compare the cases of early and delayed ccs deployments an early technological progress may arise from aggressive r d and pilot project programs but the expected cost reduction remains uncertain we show that this approach results in lower emissions and more rapid investment returns although these returns will not fully materialise until after 2030 in a second set of simulations we apply an incentive that prioritises sequestered emissions rather than avoided emissions in other words this economic instrument does not account for co2 emissions from the ccs implementation itself but rewards all the sequestered emissions in contrast with technological innovations this subsidy is certain for the investor the resulting investment level is higher and the project may become profitable before 2030 negative emission in bioethanol production does not seem to be a short term solution in our framework whatever the carbon price drift

residential willingness to pay for deep decarbonization of electricity supply contingent valuation evidence from hong kong abstract motivated by the government s proposed target of reducing co2 emissions by 30 of the 2005 level in the year 2020 we estimate the residential willingness to pay wtp for deep decarbonization of hong kong s electricity supply which is heavily dependent on coal fired generation our contingent valuation survey conducted in 2016 of 1460 households yields dichotomous choice data based on the respondents answers to a series of closed ended questions such data are less susceptible to the strategic bias that often plagues self stated wtp data obtained by direct elicitation via open ended questions using binary choice models we find that average wtp is 48 51 relative to current bills if the decarbonization target is achieved via natural gas generation and renewable energy however estimated wtp declines to 32 42 when decarbonization entails additional nuclear imports from china as the projected bill increase caused by the target s implementation is 40 our wtp estimates support the government s fuel mix policy of using natural gas and renewable energy to displace hong kong s coal generation

political economy constraints on carbon pricing policies what are the implications for economic efficiency environmental efficacy and climate policy design abstract economists traditionally view a pigouvian fee on carbon dioxide and other greenhouse gas emissions either via carbon taxes or emissions caps and permit trading cap and trade as the economically optimal or first best policy to address climate change related externalities yet several political economy factors can severely constrain the implementation of these carbon pricing policies including opposition of industrial sectors with a concentration of assets that would lose considerable value under such policies the collective action nature of climate mitigation efforts principal agent failures and a low willingness to pay for climate mitigation by citizens real world implementations of carbon pricing policies can thus fall short of the economically optimal outcomes envisioned in theory consistent with the general theory of the second best the presence of binding political economy constraints opens a significant opportunity space for the design of creative climate policy instruments with superior political feasibility economic efficiency and environmental efficacy relative to the constrained implementation of carbon pricing policies this paper presents theoretical political economy frameworks relevant to climate policy design and provides corroborating evidence from the united states context it concludes with a series of implications for climate policy making and argues for the creative pursuit of a mix of second best policy instruments

carbon trading in the policy mix the kyoto protocol is stimulating the development of emissions trading schemes at the national and international levels these are being introduced alongside existing policy instruments such as carbon taxes and negotiated agreements leading to complex problems of policy interaction but the topic of policy interaction remains under researched this paper aims to improve understanding of such interactions by examining the conditions under which a cap and trade scheme for carbon dioxide emissions may usefully coexist with carbon energy taxes support mechanisms for renewable electricity and policies to promote energy efficiency the paper argues that each of these instrument combinations may be acceptable provided they contribute to either improving the static or dynamic efficiency of the trading scheme or delivering other valued policy objectives but since the coexisting instruments may raise overall abatement costs while contributing nothing further to emission reductions the objectives and trade offs within the policy mix must be explicit

carbon geography the political economy of congressional support for legislation intended to mitigate greenhouse gas production over the last 5 years the u s congress has voted on several pieces of legislation intended to sharply reduce the nation s greenhouse gas emissions given that climate change is a world public bad standard economic logic would predict that the united states would free ride and wait for other nations to reduce their emissions within the congress there are clear patterns to who votes in favor of mitigating greenhouse gas emissions this paper presents a political economy analysis of the determinants of pro green votes on such legislation conservatives consistently vote against such legislation controlling for a representative s ideology representatives from richer districts and districts with a lower per capita carbon dioxide footprint are more likely to vote in favor of climate change mitigation legislation representatives from districts where industrial emissions represent a larger share of greenhouse gas emissions are more likely to vote no jel q54 q58 r50

technical change and the marginal cost of abatement abstract we address one aspect of the treatment of technical change in the environmental economics literature how technical change impacts the marginal cost of abatement we review a selection of papers that employ a variety of representations of technical change and show that these representations have quite different and sometimes surprising effects on the marginal costs of pollution reductions we argue that these varied representations in fact correspond to a variety of different technology options we then present results indicating that this representation matters the impacts of technical change on the marginal cost of abatement can crucially impact policy analysis

price level determinacy with an interest rate policy rule and rational expectations abstract this paper reconsiders a result obtained by sargent and wallace namely that price level indeterminacy obtains in their model if the monetary authorities adopt a feedback rule for the interest rate rather than the money stock it is shown that the indeterminacy vanishes if the interest rate rule is chosen so as to have a desired effect on the expected quantity of money demanded this holds even if considerable weight is given in the choice of a rule to the aim of smoothing interest rate fluctuations

is the income elasticity of environmental improvements less than one we estimated the income elasticity of environmental improvements for a number of european data sets the value of this parameter is consistently found to be less than one with few exceptions our findings are compared with state of the art contingent valuation studies from other countries we also compared our findings with those reported in the literature on charitable donations and corporate donations these studies show a similar pattern donations decrease as a percentage of income as income increases

the value of technological advance in decarbonizing the u s economy abstract this paper examines the role of technology in managing the costs of a carbon constraint on the u s economy two portfolios of technology are examined one reflects modest investments in climate friendly technologies the other more aggressive development the analysis indicates that the development of a broad range of low to zero carbon emitting technologies can substantially reduce but not eliminate the economic cost of decarbonization by enabling large scale emission reductions on the supply side costly reductions in demand are avoided in particular the emergence of electricity as a low carbon fuel provides a powerful lever for achieving reductions in other sectors of the economy at lower cost while the analysis suggests that there is no free lunch the bill which may indeed be well worth paying can be greatly reduced through an accelerated r d program and successful diffusion of new technology throughout the economy

the strategic marshallian cross we prove existence and uniqueness of non autarkic equilibria in bilateral oligopoly assuming only that preferences are binormal and satisfy a weakened version of gross substitutes we permit complete heterogeneity of preferences and our analysis exploits the fact that payoffs depend only on own strategy and two universal aggregates this allows us to define strategic versions of supply and demand curves such that non autarkic nash equilibria are in 1 1 correspondence with intersections of these curves the same approach can be used to establish comparative statics under the assumptions above as examples we focus on adding players and changing endowments this competitive approach also allows us to conclude that much of conventional marshallian analysis is robust to strategic manipulation strategic marshallian cross strategic manipulation imperfect competition

genuine progress indicator 2 0 pilot accounts for the us maryland and city of baltimore 2012 2014 abstract for over thirty years the genuine progress indicator gpi has been used to evaluate economic performance quantify benefits and costs of growth and predict effects of policy changes on economic wellbeing the popularity and use of the metric is increasing partially in response to new global demands for metrics that go beyond gross domestic product gdp however because the basic gpi accounting protocols have yet to be consistently updated to respond to theoretical critiques new valuation methods and new data sources a proliferation of studies at the global national and sub national level contain widely divergent methodologies because of this gpi practitioners have called for a new consistent framework to guide future gpi studies gpi 2 0 this paper is an attempt to operationalize some of the concepts that have emerged from gpi 2 0 deliberations online and at recent workshops in the form of gpi 2 0 pilot accounts for the us state of maryland and city of baltimore the goal is to demonstrate the feasibility of multi scale gpi accounts that provide a more accurate measure of current economic welfare than gdp and that incorporate new methods and sources of information to replace many of the outdated aspects of the prevailing gpi approach

atomic cournotian traders may be walrasian in a bilateral oligopoly with large traders represented as atoms and small traders represented by an atomless part when is there a nonempty intersection between the sets of walras and cournot nash allocations using a two commodity version of the shapley window model we show that a necessary and sufficient condition for a cournot nash allocation to be a walras allocation is that all atoms demand a null amount of one of the two commodities we provide four examples which show that this characterization holds non vacuously when our condition fails to hold we also confirm through some examples the result obtained by okuno et al 1980 small traders always have a negligible influence on prices while the large traders keep their strategic power even when their behavior turns out to be walrasian in the cooperative framework considered by gabszewicz and mertens 1971 and shitovitz 1973

the contingent valuation debate why economists should care t he contingent valuation method involves the use of sample surveys questionnaires to elicit the willingness of respondents to pay for generally hypothetical projects or programs the name of the method refers to the fact that the values revealed by respondents are contingent upon the constructed or simulated market presented in the survey a spirited and occasionally mean spirited battle over such methods is currently being waged involving competing factions within the federal government economists and lawyers representing business and environmental groups and interested academics as well at issue is a seemingly quite specific question should environmental regulations currently under development at both the department of the interior and the department of commerce sanction the use of the contingent valuation method in estimating the damage done by spills of oil chemicals or other substances covered by federal law more generally the debate raises broad questions about what economists have to say about the values that individuals place on public or private goods the two papers that follow this one make cases for and against the use of the contingent valuation method my aim here is to provide an overview of the technique and the debate surrounding it i also want to suggest why this debate should matter to economists both professionally and in their roles as citizens and consumers

emissions pricing spillovers and public investment in environmentally friendly technologies in a second best world of below optimal pollution pricing the public return to r d may be greater than under pigouvian pricing due to excess benefits of increasing abatement or it may be lower since private actors lack the incentives to take full advantage of the new cleaner technologies this paper uses a simple model to demonstrate the interaction between environmental policies r d externalities and the social return to innovation the results indicate that strong public support for innovation in abatement technologies is only justified if at least a moderate emissions policy is in place and spillover effects are significant if emissions policy can adjust to cost changes the public role may be enhanced since private actors will prefer to avoid ratcheting social gains from innovation increase only if innovation can allow emissions to be more fully priced technology policy is more effective with fuller emissions pricing and is better viewed as a complement to than a substitute for mitigation policy

on the sources of technological change assessing the evidence this paper uses a selective review of the economic literature on technological change to support four points that are important for interpreting and incorporating technological change into formal models of energy and the environment the review 1 supports the notion that no single source dominates the process of technological change it supports roles for rd 3 indicates that these spillovers are often indirect requiring own industry activities to utilize and 4 indicates that simple experience curve calibrations often used in formal models likely include a range of sources of technological change in addition to learning by doing some of which might not be induced by the sorts of policies typically considered in the climate context

universal health insurance in the clinton plan coverage as a tax financed public good the financing arrangements embodied in the clinton health reform plan involve some important differences in the way in which public goods are usually financed the subsidies to small low wage firms mandated to provide benefits distort markets in both labor and products and offer incentives for the creation of small firms in addition the financing scheme implicitly envisions a head tax on families at modest income levels but offers a possible rationale for it nevertheless the main reason for many of the financing features appears to be an attempt to hold down the apparent budgetary cost of universal coverage

combining price and quantity controls to mitigate global climate change abstract uncertainty about compliance costs causes otherwise equivalent price and quantity controls to behave differently and leads to divergent welfare consequences although most of the debate on global climate change policy has focused on quantity controls due to their political appeal this paper argues that price controls are more efficient simulations based on a stochastic computable general equilibrium model indicate that the expected welfare gain from the optimal price policy is five times higher than the expected gain from the optimal quantity policy an alternative hybrid policy combines both the political appeal of quantity controls with the efficiency of prices using an initial distribution of tradeable permits to set a quantitative target but allowing additional permits to be purchased at a fixed trigger price even sub optimal hybrid policies offer dramatic efficiency improvements over otherwise standard quantity controls for example a 50 trigger price per ton of carbon converts the 3 trillion expected loss associated with a simple 1990 emission target to a 150 billion gain these results suggest that a hybrid policy is an attractive alternative to either a pure price or quantity system

is there a role for commodity prices in the design of monetary policy some empirical the consumer price index in the united states follows a non trend stationary stochastic process that describes the index as drifting randomly upward without bound monetarists have long pointed to similar properties in the time series of monetary aggregates as the source of this incipient inflation their solution to this problem is close adherence by the central bank to targets for a monetary or reserve aggregate that correspond to slow and steady monetary growth with any periods of excessive monetary growth subsequently offset this would produce monetary series that are trend stationary if the demand for money is reasonably stable price series would also become trend stationary and for properly chosen targets the price level would be bounded with a mean inflation rate of zero

the role of question format for the support for national climate change mitigation policies in germany and the determinants of wtp this contingent valuation survey examines the willingness to pay wtp for climate change mitigation in germany willingness to pay is assessed by using a classic dichotomous choice referendum format and a two way payment ladder in a split sample design we find that mean wtp under the referendum format is more than twice the wtp in the payment ladder format but median wtp does not differ moreover we test the possible effect of different determinants on wtp determinants that considerably influence wtp are personal norm climate change scepticism agreement with the german renewable energy law and individualistic cognition income and gender are also important predictors

credible carbon policy the paper sets out the credibility problem in carbon policy provides a number of examples of non credibility in recent energy policy and identifies the costs of failing to address it the time inconsistency of carbon policy arising because of multiple objectives the irreversibility of energy investments and the scope for ex post reneging on ex ante commitments to set policy instruments such as carbon taxes or emission permits at appropriate levels is set in a conceptual framework analogies with monetary policy are drawn and a solution to the time inconsistency problem is proposed through the establishment of an energy carbon agency

the progressive inefficiency of replacing renewable obligation certificates with contracts for differences in the uk electricity market abstract this paper looks at the emerging risk return profile for new renewable assets as a conventional wholesale electricity market progressively decarbonises using a detailed fundamental model of price formation risks under increasing replacement of fossil fuel facilities with onshore and offshore wind we show that the risk return profile becomes less attractive over time and may therefore need sustained and possibly increasing policy support furthermore we show that green certificate trading may become progressively more attractive as a supplementary support to wholesale prices compared to fixed feed in tariffs this is because the increasingly negative correlation between renewable output and wholesale prices reduces its revenue risk compared to fixed feed in tariffs if other factors remain constant and thereby improves conventional financial performance risk metrics in particular this suggests that the recent energy policy change in britain to move away from green certificates and into contracts for differences may have been ill founded

noncooperative oligopoly in markets with a continuum of traders we show the existence of a pure strategy cournot nash equilibrium for a model of noncooperative exchange where large traders represented as atoms and small traders represented by an atomless part are allowed to buy and sell all commodities

marginal abatement costs of co2 emission reductions geographical flexibility and concrete ceilings an assessment using the poles model abstract the kyoto protocol envisage the setting up of flexibility mechanisms allowing annex b countries to fulfil their commitments to reducing greenhouse gases with respect for the principle of economic efficiency the current negotiations relate in particular to the possibility of setting up a system of tradable emissions permits for annex b countries and also of introducing ceilings to trade this paper analyses the stakes and economic potential of adopting this instrument both for those countries that made commitments in kyoto and for developing countries it is based on a formal approach that allows for a consistent framework of analysis the emission permit market is in fact simulated on the basis of a reference scenario and of marginal abatement cost curves and estimated by the poles model after analysing these marginal abatement cost curves and comparing them with those produced by other models we explore two different configurations for a competitive market a market limited to the annex b countries and a world market the results produced by the model show that widening the market to include developing countries is more effective than the annex b market solution it reduces the cost of implementing kyoto for oecd countries and at the same time allows the countries of the south to benefit from selling the permits this research also shows that introducing restrictions on exchanges for annex b countries could have a counter productive redistribution effect with the ethical argument that underlies that particular measure

paying for mitigation a multiple country study a contingent valuation study conducted in china sweden and the united states was used to investigate citizens willingness to pay wtp for reducing co2 emissions we find that a majority of the respondents in all three countries believe that the mean global temperature has increased over the last 100 years and that humans are responsible for the increase the share of americans that believes these statements is smaller and a relatively larger share of americans also believes that nothing can be done to stop climate change sweden has the highest wtp while china has the lowest jel q51 q54

fossil fuels employment and support for climate policies abstract we know that the costs of implementing various climate change mitigation policies are not uniformly distributed across individuals in society but we do not know to what extent this unequal cost distribution influences public support for these various policies this study shows that cost distribution is an important explanation for variations in public support for various climate policies using individual level data on industry of employment and support for a range of climate policies we find that those employed in the fossil fuel industry are less likely to support climate policies that are particularly costly to their industry but are as likely as everybody else to support policies with lower costs to the industry this finding challenges the traditional bifurcation between climate change skeptics and acceptors furthermore we find that opposition to renewable energy by large fossil fuel producers and consumers identified in the political economy literature is not uniformly found among these companies employees the most important implication of this study for policy makers is that support for climate policies is sensitive to the compensation of exposed groups and stimulation of alternative avenues for employment

informational implications of money interest rate and price rules the information available to private agents determines the effectiveness of various types of monetary policy in an economy in which private agents have differential information sets the ranking of three classes of monetary policy rules critically depends on the specification of agents information sets a price rule for example minimizes the variance of output around its full information level when agents observe both the interest rate and money stock more generally if all three monetary policy variables the money stock the price level and the interest rate are contemporaneously observed the policy ranking is indeterminate

referendum design and contingent valuation the noaa panel s no vote recommendation this paper considers the effects for offering a would not vote option in contingent valuation cv questions framed using the referendum format this approach arises from a suggestion made by the national oceanic and atmospheric administration s noaa panel on contingent valuation the noaa panel was asked to evaluate the use of this method for estimating the economic value of nonmarketed environmental resources in the context of natural resource damage assessments this test used the cv questionnaire developed for the study of the exxon valdez oil spill conducted by the state of alaska with in person interviews the findings suggest that when those selecting the would not vote response are treated as having voted against the program a conservative coding offering this option does not alter 1 the distribution of for and against responses 2 the estimates of willingness to pay derived from these choices or 3 the construct validity of the results

interest rates aggregate information and monetary policy abstract interest rates set on economy wide markets represent an important source of information to economic agents within the class of business cycle models advanced by lucas and barro this paper explores the information conveyed by such aggregate signals and the types of monetary policies that can influence economic activity by changing the information content of interest rates

a model of carbon price interactions with macroeconomic and energy dynamics abstract this paper develops a model of carbon pricing by considering two fundamental drivers of european union allowances economic activity and energy prices on the one hand economic activity is proxied by aggregated industrial production in the eu 27 as it provides the best performance in a preliminary forecasting exercise vs other indicators on the other hand brent natural gas and coal prices are selected as being the main carbon price drivers as highlighted by previous literature the interactions between the macroeconomic and energy spheres are captured in a markov switching var model with two states that is able to reproduce the boom bust business cycle hamilton 1989 first industrial production is found to impact positively negatively the carbon market during periods of economic expansion recession thereby confirming the existence of a link between the macroeconomy and the price of carbon second the brent price is confirmed to be the leader in price formation among energy markets bachmeier and griffin 2006 as it impacts other variables through the structure of the markov switching model taken together these results uncover new interactions between the recently created eu emissions market and the pre existing macroeconomic energy environment

monetary policy and the information content of prices rational expectations and cleared markets lead to the proposition that feedback monetary policy is irrelevant to real activity as in the analyses of sargent and wallace however if agents are differentially informed and have access to a common price then prospective monetary policy actions future feedback to imperfectly known current circumstances can alter real activity by changing the information content of prices

robust incentives and the design of a climate change governance regime in building a governance regime to address climate change should we prioritize the development of global institutions or national ones this paper focuses on two neglected characteristics to inform the governance problem the incentives for investment in low carbon energy technology and the influence of historical policy volatility examining a case study of an important low carbon energy technology wind power this study finds 1 policy volatility has been substantial 2 policy changes were uncorrelated across jurisdictions suggesting that 3 investors could have substantially reduced their exposure to the risk of policy volatility by operating globally while it also has downsides a poorly coordinated international policy regime has the advantage of reducing the risk associated with a global policy failure beyond this case study the importance of this positive effect depends on the probability of policy failures in each country the correlations among them and the probability of a global policy failure

elasticities of demand and willingness to pay for environmental services in sweden are environmental services luxuriesor necessities are low income groupsrelatively more willing to pay forenvironmental improvements than high incomegroups the discussion on the shape of theenvironmental kuznets curve and environmentaljustice call for analyses that approach thesequestions following a survey based approachfor modelling the demand for public goods thispaper provides estimates of income and priceelasticities of demand for reduced marineeutrophication effects in the case of thebaltic sea using data from five swedishcontingent valuation studies point estimatesindicate that reduced marine eutrophicationeffects can be classified as a necessity and anordinary and price elastic service confidenceintervals show however that the classificationas a necessity is not statisticallysignificant income elasticities of willingnessto pay not to be confused with incomeelasticities of demand are estimated for abroad range of environmental services insweden a basic finding is that income tends toinfluence willingness to pay positively andsignificantly the elasticity estimates are inmost cases greater than zero but less thanunity indicating that the benefits ofenvironmental improvements tend to beregressively distributed in a cost benefitanalysis of a project suggesting environmentalimprovements distributional concerns thereforecall for an introduction of weights or at leasta sensitivity analysis of how weighting wouldchange decisions about the project s socialprofitability

the information content of the interest rate and optimal monetary policy optimal monetary policy rules are derived in a rational expectations cum contracting framework monetary policy is redundant if wage setters exploit the incomplete current information embodied in today s nominal interest rate however the monetary authorities can save wage setters the costs of indexing to the interest rate a contemporaneous money supply feedback rule is as effective as wage indexation a lagged rule relevant under a regime of money supply targeting is also as effective if investors use the interest rate both rules have the same implications for the real interest rate as poole s combination policy however the two rules have strikingly different implications for the nominal interest rate

green returns to education does schooling contribute to pro environmental behaviours evidence from thailand we investigate whether there are green returns to education where formal education encourages pro environmental behaviours using nationally representative surveys on environmental issues in thailand to establish the causal relationship between education and green behaviours we exploit the instrumental variables strategy using the supply of state primary schooling i e the corresponding number of teachers per 1000 children which varies over time and across regions as the instrument while controlling for regional cohort and income effects we find that more years of schooling lead to a greater probability of taking knowledge based environmentally friendly actions a great deal but not cost saving pro environmental actions in addition the paper finds no significant impact of formal education on concern about global warming nor the willingness to pay for environmental tax

tests of equilibrium macroeconomics using contemporaneous monetary data abstract this paper uses contemporaneous monetary data to carry out econometric tests of the equilibrium approach to modelling the relation between monetary disturbances and macroeconomic fluctuations the theoretical analysis introduces into an equilibrium macroeconomic model the availability of preliminary data on current monetary aggregates and the process of accumulation of revised monetary data the econometric analysis tests two hypothesis derived from this extended model one hypothesis concerns the neutrality of perceived monetary policy the econometric results imply rejection of this hypothesis the other hypothesis concerns the non neutrality of errors in preliminary monetary data the econometric results fail to reject the contrary of this hypothesis these tests provide strong evidence against the reality of the equilibrium approach

policy interactions risk and price formation in carbon markets carbon pricing is an important mechanism for providing companies with incentives to invest in carbon abatement price formation in carbon markets involves a complex interplay between policy targets dynamic technology costs and market rules carbon pricing may under deliver investment due to r d externalities requiring additional policies which themselves affect market prices also abatement costs depend on the extent of technology deployment due to learning by doing this paper introduces an analytical framework based on marginal abatement cost mac curves with the aim of providing an intuitive understanding of the key dynamics and risk factors in carbon markets the framework extends the usual static mac representation of the market to incorporate policy interactions and some technology cost dynamics the analysis indicates that supporting large scale deployment of mature abatement technologies suppresses the marginal cost of abatement sometimes to zero whilst increasing total abatement costs however support for early stage r d may reduce both total abatement cost and carbon price risk an important aspect of the analysis is in elevating risk management considerations into energy policy formation as the results of the stochastic modelling indicate wide distributions for the emergence of carbon prices and public costs around the policy expectations

evaluating the power investment options with uncertainty in climate policy abstract this paper uses a real options approach roa for analysing the effects of government climate policy uncertainty on private investors decision making in the power sector it presents an analysis undertaken by the international energy agency iea that implements roa within a dynamic programming approach for technology investment choice case studies for gas coal and nuclear power investment are undertaken with the model illustrative results from the model indicate four broad conclusions i climate change policy risks can become large if there is only a short time between a future climate policy event such as post 2012 and the time when the investment decision is being made ii the way in which co 2 and fuel price variations feed through to electricity price variations is an important determinant of the overall investment risk that companies will face iii investment risks vary according to the technology being considered with nuclear power appearing to be particularly exposed to fuel and co 2 price risks under various assumptions and iv the government will be able to reduce investors risks by implementing long term say 10 years rather than short term say 5 years climate change policy frameworks contributions of this study include 1 having created a step function with stochastic volume of jump at a particular time to simulate carbon price shock under a particular climate policy event 2 quantifying the implicit risk premium of carbon price uncertainty to investors in new capacity 3 evaluating carbon price risk alongside energy price risk in investment decision making and 4 demonstrating roa to be a useful tool to quantify the impacts of climate change policy uncertainty on power investment

the dynamic linkage effect between energy and emissions allowances price for regional emissions trading scheme pilots in china abstract china s emissions trading scheme cets pilots are emerging and fragmented markets these emissions allowances markets may exhibit a different fundamental price process from the european union s eu and the united states us emissions trading scheme ets the dynamic linkage effects between energy and emissions allowances prices are investigated for regional ets pilots in china using cointegration techniques the empirical results confirm that in the long run coal oil and natural gas prices are the main determinant factors of regional emissions allowances prices except for the second phase beijing ets pilots however their long run cointegration relationships in the beijing and shanghai pilots are not exactly in line with the guangdong and hubei pilots in the short run the changes in oil and natural gas prices in the second phase beijing ets pilot the natural gas prices in the shanghai ets pilot and the coal prices in the hubei ets pilot are found to have significant effects on regional emissions allowances prices in china finally regional energy pricing inefficiency regional emissions trading market overreaction and their inefficient fundaments may provide major obstacles in reducing the effectiveness of the fossil energy price pass through to emissions allowances prices in regional ets pilots

intertemporal substitution and the role of monetary policy policy irrelevance once again recently marini i985 demonstrates that feedback policy is effective in barro s i976 model even in the absence of differentially informed agents or non proportional money transfers in particular marini demonstrates that a policy rule with feedback to the current money stock from disturbances dated t 2 or further in the past will be effective at fully stabilising output in barro s model this paper demonstrates that this policy effectiveness result is dependent on an implicit assumption that the length of private agents horizon falls short of the length of the lags in the feedback rule more generally this paper points out that a crucial feature of barro s i976 model is the specification of the decision horizon of private agents relative to the lag on demand disturbances in the monetary rule if the feedback lag in the monetary rule exceeds the horizons of private agents then monetary policy can stabilise output if the horizon of private agents is equal to or exceeds the lags in the monetary rule

heterogeneous preferences regarding global climate change we examine the structure of preferences for mitigating impacts of global climate change that will not occur during the lifetimes of most who are alive today because no market data exist for such distant markets a statedpreference approach is used the analysis is based on the random parameters logit model and the results indicate substantial heterogeneity in respondent preferences that mean willingness to pay is a significant and increasing function of the scope of the impact and provocatively that respondents have the same preferences over the two very different time horizons that we consider e examine the structure of preferences for mitigating impacts of global climate change that will not occur during the lifetimes of most who are alive today studies using current market data have estimated the potential costs of climate change on agriculture mendelsohn nordhaus shaw 1994 and on other aspects of measured production nordhaus 1994 but market data can not reveal the willingness of those currently alive to pay for measures to mitigate impacts that may not happen for 100 years or more there is serious public discussion involving diplomats at the highest levels about measures to mitigate emissions that would cost the united states alone 100 to 200 billion dollars annually therefore estimating the willingness of those currently alive to pay for mitigation measures is not a fanciful exercise but rather a crucial effort to determine how much mitigation should be undertaken it is the preferences of those alive today regarding acceptable levels of climate impacts and not the unknowable preferences of those who do not yet exist that will ultimately determine how much mitigation we pursue in the next quarter century as this question cannot be answered with market data we use the stated preference sp approach and elicit preferences for preventing climate change induced impacts a host of climate change impacts have been enumerated this study focuses on one type of impact that may be important but has received little attention from economists scientists have predicted that widespread ecosystem shifts may accompany changes in climate vemap 1995 ecosys tem shifts are likely to evolve slowly indicating that lost use values are likely to be small for those alive today yet the public may still be willing and asked to pay for mitigation measures that are designed to slow the transformation of ecosystems the current debate over climate change demon strates two things the first is that some people do care about long term changes that will never affect them or perhaps even their children the second is that preferences regarding the impacts of climate change are very heterogeneous as other members of the public appear much less concerned long term horizons combined with heterogeneous prefer ences makes ecosystem shifts a useful place to begin analyzing preferences for mitigating climate change im pacts a stated preference survey was designed that asked respondents to choose their most preferred program to reduce ecological impacts from a set menu of five or six different programs the programs varied in terms of costs the degree of ecosystem change and in the mitigation method four different menus provided to each respondent yielded four distinct valuation responses section ii de scribes the random parameters logit model for repeated choices that allows for a flexible correlation structure based on heterogeneous preferences the ecosystem change and the stated preference survey are discussed in section iii in section iv we estimate the random parameters model and estimate the willingness to pay to prevent various levels of ecosystem change section v concludes with a discussion of how the scope of the impact preference heterogeneity and the time horizon affect willingness to pay

do economic conditions affect public support for environmental policy abstract economic conditions are typically viewed as having an important influence on environmental policy in particular it is widely believed that under adverse economic conditions electorates and governments prioritize economic growth and jobs over costly ecological restraint the empirical evidence for this received wisdom however remains surprisingly contradictory we contribute to this debate by studying a case where the odds of the economy environment trade off claim holding true should be high an emerging economy in severe recession and environmental policy with high short term costs and long term benefits based on a representative survey n 2449 in brazil implemented in late 2015 early 2016 we examine how ego and socio tropic economic conditions both perceived and real affect citizens preferences concerning the mitigation of deforestation and climate change we find no robust evidence for an economy environment trade off the main policy implication is that from a public opinion perspective there is considerable room for ambitious environmental policy even under adverse economic conditions

train travel passengers willingness to pay to offset their co2 emissions in korea abstract due to the upsurge in concerns regarding climate change the carbon market has been growing more rapidly than ever recently a more innovative and experimental voluntary carbon market has been playing a supplementary role to the compliance market which is lacking in flexibility and diversity and has been accounting for an increasingly larger portion of the carbon market among the efforts to accumulate data and develop appropriate policies for the voluntary carbon market it is necessary to analyze the benefits of carbon offsets for ghg emissions from railways this study attempts to apply contingent valuation cv to measure the public s willingness to pay wtp for voluntary carbon offsets vcos from railway travel in korea furthermore in order to enhance the statistical efficiency of the wtp estimation and reduce the response effect in the context of wtp elicitation this study employs a one and one half bound dichotomous choice format the estimate of the mean wtp for a vco program for a specific travel distance is estimated to be krw 1 345 usd 1 24 per person this quantitative information can be utilized to develop policies related to mitigating climate change

monetary instruments and policy rules in a rational expectations environment abstract this paper explores the implications of rational expectations and the aggregate supply theory advanced by lucas 1973 and barro 1976 for analysis of optimal monetary policy under uncertainty along the lines of poole 1970 returning to a topic initially treated by sargent and wallace 1975 not surprisingly these two classical concepts alter both the menu of feasible policy choice and the desirability of certain policy actions in our setup unlike that of sargent and wallace 1975 the systematic component of monetary policy is a relevant determinant of the magnitude of business fluctuations that arise from shocks to the system central bank behavior both the selection of monetary instruments and the framing of overall policy response to economic conditions can work to diminish or increase the magnitude of business fluctuations however the activist policies stressed by the present discussion bear little if any relationship to the policy options rationalized by the conventional analysis of monetary policy under uncertainty in particular in contrast to poole s analysis money supply responses to the nominal interest rate are not important determinants of real economic activity rather the central bank should focus on policies that make movements in the general price level readily identifiable by economic agents

atomic leontievian cournotian traders are always walrasian abstract we consider a bilateral oligopoly version of the shapley window model with large traders represented as atoms and small traders represented by an atomless part for this model we show that when atoms have leontievian utility functions any cournot nash allocation is a walras allocation and consequently it is pareto optimal

willingness to pay for emissions reduction application of choice modeling under uncertainty and different management options abstract this paper presents the results of a choice modeling survey of households in queensland australia to assess values for reductions in national greenhouse emissions by 2020 the study is novel in two main ways first labeled alternatives were used to assess whether the types of management options for reducing net emissions green power energy efficient technologies or carbon capture are significant in understanding preferences for reducing emissions second the importance of the level and type of uncertainty involved in reductions is tested the types of uncertainty include 1 the uncertainty of achieving emissions reduction and 2 the uncertainty of international participation as the percentage of total global emissions covered by international agreements the results of this survey identified how choice responses vary when the level of uncertainty associated with emissions reduction options is included within choice alternatives

willingness to pay and policy instrument choice for climate change policy in the united states abstract this paper provides the first willingness to pay wtp estimates in support of a national climate change policy that are comparable with the costs of actual legislative efforts in the u s congress based on a survey of 2034 american adults we find that households are on average willing to pay between 79 and 89 per year in support of reducing domestic greenhouse gas ghg emissions 17 by 2020 even very conservative estimates yield an average wtp at or above 60 per year taking advantage of randomized treatments within the survey valuation question we find that mean wtp does not vary substantially among the policy instruments of a cap and trade program a carbon tax or a ghg regulation but there are differences in the sociodemographic characteristics of those willing to pay across policy instruments greater education always increases wtp older individuals have a lower wtp for a carbon tax and a ghg regulation while greater household income increases wtp for these same two policy instruments republicans along with those indicating no political party affiliation have a significantly lower wtp regardless of the policy instrument but many of these differences are no longer evident after controlling for respondent opinions about whether global warming is actually happening

coevolution of policy market and technical price risks in the eu ets within the eu there have been calls for governments to provide greater certainty over carbon prices even though it is evident that their price risk is not entirely due to policy uncertainty we develop a stochastic simulation model of price formation in the eu ets to analyse the coevolution of policy market and technology risks under different initiatives the current situation of a weak 20 overall abatement target motivates various technology support interventions elevating policy uncertainty as the major source of carbon price risk in contrast taking a firm decision to move to a more stringent 30 cap would leave the eu ets price formation driven much more by market forces than by policy risks this leads to considerations of how much risk mitigation by governments would be appropriate and how much should be taken as business risk by the market participants

how china s current carbon trading policy affects carbon price an investigation of the shanghai emission trading scheme pilot abstract to better establish a unified carbon market in china this study evaluates the effect of current carbon trading policy and further investigates the relationship between such policy that is published during the second phase of shanghai environment and energy exchange seee and shanghai emission allowance shea price we aim to analyze whether these policies can improve the operation efficiency of current carbon market by the mean reversion test cox ingersoll ross cir model and event study method we first analyze the potential price discovery function of shea products thereby describing the transmission channel of current policy to shea price then we examine the effect of carbon policies published in different periods on their corresponding shea price by the auto correlation test and cir simulation we find that 3 4 of all auto correlation values are less than 0 after apr 2017 and the minimum cumulative error is 31 3792 under the supply and demand channel these findings imply that shea price has the discovery function at the middle and end of trading period and the current policy affects shea price through its effect on the fundamentals of supply and demand further more than 60 of all r values r value that reflects the response of price to policy are less than 1 which implies that the published policy will improves future shea price accordingly we argue that seee belongs to a policy oriented market and the change of carbon price is closely related to emission allocation policies in this case china s government should further push forward the smooth operation of current carbon market by the aid of incentive policy in the coming period

dynamic behavior of co2 spot prices co2 emission allowances are traded nowadays over the counter otc and on exchanges across the european union eu it thus becomes increasingly important for traders of these emission certificates to have a valid co2 spot price model to value potential derivatives in addition co2 emitting companies require an adequate co2 spot price model in order to better assess their production costs and support emissions related investment decisions however sufficient price history is still lacking for the european union emission trading scheme eu ets we therefore present a tractable stochastic equilibrium model reflecting stylized features of the eu ets and analyze the resulting co2 spot price dynamics our main findings are that co2 prices do not have to follow any seasonal patterns discounted prices should possess the martingale property and an adequate co2 price process should exhibit a time and price dependent volatility structure a brief empirical examination regarding market efficiency complements our analysis