linking permit markets multilaterally we formally study the determinants magnitude and distribution of efficiency gains generated in multilateral linkages between permit markets we provide two novel decomposition results for these gains characterize individual preferences over linking groups and show that our results are largely unaltered with strategic domestic emissions cap selection or when banking and borrowing are allowed using the paris agreement pledges and power sector emissions data of five countries which all use or considered using both emissions trading and linking we quantify the efficiency gains we find that the computed gains can be sizable and are split roughly equally between effort and risk sharing

measuring the efficiency of european railways this paper is concerned with the definition and measurement of efficiency in a public body specifically railways the authors argue against commonly used measures such as profit and labour productivity in favour of a production possibility frontier approach physical measures of input and output are derived and applied using a variety of methodologies results from some of the most popular such as data envelopment analysis and corrected ordinary least squares using the translog function are shown to be potentially misleading two original approaches one using uniform efficiency distributions and the other applying bayesian state space techniques are developed and applied but these too are found to be potentially unreliable comparison with results from other authors finally lead to the conclusion that accurate measurement of efficiency is not possible although the research is able to indicate good and bad performers the final conclusion is that efficiency on the railway is a product primarily of go

irreversibility of pollution accumulation this paper presents an optimal endogenous growth model with pollutionaccumulation and abatement activities which analyzes the implications ofpollution accumulation irreversibility on the existence of sustainablegrowth paths this model studies different pollution decay functions whichpresent among others the feature that a sufficiently high pollution stocklevel can reduce the rate of decay to zero this study shows that this newfeature which gains support for the biological literature significantlyalters the traditional results on the properties of sustainable endogenousgrowth by reducing the field of existence and strengthening the role ofindividual preferences

price and network dynamics in the european carbon market this paper presents an analysis of the european emission trading system as a transaction network it is shown that given the lack of a centralized market place industrial actors had to resort to local connections and financial intermediaries to participate in the market this gave rise to a hierarchical structure in the transaction network to empirically relate networks statistics to market outcomes a pls pm modeling technique is introduced it is shown that the asymmetries in the network induced market inefficiencies e g increased bid ask spread albeit the efficiency of the market has improved from the beginning of phase ii the asymmetry persists imposing unnecessary additional costs on agents and reducing the effectiveness of the market as a mitigation instrument

quantitative versus qualitative growth with recyclable resource we reassess the issue of limits to growth in an endogenous growth model of a decentralized economy where final productions require a recyclable essential material input the model follows a material balance approach and relies on technological assumptions consistent with the material balance principle and on explicit distinction between the material content and the quality of produced goods growth follows from research activities that allow firms to improve the quality of their output and to reduce the material resource intensiveness of their production process even though recycling is assumed perfect we show that 1 the material balance constraint affect the whole transitory dynamics of the growth process 2 quantitative growth i e positive growth of material output can only be a transitory phenomenon long term economic growth taking exclusively the form of perpetual improvements in the quality of final goods a long term growth path is characterized by constant values of material variables or in a less favorable scenario by a constant negative growth rate of those variables we establish the existence conditions of a growth path based on quality improvements and constant material variables it may fail to exist in a decentralized framework even though it is quite feasible from a purely physical point of view

inequality aversion resource depletion and sustainability abstract a welfare function which incorporates aversion to inequality across generations is applied to the cake eating problem and it is shown that sustainability with positive welfare will be ensured provided that inequality aversion is sufficiently strong

a theory of economic growth with material energy resources and dematerialization interaction of three growth mechanisms the nature of energy and material resources in a non optimizing growth theory framework is clarified this involves two modifications of the conventional theory firstly multiple feedback mechanisms or growth engines are identified such that the impact of the cost of production through demand on growth is accounted for secondly a production function distinguishes between resource use technical efficiency and value creation the resulting model is analytically solved under the condition of a constant growth rate given model complexity numerical experiments are performed as well providing relevant insights to the academic and political debates on environmental kuznets curves and dematerialization

dynamic evolution characteristics of european union emissions trade system price from high price period to low price period abstract carbon market is a valid measure for promoting green and low carbon development and price is the core of market mechanism in this work combining directed limited penetrable visibility graph and coarse graining method a new method is proposed to identify the potential periods and dynamic evolution characteristics of carbon price which opens up a new perspective for government and investors to understand evolution characteristics and prevent risks at the same time a empirical analysis is conducted based on eu ets daily price from september 29 2009 to september 29 2017 and the dynamic fluctuation characteristics of carbon price from high price period to low price period are obtained

competition privatisation and productive efficiency evidence from the airline industry we use data from the airline industry to examine the extent to which the costs of airline operations are affected by rents accruing to workers and the extent to which these rents depend inter alia upon the degree of competition in the industry our empirical results based on a panel of twelve european and seven major united states airlines confirm that state ownership substantially increases rents to labour while the effects of competition are more subtle and ambiguous airline profits tend to be associated with higher rents to employees the gains from further privatisation and liberalisation may be quite large does competition have significant effects on productive as well as allocative efficiency convincing empirical answers to this question have been hard to find for two reasons first data of the quality required for robust estimation of productive efficiency are only rarely available secondly there is frequently no convincing standard against which the efficiency of an industry or a firm may be compared since when the degree of competition varies many other things such as technology network structures and firm sizes typically vary as well these problems do not automatically make comparison impossible but they compound the need for high quality data one industry which is likely to be well suited to investigating questions of this kind is the international airline industry the industry contains a large number of firms thus ensuring at least enough potential competition to make questions about the effects of competition interesting but the scope for these firms to compete with one another has been influenced to varying degrees over the years by different national and international regulatory regimes in particular deregulation of the united states industry in 1978 provided a kind of natural experiment that has led not only to comparisons of the before and after variety but also to comparisons between the united states industry and that of other global regions notably europe such comparisons are far from straightforward but they are facilitated by the fact that the technology of civil aviation is more or less internationally standardised and by the relatively high quality of available data in the industry

post mortem examination of the international financial network abstract as the recent crisis has forcefully suggested understanding financial market interconnectedness is of a paramount importance to explain systemic risk stability and economic dynamics in this paper we address these issues along two related perspectives first we explore the statistical properties of the international financial network ifn defined as a weighted directed graph where nodes are countries and links represent debtor creditor relationships in equities and short long run debt we investigate whether the 2008 financial crisis has resulted in a significant change in the topological properties of the ifn our findings suggest that the crisis caused not only a reduction in the amount of securities traded but also induced changes in the topology of the network and in the time evolution of its statistical properties this has happened however without changing the disassortative core periphery structure of the ifn architecture second we perform an econometric study to examine the ability of network based measures to explain cross country differences in crisis intensity we investigate whether the conclusion of previous studies showing that international connectedness is not a relevant predictor of crisis intensity may be reversed once one explicitly accounts for the position of each country within the ifn we show that higher interconnectedness reduces the severity of the crisis as it allows adverse shocks to dissipate quicker however being central in the network may make countries that are not members of a rich club more vulnerable in times of crisis finally we find strong evidence of nonlinear effects once the high degree of heterogeneity that characterizes the ifn is taken into account

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

non linear production abatement pollution and materials balance reconsidered abstract in the environmental economics literature the standard approach of modeling non linear production and abatement processes is to treat waste emissions simply as another factor of production cropper and oates j econ lit 30 1992 675 740 that approach does not map the materials flow involved completely and hides moreover the exact links between production residuals generation and abatement this paper shows that production functions with emissions treated as inputs can be reconstructed as a subsystem of a comprehensive production cum abatement technology that is in line with the materials balance principle in a simple economy with full regard of the materials flow it also explores the consequences for allocative efficiency and efficiency restoring taxation of multiple and interdependent residuals generated in the transformation processes of production abatement and consumption finally the paper demonstrates that efficiency may require setting the emissions tax rate above or below conventionally defined marginal abatement cost if the residual subject to abatement is not the only residual causing pollution

dimensions of sustainability geographical temporal institutional and psychological well being depends on produced goods natural amenities and preferences each can be influenced through policies and education production of goods exhibits a hierarchical structure similar to ecosystems subsystems adapt while sustaining system productivity that is higher levels have greater resilience in agriculture the farm has little adaptability the region can shift production among locations and a nation can shift among regions forests exhibit an intertemporal geographical hierarchy in which harvests are replaced by growth elsewhere and later regrowth this structure is useful in responding to change and uncertainty preferences too can and must be informed through education

railway de regulation a european efficiency comparison many european countries have sought to increase the efficiency of national railroad companies through a range of reforms including the separation of infrastructure and operations the creation of independent regulatory institutions and the provision of access to the network to third parties this document reports on a study undertaken to investigate a new world bank panel dataset that covers many european union eu countries over a period of 20 years the authors used this dataset to estimate the effects of reforms on railroad efficiency they compare the passenger traffic efficiency of national railroad companies by means of a production frontier model and then evaluate the effects of reforms on efficiency the data showed that reforms have efficiency increasing effects but the effect of reforms depends on sequencing the introduction of multiple reforms in a package has at best neutral effects but sequential reforms improve efficiency the authors also describe how they used the lisrel technique to test their data and show that their results are robust against potential problems of endogeneity

on the stochastic properties of carbon futures prices pricing carbon is a central concern in environmental economics due to the worldwide importance of emissions trading schemes to regulate pollution this paper documents the presence of small and large jumps in the stochastic process of the co 2 futures price the large jumps have a discrete origin i e they can arise from various demand factors or institutional decisions on the tradable permits market contrary to the existing literature we show that the stochastic process of carbon futures prices does not contain a continuous component brownian motion the results are derived by using high frequency data in the activity signature function framework todorov and tauchen in j econom 154 125 138 2010 todorov and tauchen in j bus econ stat 29 356 371 2011 the implication is that the carbon futures price should be modeled as an appropriately sampled centered levy or poisson process the pure jump behavior of the carbon price might be explained by the lower volume of trades on this allowance market compared to other highly liquid financial markets

price formation on the marseille fish market evidence from a network analysis abstract the empirical analysis of fish markets always reveals strong price dispersion for homogeneous or very similar goods the problem is how to explain this price dispersion on a market where there is no evident arbitrage explanations proposed by different authors include differences in organization the characteristics of the good and the influences of social interactions between buyers and sellers in line with the last of these three approaches we consider the fish market of marseille as a seller seller network we start by examining the influence of market interactions through a static and then a dynamic econometric model we then analyze the role of the seller s position in the network we bring to light a surprising paradox in that the sellers who share the most buyers with competitors i e the most central sellers charge the highest prices

a network analysis of the italian overnight money market the objective of this paper is to analyse the network topology of the italian segment of the european overnight money market through methods of statistical mechanics applied to complex networks we investigate differences in the activities of banks of different sizes and the evolution of their connectivity structure over the maintenance period the main purpose of the analysis is to establish the potential implications of the current institutional arrangements on the stability of the banking system and to assess the efficiency of the interbank market in terms of absence of speculative and preferential trading relationships

price drivers and structural breaks in european carbon prices 2005 2007 this article aims at characterizing the daily price fundamentals of european union allowances euas traded since 2005 as part of the emissions trading scheme ets the presence of two structural changes on april 2006 following the disclosure of 2005 verified emissions and on october 2006 following the european commission announcement of stricter phase ii allocation allows to isolate distinct fundamentals evolving overtime the results extend previous literature by showing that eua spot prices react not only to energy prices with forecast errors but also to unanticipated temperatures changes during colder events besides the sub period decomposition of the pilot phase gives a better grasp of institutional and market events that drive allowance price changes

feasibility and optimality of sustainable growth under materials balance abstract pollution from consumption and production is an inevitable part of economic processes we employ a materials balance approach and develop an endogenous growth theory with recycling activity to examine the evolution of the economic and environment systems this paper provides feasibility and optimality conditions for sustainable economic growth with rising environmental quality the fundamental condition of feasibility is that the flow of natural resources which eventually returns to the environment as waste and pollution has a negative growth rate in the long run

are there limits to growth a simple theoretical model of pollution is developed that generates an inverted u shape relationship between per capita income and environmental quality this model is then used to study long run growth the same inverted u shape is shown to appear in time series and the prospects for sustained growth are shown to hinge on whether increasingly strict environmental regulation is compatible with a constant rate of return on capital implementation is also studied tax and voucher schemes are shown to have an advantage over direct regulation because they provide the correct incentives for capital accumulation copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

allowance price drivers in the first phase of the eu ets abstract in the first phase of the eu emissions trading scheme eu ets the price per ton of co 2 initially rose to over 30 the price then collapsed to essentially zero by mid 2007 by deriving a structural model of the allowance price under the assumption of efficient markets i examine the extent to which this variation in price can be explained by marginal abatement costs i then gradually relax the model by allowing for delayed adjustment of price to fundamentals as well as by introducing lagged lhs variables the pattern of results suggests that while prices were not initially driven by marginal abatement costs this inefficiency was largely corrected after the accounting of 2005 emissions in april 2006

market efficiency in the european carbon markets in this paper we study the relationship between futures and spot prices in the european carbon markets from the cost of carry hypothesis the aim is to investigate the extent of efficiency market the three main european markets bluenext eex and ecx are analyzed during phase ii covering the period from march 13 2009 to january 17 2012 futures contracts are found to be cointegrated with spot prices and interest rates for several maturities in the three co2 markets results are similar when structural breaks are taken into account according to individual and joint tests the cost of carry model is rejected for all maturities and co2 markets implying that neither contract is priced according to the cost of carry model the absence of the cost of carry relationship can be interpreted as an indicator of market inefficiency and may bring arbitrage opportunities in the co2 market

evolution of time preference by natural selection this paper entertains the hypothesis that human time preferences are in evolutionary equilibrium i e that no mutation changing time preferences could be favored by natural selection this hypothesis implies that the marginal rate of substitution mrs holding darwinian fitness constant must equal the mrs holding utility constant furthermore in a market economy the latter must equal the mrs in exchange exploiting these principles the author finds that the long term real interest rate should equal ln 2 per generation about 2 percent per year and that young adults should discount the future more rapidly than their elders copyright 1994 by american economic association

towards an ecological economics of sustainability abstract persistent disagreement both as to the interpretation to be given to sustainability and as to the relation between ecological and economic sustainability has hindered the development of an ecological economics of sustainable resource use this paper identifies the main concepts of sustainability deriving from the two disciplines in order to explore the difference implied by an ecological approach to the problem it is argued that present economic and ecological approaches are largely disjoint and that they address basically different phenomena by combining the efficiency requirements of what is usually thought of as economic sustainability with the stability requirements of an ecological approach it is shown that an intertemporally efficient allocation of resources that satisfies the conditions for constant levels of consumption is not necessary to assure ecological sustainability ecological sustainability requires that the allocation of economic resources should not result in the instability of the economy environment system as a whole

product design and efficient management of recycling and waste treatment abstract using a general equilibrium model where material is first extracted then used for producing a consumption good recycled and finally treated to reduce environmental damage we study efficiency restoring policies when one or more of the constituent markets are inactive the material is modeled as being embodied in the output and forms an important aspect of green product design if all markets for embodied material per unit output fail and if recycling benefit exceeds environmental damage the policy instruments needed for green design are a tax on the consumption good supply and a subsidy on the demand for material input

sustainable growth and the environmental kuznets curve abstract this paper develops an endogenous growth model with pollution and both human and physical capital human capital is produced cleanly and physical capital can be used for pollution control economic growth is sustainable in the long run it is optimal for human capital to grow more rapidly than physical capital output and consumption while pollution declines for realistic parameter values our results differ sharply from stokey s result for an ak technology that sustained economic growth is not optimal the model can generate an environmental kuznets curve a pollution tax or a voucher system can implement the pareto efficiency solution

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

causes of the eu ets price drop recession cdm renewable policies or a bit of everything new evidence the price of eu allowances euas in the eu emissions trading scheme eu ets fell from almost 30 tco2 in mid 2008 to less than 5 tco2 in mid 2013 the sharp and persistent price decline has sparked intense debates both in academia and among policy makers about the decisive allowance price drivers in this paper we examine whether and to what extent the eua price drop can be justified by three commonly identified explanatory factors the economic recession renewable policies and the use of international credits capitalizing on marginal abatement cost theory and a broadly extended data set we find that only variations in economic activity and the growth of wind and solar electricity production are robustly explaining eua price dynamics contrary to simulation based analyses our results point to moderate interaction effects between the overlapping eu ets and renewable policies the bottom line however is that 90 of the variations of eua price changes remains unexplained by the abatement related fundamentals together our findings do not support the widely held view that negative demand shocks are the main cause of the weak carbon price signal in view of the new evidence we evaluate the eu ets reform options which are currently discussed

carbon price drivers phase i versus phase ii equilibrium abstract the aim of this paper is to investigate the determinants of the carbon price during the two phases of the european union emission trading scheme eu ets more specifically relying on daily eu allowance futures contracts we test whether the carbon price drivers identified for phase i still hold for phase ii and evolve toward a long run relationship using cointegration techniques and accounting for the 2006 structural break in the carbon market we show that while a cointegrating relationship exists for both phases of the eu ets the nature of this equilibrium relationship is different across the two subperiods with an increasing role of fundamentals in phase ii deriving equilibrium values we show that the carbon price tends to be undervalued since the end of 2009

competitive equilibria and sustainable growth in a life cycle model with natural resources the purpose of this note is to consider interactions between capital accumulation and natural resource exploitation in diamond s 1965 overlapping generations olg model the presumption in the literature on economic growth under resource constraints e g solow 1974 or stiglitz 1974 is that constant standards of living are possible in the presence of nonreproducible natural resources even in the absence of technical progress provided only that capital and resources are good substitutes in production and society makes sufficient investments in reproducible capital to offset the optimally declining stock of natural resources this literature ignores generation overlap and treats society in each period as a single generation which cares about and also discounts the welfare of its immediate descendants and which has complete control over the rate of resource use and the saving rate whether a sequence of selfish finite lived and interdependent generations interacting via competitive markets will implement these paths is an open question this note introduces a stationary population log linear version of diamond s model in which natural resources are selfreproducible and essential in production and capital depreciates completely after one period in this environment it is technically feasible to achieve growth paths in which the input and the stock of natural resources are constant and in which capital accumulation leads to growth in living standards these paths of resource use can be interpreted as emanating from the normative concept of sustainable development now advocated

the design of reform packages under uncertainty the authors present a model of large scale economic reforms modeled on the transition process in eastern europe with aggregate and individual uncertainty concerning the outcome of reforms the government is assumed to choose the speed and sequencing of reforms the authors compare big bang strategies with gradualist reform packages they show that gradualist reform packages may be easier to get started optimal sequencing of reforms should aim at creating constituencies for further reforms and gradualism may generate a higher investment response because of a lower option value of waiting than would a big bang approach copyright 1995 by american economic association

excess capacity a permanent characteristic of us airlines this paper examines the permanence of excess capacity in the us airline industry to avoid the problems with the standard engineering measure of capacity utilization load factor we define and measure capacity as an economic concept two measures of economic capacity utilization are then computed one a demand based measure and the other an output based measure of capacity utilization both measures share little in common with the standard engineering measure load factor and reveal some interesting attributes of airline travel demand this paper also provides interesting new insights into the role of deregulation and the costs of excess capacity during regulation specifically it is found that deregulation with the concomitant rationalization of route structures enabled airlines to move closer to their optimal levels of capacity and facilitated substantial improvements in capacity utilization and cost reductions over the period considered 1998 john wiley sons ltd

intertemporal preferences and intergenerational equity considerations in optimal resource harvesting abstract optimal resource harvesting decisions are reexamined in light of a distinction between personal discount rates reflecting individuals rate of time preference and generational discount rates reflecting considerations of equity for future generations the discount rates have partially counteracting effects upon the optimal harvesting decisions and upon the optimal distribution of benefits in any one period for instance it is the generational discount rate that determines the potential for economically optimal extinction of a renewable resource by distinguishing the two discount rates it is possible to give each generation equal consideration while still allowing for individual impatience

liaisons dangereuses increasing connectivity risk sharing and systemic risk the recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what architecture can make the financial system more resilient to global crises this paper shows that a financial network can be most resilient for intermediate levels of risk diversification and not when this is maximal as generally thought so far this finding holds in the presence of the financial accelerator i e when negative variations in the financial robustness of an agent tend to persist in time because they have adverse effects on the agent s subsequent performance through the reaction of the agent s counterparties 2012 elsevier b v all rights reserved

the rise fall and sustainability of capital resource economies in debates about green accounting it is sometimes argued that a positive value of aggregate investments indicates that an economy is developing sustainably asheim 1994 and pezzey 1994 have shown that this is wrong using a version of the well known dasgupta heal economy with one capital and one non renewable resource stock as a counterexample asheim s proof referred to the unproved assumptions that in such an economy a higher rate of time preference induces higher initial consumption and vice versa and that optimal consumption is initially rising and then falling here we show that these assumptions do hold true under certain circumstances thereby also proving some of dasgupta and heal s other conjectures about sustainability

sustainability under uncertainty a deontological approach a deontological or kantian approach to intergenerational fairness suggests that sustainability criteria should be imposed as prior constraints on the maximization of social preferences concerning the distribution of welfare between present and future generations in particular it is plausible to assert that each successive generation holds a duty to ensure that the expected welfare of its offspring is no less than its own perceived well being this moral rule implies a bias against actions that generate present benefits but impose the risk of irreversible future losses if the preservation of options would allow for improved decisions as new information became available

risk neutral models for emission allowance prices and option valuation the existence of mandatory emission trading schemes in europe and the united states and the increased liquidity of trading on futures contracts on co2 emissions allowances led naturally to the next step in the development of these markets these futures contracts are now used as underliers for a vibrant derivative market in this paper we give a rigorous analysis of a simple risk neutral reduced form model for allowance futures prices demonstrate its calibration to historical data and show how to price european call options written on these contracts this paper was accepted by haitao li guest editor finance

centrality and pricing in spatially differentiated markets the case of gasoline we highlight the importance of centrality for pricing firms characterized by a more central position in a spatial network are more powerful in terms of having a stronger impact on their competitors prices and on equilibrium prices these propositions are derived from a simple theoretical model and investigated empirically for the retail gasoline market of vienna austria we compute a measure of network centrality based on the locations of gasoline stations in the road network results from a spatial autoregressive model show that prices of gasoline stations are more strongly correlated with prices of central competitors

sustainability constraints versus optimality versus intertemporal concern and axioms versus data sustainable sustained or survivable development are defined here as distinct sustainability constraints on intertemporal distribution in a context which ignores uncertainty environmental and intratemporal concerns such constraints are neither self contradictory nor redundant for they can conflict with maximizing the present value of utility optimality nor inferior since the axioms underlying optimality are ethically arbitrary and refuted by empirical psychological data axiomatic arguments may clarify but cannot resolve debates about intertemporal concerns data suggest that sustainability constraints are not respected and that intertemporal welfare functions containing a preference for sustained improvement may better reflect what bodies politic mean by sustainability