the design of environmental markets what have we learned from experience with cap and trade this article reviews the design of environmental markets for pollution control over the past 30 years and identifies key market design lessons for future applications the focus is on a subset of the cap and trade systems that have been implemented planned or proposed around the world three criteria led us to the selection of systems for review first among the broader class of tradable permit systems our focus is exclusively on cap and trade mechanisms thereby excluding emission reduction credit or offset programmes second among cap and trade mechanisms we examine only those that target pollution abatement and so we do not include applications to natural resource management such as individual transferable quota systems used to regulate fisheries third we focus on the most prominent applications those that are particularly important environmentally economically or both

new evidence on implicit contracts from linked employer employee data we improve the precision of the implicit contract model test proposed by beaudry and dinardo 1991 our dataset allows us to define the exact industry and plant of a particular employment relationship link local labor market characteristics to individual level wages and control for composition effects we find evidence in favor of the spot market model of wage setting in the whole sample but there is significant variation across industries and education levels in particular the spot market matters most for low skill workers while the implicit contract model with one sided limited commitment applies better to high skill workers

gender sorting and the glass ceiling in high tech firms with few exceptions studies have conceived of the glass ceiling as reflecting internal promotion biases in this article the authors argue that glass ceiling patterns can also be the result of external recruitment and hiring processes using data on people applying by means of the internet for jobs at 441 small and medium sized high tech firms they find evidence that the glass ceiling is produced by both internal and external hiring processes on the supply side females are sorted into lower level job queues than males on the demand side screening biases against women also are evident but a series of what if simulations suggest that demand side screening processes play a comparatively minor role in producing the glass ceiling pattern these results suggest that bias remediation policies designed to equalize gender differences in hiring chances are likely to be less effective than recruitment and outreach policies designed to improve gender disparities in candidate pools

reprint of price and quantity collars for stabilizing emission allowance prices laboratory experiments on the eu ets market stability reserve abstract we report on laboratory experiments with financially motivated participants comparing alternative proposals for managing the time path of emission allowance prices in the face of random firm specific and market level structural shocks market outcome measures such as social surplus and price variability are improved by the use of a price collar auction reserve price and soft price cap comparable performance enhancements are not observed with the implementation of a quantity collar that adjusts auction quantities in response to privately held inventories of unused allowances in some specifications the quantity collar performed worse than no stabilization policy at all the experiment implemented a specific set of structural elements and extrapolation to other settings should be done with caution nevertheless an examination of the observed behavioral patterns and deviations from optimal behavior suggests that a price collar has an important although perhaps not exclusive role to play in constructing an effective market stability policy

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

policy stringency under the european union emission trading system and its impact on technological change in the energy sector abstract in this study we use patent count data for overall climate change mitigation technologies and for those related to energy production and distribution to evaluate the relationship between the sizable oversupply of european union emissions allowances and a policy shift marked by the transition from phase i to phase ii under the european union emission trading system on the one hand and on green patenting on the other according to our results the expected negative impact of this oversupply on technological change seems to be confirmed thus stakeholders take the actual supply of certificates into account when determining their innovative activity in the same vein they do so with respect to policy changes related to greater stringency which generated a sizeable increase in patenting activity when controlling for other economic factors our results suggest that a critical evaluation of emission caps and allowances distribution must be undertaken

investment decisions and transferable discharge permits an empirical study of water quality management under policy uncertainty the problem of investiment decisions for sources participating in transferable discharge permit tdp markets has not received much attention one way tdps offer potential savings is with their ability to influence development in a region static models have assessed the potential savings of tdps but do not explicitly consider investment decisions thus they do not capture this long run role nor that of policy uncertainty and tend to understate both the cost saving potential and the difficulty in achieving it this paper addresses both problems by emphasizing the temporal dimension of tdps a two period investment model investigates the magnitude of these potential savings and the effects of two types of policy uncertainty upon expected gains from permit trading

what can we learn from the grand policy experiment lessons from so2 allowance trading stable url http links jstor org sici sici 0895 3309 28199822 2912 3a3 3c69 3awcwlft 3e2 0 co 3b2 tthe journal of economic perspectives is currently published by american economic association your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals aea html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgtue jun 26 16 25 17 2007

new evidence on canadian wage rates 1900 1930 this paper shows there are serious errors in published canadian nominal wage data and presents hourly wage series developed from firm records for machinists helpers and laborers employed by the canadian pacific railway between 1900 and 1930 this new evidence suggests that real wage growth in canada was faster than previously believed and that there were substantial changes in wage inequality

personnel policies at the union bank of australia evidence from the 1888 1900 entry cohorts this article uses personnel payroll and other records from the union bank of australia to examine internal labor markets it is shown that employment was characterized by limited ports of entry impersonal rules for pay and promotion well defined career ladders shielding from the external labor market and a long term employment relationship in addition tenure within the bank was rewarded considerably more than experience elsewhere and compensation increased considerably after 25 30 years tenure these facts are partially consistent with the human capital matching and contract theory models but cannot be fully explained by any one model

externalities and corrective policies in experimental markets this paper reports on the behaviour of simple laboratory markets which have an externality experiences with these markets provide some help in answering two broad questions 1 do markets with externalities behave in accordance with the law of supply and demand 2 how do the pollution tax pollution standard and pollution licenses compare as methods for correcting the externality

trading sulphur emissions in europe guided bilateral trade in this paper a system of guided permit trading is developed for so2emissions reduction which considers permit trading as a bilateral andsequential process this implies that in order to meet the deposition targetsat the end of the trading process not every single trade transaction hasto meet the deposition targets to ensure that the target is ultimately met the number of permits traded should be controlled by a trade coordinatinginstitution a simulation of the system of guided bilateral trading ofso2 permits among european countries on the basis of the secondso2 protocol indicates that some non profitable trade transactionstake place this prevents the cost effective emission allocation from beingfully achieved however the calculations show that guided bilateral permittrading may generate substantial cost savings while contributing toenvironmental protection

worker mobility in a search model with adverse selection we analyze the effects of adverse selection on worker turnover and wage dynamics in a frictional labor market we consider a model of on the job search where firms offer promotion wage contracts to workers of different abilities which is unknown to firms at the hiring stage with sufficiently strong information frictions low wage firms offer separating contracts and hire all types of workers in equilibrium whereas high wage firms offer pooling contracts promoting high ability workers only low ability workers have higher turnover rates and are more often employed in low wage firms the model replicates the negative relationship between job to job transitions and wages observed in the u s labor market

the goals and promise of the sarbanes oxley act the primary goal of the sarbanes oxley act was to fix auditing of u s public companies consistent with its full official name the public company accounting reform and investor protection act of 2002 by consensus auditing had been working poorly and increasingly so the most important and most promising part of sarbanes oxley was the creation of a unique quasi public institution to oversee and regulate auditing the public company accounting oversight board pcaob in controversial section 404 the law also created new disclosure based incentives for firms to spend money on internal controls above increases that would have occurred after the corporate scandals of the early 2000s in exchange for these higher costs which have already fallen substantially sarbanes oxley promises a variety of long term benefits investors will face a lower risk of losses from fraud and theft and benefit from more reliable financial reporting greater transparency and accountability public companies will pay a lower cost of capital and the economy will benefit because of a better allocation of resources and faster growth sarbanes oxley remains a work in progress section 404 in particular was implemented too aggressively but reformers should push for continued improvements in its implementation by pcaob rather than for repeal of the legislation itself

creating markets for air pollution control in europe and the usa this paper surveys recent efforts to relax the rigid regulatory frameworks for air pollution control in europe and the usa european policies have mainly taken the form of bubbles and compensation or offset schemes emission trading has been limited to intra firm solutions for various reasons industry structure absence of real scarcity and too restrictive trading rules bubbles have been granted to homogenous sectors only and can be characterized as direct regulation for a group rather than tradable permit systems by contrast the sulphur allowance program in the usa has laid down the foundation for a pollution permit market with few formal restrictions problems that arise are mainly related to local environmental and public utility controls europe can learn from the usa that regular national permit markets could be installed preferably for homogenous sectors in designing the permit system the differences between the usa and europe in terms of ecosystem sensitivity stringency of regulation and differentiation of regional environmental policy have to be taken into account

the signaling role of promotions further theory and empirical evidence an extensive theoretical literature investigates the role of promotions as a signal of worker ability we extend the theory by focusing on how the signaling role of promotion varies with education and then investigate the resulting predictions using a longitudinal data set that contains detailed information concerning the internal labor market history of a medium sized firm in the financial services industry our results support signaling being important for understanding the differences between promotion practices concerning bachelor s and master s degree holders while the evidence concerning the importance of signaling for high school graduates and phds is mixed

the role of policy in energy transitions lessons from the energy liberalisation era the aim of this paper is to discuss the period of energy privatisation and liberalisation which began in the 1980s within its wider historical context the key issues are what has been learned from this recent period and how significant is it in the light of an energy transition to low carbon energy system by 2050 energy liberalisation has led to positive and globally widespread but modest efficiency gains but a lack of clearly visible direct benefits to households in many countries it has significantly improved the governance of monopoly utilities via independent regulators the prospects for competition and innovation and the quality of policy instruments for environmental emissions control through the emergence of trading mechanisms we conclude that it is not liberalisation per se that will determine the movement towards a low carbon energy transition but the willingness of societies to bear the cost which will be significant no matter what the extent of liberalisation

the problem of the commons still unsettled after 100 years the problem of the commons is more important to our lives and thus more central to economics than a century ago when katharine coman led off the first issue of the american economic review as the us and other economies have grown the carrying capacity of the planet in regard to natural resources and environmental quality has become a greater concern particularly for commonproperty and open access resources the focus of this article is on some important unsettled problems of the commons within the realm of natural resources there are special challenges associated with renewable resources which are frequently characterized by open access an important example is the degradation of openaccess fisheries critical commons problems are also associated with environmental quality a key contribution of economics has been the development of market based approaches to environmental protection these instruments are key to addressing the ultimate commons problem of the twenty first century global climate change jel q15 q21 q22 q25 q54

pricing and regulating affect environmental ethics effluent charges and tradeable permits are economically efficient but rarely used a new explanation for this discrepancy is offered pricing may crowd out environmental ethics in the pricing and via spillovers also in non pricing sectors pricing may therefore increase pollution providing a reason why decision makers tend to reject environmental pricing five propositions showing the conditions for counterproductive effects are advanced they are consistent with available empirical evidence regulation by setting standards and subsidies damage environmental ethics less than pricing because pollution is condoned damaging environmental ethics may prevent political action in favor of the environment

the effect of allowance allocations on cap and trade system performance abstractan implication of the coase theorem is that under certain conditions the market equilibrium in a cap and trade system will be cost effective and independent of the initial allocation of tradable rights that is the overall cost of achieving a given aggregate emission reduction will be minimized and the final allocation of permits will be independent of the initial allocation we call this the independence property this property is important because it means that the government can establish the overall pollution reduction goal for a cap and trade system by setting the cap and leaving it up to the legislature to construct a constituency in support of the program by allocating the allowances to various interests without affecting either the environmental performance of the system or its aggregate social costs we examine the conditions under which the independence property is likely to hold both in theory and in practice

internal labor markets and worker rents abstract we show that establishing an internal labor market by offering combined contracts across hierarchy levels strictly dominates external recruitment when workers are homogeneous the reason is that only an internal labor market can exploit higher tier rents for incentive provision on lower tiers given unobservable heterogeneity of workers relying on an internal labor market has the further advantage of improving the selection of high ability workers for higher ranks which is complemented by rent based incentive schemes however observable worker heterogeneity gives rise to a trade off between incentive and selection issues and may lead to ports of entry on higher tiers of the hierarchy

the political economy of market based environmental policy the u s acid rain program the u s acid rain program enacted in 1990 gave valuable tradable sulfur dioxide emissions permits called allowances to electric utilities we examine the political economy of this allocation though no senate or house votes were ever taken hypothetical votes suggest that the actual allocation would have beaten plausible alternatives while rent seeking behavior is apparent statistical analysis of differences between actual and benchmark allocations indicates that the legislative process was more complex than simple models suggest the coalition of states that produced and burned high sulfur coal both failed to block acid rain legislation in 1990 and received fewer allowances than in plausible benchmark allocations some of these states may have received additional allowances to cover 1995 99 emissions by giving up allowances in later years and some major coal producing states seem to have focused on benefits for miners and on sustaining demand for high sulfur coal

economic prescriptions for environmental problems how the patient followed the doctor s orders o ne of the dangers with ivory tower theorizing is that it is easy to lose sight of the actual set of problems which need to be solved and the range of potential solutions as one who frequently engages in this exercise i can attest to this fact in my view this loss of sight has become increasingly evident in the theoretical structure underlying environmental economics which often emphasizes elegance at the expense of realism in this paper i will argue that both normative and positive theorizing could greatly benefit from a careful examination of the results of recent innovative approaches to environmental management the particular set of policies examined here involves two tools which have received widespread support from the economics community marketable permits and emission charges pigou 1932 dales 1968 kneese and schultze 1975 both tools represent ways to induce businesses to search for lower cost methods of achieving environmental standards they stand in stark contrast to the predominant command and control approach in which a regulator specifies the technology a firm must use to comply with regulations under highly restrictive conditions it can be shown that both of the economic approaches share the desirable feature that any gains in environmental quality will be obtained at the lowest possible cost baumol and oates 1975 until the 1960s these tools only existed on blackboards and in academic journals as products of the fertile imaginations of academics however some countries have recently begun to explore using these tools as part of a broader strategy for managing environmental problems

random errors dirty information and politics rational voters assessments of candidates and policy proposals are unbiased but affected by random errors clean information decreases these errors while dirty information increases them in politics most voting procedures weigh random individual errors asymmetrically thus such errors do not counterbalance one another in the aggregate they systematically affect politics this illuminates the roles of political propaganda and interest groups it helps to explain various puzzles in public choice e g the frequent use of inefficient policy instruments institutional conditions are identified that shape the aggregate impact of individual errors and the politicians incentives to produce dirty information

work incentives hierarchy and internal labor markets this paper argues that contracts with payment based on a ranking of employee performance can provide performance incentives even under asymmetric information that prevents payment based on individual performance only being enforceable such contracts also fit with five features of labor markets that have aroused considerable interest 1 hierarchical wage structures 2 internal promotion 3 wage rates that rise with seniority and experience more than productivity 4 the variance of earnings increasing with experience and 5 wage rates attached to jobs rather than individuals with differentials set by administrative procedures rather than by reference to external market wages

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

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

empirical age earnings profiles the human capital earnings function in which earnings are expressed as a quadratic in potential experience is probably the most widely accepted empirical specification in economics in spite of its widespread acceptance the human capital earnings function provides a very poor approximation of the true empirical relationship between earnings and experience the standard formulation understates early career earnings growth by about 30 50 and overstates midcareer growth by 20 50 however simple alternative specifications that fit the data are available

incentives wages and promotions theory and evidence i study an incentive problem that has been largely ignored in the agency literature incentives for repeated human capital investment the optimal contract is very simple but still provides rich implications for incentive and wage structures in large organizations the empirical evidence is presented using personnel records of health insurance claim processors in a large u s insurance company these processors are white collar nonmanagerial female service industry workers a rapidly growing but rarely studied labor group the empirical findings are consistent with the main features of the optimal contract

environmental regulation a value theoretic and class based analysis following a value theoretic and class based approach it is argued in this paper that ecological problems are inseparably linked to the process of extracting surplus value in capitalism and owing to their adverse impacts instigate struggles over the appropriation of nature these struggles fought within and outside the state by competing agents shape environmental regulation in particular taxes permits command and control measures and subsidies affect prices profits and rents and have class and other social implications evidence of current environmental regulation shows that it takes places under the great influence of capitalist concerns

promotions demotions halo effects and the earnings dynamics of american executives this paper explores the determinants of earnings growth in corporate hierarchies using static and dynamic panel data techniques the novelty derives from the distinction between base pay and bonus the asymmetric effects of promotion and demotion and the consideration of dynamic effects we find that the convexity of pay structures is robust to the allowance for unobserved individual heterogeneity demotion has a stronger effect on compensation growth in absolute value than promotion dynamic models indicate that the causal effect of past promotion is positive on the growth in base and total pay but has no significant effect on bonus growth

has new york become less competitive than london in global markets evaluating foreign listing choices over time abstract we study the determinants and consequences of cross listings on the new york and london stock exchanges from 1990 to 2005 this investigation enables us to evaluate the relative benefits of new york and london exchange listings and to assess whether these relative benefits have changed over time perhaps as a result of the passage of the sarbanes oxley act in 2002 we find that cross listings have been falling on us exchanges as well as on the main market in london this decline in cross listings is explained by changes in firm characteristics instead of by changes in the benefits of cross listing we show that after controlling for firm characteristics there is no deficit in cross listing counts on us exchanges related to sox investigating the valuation differential between listed and non listed firms the cross listing premium from 1990 to 2005 we find that there is a significant premium for us exchange listings every year that the premium has not fallen significantly in recent years and that it persists when allowing for time invariant unobservable firm characteristics in contrast no premium exists for listings on london s main market in any year firms increase their capital raising activities at home and abroad following a cross listing on a major us exchange but not following a cross listing in london our evidence is consistent with the theory that an exchange listing in new york has unique governance benefits for foreign firms

the london stock exchange s aim experiment regulatory or market failure a discussion of gerakos lang and maffett abstract the conference paper by gerakos lang and maffett 2013 provides reliable descriptive evidence on the post ipo performance of firms listing on the london stock exchange s alternative investment market aim their findings are consistent with both a failure of private sector regulation and incorrect market expectations about aim s investor protections in this discussion of gerakos et al 2013 i highlight the strengths and limitations of their conference paper summarize how various regulatory and market factors could produce the observed systematic under performance of aim offerings and outline paths for future research on the topic

what do emissions markets deliver and to whom evidence from southern california s nox trading program a perceived advantage of cap and trade programs over more prescriptive environmental regulation is that enhanced compliance flexibility and cost effectiveness can make more stringent emissions reductions politically feasible however increased compliance flexibility can also result in an inequitable distribution of pollution we investigate these issues in the context of southern california s reclaim program we match facilities in reclaim with similar california facilities also located in non attainment areas our results indicate that emissions fell approximately 24 percent on average at reclaim facilities relative to our counterfactual furthermore we find that observed changes in emissions do not vary significantly with neighborhood demographic characteristics

do formal salary systems really matter drawing on a single large u s corporation s personnel records for the years 1989 93 the authors analyze an example of the kind of formal salary system used by most large firms they find that this firm s practices were consistent with most of the important conclusions of prior empirical research on internal labor markets the system was highly centralized covering salary levels salary ranges raises and bonuses supervisors had little discretion over pay other than through subjective performance ratings the firm held fairly strictly to the salary rules leading to observable constraints on pay for employees near the top of the salary range these constraints however apparently did not impose important costs on the firm in the form of increased turnover although the system operated without any apparent connection to external factors the authors conclude that it transmitted external labor market forces with little distortion

the internal economics of a university evidence from personnel data using a rich personnel data set of a large european university we find strong evidence for the existence of an internal labor market first there is a strong port of entry at the lowest academic rank and in fact even prior to entering professorship resulting in very long internal careers second wages do not follow external wage developments we subsequently consider various incentive theories regarding the dynamics of promotions as organized through annual tournaments as expected a rigid set of research and teaching criteria determine the speed of promotions at the same time administrative rigidities play an important role

the gains from agricultural groundwater trade and the potential for market power theory and application this article models and estimates the efficiency gains from using market based instruments relative to command and control to manage groundwater a theoretical model of an imperfectly competitive groundwater market is developed to show how the magnitude and distribution of the gains from trade change as market structure varies market structure is a key consideration because future groundwater markets will likely feature geographic limitations to trade large agricultural players and a legal environment that is conducive to forming cartel like coalitions application of the model to a groundwater dependent agricultural region in southern california shows the existence of large gains from trade despite the potential for market power with benefits up to 36 greater than that under command and control distributional impacts however can be sizable even for small degrees of market power simulations that vary market conditions show that results likely generalize to other groundwater basins

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

a tradable permit system in an intertemporal economy it is known that in an intertemporal competitive economy a tradable permit system may not achieve efficiency without setting appropriate permit interest rates i e rewards for holding permits to find the rates however we need to know in advance the path of efficient permit prices which is difficult to obtain this study intends to solve this problem in two ways first we analyze a special case in which the permit interest rates are given by a simple rule for example if the marginal abatement cost of pollution emission is constant then the appropriate rate is to equal the monetary interest rate as is the case for global warming if the damage is caused in the future far beyond the planning period of the environmental program the appropriate rate coincides with the marginal self recovery of environmental stock under certain conditions as a second approach we propose a tradable permit system with a permit bank as a mechanism by which the permit interest rates are generated endogenously without governmental intervention other than the issuance of permits however we also show that this approach raises the problem of indeterminacy of the equilibrium

the effect of implicit contracts on the movement of wages over the business cycle evidence from the national longitudinal surveys a 1991 study by paul beaudry and john dinardo found evidence of internal labor markets that augment incumbent workers wages when the external labor market is tight when unemployment is low and shield their wages when it is slack current wages they found depend on the tightest labor market conditions observed since a worker was hired not current labor market tightness or labor market tightness at the time of hiring this paper replicates and extends that research using data from six cohorts of the national longitudinal surveys that together span more than three decades as well as an estimation framework more robust than that in the original study the author finds strong support for beaudry and dinardo s key prediction supplementary regressions confirm other implications of the theory as well recently at least the effect of implicit contracting on wages has been similar for men and women

efficient pollution regulation getting the prices right this paper argues for efficient environmental regulations that equate the mar ginal damage of pollution to marginal abatement costs across space the paper estimates the source specific marginal damages of air pollution and calculates the welfare gain from making the current sulfur dioxide allowance trading pro gram for power plants more efficient the savings from using trading ratios based on marginal damages are between 310 and 940 million per year the potential savings from setting aggregate emissions efficiently and from includ ing more sources of air pollution are many times higher jel h23 q53 q58

transitional politics emerging incentive based instruments in environmental regulation abstract this paper proposes a positive theory of environmental instrument choice we study a democratic society that seeks to lower the level of pollution from industrial sources to a pre specified target the target can be implemented by one of three instruments s uniform emission standards p tradeable permits and t emission taxes the conflict of interest between special interests representing polluters and the electorate is resolved by an elected politician we characterize when each of the three policy instruments is chosen in political equilibrium and show that the transition observed in many countries from s to either p or t can be understood as a natural consequence of increasingly ambitious environmental targets

flexibility premium of emissions permits abstract investments in abatement technology are often characterised by irreversibility and significant implementation lags whereas emissions permits can be traded at any time as such abatement and emissions permit trading systems are hardly perfect substitutes we formally study the flexibility of emissions permits and propose a unified framework to rationalise the impact of both investment divestment lags and irreversibility in relation to the price of emissions permits using option pricing concepts we reformulate the technology adoption problem in terms of the technology s characteristics irreversibility and implementation lags and offer a conceptual quantification of the flexibility premium of emissions permits

challenges from state federal interactions in us climate change policy with a focus on two sorts of regulation renewable electricity and clean energy standards and automobile fuel economy standards we analyze problematic interactions that arise when state policies are nested within the domain of federal policy here state efforts may fail to reduce greenhouse gas emissions nationally and may compromise cost effectiveness difficulties from overlapping regulations are avoidable through price as opposed to quantity based federal policy we identify some potentially positive interactions between state and federal policies and identify rationales for state action when federal and state policies do not overlap

innovation and the international diffusion of environmentally responsive technology abstract new evidence is presented on environmental innovation and diffusion over the 1970s and 1980s at a global level a substantial amount of innovations occurred in the united states japan and germany the share of environmental patents in all patents varied between 0 6 and 3 and as such was higher than the corresponding share of pollution abatement expenditure in gdp japanese environmental innovation rates were consistently high certain plausible connections between environmental regulation and innovation also emerge across these three countries and over time innovation responded to pollution abatement expenditure an indicator of the severity of environmental regulations environmental patenting rates in developing countries were also high reaching 2 in many years in brazil developing country innovators obtained a non trivial number of patents most of which appear geared towards adapting imported technologies to local conditions however domestic innovation was only one path to new technologies imports of disembodied environmental technologies foreign patents registered in developing countries were substantial foreign patents were typically important or generic patents evidence also suggests that such patents protected intellectual property in equipment exported developing countries especially in east asia often chose to obtain technologies embodied in pollution abatement equipment

voluntary environmental agreements good or bad news for environmental protection abstract there has been growing interest in the use of voluntary agreements vas as an environmental policy tool this article uses a simple model to determine whether vas are likely to lead to efficient environmental protection we consider cases where polluters are induced to participate either by a background threat of mandatory controls the stick approach or by cost sharing subsidies the carrot approach the results suggest that the overall impact on environmental quality could be positive or negative depending on a number of factors including the allocation of bargaining power the magnitude of the background threat and the social cost of funds