in defence of historical accountability for greenhouse gas emissions abstract this commentary argues in defence of equal per capita emissions with historical accountability as a general rule for allocating the right to emit greenhouse gases historical accountability takes into account historical inequalities in per capita emissions implicitly it gives every human being an equal share of the global resource atmosphere independent of place or time three reasons are put forward to argue why historical accountability should be the guiding principle for an international agreement allocating rights of emissions in addition as it has been dismissed by many scholars six arguments are given to refute objections against historical accountability

escaping the polluter pays trap financing wastewater treatment on the tijuana san diego border abstract building and operating infrastructure to address transboundary environmental hazards requires dividing the cost of pollution prevention between bordering states when cost burden questions arise the solution often suggested is the polluter pays principle ppp however when political and economic relations between neighboring countries are asymmetrical other cost burden principles are often adopted given the discrepancy between theory and practice the aim of this study is to identify some of the available cost burden principles and to examine when they might replace the ppp the pollution prevention regime along the san diego tijuana border is used as a case study it was found that under asymmetrical relations there are several competing cost burden principles some principles are adopted since they are perceived by some to be fair while others are adopted since they provide effective wastewater treatment the ones that were found effective are those that offset to some degree existing asymmetries this explains why the ppp was replaced in the san diego tijuana case with other cost burden principles that better offset the asymmetries and thus they provided a more effective wastewater treatment than the ppp

the symmetry between controlling pollution by price and controlling it by quantity under ideally competitive conditions both controlling pollution by price using a combined charge subsidy scheme and controlling it by quantity using a marketable permit scheme can achieve short and long run efficiency and also political acceptability provided that both schemes embody the same degree of environmental ownership the resulting full symmetry between control by price and control by quantity a symmetry overlooked in the literature because of the entry exit assumptions automatically made for most subsidy schemes allows a useful practical choice to be made between the two control systems

sharing the burden for climate change mitigation in the canadian federation dividing the burden for greenhouse gas abatement amongst the provinces has proven challenging in canada and is a major factor contributing to canada s poor historic performance on greenhouse gas abatement as the country aims to achieve substantial cuts to emissions over the next decade and by mid century such burden sharing considerations are likely to be elevated in importance this paper uses a calibrated multi region multi sector computable general equilibrium model to compare a number of archetypal rules for sharing the burden of a joint commitment amongst members for the case of greenhouse gas reductions in canada because of the substantial heterogeneity amongst canadian provinces these different burden sharing rules imply signifcantly different relative abatement effort amongst provinces and also signifcantly different welfare implications when emission permits are allocated on an equal per capita basis welfare is increased in ontario british columbia quebec and manitoba and signifcantly reduced in alberta and saskatchewan in contrast when emission permits are allocated based on historic emissions alberta and saskatchewan are made better off and ontario british columbia quebec and manitoba are made worse off we compare these archetypal burden sharing rules to existing provincial emission reduction commitments and find that none of the standard burden sharing rules comes close to existing commitments we argue that the debate on burden sharing of greenhouse gas abatement in canada could be objectified if informed by coherent quantitative analysis such as the one presented here

a dynamic analysis of the marketable permits approach to global warming policy a comparison of spatial and temporal flexibility abstract this paper presents a generalized dynamic model of greenhouse gas emissions trading under constraints on the volume of transactions an empirical version of the model is used to evaluate potentially cost saving flexibility mechanisms joint implementation and clean development mechanism and potentially cost adding restrictions supplementarity of the kyoto protocol the results indicate the greatest gains would stem from extending permit trading spatially among industrialized nations although sizable gains would also emanate from the inclusion of developing countries gains from intertemporal trading banking and borrowing are meager restrictions on the volume of permit purchases have by far the most costly effect when developing countries are incorporated into trading sensitivity tests with respect to differential discount rates across countries and technological change indicate the results are robust

using contests to allocate pollution rights in this paper we advocate a new initial allocation mechanism for a tradable pollution permit market we outline a permit allocation contest pac that distributes permits to firms based on their rank relative to other firms this ranking is achieved by ordering firms based on an observable external action where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradable permit market we argue that this mechanism has a number of benefits over auctioning and grandfathering using this mechanism efficiently distributes permits allows for the attainment of a secondary policy objective and has the potential to be more politically appealing than existing alternatives

task assignment under agent loss aversion we analyze a task assignment model in which a principal assigns a task to one of two agents depending on future states if the agents have concave utility the principal assigns the task to them contingent on the state we show that if the agents are loss averse a state independent assignment assigning the task to a single agent in all states can be optimal even when the principal can write a contingent contract at no cost

the kyoto protocol a review and perspectives international concern about climate change has led to the kyoto protocol negotiated in 1997 which contains legally binding emission targets for industrialized countries to be achieved during the commitment period 2008 2012 while proponents of the protocol celebrate it as a breakthrough in international climate policy opponents criticize that its approach namely setting targets and timetables for emission reductions is seriously flawed this paper provides a critical assessment of the protocols potential performance and discusses amendments to foster its effectiveness and efficiency it concludes that even without any effective emission reductions in the initial commitment period the ratification of kyoto is important for the further policy process of climate protection the kyoto protocol has established a flexible broad based international mechanism that provides a valuable starting point for shaping efficient climate policies in the future

welfare specifications and optimal control of climate change an application of fund the sensitivity of the optimal control of carbon dioxide emissions to the specification of the social welfare function is systematically explored using the fund model increasing risk aversion emphasises climate change damages relative to emission reduction costs but at the same time increases the discount rate of consumption without international co operation the discount rate effect dominates so that optimal control decreases with increasing risk aversion with international co operation optimal control first increases then decreases with increasing risk aversion since climate change falls heaviest on the poor optimal control increases with increasing inequity aversion full fledged intergenerational welfare functions on the one hand emphasise climate change damages but on the other hand place more weight on current poorer generations in fund the two tendencies almost cancel

cooperative action on greenhouse gas emissions and the distribution of global output and damage this paper compares the performance of two allowance allocation rules in an international climate change treaty i construct a model in which countries differ according to both gdp and an idiosyncratic damage parameter that links global emissions to damage for an individual country allowances are allocated to treaty members according to an allocation rule based on a single allocation parameter the model can be solved analytically to determine upper and lower bounds on this allocation parameter that ensure that a treaty of any given composition is internally and externally stable i focus on grand coalition treaties the first treaty examined uses a simple proportional rule in which allocations are set as some fraction of emissions in the non cooperative equilibrium the second treaty adds a coverage contingent element to the allocation rule such that the emissions reduction required of each treaty member is weighted by the fraction of global emissions that treaty members as a whole emit in the non cooperative equilibrium i show that the coverage contingent treaty outperforms the simpler treaty except when all countries have the same emissions intensity in the non cooperative equilibrium in which case neither treaty can reduce emissions

renegotiation proof climate agreements with full participation conditions for pareto efficiency recent contributions show that climate agreements with broad participation can be implemented as weakly renegotiation proof equilibria in simple models of greenhouse gas abatement where each country has a binary choice between cooperating i e abate emissions or defecting no abatement here we show that this result carries over to a model where countries have a continuum of emission choices indeed a pareto efficient climate agreement can always be implemented as a weakly renegotiation proof equilibrium for a sufficiently high discount factor this means that one need not trade off a narrow but deep treaty with a broad but shallow treaty

regional allocation of carbon emission quotas in china evidence from the shapley value method abstract it is an important task for china to allocate carbon emission quotas among regions so as to realize its carbon reduction targets and establish the national cap and trade carbon market meanwhile it is supposed to be cost effective to jointly reduce china s carbon emissions through some collaborative activities among regions then a natural question is how to allocate the quotas among regions in light of the collaboration for this purpose the shapley value method is adopted and the results show that first the regions with higher gdp higher carbon outflow and higher carbon reduction connection should be allocated more carbon quotas moreover when the collaboration is considered the optimal allocation of carbon quotas among regions will change significantly compared to the basic quotas by the entropy method and the central region is allocated the largest proportion of carbon quota among regions which indicates its largest radiation effect besides the collaboration between the central region and northern coast region and that between the central region and the eastern region should be paid close attention these results may provide insightful support for decision makers to promote collaborative carbon reduction and allocate carbon quotas in china

who should abate carbon emission we review the optimal pattern of carbon emission abatements across countries in a simple multi country world we model explicitly with the model in chichilnisky 4 the fact that the atmosphere is a public good within this framework we establish conditions for it to be necessary for optimality that the marginal cost of abatement be the same in all countries these condition are quite restrictive and amount to either ignoring distributional issues between countries or operating within a framework within which lump sum transfers can be made between countries these results have implications for the use of tradeable emission permits which as normally advocated will lead to the equalization of marginal abatement costs across countries the observation that the atmosphere is a public good implies that we may need to look at a lindahl equilibrium rather than a walrasian equilibrium in tradeable permits

distributional aspects of emissions in climate change integrated assessment models the recent failure of copenhagen negotiations shows that concrete actions are needed to create the conditions for a consensus over global emission reduction policies a wide coalition of countries in international climate change agreements could be facilitated by the perceived fairness of rich and poor countries of the abatement sharing at international level in this paper i use two popular climate change integrated assessment models to investigate the path and decompose components and sources of future inequality in the emissions distribution results prove to be consistent with previous empirical studies and robust to model comparison and show that gaps in gdp across world regions will still play a crucial role in explaining different countries contributions to global warming

fiscal institutions fiscal policy and sovereign risk premia in emu we investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of eurozone countries deficits significantly increase risk premia measured by relative swap spreads the effect of deficits is significantly lower under emu this effect partly results from neglecting the role of fiscal institutions after controlling for institutional changes fiscal policy remains a significant determinant of risk premia in emu better institutions are connected with lower risk premia furthermore deficits matter less for risk premia in countries with better institutions markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important

the impact of china s carbon allowance allocation rules on the product prices and emission reduction behaviors of ets covered enterprises abstract it is an important task for china to allocate carbon emission allowance to realize its carbon reduction target and establish carbon trading market china has designed several allocation rules within seven pilot regions what influence those rules may cause is closely related with the enthusiasm of emission trading scheme ets covered enterprises participation in carbon market and more importantly with the mechanism design and sustainable development of carbon market for this purpose the multi stage profit model is developed to analyze the ets covered enterprises product prices and emission reduction behaviors under different allocation rules the results show that first under the rules of grandfathering self declaration and auctioning when deciding the optimal product price and optimal carbon emission reduction those enterprises may focus on maximizing current stage profit however under the rule of benchmarking those enterprises may care more about the impact of current decisions on the profit in next stage second the optimal product price policy is positively correlated with the price of the same kind products consumers low carbon awareness and government subsidy finally along with the increase of carbon price consumers low carbon awareness and government subsidy and the decrease of carbon emission cap those enterprises tend to reduce carbon emissions

the role of technological availability for the distributive impacts of climate change mitigation policy the impacts of the availability of low carbon technologies on the regional distribution of mitigation costs are analyzed in a global multi regional integrated assessment model three effects on regional consumption losses are distinguished domestic measures trade of fossil energy carriers and trade of emission permits key results are i gdp losses and a redirection of investments in the energy system towards capital intensive technologies are major contributions to regional consumption losses ii a devaluation of tradable fossil energy endowments contributes largely to the mitigation costs of fossil fuel exporters iii in case of reduced availability of low carbon technologies the permit market volume and associated monetary redistributions increase the results suggest that the availability of a broad portfolio of low carbon technologies could facilitate negotiations on the permit allocation scheme in a global cap and trade system

the abatement market a proposal for environmental cooperation among asymmetric countries we present a model of interaction among technologically asymmetriccountries whose use of an open access environmental resource generatesmutual externalities we show that countries can improve bothenvironmental quality and their individual welfare levels by buying sellingpollution abatement this market mechanism which reduces incentive forfree riding is more effective the larger the technological gap betweencountries

optimal intensity targets for greenhouse gas emissions trading under uncertainty uncertainty is an obstacle for commitments under cap and trade schemes for emission permits we assess how well intensity targets where each country s permit allocation is indexed to its future realized gdp can cope with uncertainties in international greenhouse emissions trading we present some empirical foundations for intensity targets and derive a simple rule for the optimal degree of indexation to gdp using an 18 region simulation model of a cooperative global cap and trade treaty in 2020 under multiple uncertainties and endogenous commitments we show that optimal intensity targets could reduce the cost of uncertainty and achieve significant increases in global abatement the optimal degree of indexation to gdp would vary greatly between countries including super indexation in some advanced countries and partial indexation for most developing countries standard intensity targets with one to one indexation would also improve the overall outcome but to a lesser degree and not in all individual cases although target indexation is no magic wand for a future global climate treaty gains from reduced cost uncertainty and the potential for more stringent environmental commitments could justify the increased complexity and other potential downsides of intensity targets

carbon dioxide emissions allocation a review carbon dioxide co2 emissions allocation plays a fundamental role in determining reduction responsibility at economy level or emission permits at firm level past decades have seen the development and applications of various methods for co2 emissions allocation this paper provides a literature review of co2 emissions allocation with emphasis on the evolution of allocation methods used it begins with a summary of the most popular allocation principles and criteria that lay a foundation for the development of allocation methods we then classify the existing allocation methods into four groups namely indicator optimization game theoretic and hybrid approaches the main features and findings of past studies are identified and summarized while the fairness principle prevails in earlier studies the efficiency principle has been found to receive increasing attention recently we also present a comparison of the empirical results based on ten popular indicator methods to show how indicator choice affects the allocation results issues related to selecting appropriate methods in co2 emissions allocation are finally discussed further research may be carried out to strike a balance between fairness and efficiency so that the allocation results become more widely acceptable and economically feasible

pay reference points and police performance several theories suggest that pay raises below a reference point will reduce job performance final offer arbitration for police unions provides a unique opportunity to examine these theories as the police officers either receive their requested wage or receive a lower one in the months after new jersey police officers lose in arbitration arrest rates and average sentence length decline and crime reports rise relative to when they win these declines in performance are larger when the awarded wage is further from the police union s demand the findings support the idea that considerations of fairness disappointment and more generally reference points affect workplace behavior

equity implications of two burden sharing rules for stabilizing greenhouse gas concentrations this paper focuses on the equity aspects of international burden sharing for global co2 emission stabilization it first summarizes and classifies equity principles proposed in the published literature of the field of these the authors selected three major equity principles i e egalitarian equity horizontal equity and proportional equality often referred to also as sovereign equity to carry out a detailed examination of two sets of quantitative emission entitlements which are based on two burden sharing rules i e the equal emissions per capita approach and the carbon intensity approach the two burden sharing rules were chosen as not only particularly popular but also because their application results in distinctly different burden sharing among countries to make the two rules comparable we used a global carbon emission path until the year 2050 that leads to an atmospheric co2 concentration of 550 ppm we then used the two rules for allocating the global emissions described by that path to allocate carbon emission entitlements to 67 countries and 9 world regions in general developing countries receive relatively higher entitlements under the equal emissions per capita approach whereas industrialized countries are relatively better off under the carbon intensity approach in some countries and regions emission entitlements as calculated by any of the two burden sharing rules are so low that it would be unrealistic to assume that actual emissions can be limited to the emission entitlements assigned to them without using flexibility mechanisms such as those defined in the kyoto protocol in this sense the calculated entitlements can be also interpreted as the initial allocation of tradable emission allowances of countries or regions nonetheless we considered any numerical determination of resulting carbon trade flows to be outside the scope of our paper

administrative costs and instrument choice for stochastic non point source pollutants this paper extends the empiricalanalysis of non point source pollution to thecase where the pollutant is stochastic andalternative regulatory instruments havedifferent administrative costs it also appliesa method of stochastic programming whereemissions are log normally distributed forthe kennet catchment in south west england werank a range of policies in terms of abatementcosts alone and total costs abatement andadministrative costs on the basis ofabatement costs alone a uniform emission taxis the cost minimising policy but on the basisof total cost a nitrogen input tax is theleast cost policy furthermore the policyranking based on total costs changes as thereliability standard increases

revealing the political decision toward chinese carbon abatement based on equity and efficiency criteria abstract china s economic reform over the past 30 years has allowed the free market to drive economic development however government still plays a key role in the energy sector by allocating energy conservation and emissions abatement how does the government make an equity decision as a tradeoff to market efficiency this is an unanswered question the purpose of this paper is to illustrate the government s preference toward equity and efficiency using the provincial level co 2 intensity allocation data we investigate the political decision that the government made based on the equity and efficiency criteria we find that the equity index plays a more important role than the efficiency index in determining the co 2 intensity target in addition political factors such as social stability are found to be important factors

reducing conflicts between climate policy and energy policy in the us the important role of the states the absence of us national action on global climate change policy has prompted initiatives by the us congress cities states and regions toward what is likely to become a long term collaborative effort to harmonize national energy and climate policies this upward evolution in the face of a reluctant administration is historically consistent with the development of national legislation on other environmental and social issues in the us at the heart of this movement is the need to resolve conflicts between high intensity use of low cost fossil energy supplies and the dominating impact of carbon dioxide emissions on global climate change us states are among the largest carbon dioxide emitters in the world and play a critical role in supplying and transforming energy as well as consuming it for economic advantage state governments are also likely to have to shoulder some of the cost of potentially extensive climate damages and bear the brunt of the cost of implementing future federal mandates as a result many are taking proactive stances on the development of climate mitigation policy to prepare for accelerate and or guide national policy as us states show leadership on addressing greenhouse gas emissions they also play an important role in forging policies and measures that reduce economic conflict between energy and climate goals a number have launched or completed greenhouse gas mitigation plans and other major policies in the past few years that address these conflicts through 1 finding ways to reduce mitigation costs including the use of incentive based policy instruments 2 promoting an open and democratic policy process that includes major stakeholders 3 promoting equity across socioeconomic groups regions and generations and 4 promoting interregional cooperation the results are promising and suggest that the state arena for climate and energy policy is evolving quickly and constructively toward alternatives that reduce conflict regional efforts are also unfolding along with greater congressional attention to the lessons learned and commitments made by sub federal actions in the next few years many national energy and climate conflicts are likely to be tested and addressed by states among these pennsylvania is likely to be an important player due to its high profile of energy production and potential for leadership

integrated weighting approach to carbon emission quotas an application case of beijing tianjin hebei region abstract the coordinated development of beijing tianjin hebei region has been included in the chinese 12th five year plan as a national strategy accordingly the cooperation of energy saving and environmental protection is an important part at the present stage establishing carbon emission trading market in china is regarded as an effective measure to reduce and control carbon dioxide emission meanwhile it is an important task for government to allocate carbon emission quotas among regions in order to explore the cross provincial carbon trading market mode of china this paper aims to construct a comprehensive index and use the integrated weighting approach to simulate the carbon quota allocation of beijing tianjin hebei region the results show that firstly the indicator of responsibility which is about 0 56 is given relatively more weight among the three indicators by comparison the weights of capacity and potential are 0 13 and 0 30 secondly the provinces with strong economic ability and lower carbon reduction potential may get fewer proportions of carbon emission quotas such as beijing thirdly since undertaking the function transfer and dispersal of beijing and tianjin hebei should have a relatively high carbon emission quotas in the future carbon trading market these results may provide insightful support for decision makers to promote collaborative carbon reduction and allocate carbon quotas in beijing tianjin hebei region of china

equity and carbon emissions trading a model analysis carbon emissions trading is a key instrument of climate policy it helps to bring about emission reductions in that place where they are least costly however fair burden sharing is about more than just cost efficiency while focussing on the instrument of emissions trading this paper touches upon equity issues that frame decisions on emission rights allocation the analysis is based on the iclips model the model study gives new insights on how the equal per capita allocation principle influences the intertemporal emission paths and about the distribution of mitigation costs in the long run apart from the intuitive economic evaluation of model results this paper also attempts to provide an evaluation from an equity point of view for a variety of assumptions model results show that several developing countries could benefit considerably from joining an international emissions trading system thereby becoming potential collaborators in post kyoto climate agreements

how do elections affect international cooperation evidence from environmental treaty participation is there a strategically beneficial time for political leaders to make international environmental commitments based on the political cycles theory we argue that leaders have incentives to delay costly ratification of international environmental agreements to the post electoral period however the cost of participating in these agreements is often lower for developing countries and they may enjoy indirect advantages which may make them more prone to ratifying in the pre electoral period these hypotheses are assessed empirically by studying the ratification process of 41 global environmental agreements censused in the environmental treaties and resources indicators database from 1976 to 1999 we use a duration model in which time is measured on a daily basis enabling us to precisely identify pre and post electoral periods a significant challenge in political cycles studies our investigation reveals the existence of political ratification cycles that are of substantial magnitude and non linear over the pre and post electoral years

fiscal adjustment in eu countries a balance sheet approach abstract several european union countries have recently implemented or are envisaging fiscal operations which improve budgetary figures but have no structural impact on government finances we evaluate some of these measures using a balance sheet approach in particular we examine the degree to which reductions in government debt in eu countries has been accompanied by a decumulation of government assets in the runup to maastricht we find a strong correlation between changes in government liabilities and government assets and larger declines in government assets in countries starting from higher public debt levels

equitable cost benefit analysis of climate change greenhouse gas emissions and vulnerability to climate change show a strong negative correlation this is the moral issue at the heart of the climate problem however little attention has been paid to this in the literature see banuri et al 1996 for an overview the literature on equity issues in climate change is largely confined to the distribution of emissions reduction targets this literature takes the need to reduce greenhouse gas emissions for granted and takes a parametric approach to the required reductions on the other hand the literature that tries to derive how much emissions abatement is desirable largely ducks the equity issue this paper is an attempt to combine the two problems

loss aversion in a consumption savings model abstract we propose a model of consumption and saving based on kahneman and tversky s prospect theory that implies a fundamental asymmetry in consumption behavior inconsistent with other models of consumption when there is sufficient income uncertainty a person resists lowering consumption in response to bad news about future income this resistance is greater than the resistance to increasing consumption in response to good news we present empirical evidence from five countries that confirms this behavior

tradeable emission permits and the control of greenhouse gases this article reiterates the case for tradeable permits as a global policy option for limiting greenhouse gas emissions and considers the detailed design of a global tradeable permit regime emphasising the importance of the initial assignment of property rights and arguing that the relevant property rights in this case are the rights of every member of the world community to share in a sustainable global atmosphere and climate the allocation of permits should therefore be done on a per capita basis across the world community with the result that rents generated by the process of reducing carbon emissions would accrue to non polluters most of whom live in the south the international transfers of income and wealth implied by the proposed scheme are large but feasible there is therefore a real prospect that an international convention on carbon dioxide emissions could end the debt crisis and finance sustainable development in the south

an effective allocation criterion for co2 emissions abstract the kyoto protocol has set relatively easy targets for emission limitations for annex i parties these are not sufficient to save the earth from climate change or to prevent dangerous anthropogenic interference of the climate it is the contention of the authors that eventually all parties to the protocol will have to undertake commitments equal per capita emissions with simple and transparent adjustments for the short and medium term could be the most equitable basis for allocating emissions rights it is reasonable to accept an individual as the unit of account since we are discussing anthropogenic emissions i e those which are generated by humans besides being equitable for any criterion to be successful it should be effective and implementable in order to be effective global emissions have to be restricted to a pre determined level this is possible with the widest participation which would include both annex i and non annex i countries the approach should be practical flexible and one which is easy to implement this paper proposes a very simple exposition of the common but differentiated responsibility concept article 4 1 of the fccc it aims to strike a balance between the concerns relating to the choice of the numeraire viz population and gdp in determining emission targets in other words both equity and efficiency considerations are addressed in the approach suggested herein the authors would like to acknowledge dr leo schrattenholzer for providing invaluable comments and dr tom wigley for providing critical information

over optimism in forecasts by official budget agencies and its implications the paper studies forecasts of real growth rates and budget balances made by official government agencies among 33 countries in general the forecasts are found i to have a positive average bias ii to be more biased in booms and iii to be even more biased at the 3 year horizon than at shorter horizons this over optimism in official forecasts can help explain excessive budget deficits especially the failure to run surpluses during periods of high output if a boom is forecasted to last indefinitely retrenchment is treated as unnecessary many believe that better fiscal policy can be obtained by means of rules such as ceilings for the deficit or better yet the structural deficit but we also find iv countries subject to a budget rule in the form of euroland s stability and growth pact sgp make official forecasts of growth and budget deficits that are even more biased and more correlated with booms than do other countries this effect may help explain frequent violations of the sgp the question becomes how to overcome governments tendency to satisfy fiscal targets by wishful thinking rather than by action chile in 2000 created structural budget institutions that may have solved the problem independent expert panels insulated from political pressures are responsible for estimating the long run trends that determine whether a given deficit is deemed structural or cyclical the result is that chile s official forecasts of growth and the budget have not been overly optimistic even in booms unlike many countries in the north chile took advantage of the 2002 7 expansion to run budget surpluses and so was able to ease in the 2008 9 recession

how basic are behavioral biases evidence from capuchin monkey trading behavior behavioral economics has demonstrated systematic decision making biases in both lab and field data do these biases extend across contexts cultures or even species we investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles we show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles including reference dependence and loss aversion given our capuchins inexperience with money and trade these results suggest that loss aversion extends beyond humans and may be innate rather than learned

equity in international greenhouse gases abatement scenarios a multicriteria approach abstract the climate change problem involves long term global efforts through sustainable development the international burden sharing of greenhouse gases ghg abatement constitutes a controversial debate equity is an important issue to be considered in the mitigation policies to insure the participation of as many developing countries as possible the main purpose of this research is to allocate equitable international ghg emission entitlements using several criteria there are many equity definitions and some are conflicting a dynamical multicriterion method is proposed to compare various alternatives and to find a compromise solution if the decision making process can take into account interests and preoccupations of every country significant progress could be made to achieve a world consensus several burden sharing schemes are proposed then modeling abatement scenarios using the times world energy model will allow us to determine the cost effectiveness opportunities

disaggregation of energy saving targets for china s provinces modeling results and real choices starting with the 11th five year plan fyp and continuing in the 12th fyp quantitative and binding targets have been set for energy efficiency improvement in china drawing on international experience in burden sharing on climate change this paper presents a framework for provincial level disaggregation of energy saving targets in china based on principles of equity and efficiency four scenarios have been established by weighting different choice preferences of responsibility capacity and potential in addition nonlinear and linear allocation models have been developed by considering or ignoring marginal energy saving cost when this framework was applied to the disaggregation of the national energy saving target of 16 during the 12th fyp the results show that the final allocation schemes are largely determined by the policy maker s choice preferences the extreme reduction target of 37 26 fell to shanghai under responsibility preferring rp using the linear allocation method while the capability preferring cp scenario considering marginal energy saving cost is the closest to the actual scheme accepted by the 30 provinces development of such a framework may serve as a feasible policy instrument to help china achieve its conservation targets in a cost effective way and in accordance with its regional development strategies

who should abate carbon emissions an international viewpoint abstract we review the optimal pattern of carbon emission abatements across countries in a simple multi country world we model explicitly with the model in chichilnisky 1993b the fact that the atmosphere is a public good within this framework we establish conditions for it to be necessary for optimality that the marginal cost of abatement be the same in all countries these conditions are quite restrictive and amount to either ignoring distributional issues between countries or operating within a framework within which lump sum transfers can be made between countries these results have implications for the use of tradeable emission permits which as normally advocated will lead to the equalization of marginal abatement costs across countries the observation that the atmosphere is a public good implies that we may need to look at a lindahl equilibrium rather than a walrasian equilibrium in tradeable permits

international equity and differentiation in global warming policy ne of the major obstacles to reaching a comprehensive agreement on global warming is the setting of greenhouse gas emission reduction targets for individual countries long standing tensions between industrialized and developing countries have raised the issue of equity in burden sharing moreover individual industrialized nations have pleaded special circumstances and have sought differentiation in their obligations this paper analyzes alternative rules for distributing tradable carbon dioxide emissions permits a non linear programming model which distinguishes between allocation based and outcome based rules is used to analyze the relative welfare outcomes the model is applied to the world body of nations and yields several important policy implications

political institutions and pollution control this paper models the selection of environmental policies under authoritarian and democratic regimes and tests the hypothesis that political institutions systematically affect the enactment of environmental regulations the results support the contention that political institutional arrangements rather than resource endowments largely determine policies concerning environmental regulation copyright 1992 by mit press

greenhouse gas emissions trading among pacific rim countries an analysis of policies to bring developing countries to the bargaining table this paper examines the aggregate net costs and individual country cost savings of greenhouse gas emissions trading among pacific rim countries we propose emission permit allocation rules designed to entice developing countries to participate absence of developing country involvement has served as an excuse for the lack by participation by the united states in the first compliance period of the kyoto protocol and may serve as a disincentive to even more countries in subsequent periods our analysis specifies permit allocation rules that could result in no net costs and even cost savings to developing countries for their involvement in the emissions trading market while at the same time providing extensive benefits to industrialized countries through access to lower cost mitigation alternatives

abatement costs of post kyoto climate regimes abstract this article analyses the abatement costs of three post kyoto regimes for differentiating commitments compatible with stabilising atmospheric greenhouse gases concentrations at 550 ppmv co 2 equivalent in 2100 the three regimes explored are 1 the multi stage approach assumes a gradual increase in the number of parties involved who are adopting either emission intensity or reductions targets 2 the brazilian proposal approach i e the allocation or reductions based on countries contribution to temperature increase 3 contraction convergence with full participation in convergence of per capita emission allowances in 2050 the global costs increase up to about 1 of the world gdp ranging from 0 5 to 1 5 depending on baseline scenario and marginal abatement costs four groups of regions can be identified on the basis of similar costs expressed as the percentage of gdp these are 1 oecd regions with average costs 2 fsu the middle east and latin america with high costs 3 south east asia and east asia incl china with low costs and 4 south asia incl india and africa with net gains from emissions trading for most regimes the brazilian proposal approach gives the highest costs for groups 1 and 2 the distribution of costs for the contraction convergence approach highly depends on the convergence year the multi stage approach and contraction convergence convergence year 2050 seem to result in relatively the most even distribution of costs amongst all parties

defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can b e defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whol e story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of governme nt narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these is sues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

emission allowances and mitigation costs of china and india resulting from different effort sharing approaches to meet ambitious global climate targets mitigation effort in china and india is necessary this paper presents an analysis of the scientific literature on how effort sharing approaches affect emission allowances and abatement costs of china and india we find that reductions for both china and india differ greatly in time across and within approaches and between concentration stabilisation targets for china allocated emission allowances in 2020 are substantially below baseline projections moreover they may be below 2005 emission levels particularly for low concentration targets below 490 ppm co2 eq effort sharing approaches based on allocating reduction targets lead to relatively lower reductions for china than approaches that are based on allocating emission allowances for 2050 emission allowances for china are 50 80 below 2005 levels for low concentration targets with minor differences between approaches still mitigation costs of china including emissions trading remain mostly below global average according to literature chinese emission allowances peak before 2025 2030 for low concentration targets india s emission allowances show high increases compared to 2005 levels if emission trading is allowed financial revenues from selling credits might compensate mitigation costs in most approaches even for low concentration targets india s emission allowances peak around 2030 2040 for all concentration targets c 2012 elsevier ltd all rights reserved

global environmental risks the need to manage climate risks is not a new it has shaped social institutions for many centuries in medieval england a peasant farmer s land was broken into many widely dispersed parcels economic historians interpret this as a way of hedging climate risk see references in bromley 9 land in different locations would be affected differently by droughts floods and frosts by spreading land holdings over different locations as well as by organizing agricultural cooperatives and buying insurance farmers have managed climate risk for many centuries

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

selecting permit allocation rules for agricultural pollution control a bargaining solution abstract one of the primary justifications for using transferable permits for pollution control is that they achieve a given level of emission reduction at the lowest cost although the initial allocation of pollution permits may have no impact in terms of efficiency it does have a significant impact on equity in this paper we examine a variety of permit allocation rules for a small catchment in south west england an asymmetric nash bargaining framework is employed to characterise agents co operative behaviour and to explain their likely preferences over permit allocation rules the results indicate that the preferred allocation scheme depends upon the relative bargaining power of the agents furthermore some potential links between ex ante and ex post equity criteria were also discussed

neoclassical theory versus prospect theory evidence from the marketplace several experimental studies have provided evidence that suggest indifference curves have a kink around the current endowment level these results which clearly contradict closely held economic doctrines have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory e g prospect theory which invokes psychological effects this paper pits neoclassical theory against prospect theory by investigating data drawn from more than 375 subjects actively participating in a well functioning marketplace the pattern of results suggests that prospect theory adequately organizes behavior among inexperienced consumers but consumers with intense market experience behave largely in accordance with neoclassical predictions moreover the data are consistent with the notion that consumers learn to overcome the endowment effect in situations beyond specific problems they have previously encountered this transference of behavior across domains has important implications in both a positive and normative sense

descriptive prescriptive and second best approaches to the control of global greenhouse gas emissions a prescriptive second best approach is developed for determining the control of greenhouse gas emissions in an inter temporal multi region model of the world concerns about inter and intra generational equity are reflected in the rate of time preference and regional weights of a social welfare function choices are narrowed down by the ethical principle of anonymity a third dimension of equity inequality aversion is subject to greater variation the aggressiveness of recommended abatement can be made to bracket results for a common descriptive model by the choice of inequality aversion in this manner the perception of a sharp dichotomy between descriptive and prescriptive approaches is moderated

disaggregating energy use cap among china s provinces the 2015 paris climate change negotiations represents the most ambitious worldwide effort to date to combat climate change as the largest energy consumer and carbon emitter china pledges 60 65 cut in carbon intensity below 2005 levels by 2030 to accelerate china s climate efforts china has also committed to cap its primary energy use at 4 8 billion tons of coal equivalent in 2020 this paper proposes an equitable and efficient scheme to disaggregate this national goal among provinces a three step disaggregation procedure is proposed which takes into account the initial allocation national redistribution and inter provincial adjustment first this study allocates the incremental energy quota taking 2010 as the base year second part of the energy quota is set aside by the central government for redistribution purposes while an incremental energy quota index comprising equity and efficiency criteria is used for initial allocation among provinces finally historical efforts and inter provincial energy flows are considered for inter provincial adjustment this disaggregation scheme is flexible and can be easily extended to allocation and management of other resource and environmental targets the empirical findings can assist decision makers in identifying which provinces are likely to over consume the energy quota relative to the proposed allocation and which provinces are likely to perform better in energy conservation moreover the results show that the energy cap set for 2020 is unachievable without further action market based instruments such as an energy allowance trading market are strongly recommended to achieve the energy use target in an equitable and cost effective manner

international environmental agreements and strategic voting two anonymous referees have provided very valuable comments and suggestions we have also benefited from discussions at seminars at the universities of bonn dortmund and dresden and at the conferences of euresco the european economic association and the verein fur socialpolitik this paper was partly written while haupt was visiting the economics department at the university of colorado at boulder he is very grateful to the members of the department particularly to eckhard janeba for their hospitality and for stimulating discussions and to the fritz thyssen stiftung for funding his research visit we also thank the deutsche forschungsgemeinschaft dfg for financial support

the us market for so2 permits policy implications of the low price and trading volume abstract the price of so2 permits and the volume of trading under the us acid rain program have been lower than expected this can be explained by the creation and distribution of more permits than were initially authorized by the sale of permits by high cost abaters who are subject to more stringent local emission constraints or who have irreversibly invested in high cost abatement technologies and by the deregulation of the natural gas and railroad industries which in combination with incentives for cost cutting under the new market approach to so2 control has lowered marginal costs of abatement curves and made them more uniform across powerplants the low price of permits and low trading volume are evidence that market approaches to pollution control can be more cost effective than command and control regulations the effect of public policies and technological changes on the allowance market are usefully examined in the context of an ideal market in which the equilibrium price of allowances equals the marginal cost of abatement of individual powerplants using recent data from coggins and swinton 1996 we are able to explain the current price of permits with some accuracy

rational expectations and loss aversion potential output and welfare implications abstract we add some elements of prospect theory to an analytically tractable version of lucas s islands model and show that the inclusion of reference dependence declining sensitivity and loss aversion into the agents utility function leads to four main results first the presence of behavioral elements negatively affects the natural level of output second loss aversion reduces output variance third the expected utility of a representative agent is generally lower than that obtained when loss aversion is absent fourth the presence of loss aversion eliminates the paradoxical increase in expected utility that may be generated in the standard model by an increase in monetary policy uncertainty

the effectiveness of institutional borrowing restrictions empirical evidence from spanish municipalities the need for restrictions on borrowing by subnational governments is a generally accepted notion that is justified both by public choice theory and by the fact that such restrictions are in force in the majority of decentralized countries furthermore recent breaches of the stability and growth pact of the european union have led to the introduction of legislative tools aimed at balancing the budget at all levels of government have come to the forefront of interest in european public finance research this paper is concerned with the financial situation and debt level of spanish municipalities from 1988 to 2000 we have two main objectives the first is to assess the value of mandatory limitations on municipal borrowing and past trends in the borrowing policies adopted by spanish local authorities the second is to develop an econometric model using panel data stratified by population size to measure indebtedness in spanish municipalities these measures enable us to formulate a series of hypotheses to explain municipal borrowing practices which are then tested empirically the evidence thus obtained appears to support the effectiveness of institutional borrowing restrictions to introduce some financial discipline in the borrowing policies adopted by local governments in spain

public accounting fudges towards emu a first empirical survey and some public choice considerations this paper analyses some one off measures and other accounting tricks that eu member states have been using to qualify for emu membership moving from empirical evidence to strategic goals this investigation brings to the fore three crucial issues the weakness of the methodological rules of the european system of accounts used to assess budgetary convergence in line with the maastricht treaty the open ended definition of the required budgetary discipline the shortcomings of the excessive deficit procedure enforced through the stability pact the conclusion urges a return to a strict annual balance requirement for governments current accounts to impede strategic adjustments of budgetary positions that are in fact creative accounting operations

the allocation of co2 emissions as a claims problem abstract in the context of multilateral negotiations on climate change this paper proposes to use the claims approach as a reasonable and practicable alternative in order to allocate the admissible co2 emissions per region the proposed methodology entails analyze the application of a broad group of theoretical solutions through the establishment of equity and stability criteria to this regard the empirical analyzing combines several co2 world endowments from meinshausen et al 2009 together with claims forecasts associated with the rcp representative concentration pathways scenarios the results obtained indicate that the constrained equal awards and minimal solutions are clearly equity sensitive given that the co2 emission reduction imposed by the constrained equal awards solution on asia and the oecd are very important and considering the better balance between equity and proportionality associated with the min solution it could be that this latter solution would be the most practicable and acceptable

trading rules and the environment does equal treatment lead to a cleaner world abstract in this paper we consider a three stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform most favored nation mfn tariffs on countries choice over environmental standards for varying degrees of pollution spillovers because of the presence of punishment effects and stronger own and cross tariff effects we find that discrimination yields higher standards than mfn and free trade independently of the extent of pollution spillovers when pollution is local and incentives to free ride on other countries abatement efforts are weak we show however that welfare is larger under mfn than under discrimination in a dynamic setting we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement iea and obtain that multilateral cooperation is easier to sustain under discrimination than under mfn or free trade

two cheers and a qualm for behavioral environmental economics behavioral economics can gain more in roads into environmental economics if we better understand why exchange institutions fail more effectively reduce health risks and environmental conflicts encourage more coordination and cooperation design better incentive systems more accurately estimate economic measures of value and promote more protection at less cost behavioral economics deserves two cheers for advancing ideas of context dependence and social preferences which we illustrate with two examples of recent research

economic targets and loss aversion in international environmental cooperation economic targets in environmental coopeartion in the standard emission problem each country s ruling party decides on an optimal level of emissions by analyzing the cost and benefit to the country however such policy decisions are often influenced by political parties incentives to be elected voters tend to give higher priority to economic issues than they do to environmental ones as a result political parties have additional incentives to reach a critical economic benefit level at a cost of higher emission level in order to satisfy voters expectations in economic issues therefore this study explores the implications of political parties being averse to insufficient economic performance relative to a critical economic target level on sustaining an international environmental agreement on emission levels in doing so we allow countries to have asymmetric concerns about economic targets as well as asymmetric technology levels we find that stronger concerns about economic targets deter the most cooperative emission levels countries could jointly sustain furthermore technological asymmetry could either deepen or offset this impact these results suggest that efforts on achieving substantial international environmental agreements should be supported at the citizen level to eliminate the adverse effects

allocation of co2 emission permits economic incentives for emission reductions in developing countries the economic impacts on developing regions following a global cap and trade system for carbon dioxide are assessed through the use of an energy economy systems model both an equal per capita allocation and a contraction and convergence allocation with convergence of the per capita emissions by 2050 are shown to offer economic incentive for africa india and probably also latin america to accept binding emissions commitments under a 450 ppm carbon dioxide stabilization scenario the gain for latin america is mainly a result of increased export revenues from sales of bio fuels as a result of the climate policy it is on the other hand unlikely that these allocation approaches would offer an economic incentive for china to join the regime because of its high economic growth present higher per capita emissions than india and africa and more costly mitigation options than latin america a more stringent allocation for developing countries such as contraction with convergence of the per capita emissions by the end of this century is estimated to generate reduced net gains or increased net losses for the developing regions though africa is still expected to gain

what do deficits tell us about debt empirical evidence on creative accounting with fiscal rules in the eu fiscal rules such as the excessive deficit procedure and the stability and growth pact sgp aim at constraining government behavior milesi ferretti 2003 develops a model in which governments circumvent such rules by reverting to creative accounting the amount of this depends on the reputation cost for the government and the economic cost of sticking to the rule we provide empirical evidence of creative accounting in the european union we find that the sgp rules have induced governments to use stock flow adjustments a form of creative accounting to hide deficits the tendency to substitute stock flow adjustments for budget deficits is especially strong for the cyclical component of the deficit as in times of recession the cost of reducing the deficit is particularly large

building climate coalitions on preferential free trade agreements in this paper we discuss the endogenous formation of climate coalitions in an issue linkage regime in particular we propose a preferential free trade agreement on which a climate coalition should be built the basic idea is that the gains of free trade can provide strong incentives for countries to join the coalition as a framework a multi stage strategic trade model is employed in which each country may set an emission cap being effective on a permit market in addition a discriminatory import tariff may be imposed on dirty goods however at the heart of our approach is a preferential free trade arrangement among the members of a climate coalition leading to a favourable shift in the terms of trade as a main result trade liberalisation is found as an institution highly effective in building climate coalitions in particular the parametrical simulation of the model shows that participation in joint emission reduction is higher consumption patterns are more environmentally friendly and coalitional welfare is much more improved than in case of a single issue environmental agreement

uncertainty loss aversion and markets for energy efficiency increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil fuel combustion reducing oil dependence and achieving a sustainable global energy system the tendency of markets to neglect apparently cost effective energy efficiency options has been called the efficiency gap or energy paradox the market for energy efficiency in new energy using durable goods however appears to have a bias that leads to undervaluation of future energy savings relative to their expected value this paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers this framework relies on the theory of context dependent preferences the uncertainty loss aversion bias against energy efficiency is quantifiable making it potentially correctible by policy measures the welfare economics of such policies remains unresolved data on the costs of increased fuel economy of new passenger cars taken from a national research council study illustrate how an apparently cost effective increase in energy efficiency would be uninteresting to loss averse consumers

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

reducing conflict in global warming policy the potential of equity as a unifying principle abstract international agreement on global warming mitigation is likely to prove difficult efficiency based policies will result in disparate costs and benefits among nations and thus hinder cooperation this paper suggests that consideration be given to an equitable sharing of the economic impacts of global warming policy acknowledging that there is no universally held concept of equity the policy implications of several alternatives are explored because there is considerable variation in these implications it will be important for decision makers to clarify their preferred concepts of equity during the course of their negotiations on policies to address global warming

equity and distributional implications of climate change this paper looks at the climate change problem from an equity perspective it compares utilitarian approaches with ones based on rights or capabilities it argues that few of the proposals that have been discussed in the literature have an ethical basis while those that do have a number of problems the paper looks at the practicalities of addressing the equity problem in international negotiations two specific dimensions of the equity problem in the context of climate change are explored further in the paper those relating to uncertainty and those relating to discounting

defining the government s debt and deficit defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can be defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whole story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these issues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships