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

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

qualitative and quantitative evidence on the true local welfare costs of forest conservation in madagascar are discrete choice experiments a valid ex ante tool summary protected areas may impose local welfare costs through the enforcement of use restrictions predicting their welfare impacts before their establishment could help with the design of compensation schemes discrete choice experiments dces are increasingly used for ex ante evaluations but their validity is largely untested in low income settings using a case study of a new redd reducing emissions from deforestation and forest degradation project in eastern madagascar we explore the validity of dces in two ways i whether the estimates of welfare costs derived from dce are affected by respondents prior experience of conservation ii whether dce results have high theoretical and content validity we surveyed households who have varying degrees of experience of restrictions to swidden agriculture we also qualitatively debriefed a sub sample of respondents to better understand their thought processes latent class analysis shows that dce outcomes vary with conservation experience households more experienced with forest protection are less willing to trade off rights to clear forest for swidden agriculture with any compensatory interventions whereas less experienced households highly favor support for alternative agricultural techniques and a secure right to clear one hectare of forest although the results show apparent non attendance to some attributes e g cash payments qualitative debriefings suggest that respondents infact do expect relatively low or no utility from the given attributes and hence have theoretically valid preferences similarly the dce has generally high content validity although dce can elicit current preferences in this context using ex ante dce to estimate the welfare costs of such a long term intervention requires caution we conclude that it is difficult to robustly estimate compensation in advance of an intervention there is therefore a need to rethink conservation approaches and the feasibility of achieving fair compensations for conservation imposed restrictions

dynamic asset allocation with event risk major events often trigger abrupt changes in stock prices and volatility we study the implications of jumps in prices and volatility on investment strategies using the event risk framework of duffie pan and singleton 2000 we provide analytical solutions to the optimal portfolio problem event risk dramatically affects the optimal strategy an investor facing event risk is less willing to take leveraged or short positions the investor acts as if some portion of his wealth may become illiquid and the optimal strategy blends both dynamic and buy and hold strategies jumps in prices and volatility both have important effects

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

fairness in public good provision an investigation of preferences for equality and proportionality a binary public good voting mechanism is designed to test for preferences for income equality and cost benefit proportionality the voting design isolates preferences for equality from those for proportionality and controls for alternative external preferences such as altruism envy and the rawlsian difference principle individuals choose between greater income or fairness in these demand revealing votes treatments vary whether the positions of voters are earned or random whether votes are hypothetical or real and whether they are over gains or losses significant deviations from self interested voting are observed in all treatments testing for equality and in some treatments testing for proportionality

jump processes in natural gas markets abstract many analysts believe that natural gas will have an increasingly important role in the next few decades accordingly understanding the underpinnings of natural gas prices is likely to be critical both to policy analysts and to market participants at present it is common to assume that these prices follow a geometric brownian motion i e that log returns the inter temporal differences in the natural log of prices are normally distributed possibly allowing for some form of mean reversion increasingly however it has been recognized that the arrival of new information can lead to unexpectedly rapid changes or jumps in spot prices the implication is that the presumption of normally distributed log returns may be suspect in particular the prospect for abnormally fat tails becomes important this article investigates the potential presence of jumps in two key natural gas prices the spot price at the henry hub in the u s and the spot price for natural gas at the national balancing point in the u k we found compelling empirical evidence for the importance of jumps in both markets though jumps appear to be more important in the u k

is there agreement between beneficiaries on who should bear the costs of conserving farm landscapes abstract in recent years market based incentives have been regarded as a potential solution for addressing market failure related to environmental externalities determining the optimal payment schedule to facilitate such market mechanism typically involves a valuation exercise to capture the static benefits received by beneficiary groups from the public good in this study we augment the valuation estimates with a notion of fair share by assessing opinions of two beneficiary groups tourists and bed and breakfast owners regarding an acceptable division of the burden of financing the public good we find a significant difference in views tourists believe that their accommodation providers should contribute almost twice the amount that they themselves are willing to pay on the contrary a majority of bed and breakfast owners surveyed were against burdening tourists with any additional payments

do reminders of substitutes and budget constraints influence contingent valuation estimates a test is performed of the recommendation by the noaa panel on contingent valuation that respondents be reminded about other substitute resources and their budget constraint prior to answering the willingness to pay wtp question the context for this experiment is a cvm study of the benefits from reducing fire hazards to old growth forests in oregon the test was performed using two mail surveys that were otherwise identical except for the inclusion of reminder statements prior to the wtp question the dichotomous choice logit equations were not statistically different between versions and the mean wtp results were identical

the causes of order effects in contingent valuation surveys an experimental investigation contingent valuation researchers have found that the hypothetical values respondents place on a nested sequence of environmental goods are sensitive to the order in which the goods are presented typically the smallest bundle of goods is valued more highly if presented first than if following more comprehensive bundles such effects appear even when each bundle is valued from an exclusive list or as an alternative to any other so that income and substitution effects are controlled we conduct lab experiments where participants are asked to value sequences of nested goods for purchase from an exclusive list using an incentive compatible becker degroot marschak mechanism we test whether order effects occur in valuation for a induced value goods b actual private goods and c identical private goods that are to be donated to charities we find significant order effects when the goods are valued for own use but not when they are valued for donation

a conjoint analysis of corporate preferences for the sectoral crediting mechanism a case study of shanxi province in china it is crucial to understand corporate preferences in designing and planning new market based instruments using the method of conjoint analysis this paper evaluates corporate preferences for policy alternatives of the sectoral crediting mechanism aiming at supporting its discussions and development data were collected from 94 companies in all 11 prefecture level cities of shanxi province china the results confirm that companies are most concerned about three policy attributes domestic policy instruments the relationship with the clean developing mechanism and the principle of common but differentiated responsibilities from the viewpoint of the chinese businesses surveyed the ideal policy alternative has a domestic policy instrument in which installations with voluntary targets receive tradable units while co existing with the clean developing mechanism and providing opportunities to get financial and technical assistance from developed countries meanwhile the coverage of the sectoral crediting mechanism could be expanded to small companies that are the most inefficient and thus have the lowest abatement costs in some sectors the results of this study are important in light of ongoing discussions and developments of the sectoral crediting mechanism in china

real investment options with multiple sources of rare events abstract we value real investment options when the underlying asset follows a mixed jump diffusion process involving various types sources of rare events jumps these jumps are assumed independent of each other with each type having a log normally distributed jump size and a random poisson distributed arrival time they may represent uncertainties about the arrival and impact on the underlying investment of new information concerning technological innovation competition political risk regulatory effects and other sources an analytic solution is presented for european claims call or put options with multiple sources of jumps a discrete time markov chain methodology implemented within a finite difference scheme is proposed for the valuation of american as well as european options the approach is also applicable to financial options with multiple types of rare events the approach is illustrated through valuing complex real options with compound features involving interactions between optimal investment and subsequent operating decisions specifically we value a growth option and an extension option

geometric brownian motion and structural breaks in oil prices a quantitative analysis the purpose of this paper is to present a quantitative analyses of oil price s path we try to argue that despite its parsimony and simplicity geometric brownian motion can perform well as a proxy for the movement of oil prices and for a state variable to evaluate oil deposits we base our argument on evidences of very low speed of mean reverting or long half life since unit root tests only can reject its null hypothesis in a sample longer than 100 years on the other hand we reject the null hypothesis of unit root with two endogenous breaks showing that the usual rejection can be attributed to omitted structural breaks we conclude that the average half life of oil price between 4 and 8 years depending on the model chosen is long enough to allow a good approximation as a geometric brownian motion

are citizens willing to pay for agricultural multifunctionality agricultural multifunctionality is the recognition of the joint exercise of economic environmental and social functions by the agricultural sector in order to make the concept operative for the design of public policies it is necessary to estimate the social demand for such functions the main objective of this article is to present an empirical application in this sense for this purpose we have adopted the agricultural system of cereal steppes in tierra de campos in spain as a case study the economic valuation technique used is the choice experiment the results suggest the existence of a significant demand for the different functions although the demand is heterogeneous depending on the socioeconomic characteristics of the individuals surveyed

an econometric analysis of emission allowance prices knowledge of the statistical distribution of the prices of emission allowances and their forecastability are crucial in constructing among other things purchasing and risk management strategies in the emissions constrained markets this paper analyzes the two emission permits markets co2 in europe and so2 in the us and investigates a model for dealing with the unique stylized facts of this type of data its effectiveness in terms of model fit and out of sample value at risk forecasting as compared to models commonly used in risk forecasting contexts is demonstrated

decisiveness attitude expression and symbolic responses in contingent valuation surveys abstract despite suggestions that respondents to contingent valuation studies often follow alternate models of individual decision making few theoretical models have been developed the paper presents a theoretical model of symbolic and attitude expressive contingent valuation responses drawing on relevant contributions in psychology and political science it is argued that the highly symbolic and emotional nature of many environmental issues often activates the need for individuals to express their attitudes and values which when coupled with a perceived non decisiveness of individual questionnaire responses can result in value expressive considerations dominating some cvm responses at the expense of the desired outcome appraisal economic tradeoffs the implications for some topical issues in cvm are explored

earmarking conservation further inquiry on scope effects in stated preference methods applied to nature based tourism abstract the way people assign value to nature conservation policies has important implications for management choices economic valuation surveys are affected by individual behavioural patterns that are not exhaustively explained by traditional sources of bias such as embedding flagship species fixed budget commodity misspecification and warm glows through a contingent valuation study of alpine wildlife we use an external scope test to evaluate the difference in willingness to pay among tourists for conservation policies targeted either to the ibex alone or to the four ungulates populating the gran paradiso national park in northwest italy ibex red deer roe deer chamois we find that park users are willing to contribute significantly more to policies protecting one of the four ungulates than all four of them a result that we argue should be ascribed to pure aversion to less specific policy objectives i e to a preference for punctual earmarking of resources devoted to conservation

the noaa panel report a new beginning or the end of an era an account of the prospective contribution of some proposed project or policy to the satisfaction of human preferences the central focus on preference satisfaction led bc analysts to be concerned with economic surpluses and the values of nonmarketed goods and amenities matters that took the inquiry well beyond the prices and quantity changes that first attracted the analysts attention cv was specifically designed for enlisting survey research methods with their broad scope of potential applications to obtain benefit estimates consistent with a rigorous welfare change measurement framework samuelson s model for valuing public goods in which individual valuations were rigorously defined and aggregated to obtain the social value was applied directly in early cv applications i e through the 1970s the objective was to define a baseline or default situation and a proposed project and to ask respondents to report a valuation that would leave them indifferent between implementing the proposal or defaulting to the baseline situation for proposed projects that would improve things but at a cost respondents were asked to announce their maximum willingness to pay wtp alternatively to make sure that the full consumer s surplus was identified iterative bidding was used to drive the respondent all the way to the point of indifference the market analogy with only minimal concessions to the public goods context dominated the language of cv survey format and of communication among cv researchers these early excursions into cv encountered skepticism from economists who have traditionally argued despite the isolation paradox that undermines markets in public goods that real transactions are much more reliable indicators of value than self reported behavioral intentions many social scientists were skeptical or even hostile to cv for reasons quite different from those that worried economists they recognized that there are many different philosophical systems of valuing and many different institutions beyond the market for providing public amenities to these social scientists it seemed perverse to force the richness and diversity of human ways of valuing and providing public amenities into the rigid molds of bca and cv 1

optimal pricing strategies for a cluster of goods own and cross price effects with correlated tastes contingent valuation methods are used to identify observed and unobserved preferences of goods and services we apply these methods in the context of multivariate probit analysis to compute willi

constructive consumer choice processes consumer decision making has been a focal interest in consumer research and consideration of current marketplace trends e g technological change an information explosion indicates that this topic will continue to be critically important we argue that consumer choice is inherently constructive due to limited processing capacity consumers often do not have well defined existing preferences but construct them using a variety of strategies contingent on task demands after describing constructive choice consumer decision tasks and decision strategies we provide an integrative framework for understanding constructive choice review evidence for constructive consumer choice in light of that framework and identify knowledge gaps that suggest opportunities for additional research

diagnosing insensitivity to scope in contingent valuation sensitivity to scope is considered a desirable property of contingent valuation studies and often treated as a necessary condition for validity we first provide an overview of scope insensitivity explanations put forth in the environmental valuation literature then we analyze data from a contingent valuation survey eliciting willingness to pay to prevent oil spills of four different magnitudes in arctic norway in the baseline analysis the scope inference is ambiguous there is only statistical difference in willingness to pay to avoid a very large versus small oil spill nok 1869 and nok 1086 respectively however further explorations show that several confounding factors suggested in the literature influence the scope inference the scope sensitivity improves when we control for subjective probabilities of amenity provision exclude respondents based on the debriefing questions take into consideration the sample sizes and impose diminishing marginal utility overall the analysis supports an emerging view in the contingent valuation literature suggesting that statistical scope insensitivity is not a sufficient reason for deeming a study invalid

short term variations and long term dynamics in commodity prices in this article we develop a two factor model of commodity prices that allows meanreversion in short term prices and uncertainty in the equilibrium level to which prices revert although these two factors are not directly observable they may be estimated from spot and futures prices intuitively movements in prices for long maturity futures contracts provide information about the equilibrium price level and differences between the prices for the short and long term contracts provide information about short term variations in prices we show that although this model does not explicitly consider changes in convenience yields over time this short term long term model is equivalent to the stochastic convenience yield model developed in gibson and schwartz 1990 we estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil linked assets to demonstrate its use and some of its advantages over the gibson schwartz model

what s to know about hypothetical bias in stated preference valuation studies abstract hypothetical bias arises in stated preference valuation studies when respondents report a willingness to pay wtp that exceeds what they actually pay using their own money in laboratory or field experiments although this bias is not found in all stated preference surveys hypothetical wtp typically exceeds the actual value by a factor of two to three unfortunately there is no widely accepted general theory of respondent behaviour that explains hypothetical bias therefore two meta analyses are reviewed to test current hypotheses regarding the causes of this overstatement of wtp and the associated recommendations to mitigate the bias suggestions for future research are made including the development of a general theory

optimal contracting with endogenous social norms research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers within an agency framework we model endogenous social norms by assuming that each agent s cost of implementing an action depends on the social norm for that action defined to be the average level of that action chosen by the agent s peer group we show how endogenous social norms alter the effectiveness of monetary incentives determine whether it is optimal to group agents in a single or two separate organizations and may give rise to a costly adverse selection problem when agents sensitivities to social norms are unobservable

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

the economics of pollution permit banking in the context of title iv of the 1990 clean air act amendments abstract this paper presents a model of the collective emission permit banking behavior of electricity generating units affected by title iv of the clean air act amendments of 1990 a rigorous treatment of the constraint that pollution permits cannot be borrowed from future allocations is introduced this approach enables an analysis of the impact of future changes in electricity demand regulations and technologies on the present permit price and emissions level the effect of uncertainty on the banking behavior is also explored

a note on tradeable permits this note offers a perspective on whether tradeable permits are a passing fad or an enduring trend it does so in noting how various types of tradeable permit systems relate to conventional environmental permits what are the unique requirements of tradeable permit systems and why they might be preferred to alternative instruments a final observation concerns the analogy between tradeable permits for environmental goods and private property in land

modeling co2 emission allowance prices and derivatives evidence from the european trading scheme this paper studies the three main markets for emission allowances within the european union emissions trading scheme eu ets powernext nord pool and european climate exchange ecx the analysis suggests that the prohibition of banking of emission allowances between distinct phases of the eu ets has significant implications in terms of futures pricing motivated by these findings we develop an empirically and theoretically valid framework for the pricing and hedging of intra phase and inter phase futures and options on futures respectively

recreational value user heterogeneity and site characteristics in contingent valuation abstract we propose an adaptation of the dichotomous choice contingent valuation method applied to the recreational quality of a site and to heterogeneity between visitors tourists and residents this method is based on a set of repeated valuation questions and is used to study relations between the components of environmental goods we propose its application to public coastal sites in south western france we show that programmes regarding the ocean beaches and forests are generally independent of one another in order to stress the heterogeneity of users two separate models are assessed the way time is taken into account then appears to be one of the most interesting sources of divergence between tourists and residents individual wtp per day also varies this confirms that beaches used by residents provide high economic benefits although they generate little indirect revenue finally contingent valuation appears to be a useful alternative for analyzing the multiple dimensions of a public policy

towards a better climate treaty the kyoto protocol is an example of how not to construct a treaty negotiators began by focusing on the short term agreeing that the industrialized countries should cut their emissions of greenhouse gases by about 5 relative to 1990 by 2008 2012 then they agreed that these cuts should be achieved cost effectively incorporating flexible mechanisms only later did they worry about whether the treaty created incentives for broad participation and full compliance negotiators should have approached things the other way around they should have begun by thinking of how they could achieve both broad participation and full compliance and of how they could reduce emissions in the long term had they done so a better more effective treaty would have been negotiated in this essay the author explains why kyoto is unlikely to succeed in mitigating climate change he also proposes an alternative treaty design that is likely to work better

reconsidering heterogeneity and aggregation issues in environmental valuation a multi attribute approach the economic valuation of complex environmental goods composed of multiple attributes is an expanding field of research in ecological and environmental economics however several issues are still subjects of debate this paper focuses on three of them the linearity of the valuation function in the attributes aggregation criteria for obtaining social values and the heterogeneity of individuals utility functions a methodological approach based on multi attribute utility theory which enables us to contrast the impact of these concerns on the valuation of environmental goods is proposed we employ the methodology to value a protected natural area and from the results obtained we can conclude that the non linearity and the heterogeneity of the individual utility function are relevant aspects of environmental valuation that need to be taken into account when valuing environmental goods

intertemporal permit trading for the control of greenhouse gas emissions this paper integrates two themes in the intertemporal permitliterature through the construction of an intertemporal bankingsystem for a pollutant that creates both stock and flow damages a permit banking system for the special case of a pollutant thatonly causes stock damages is also developed this latter simpler case corresponds roughly to the greenhouse gas emissionreduction regime proposed by the u s department of state as ameans of fulfilling the u s commitment to the frameworkconvention on climate change this paper shows that environmentalregulators can achieve the socially optimal level of emissionsand output through time by setting the correct total sum ofallowable emissions and specifying the correct intertemporaltrading ratio for banking and borrowing for the case ofgreenhouse gases we show that the optimal growth rate of permitprices and therefore the optimal intertemporal trading rate hasthe closed form solution equal to the ratio of current marginalstock damages to the discounted future value of marginal stockdamages less the decay rate of emissions in the atmosphere given a non optimal negotiated emission path we then derive apermit banking system that has the potential to lower net socialcosts by adjusting the intertemporal trading ratio taking intoaccount the behavior of private agents we use a simplenumerical simulation model to illustrate the potential gains fromvarious possible banking systems

part whole bias in contingent valuation will scope effects be detected with inexpensive survey methods the purpose of this paper is to test for scope effects with the contingent valuation method we use data from a telephone survey focusing on water quality improvements in the albemarle and pamlico sounds in north carolina we find that the willingness to pay estimates are sensitive to the scope of the policy these results suggest that the use of inexpensive survey methods may not be the cause of the failure to detect scope effects in some recent contingent valuation studies

a model of intertemporal emission trading banking and borrowing abstract this paper provides a general treatment of emission trading banking and borrowing in an intertemporal continuous time model using optimal control theory the decentralized behavior of firms is shown to lead to the least cost solution attainable under joint cost minimization explicit solutions for the time paths of emissions and permit prices are derived when firms are allowed to both bank and borrow and when firms are only allowed to bank emission permits the policy implications of emission banking and borrowing are discussed

valuation of commodity futures and options under stochastic convenience yields interest rates and jump diffusions in the spot this paper investigates the effects of stochastic convenience yields stochastic interest rates and jumps in the spot price on the pricing of commodity futures forwards and futures options numerical examples show that one factor prices differ materially from the stochastic convenience yield two factor prices when convenience yield is considerably above its long term average the extension to a three factor model with stochastic interest rates leads to a different futures price but the forward price is unchanged the extension ofthe three factor model to include jumps in the spot price process does not affect forward or futures prices but it can have an impact on options prices the model is applied to price the present value of future cash flows from a real asset

limiting environmental program contradictions a demand systems application to fishery management economically efficient natural resource policy requires the comprehensive management of environmental improvements over a system of sites use of multisite demand and benefit models can reduce the number and cost of environmental program contradictions in this paper we present a multisite demand model that incorporates several quality dimensions for a system of new mexico fishing sites use of the model permits managers to improve total welfare at lower cost by simultaneously distributing opportunity across all elements in resource users choice sets model results show that errors that result from independently adding values of interdependent program elements approach 50

applying socio ecological economics a case study of contingent valuation and integrated catchment management abstract socio ecological economics has emerged as a new movement within ecological economics that overtly takes account of the sociological and political bases of economic activity as well as the biophysical base the paper comments on the usefulness of the principles of socio ecological economics in the light of a recent example of applied social and economic research into contingent valuation cv and integrated catchment management icm in the hawkesbury nepean in the first australian study of the temporal stability of cv responses it was found that average willingness to pay wtp to improve water quality did not change significantly over a 2 year period nor could any statistically significant explanation of bid size or change in wtp be found on each of the three occasions when cv surveys were completed participants were asked a series of follow up questions and then engaged in discussion on attitudes to cv reasons for any changes in wtp and views of possible uses for cv in icm socio ecological economics proved to be useful in analysing the results of the case study by identifying a wider range of possible determinants of individual and government behaviour than simple maximisation models these determinants especially ethical values for individuals and organisational culture for governments provided good explanations for the qualitative results obtained and perhaps a better explanation of the quantitative results it also usefully emphasised the dynamics of the interaction between the different determinants of behaviour with regard to cv consideration of the likely dynamic between the different organisational structures and cultures within icm raised the possibility that introducing cv into icm in a widespread fashion could lead to resistance and modification of its use to a more qualitative and educative role the ideas of socio ecological economics have made a valuable contribution to the understanding and analysis of this case study and provide the beginning of a research agenda for socially oriented ecological economists results of the case study suggest that this agenda should include the applications of learning theory and social ecology to policy making institutions and processes for moving towards sustainability

validity of open ended and payment scale approaches to eliciting willingness to pay the open ended and payment scale approaches to eliciting willingness to pay wtp valuations are compared use of the payment scale led to a higher response rate a higher rate of completion of the wtp question higher mean and median wtp values a stronger association between wtp and ability to pay and a higher r2 in regression analysis of wtp on several independent variables taking these results in combination it can be inferred that the payment scale technique leads to more valid wtp values than use of the open ended approach

designing an emissions trading scheme for china with a dynamic computable general equilibrium model abstract to fulfill its copenhagen pledges to control carbon emissions and mitigate climate change china plans to establish a nationwide emissions trading scheme ets in 2016 this paper develops a multi sector dynamic computable general equilibrium model with an ets module to study the appropriate ets policy design including a carbon cap permit allocation and supplementary policies e g penalty policies and subsidy policies the main results are as follows 1 to achieve china s copenhagen pledge the equilibrium nationwide carbon price is observed to be between 36 and 40 rmb yuan per metric ton 2 the ets policy has a cost effective mitigation effect by improving china s production and energy structures with relatively little economic harm 3 various ets sub policies should be carefully designed to balance economic growth and carbon mitigation in particular the carbon cap should be set according to china s copenhagen pledge a relatively large distribution ratio of free permits the output based grandfathering rule for free permits a penalty price on illegitimate emissions slightly above the carbon price and a sufficient subsidy from ets revenue are strongly recommended in the early stages to avoid significant economic loss these designs can be adjusted in later stages to enhance the mitigation effect

sequencing and valuing public goods abstract this paper establishes several propositions concerning the importance of context in valuing public goods it first provides necessary and sufficient conditions for the value of a public good to be independent of context utility constant valuation sequences are considered where public goods are systematically made available or taken away for the case of strict hicksian substitutes willingness to pay for an increase in one of the public goods is strictly decreasing the farther out in a sequence it is valued for the destruction of public goods the reverse is true for willingness to accept compensation sequencing has opposite implications for the assessment of the benefits of providing public goods than for the assessment of the damage from destroying them

modeling the price dynamics of co2 emission allowances abstract in this paper we analyze the short term spot price behavior of carbon dioxide co 2 emission allowances of the new eu wide co 2 emissions trading system eu ets after reviewing the stylized facts of this new class of assets we investigate several approaches for modeling the returns of emission allowances due to different phases of price and volatility behavior in the returns we suggest the use of markov switching and ar garch models for stochastic modeling we examine the approaches by conducting an in sample and out of sample forecasting analysis and by comparing the results to alternative approaches our findings strongly support the adequacy of the models capturing characteristics like skewness excess kurtosis and in particular different phases of volatility behavior in the returns

the fine structure of asset returns an empirical investigation we investigate the importance of diffusion and jumps in a new model for asset returns in contrast to standard models we allow for jump components displaying finite or infinite activity and variation empirical investigations of time series indicate that index dynamics are devoid of a diffusion component which may be present in the dynamics of individual stocks this leads to the conjecture confirmed on options data that the risk neutral process should be free of a diffusion component we conclude that the statistical and risk neutral processes for equity prices are pure jump processes of infinite activity and finite variation

contingent valuation a new perspective after several decades of academic research on the contingent valuation cv method a consistent behavioral explanation of hypothetical bias is still lacking based on evidence from economics economic psychology and the political sciences i propose an explanation that is based on two simple working hypotheses about respondent behaviour in contingent valuation surveys the first hypothesis is that survey respondents are unable to form consistent preferences about unfamiliar goods unless the choice context offers reliable informative cues that can be rationally exploited in simplified heuristics the second hypothesis is that the probability and impact of strategic responses in dichotomous choice questions about public goods depends on the extent to which the presented hypothetical costs differ from the actual costs the literature on hypothetical bias is revisited in the light of these behavioral hypotheses i find that the hypotheses are generally supported by the empirical data moreover the hypotheses are able to explain several important empirical phenomena that previous research has not been able to explain in particular they solve the puzzle that pre election polls but not cv surveys are able to predict actual referendum outcomes and they explain why income effects on willingness to pay are lower in cv responses than in actual votes if confirmed by further studies the hypotheses will have important implications for future research and practice first the hypothetical costs presented in the dichotomous choice question should to be close enough to the actual costs to be credible to all respondents this can be achieved by specifying the costs as a percentage rather than absolute change in taxes second the respondents should be given the option to answer based on information about the positions of large parties and interest groups with known political orientation rather than based on the raw policy information theory and evidence suggest that this new survey paradigm largely eliminates the fundamental problems of the conventional stated preference methods

fairness of prices user fee policy and willingness to pay among visitors to a national forest abstract imposing user fees in nature based tourism nbt contexts has been a controversial issue based on the notions of justice and fairness this study extended previous work examining the relationship between attitudes toward user fees and spending support in a proposed structural model of price fairness fee spending support and willingness to pay wtp this paper identified the antecedents of wtp user fees and empirically examined to what extent the data fit the model furthermore the moderating role of place attachment in the model was investigated by using multiple group structural equation modeling subjects n 562 were recreational tourists to a forest area in the southeast u s results revealed that spending support partially played a mediating role in the relationship between perceived price fairness and wtp user fees a multiple group invariance test also demonstrated that while the degree of place identity moderated the effect of price fairness on spending support the degree of place dependence did not influence the relationships among the antecedents of wtp

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

valuation of tropical rainforests philosophical and practical issues in the use of contingent valuation abstract this paper explores the possibility of using a large scale multi country contingent valuation study for making decisions concerning global resources in the specific context of valuing a large set of tropical rainforests before considering the practical issues involved in implementing such a study the paper addresses philosophical issues related to the use of contingent valuation including the role of passive use motives such as altruism and the role of information the implications of empirically based criticisms which argue that contingent valuation results are unreliable are also considered the main portion of the paper sketches the practical difficulties likely to be encountered in actually implementing a large contingent valuation study in multiple countries which seeks to value a common set of tropical rainforests some key study design choices are discussed

the impact of globalization on rural poverty the paper first reviews the meaning and causes of globalization it indicates that globalization is not a new phenomenon in history but the current phase seems to have new elements that did not exist previously regarding the consequences of the various aspects of globalization at the national level it is shown that there can be both positive and negative aspects in the short and long runs however empirical investigations seem to suggest largely positive implications the structure of poverty in rural areas is subsequently discussed and it is shown that rural poverty takes very different forms in different parts of the world exploring the various aspects of the incomes of the rural poor reveals that there are both opportunities but also dangers of detrimental impacts from global integration on balance it appears that globalization creates both opportunities as well as risks and the impacts on the rural poor will depend on the extent to which they manage to seize the opportunities while managing the increased risks

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

how people respond to contingent valuation questions a verbal protocol analysis of willingness to pay for an environmental regulation abstract this paper investigates what a respondent is thinking when answering a willingness to pay question in a contingent valuation using a think aloud technique from psychology called verbal protocol analysis the willingness to pay responses we observed seem to be constructed from a variety of considerations including an obligation to pay a fair share of the cost of the solution and signaling concern for a larger set of environmental issues the finding that respondents seem to construct their values at the time they are asked rather than reporting a more well defined value is seen as consistent with over two decades of research on the psychology of decision making potential uses of verbal protocols in contingent valuation studies are also discussed

economic valuation of the environment how citizens make sense of contingent valuation questions this study adopts a qualitative approach in order to investigate how people make sense of contingent valuation cv questions of a global environmental amenity the objective is not only to capture people s motivations and considerations of willingness to pay wtp but also to determine if they adequately comprehend an economic valuation of such public goods the findings indicate that a large proportion of respondents do not interpret the valuation task as intended however this lack of understanding is not always expressed unless probed in relation to the elicitation question and some people have the tendency to provide monetary estimates anyway whatever meaning they attach to these

economies of scope in endangered species protection evidence from interest group behavior abstract this paper looks for positive spillovers from the legal protection of one species to the welfare of others and for evidence of economies of scope in the costs associated with protecting species under the endangered species act the analysis uses data on the intensity of interest group comment activity in response to proposals to protect new species the results suggest that these phenomena are significant strengthening arguments that wildlife protection policy should be shifted toward species groups or ecosystems however the findings are also consistent with diminishing public willingness to pay for protected species in a given area a pattern which also has public policy implications

trader types and volatility of emission allowance prices evidence from eu ets phase i abstract this paper studies the relation between the trading activity of market participants and the volatility of the european emission allowance price during phase i of the european union emission trading system eu ets we focus on the contrasting roles of different trader types we find evidence of a positive and significant trading activity volatility relation which appears to be stronger when accounting for trader type the positive relation can be mainly attributed to energy providers in contrast industrial companies seem to have traded more frequently when volatility levels were lower finally the non liable players represented by financial intermediaries appear to have acted as a flexible counterparty trading more with the energy sector when volatility was higher and more with the industrial firms when volatility was lower we discuss possible explanations for these contrasted positions understanding the trading activity volatility link is relevant for evaluating the efficiency of the eu ets although the relation is generally positive many players remained often inactive and traded mostly when volatility levels were lower policies targeting the engagement of less active players could lead to a smoother incorporation of information into prices and to an increase in market efficiency

directional heterogeneity in wtp models for environmental valuation many studies in the stated preference literature on environmental valuation do not include the effects of substitutes and distance in willingness to pay wtp models in spite of the relevance of these effects in aggregation and benefit transfer heterogeneity in the availability of substitutes over space may cause multidirectional distance effects in wtp as a result disregarding this spatial heterogeneity may lead to biased estimators of the distance effect and associated wtp values cameron 2006 in this paper we demonstrate that distance decay is subject to significant directional effects which tend to be related to differences in the availability of substitutes across the study area we apply a straightforward methodology to account for such spatial heterogeneity in choice experiments and assess the effect on wtp for improvements in ecosystem services in a lake district we model distance decay effects whilst controlling for heterogeneity between users and non users and non use related wtp reasons the directional effects result in significantly different wtp estimates different market sizes reflecting the population with positive wtp and differences in total wtp up to 32

ordering effects in nested top down and bottom up contingent valuation designs abstract within a contingent valuation cv survey ordering effects are defined where responses to a given question vary in a theoretically unanticipated manner according to the positioning of that question relative to others in the survey instrument this paper employs a split sample cv design to investigate the potential for such ordering effects upon stated willingness to pay for nested goods in one top down design values are first elicited for protecting the whole of an endangered area after which values for a part sub area are elicited a second bottom up treatment reverses the order of valuation tasks with the part scheme valued prior to the whole results show that whole and part valuation responses are logically ordered and determined by a consistent set of factors irrespective of question order however variance to question order was observed in both the part and whole valuations the correspondence of these results to standard and non standard preference theories is explored and the difficulties and practical issues concerning valuing nested goods are highlighted

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

sequencing and the adding up property in contingent valuation of endangered species are contingent non use values economic values this paper presents tests of the theoretical validity of the contingent valuation cv method the validity of cv is especially a concern when involving environmental goods with a predominant non use value one test of theoretical validity is the adding up property that implies that a specific good should be equally valued irrespectively of it is being valued directly or built up sequentially in this cv study four independent sub samples stated willingness to pay for the same composite good or package using different sequences one sub sample valued the composite good directly while two sub samples faced built up sequences valuing first subsets of this composite good a fourth sub sample valued the composite good from a dividing out approach facing first the valuation of a larger multi package theoretically expected sequencing effects were observed the subset goods obtained higher values earlier in a sequence and the dividing out approach decreased the stated value for the composite good most importantly these cv data did pass the tests of the adding up property

valuation of small and multiple health risks a critical analysis of sp data applied to food and water safety this study elicits individual risk preferences in the context of an infectious disease using choice experiments a main objective is to examine scope sensitivity using a novel approach our results suggest that the value of a mortality risk reduction vsl is highly sensitive to the survey design our results cast doubt on the standard scope sensitivity tests in choice experiments but also on the validity and reliability of vsl estimates based on stated preference studies in general this is important due to the large empirical literature on non market evaluation and the elicited values central role in policy making

oil price hikes and development triggers in peace and war the theory of irreversible investment predicts that development of an oil field should take place when a unique price trigger is passed at the start of the 1990 91 gulf war however oil prices promptly doubled only to fall back to their previous level when peace returned six months later to incorporate such large but transitory price hikes we evaluate the profitability of an oil field contingent on war and peace and calculate separate triggers in each case for plausible parameter values we find that the switch between these development triggers is about 45 of the price hike caused by the war the price hike is therefore equivalent to a permanent price increase of only a quarter of its size copyright 1996 by royal economic society

incorporating psycho social considerations into health valuation an experimental study abstract this study used multiple elicitation question modes and group discussions to value psycho social considerations associated with public perceptions of health risks values for saving 100 statistical lives in six different policy contexts varied by 50 largely due to psycho social considerations of choice and control a currency effect was found value of life differentials were smaller when questions were framed directly in the currency of lives saved rather than willingness to pay or public spending to save lives discussions reduced but did not eliminate inconsistencies and slightly increased the relative valuations of health interventions involving less choice and control by those at risk

clean development mechanism cdm after the first commitment period assessment of the world s portfolio and the role of latin america abstract the clean development mechanism cdm represents the main effort to help developing countries develop sustainably and developed countries to reach their emission reductions targets set under the kyoto protocol with the ending of the first commitment period there is an opportunity to assess the state of the cdm portfolio 2008 2012 this article is the first effort to evaluate the cdm portfolio throughout the first commitment period as well as the first paper focused on latin america s cdm portfolio as a whole concentrating on renewable energy projects moreover a special analysis is performed for chile latin america s third most important cdm country after brazil and mexico 6th worldwide after china india korea brazil and mexico and first in cers registered among the small countries an ideal host because of its high political stability government effectiveness access to capital and regulatory quality in addition a study was performed on 180 renewable energy projects in latin america revealing that the additionality assessments performed under the cdm are too subjective hindering the validation of the projects and their transparency the main policy implication of this research is to expose the need for a radical change to the succeeding document to the kyoto protocol in order to reduce the inequality amongst host countries and ensure that cdm fulfills its sustainable development claim some of the proposed measures include establishing uniform benchmarks to be used against similar projects a thorough validation for declared barriers simplifying the registering process and providing international aid for the least developed countries that have historically lacked the ability to participate in the cdm

mixing methods within stated preference environmental valuation choice experiments and post questionnaire qualitative analysis abstract assessing public preferences for natural resources is a difficult task the complexity of the research problem has encouraged practitioners to adopt qualitative approaches as exploratory and diagnostic tools within the conventionally more quantitative stated preference research building on best practice from previous studies this paper reports the findings of post questionnaire focus group analysis investigating the adequacy of a choice experiment ce valuation exercise and its public acceptability the specifics of the scenario and design choices are shown to markedly reduce problems of charity like and bid realism fair share responses observed in previous studies and significant sensitivity to good characteristics is observed however a less tractable problem of valuing unfamiliar goods remains with insights given regarding public acceptability and the usefulness of the findings to environmental decision making

preference refinement in deliberative choice experiments for ecosystem service valuation choice experiments have gained considerable popularity in ecosystem service valuation in a one shot survey respondents are faced with a strenuous task asking them to discover and monetize their preferences for often unfamiliar ecosystem services in a previously unknown hypothetical market situation we present a deliberative choice experiment that aims to generate well rationalized value estimates for policy advice two aspects of deliberation discussion and time to reflect are examined in terms of their effect on preference refinement we find more comprehensive choice motives after deliberation as well as indications for preference adjustment and a slight increase in choice certainty jel q51 q57

measuring the environmental cost of hypocrisy this paper provides an example of how to estimate the marginal environmental cost of hypocrisy using revealed behavior and self identification survey responses from coffee drinkers regarding their use of cardboard and plastic i e non reusable cups coffee shops provide a convenient microcosm for assessing the impact of hypocritical behavior because of 1 readily available cheap substitutes i e reusable coffee cups 2 a relatively accurate estimate of the environmental in particular carbon cost associated with using non reusable cups and 3 the ability to delineate hypocritical behavior by observing a choice with relatively few potential confounding factors hypocritical behavior is measured as a geometric mean of how often an individual takes coffee in a non reusable cup and the degree to which the individual self identifies as being concerned about his environmental footprint all else equal the more often a person takes his coffee in a non reusable cup and the greater the degree to which he self identifies as being concerned about his footprint the greater the individual s hypocrisy score controlling for other attitudinal and demographic characteristics including self identified awareness of environmental issues and willingness to pay for the convenience of using a non reusable cup we are able to determine the marginal effect of an individual s hypocrisy score on the environmental cost associated with the use of non reusable coffee cups

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