endogenous growth convexity of damage and climate risk how nordhaus framework supports deep cuts in carbon emissions to slow or not to slow nordhaus 1991 was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of worldwide importance we offer our assessment of the original article and trace its legacy in particular nordhaus s later series of dice models from this work many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls we use dice itself to provide an initial illustration that if the analysis is extended to take more strongly into account three essential elements of the climate problem the endogeneity of growth the convexity of damage and climate risk optimal policy comprises strong controls

regional climate change policy under positive feedbacks and strategic interactions the surface albedo feedback along with heat and moisture transport from the equator to the poles is associated with polar amplification which is a well established scientific fact the present paper extends brock and xepapadeas in eur econ rev 94 263 282 2017 to a non cooperative framework with polar amplification where regions decide emissions by maximizing own welfare this can be regarded as a case of regional non cooperation regarding climate change open loop and feedback solutions are derived and compared in terms of temperature paths and welfare with the cooperative solution carbon taxes which could bridge the gap between cooperative and non cooperative emissions path are also derived finally the framework is extended to a ramsey set up in which it is shown how the regional climate model can be coupled with standard optimal growth models numerical simulations confirm the theoretical results and provide insights about the size and the direction of deviations between the cooperative and the non cooperative solutions

climate change policy under polar amplification abstract polar amplification is an established scientific fact which has been associated with the surface albedo feedback and with heat and moisture transport from the equator to the poles in this paper we unify a two box climate model which allows for heat and moisture transport from the southern region to the northern region with an economic model of welfare optimization our main contribution is to show that by ignoring spatial heat and moisture transport and the resulting polar amplification the regulator may overestimate or underestimate the tax on greenhouse gas emissions the direction of bias depends on the relations between marginal damages from temperature increase in each region we also determine the welfare cost when a regulator mistakenly ignores polar amplification numerical simulations confirm our theoretical results while ballpark estimates indicate that the tax bias could be as high as 20 while welfare cost could reach 2 of global effective steady state consumption

as bad as it gets how climate damage functions affect growth and the social cost of carbon the paper analyzes the effects of varying climate impacts on the social cost of carbon and economic growth we use polynomial damage functions in a model of an endogenously growing two sector economy the framework includes nonrenewable natural resources which cause greenhouse gas emissions pollution stock harms capital and reduces economic growth we find a big effect of the selected damage function on the social cost of carbon and a significant impact on the growth rate in our calibration a quartic damage function raises the social cost of carbon by more than a factor of ten compared to the linear function in the social optimum the growth rate remains positive even when the damage function is highly convex we test the robustness of the results by adding pollution decay lowering the elasticity of intertemporal substitution and addressing uncertainty which does not alter our results we find that high marginal climate damages require stringent climate policies but do not preclude positive economic growth despite convexity provided that policies are designed in an efficient manner

game theoretic modelling of transboundary pollution transboundary pollution is pollution which is emitted in one country and deposited or causing harm in another country due to the absence of a supranational institution that could enforce international legislation transboundary externalities cannot be approached in the same way as domestic pollution problems in an attempt to find non traditional solutions to such crossborder problems recent environmental economics literature incorporates behavioural assumptions with the help of game theory this paper discusses how different types of transboundary pollution have been approached and which static and dynamic game theoretic solution concepts have been evaluated while full cooperation among countries yields the economically optimal outcome it is difficult to reach because countries are faced with an inequitable sharing of the burden of pollution abatement and with the incentive to free ride side payment schemes to aid burden sharing and strategies to circumvent free riding are reviewed issues such as transaction costs information and motivation are briefly discussed

climate change heterogeneities and stability of international fiscal harmonization this paper analyzes the instability introduced into multilateral agreements by two types of heterogeneity heterogeneity of countries size and number of producing members and heterogeneity of lobbies asymmetric influence at the national versus the international level the work extends theoretical prospective analyses on environmental taxation as illustrated by the harmonization of fuel taxes we show that the acceptability of the tax set at the multilateral level depends on the type of coalitions that participate in the multilateral negotiation size and number of producing countries and the asymmetry in the local state level power of lobbies during negotiations

environmentalism democracy and pollution control this paper makes two empirical contributions to the literature based on predictions generated by a lobby group model first we investigate how environmental lobby groups affect the determination of environmental policy in rich and developing countries second we explore the interaction between democratic participation and political electoral competition the empirical findings suggest that environmental lobby groups tend to positively affect the stringency of environmental policy moreover political competition tends to raise policy stringency in particular where citizens participation in the democratic process is widespread

economy wide estimates of the implications of climate change sea level rise the economy wide implications of sea level rise in 2050 are estimated using a static computable general equilibrium model this allows for a better estimate of the welfare effects of sea level rise than the common direct cost estimates and for an estimate of the impact of sea level rise on greenhouse gas emissions overall general equilibrium effects increase the welfare costs of sea level rise but not necessarily in every sector or region in the absence of coastal protection economies that rely most on agriculture are hit hardest although energy is substituted for land overall energy consumption falls with the shrinking economy hurting energy exporters with full coastal protection gdp increases particularly in regions with substantial dike building but utility falls least in regions that protect their coasts and export energy energy prices rise and energy consumption falls the costs of full protection exceed the costs of losing land the results also show direct costs the usual method for estimating welfare changes due to sea level rise are a bad approximation of the general equilibrium welfare effects previous estimates of the economic impact of sea level rise are therefore biased

political internalization of economic externalities and environmental policy abstract this paper derives the characteristics of endogenous environmental policy in a common agency model of politics and proceeds to show that competition between lobby groups is an important source of internalization of economic externalities our analysis generalizes bhagwati s principle of targeting to the case of distorted political markets moreover we show that the politically optimal structure of environmental taxes incorporates a pigouvian adjustment however since lobby groups care about the distribution of income as well as about efficiency the equilibrium structure of taxes differs considerably from the pigouvian rule

energy balance climate models and general equilibrium optimal mitigation policies in a general equilibrium model of the world economy we develop a two dimensional energy balance climate model featuring heat diffusion and anthropogenic forcing driven by global fossil fuel use across the sphere of the earth this introduces an endogenous location dependent temperature function driving spatial characteristics in terms of location dependent damages resulting from local temperature anomalies into the standard climate economy framework we solve the social planner s problem and characterize the competitive equilibrium for two polar cases differentiated by the degree of market integration we define optimal taxes on fossil fuel use and how they may implement the planning solution our results suggest that if the implementation of international transfers across latitudes is not possible then optimal taxes are in general spatially non homogeneous and may be lower at poorer latitudes the degree of spatial differentiation of optimal taxes depends on heat transportation by employing the properties of the spatial model we show by numerical simulations how the impact of thermal transport across latitudes on welfare can be studied

multiple equilibria in a stochastic implementation of dice with abrupt climate change abstract integrated assessment modeling of global climate change has focused primarily on gradually occurring changes in the climate system however atmospheric and earth scientists have become increasingly concerned that the climate system may be subject to abrupt discontinuous changes on short time scales and that anthropogenic greenhouse gas emissions could trigger such shifts incorporating this type of climate dynamics into economic or integrated assessment models can result in model non convexity and multiple equilibria and thus complicate policy analysis relative to models with unique globally optimal policies using a version of the nordhaus dice model amended in previous research by keller et al 2004 keller klaus benjamin m bolker david f bradford 2004 uncertain climate thresholds and optimal economic growth journal of environmental economics and management 48 1 723 741 in conjunction with a stochastic global optimization algorithm we generate level sets of solutions which helps identify multiple equilibria resulting from the potential abrupt cessation of the north atlantic thermohaline circulation we discuss the implications of this model geometry for formulating greenhouse gas abatement policy under uncertainty and suggest that this general approach may be useful for addressing a wide range of model non convexities including those related to endogenous technological change

is the tendency to variation a chief cause of progress this paper briefly reviews the sources of the diversity of innovative activity within industries and interprets the literature to suggest that there are three ways in which such diversity may stimulate technological progress including a selection effect a breadth effect and a complementarity effect using industry level data from the yale survey administered in the 1980s the paper presents preliminary empirical results on the relationship between the diversity of r d activities within industries and their rate of technical advance this exploratory exercise finds that controlling for industry r d intensity greater diversity in innovative activity is associated with a more rapid pace of technological change policy implications are considered copyright 2001 by oxford university press

keep searching and you ll find what do we know about variety creation through firms search activities for innovation this article critically reviews and synthesizes the contributions found in theoretical and empirical studies of firm level innovation search processes it explores the advantages and disadvantages of local and non local search discusses organizational responses and identifies potential exogenous triggers for different kinds of search it argues that the initial focus on local search was a consequence in part of the attention in evolutionary economics to path dependent behavior but that as localized behavior was increasingly accepted as the standard mode studies began to question whether local search was the best solution in all cases more recently the literature has focused on the trade offs being created by firms having to balance local and non local search we account also for the apparent variety paradox in the stylized fact that organizations within the same industry tend to follow different search strategies but end up with very similar technological profiles in fast growing technologies the article concludes by highlighting what we have learnt from the literature and suggesting some new avenues for research

trade transboundary pollution and foreign lobbying in this paper we explore the use of trade policy in addressing transboundary stock pollution problems such as acid rain and water pollution we show that a tariff determined by the current level of accumulated pollution can induce the time path of emissions optimal for the downstream polluted country but if the upstream polluting country can lobby the downstream government to impose lower tariffs distortions brought by corruption and foreign lobbying lead to a rise in the upstream country s social welfare and to a decrease in social welfare in the downstream country thus the usefulness of trade policy as a tool for encouraging cooperation and internalizing transboundary externalities depends critically on the degree of governments susceptibility to foreign political influence

decentralized and efficient control of transboundary pollution in federal systems abstract decentralized control of transboundary pollution in federal systems can be efficient when population crowding is socially costly in this paper an upstream region abates pollution or makes an interregional income transfer to the downstream region with the sole intent of deterring immigration because either instrument abatement expenditure or interregional income transfer alone implements an efficient population distribution between the regions interregional income transfers are unnecessary for efficiency without explicit income transfers each region provides the efficient portion of the aggregate level of pollution abatement in the nash equilibrium

plant location wind direction and pollution policy under offshoring we examine pollution policy in a unified three country framework with the country in the middle playing double roles as both a polluter and a victim we find that government preference over profits and consumer surplus to be important and so is environmentalism in particular the most downwind country has the least incentives to control pollution under oligopoly several additional undesirable scenarios may arise due to the interaction between wind direction and the incentive trade offs in rent shifting and pollution control we analyse the mechanisms behind and provide policy guidance

political influence on non cooperative international climate policy we analyze non cooperative international climate policy in a setting of political competition by national interest groups in the first stage countries decide whether to link their domestic emission permit markets to an international market which only forms if it is supported by all countries in the second stage countries non cooperatively decide on the number of tradable emission allowances in both stages special interest groups try to sway the government in their favor we find that i both the choice of regime and the levels of domestic and global emissions only depend on the aggregate levels of organized stakes in all countries and not on their distribution among individual interest groups and ii an increase in lobbying influence by a particular lobby group may backfire by inducing a change towards the lobby group s less preferred regime

foreign influence and welfare how do foreign interests inuence the policy determination process what are the welfare implications of such foreign inuence in this paper we develop a model of foreign inuence and apply it to the study of optimal taris we develop a two country voting model of electoral competition where we allow the incumbent party in each country to take costly actions that probabilistically aect the electoral outcome in the other country we show that policies end up maximizing a weighted sum of domestic and foreign welfare and we study the determinants of this weight we show that although foreign inuence is zero in equilibrium its threat may be welfare enhancing from the point of view of aggregate world welfare this is because foreign inuence helps alleviate externalities arising from cross border eects of policies the threat of foreign inuence can however prove harmful in the presence of large imbalances in inuence power across countries we apply our model of foreign inuence to the study of optimal trade policy we derive a modied formula for the optimal import tariand show that a country s import tariis more distorted whenever the inuenced country is small relative to the inuencing country and whenever natural trade barriers between the two countries are small

welfare ranking of environmental policies in the presence of capital mobility and cross border pollution we construct a model of two regions with cross border pollution and with inter regional regional capital mobility rcm or international international capital mobility icm capital mobility each region uses emission taxes or intra regionally or inter regionally tradable emission permits to reduce pollution we show that the non cooperative settings of all three instruments are always inefficient relative to their cooperative settings when regions are symmetric then i with rcm the non cooperative setting of intra regionally tradable emissions permits is welfare superior to that of the other two instruments ii with icm the non cooperative settings of intra regionally tradable emission permits and of emission taxes are equivalent and superior to that of inter regionally tradable emission permits and iii with icm the three instruments are equivalent only when cross border pollution is perfect

kyoto protocol cooperation does government corruption facilitate environmental lobbying does environmental lobbying affect the probability of environmental treaty ratification does the level of government corruption play a role for the success of such lobbying in this paper we propose that a more corruptible government may be more responsive to the demands of the environmental lobby we use several stratified hazard models and panel data from 170 countries on the timing of kyoto protocol ratification to test this hypothesis we find that increased environmental lobby group activity raises the probability of ratification and the effect rises with the degree of corruption

why the far distant future should be discounted at its lowest possible rate abstract a critical feature of the distant future is currently unresolvable uncertainty about what will then be the appropriate rate of return on capital to use for discounting this paper shows that there is a well defined sense in which the lowest possible interest rate should be used for discounting the far distant future part of any investment project some implications are discussed for evaluating long term environmental projects or activities like measures to mitigate the possible effects of global climate change

the spillover effects of good governance in a tax competition framework with a negative environmental externality we investigate the impact of a political regime shift affecting consumers business interests and lobby contributions when countries engage in tax competition in capital and a polluting resource when consumers have more influence than resource owners the resource tax rate and public spending rise while environmental damages lobbying contribution and the capital tax rate fall this response can spillover to other countries leading to lower welfare capital tax harmonization improves welfare of consumers and resource owners resource tax harmonization and governance harmonization both reduce the influence of lobbying and improve consumer welfare but resource owners are worse off

location decentralization and knowledge sources for innovation when firms seek to innovate they must decide where to locate their innovation activity this location choice requires firms to make a simultaneous choice about the organizational structure of innovation activity almost by definition multiple locations per firm imply some degree of decentralization we compare predictions of the knowledge based view with the predictions of organizational economics regarding the location and decentralization of r d using firm level data on r d locations in finland we examine the conditions under which firms with multiple r d locations also have greater innovation output our results indicate that multilocation of r d activity is positively associated with imitative innovation output and is strongly correlated with greater external knowledge sourcing we also find that the positive association between multiple r d locations and innovative output does not apply to new to the market innovations the results are consistent with the interpretation that multilocation of r d enables firms to access a broad set of external sources of knowledge in pursuit of imitative rather than new to the market innovation moreover these findings imply heterogeneity in r d strategies between firms pursuing new to the market innovation and firms pursuing imitative innovation it is thus important to distinguish between new to the market and imitative innovations because their determinants may differ

the impact of selected abatement strategies on transnational pollution the terms of trade and factor rewards a general equilibrium approach abstract widespread publicity of international conflict over transfrontier pollutants such as acid deposition and the november 1986 chemical spill in the rhine river has increased the public s awareness of the need to devise abatement strategies appropriate for transnational pollution this article develops a general equilibrium approach for analyzing the economic impacts of selected abatement strategies the model includes internationally mobile goods capital and pollution flows and flexible output and factor prices the general equilibrium approach provides policymakers with important information which is usually not revealed by a partial equilibrium approach that is demonstrated by applying the model to the north american acid deposition issue

international coordination on climate policies given the current trend in global emissions the latest round of climate change negotiations at the durban meeting of december 2011 for the adoption of a comprehensive global treaty on climate change mitigation as soon as possible and no later than 2015 and to come into force in 2020 has hardly shown the results one would have hoped for even for the most optimistic it remains unclear whether one can expect a successful negotiating outcome by 2015 there are inherent difficulties associated with climate change negotiations ranging from which countries should bear most responsibility for a given emission reduction target to the assessment of a globally efficient time path for pricing harmful greenhouse gas emissions ghgs these difficulties become even more complex and challenging under the pervasive uncertainty of climate science and the uncertainty about the feedback loop between climate change damages and economic growth during the past decades the environmental economics literature has provided important insights regarding the design of environmental fiscal policies and treaties but there is a host of issues that remain relatively unexplored for instance we know little about the cooperative solution for carbon and trade policies when climate change affects the productive possibilities of countries in this context it is also not obvious whether observed policies could be improved upon in such a way that all countries gain in welfare it remains also unclear what the carbon extraction path should be in the absence of a comprehensive treaty such as for example if environmental policy is unilaterally chosen subject to an agreed ceiling in global temperature though carbon pricing instruments like carbon taxes cap and trade and hybrids have been well studied not much is known about their properties in the presence of offset schemes such as the clean development mechanism more work is also required to understand the strategic implications of the uncertainty surrounding climate change and how this affects for example the choice of climate change strategy precautionary or wait and see how uncertainty impacts the propensity of countries to sign a climate treaty and the extent to which the possibility of a climate catastrophe fosters or hinders cooperation understanding political economy issues is also vital in tackling climate change because efficient climate policies stand little chance of being successfully negotiated and implemented if they do not receive the support of the electorate the papers in the special issue of the journal of environmental economics and management are precisely devoted to this broad research agenda

harmonizing tailpipe policy in symmetric countries improve the environment improve welfare abstract we show that harmonizing emissions policy may be bad for the environment and or global welfare even when pollution is transboundary and countries are identical in every way harmonization effectively internalizes the transboundary aspects of pollution but it also changes the politics surrounding tailpipe regulation with harmonization producers can no longer avoid strict local regulation by simply exporting their products to overseas markets with weak standards for consumer goods as a result harmonization may raise political opposition to regulation to examine these competing effects we develop a generic treatment of the politics of environmental regulation a treatment we show to be isomorphic to three popular models of political economy majority rules a political elite and a political contributions approach we find that harmonization both weakens environmental regulation and reduces global welfare when the level of political capture by dirty industry is high relative to the rate of pollution transmission across borders

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

pollution control with uncertain stock dynamics when and how to be precautious abstract the precautionary principle pp applied to environmental policy stipulates that in the presence of uncertainty society must take robust preventive action to guard against worst case outcomes it follows that the higher the degree of uncertainty the more aggressive this preventive action should be this normative maxim is explored in the case of a stylized dynamic model of pollution control with uncertain in the knightian sense stock dynamics using the robust control framework of hansen and sargent 12 optimal investment in damage control is found to be increasing in the degree of uncertainty thus confirming the conventional pp wisdom optimal mitigation decisions however need not always comport with the pp in particular when damage control investment is both sufficiently cheap and sensitive to changes in uncertainty damage control investment and mitigation may act as substitutes and a pp with respect to the latter can be unambiguously irrational the theoretical results are applied to a calibrated linear quadratic model of climate change the analysis suggests that a reversal of the pp with respect to mitigation while theoretically possible is very unlikely

malthus in the light of climate change abstract to reconsider the malthusian predictions of natural limits to economic development the paper develops a multi sector growth model with exhaustible resource extraction investments in physical and knowledge capital climate change and endogenous fertility economic growth is driven by endogenous innovations which increase in the availability and productivity of research labour poor substitution of natural resources triggers sectoral change climate change is the result of polluting resource use which is like consumption and investments based on the intertemporal optimization of the households highlighting the importance of bounded resource supply and of rational extraction decisions i show that climate change is independent of population growth in steady state and there is no causal relationship between climate and population during transition to steady state the consumption per capita growth rate rises in the innovation rate and the output elasticities of labour and capital in the different sectors unlike climate policy population policy is not warranted it may be counterproductive because labour is crucial for the research sector

domestic and international influences on green taxation economists have made a strong case for the relative efficiency of market based mechanisms for environmental regulation such as cap and trade and green taxes yet the spread of these forms has been limited and traditional command and control regulation still predominates the authors explain geographical and temporal variation in green tax burdens by considering their domestic and international determinants modeling international influences using spatial lags hypotheses are tested using panel data on organisation for economic co operation and development member states from 1995 to 2004 at the domestic level the authors show that green tax burdens are influenced by the left right and environmental positions of legislative medians and the power of the energy producing sector among other factors the authors also show that ideas about policy diffuse through international networks generated by trade and environmental intergovernmental organizations but they do not find compelling evidence for intern

vertical integration and dis integration of computer firms a history friendly model of the co evolution of the computer and semiconductor industries in this article we present a history friendly model of the changing vertical scope of computer firms during the evolution of the computer and semiconductor industries the model is history friendly in that it attempts at replicating some basic stylized qualitative features of the evolution of vertical integration on the basis of the causal mechanisms and processes which we believe can explain the history these factors are identified in the coevolution of capabilities the size of markets and the structure of industries in particular the basic assumption is that the principal force behind the patterns of vertical integration and disintegration of computer firms was the differential development of capabilities for designing and producing semiconductors among firms on this basis the changing boundaries of firms are analyzed in the context of dynamic and uncertain technological and market environments characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress the model illustrates how the patterns of vertical integration and specialization in the computer industry change as a function of the evolving levels and distribution of firms capabilities over time and how they depend on the coevolution of the upstream and downstream sectors specific conditions in each of these markets the size of the external market the magnitude of the technological discontinuities the lock in effects in demand exert critical effects and feedbacks on market structure and on the vertical scope of firms as time goes by copyright 2008 oxford university press

environmental taxes and first mover advantages this paper studies whether governments prefer to be leaders or followers in environmental policies to analyze this question i assume transboundary pollution and two countries that have to decide whether to set environmental taxes sequentially or simultaneously when taxes are set sequentially an effect denoted as the sequential setting effect arises that raises the equilibrium taxes i show that whether governments prefer to be leaders or followers in taxes depends on the degree to which environmental pollution spills over to trading partners when this overspill is low enough taxes are strategic complements and both the leader and the follower obtain greater welfare than under a simultaneous tax setting however the leader country obtains greater welfare than the follower in this case governments set taxes sequentially when the degree to which environmental pollution spills over to trading partners is high enough taxes are strategic substitutes and governments set taxes simultaneously in this case each government wants to avoid becoming the follower in taxes

spatial climate economic models in the design of optimal climate policies across locations we couple a one dimensional energy balance climate model with heat transportation across latitudes with an economic growth model we derive temperature and damage distributions across locations and optimal taxes on fossil fuels which in contrast to zero dimensional integrated assessment models account for cross latitude externalities we analyze the impact of welfare weights on the spatial structure of optimal carbon taxes and identify conditions under which these taxes are spatially nonhomogeneous and are lower in latitudes with relatively lower per capita income populations we show the way that heat transportation affects local economic variables and taxes and locate sufficient conditions for optimal mitigation policies to have rapid ramp up initially and then decrease over time

carbon prices for the next hundred years this paper examines the socially optimal pricing of carbon emissions over time when climate change impacts are unknown potentially high consequence events the carbon price tends to increase with income but learning about impacts or their absence decouples the carbon price from income growth the price should grow faster than the economy if the past warming is not substantial enough for learning the true long run social cost it grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so a quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years

how do governments actually use environmental taxes this paper empirically examines how governments actually use environmental taxes by looking to what extent their resort to this type of taxation is consistent with three alternative interpretation

optimal taxes on fossil fuel in general equilibrium we analyze a dynamic stochastic general equilibrium dsge model with an externality through climate change from using fossil energy our central result is a simple formula for the marginal externality damage of emissions or equivalently for the optimal carbon tax this formula which holds under quite plausible assumptions reveals that the damage is proportional to current gdp with the proportion depending only on three factors i discounting ii the expected damage elasticity how many percent of the output flow is lost from an extra unit of carbon in the atmosphere and iii the structure of carbon depreciation in the atmosphere thus the stochastic values of future output consumption and the atmospheric co2 concentration as well as the paths of technology whether endogenous or exogenous and population and so on all disappear from the formula we find that the optimal tax should be a bit higher than the median or most well known estimates in the literature we also formulate a parsimonious yet comprehensive and easily solved model allowing us to compute the optimal and market paths for the use of different sources of energy and the corresponding climate change we find coal rather than oil to be the main threat to economic welfare largely due to its abundance we also find that the costs of inaction are particularly sensitive to the assumptions regarding the substitutability of different energy sources and technological progress

asymmetric tax policy responses in large economies with cross border pollution we build a model of cross border pollution between two large open economies one importing the polluting good and the other exporting it and derive their non cooperative trade and environmental tax policies we show among other things that 1 in response to a bilateral reduction in trade taxes by both countries the former country s optimal policy is to lower its nash emissions tax while the latter s is to raise it and 2 in response to an increase in emissions tax rates by both countries the former country s optimal reaction is to raise its nash import tariff while the latter s is to reduce its nash export tax that is in the present context freer trade leads the exporting country to adopt stricter while the importing country laxer environmental tax policies

climate engineering under deep uncertainty abstract climate engineering and in particular solar radiation management srm is attracting increasing attention as a climate policy option however its potentially strategic nature and unforeseen side effects provide major policy and scientific challenges we study the role of srm in a two country model with the notable feature of deep uncertainty modeled as model misspecification of srm side effects we find that deep uncertainty leads to a reduction in srm deployment under both global cooperation and strategic nash behavior and that the effect is larger if countries act strategically furthermore we demonstrate that if countries have different model confidence about srm impacts then the more confident country will engage more strongly in using srm leading this country to free drive

the political economy of trade liberalization and environmental policy a pressure group model where environmental and industry lobby groups offer political support in return for favorable pollution tax policies is used to explain and predict the equilibrium pollution tax in sectors protected by tariffs the political economy effects of trade liberalization are investigated the pollution tax is shown to decrease if the lobbying effort by the environmental lobby decreases more rapidly than by the industry lobby ceteris paribus the level of political conflict falls with trade liberalization pollution may increase because of a reduction of the pollution tax and tax revenues may fall simultaneously as pollution increases the global trading system is currently undergoing another round of multilateral trade liberalization and regional economic integration is occurring in several parts of the world the trade environment link has become an important part of trade liberalization talks it is commonplace for industry representatives to argue that less stringent environmental regulations give less developed countries ldcs a comparative advantage in pollution intensive goods and that industries with high abatement costs will migrate to ldcs environmentalists argue that international differences in environmental laws and regulations may be reduced to their lowest common denominator through political pressure this is not a fear of trade liberalization itself but of the effects of lower trade barriers on the political determination of environmental regulation

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

the political economy of pollution taxes in a small open economy abstract this paper develops a positive theory explaining pollution tax policy outcomes in a small open economy the equilibrium tax rate depends on lobby group membership the relative importance of lobbying activities and the tax elasticity of pollution the equilibrium properties are investigated the model is extended to incorporate pollution abatement and a pollution abatement subsidy we show that total pollution may be increasing in the pollution abatement subsidy rate this effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium

to ban or not to ban foreign lobbying and cross national externalities this paper studies the costs and benefits of foreign lobbying we show how and when foreign lobbying can help internalize cross national externalities we argue that this is an often overlooked benefit of foreign lobbying we also study under what conditions a constitutional rule banning foreign lobbying is in the national interest of a country a key factor in this calculus is whether the interests of foreign lobby groups and domestic unorganized groups coincide or not we illustrate the logic with examples from trade policy and environmental regulation bannir ou ne pas bannir lobbying etranger et effets externes transnationaux ce texte etudie les couts et avantages du lobbying etranger on montre quand et comment que le lobbying etranger peut aider a internaliser des effets externes transnationaux on suggere que c est souvent un avantage qu on est porte a negliger du lobbying etranger on etudie sous quelles conditions une regle constitutionnelle bannissant le lobbying etranger peut etre dans l interet national d un pays un facteur cle dans ce calcul est le fait que les interets des groupes etrangers coincident ou non avec ceux des groupes nationaux non organises on illustre la logique sous jacente a l aide d exemples portant sur la politique commerciale et la reglementation environnementale

political economy of the kyoto protocol the kyoto protocol negotiated in december 1997 is the first international treaty to limit emissions of greenhouse gases but kyoto does not mark the conclusion to international cooperation on climate change it is really just a beginning this paper shows that in the aggregate the benefits of undertaking the kyoto reductions should exceed the corresponding costs provided these are achieved cost effectively but although kyoto seeks to promote cost effectiveness it may yet prove very costly moreover the agreement may not even achieve the reductions that it promises either because emissions will relocate to the countries that are not required to stay within kyoto prescribed ceilings or because paper trades will be promoted by the protocol s mechanisms more fundamentally kyoto does not deter non compliance and it only weakly deters non participation these flaws need to be mended but the nature of the problem makes that an especially difficult task copyright 1998 by oxford university press

green lobbies and transboundary pollution in large open economies abstract we employ a common agency model of policy making to examine how green lobbies affect the determination of trade and environmental policies in two large countries that are linked by trade flows and transboundary pollution we show that the impact of green lobbying on environmental policy outcomes depends crucially on the prevailing trade regime cooperative or non cooperative on whether environmental agencies act in a unilateral or coordinated manner and on the size of the emission leakages and transboundary spillovers under free trade a unilateral increase in pollution taxes reduces domestic emissions at the cost of increased foreign emissions in this case if the emission leakages and the associated transboundary spillovers are large enough green lobbying can create a bias towards lower pollution taxes

optimal climate change mitigation under long term growth uncertainty stochastic integrated assessment and analytic findings abstract economic growth over the coming centuries is one of the major determinants of today s optimal greenhouse gas mitigation policy at the same time long run economic growth is highly uncertain this paper is the first to evaluate optimal mitigation policy under long term growth uncertainty in a stochastic integrated assessment model of climate change the sign and magnitude of the impact depend on preference characteristics and on how damages scale with production we explain the different mechanisms driving optimal mitigation under certain growth under uncertain technological progress in the discounted expected utility model and under uncertain technological progress in a more comprehensive asset pricing model based on epstein zin weil preferences in the latter framework the dominating uncertainty impact has the opposite sign of a deterministic growth impact the sign switch results from an endogenous pessimism weighting all of our numeric scenarios use a dice based assessment model and find a higher optimal carbon tax than the deterministic dice base case calibration

the economy climate change and infectious diseases links and policy implications this short paper provides a modeling framework for unifying the economy climate change and the outbreak of infectious diseases such as the recent covid 19 pandemic we stress that continuous growth of consumption activities capital accumulation and climate change could increase the potential of the epidemic its contact number or the probability of its arrival this framework of analysis allows us to think of infectious disease policies in two stages in the short run containment policies like social distancing could help to stop the epidemic in the medium and the long run economic policies could help to reduce the potential of the epidemic or the probability of its emergence

global warming and a potential tipping point in the atlantic thermohaline circulation the role of risk aversion the risk of catastrophes is one of the greatest threats of climate change yet conventional assumptions shared by many integrated assessment models such as dice lead to the counterintuitive result that higher concern about climate change risks does not lead to stronger near term abatement efforts this paper examines whether this result still holds in a refined dice model that employs the epstein zin utility specification and that is fully coupled with a dynamic tipping point model describing the evolution of the atlantic thermohaline circulation thc risk is captured by the possibility of a future collapse of the circulation and it is nourished by fat tailed uncertainty about climate sensitivity this uncertainty is assumed to resolve in the middle of the second half of this century and the near term abatement efforts which are undertaken before that point of time can be adjusted afterwards these modelling choices allow posing the question of whether aversion to this specific tipping point risk has a significant effect on near term policy efforts the simulations however provide evidence that it has little effect for the more likely climate sensitivity values a collapse of the circulation would occur in the more distant future in this case acting after learning can prevent the catastrophe implying the remarkable insensitivity of the near term policy to risk aversion for the rather unlikely and high climate sensitivity values the expected damage costs are not great enough to justify taking very costly measures to safeguard the thc our simulations also provide some indication that risk aversion might have some effect on near term policy if inertia limiting the speed of decarbonisation is accounted for as it is highly uncertain how restrictive this kind of inertia will be future research might investigate the effects of risk aversion if additional uncertainty about inertia is considered