the short term impact of a domestic cap and trade climate policy on local agriculture a policy simulation with producer behavior this study is intended to develop understanding of possible impact of a domestic cap and trade climate policy on local agriculture we focus the study on the transition period after the policy has raised input prices for production but before establishment of new equilibrium in agricultural commodity markets we construct a policy simulation model based on production economics that explicitly considers producer behavior in the focal period we apply the model to a production region in the us to quantify the impact of different levels of carbon price on production cost production value and farm income our case study shows that 1 producers have ability to alleviate the cost impact 2 producers may benefit by selling carbon credits in the carbon market but the revenue is likely to be limited 3 the economic return of farm production is critical to the impact assessment 4 the impact may vary across producers and 5 regulation on the fertilizer industry is an important policy element that can influence the assessment of the impact this study has important implications for climate policy design

secondary forests as temporary carbon sinks the economic impact of accounting methods on reforestation projects in the tropics abstract tropical forestry is often not competitive with agricultural land uses such as pasture for cattle ranching additional revenues from carbon sequestration generated by the clean development mechanism cdm of the kyoto protocol can change this situation in three different zones of north western ecuador minimum compensation payments for carbon sequestration were determined which would make reforestation a feasible land use alternative based on our findings that these minimum prices depend on the net benefit of the respective land use alternatives and on the accounting regimes for cdm sink projects we applied the accounting rules for temporary and long term certified emission reductions cer to two reforestation projects forest plantation and natural regrowth of secondary forest a comparison of these alternatives showed that secondary forest is an attractive alternative under both accounting regimes because of its low establishment costs and relative early timber revenues after identifying the zone most suitable for carbon sink projects we calculated net benefits of land use changes in the event that certain prices for emission reductions were actually paid we found that secondary forest becomes economically attractive if the price of permanent credits is above 4 5 tco 2 whereas forest plantations require permanent cer prices of 7 0 tco 2 in both cases the results are within the price margins forecasted by various institutions for the first commitment period of the kyoto protocol the presented methodology is meant to support the decision making process on the supply side of a future cer market opportunity costs of land use changes have to be analyzed carefully before deciding in favor of long binding forestry projects assigning temporary credits to naturally regrown secondary forests could although excluded from cdm during the first commitment period combine the advantages of a flexible accounting regime with the positive economic and ecological effects of this competitive land use

institutional determinants of success among forestry based carbon sequestration projects in sub saharan africa summary this paper contributes to the debate on the economic and social implications of carbon forestry through the study of 42 programs in africa using carbon offset payments to fund tree planting activities such projects may be understood as multi layered collective action problems growing trees for carbon offsets requires not only international financial incentives to plant trees but also local institutions to monitor impose sanctions and distribute benefits consistent with economic theories large projects appear to realize economies of scale contrary to expectations community based projects on lower quality sites often successfully generate and sell offsets while private for profit initiatives appear susceptible to collapse

forest management under fire risk when forest carbon sequestration has value abstract we develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire an empirical application is provided for a forest owner producing maritime pine in southwest of france our results indicate that a higher risk of fire will decrease the optimal rotation period on the contrary higher carbon prices increase the optimal harvesting age to investigate the contradictory effects of fire risk and carbon price on forest rotation we identify the set of carbon prices and fire risks that lead to a given rotation age we also show that forest owner s willingness to pay for a risk reduction can be substantial 37 33 euros by ha and by year to reduce the annual fire risk from 1 26 to 0 07

health and democracy in spite of the inexorable march of democracy around the globe just how democratic institutions a ect human well being is open to debate the evidence that democracy promotes prosperity is neither strong nor robust moreover which aspects of policy making and human well being are promoted by democracies is still a subject of debate 1 even if correlations between democracy and outcome measures can be found there is an overriding di culty of interpreting them as causal e ects whether democracy matters per se or simply serves as a proxy for societal and political development presents a di cult problem for research in this area thinkers such as lipset 1959 have argued that democracy can thrive only when conditions are right if this is correct then becoming democratic may only serve as a proxy for these hard to measure cultural and societal preconditions this paper explores these issues further by reconsidering the link between democracy and health using panel data from a cross section of countries the

carbon subsidies taxes and optimal forest management we consider the effect of carbon credit payment schemes on forest owners land use and harvest decisions we study two possible credit allocation regimes one where credits are allocated according to the actual amount of carbon sequestered by the trees on a piece of land and another where credits are allocated according to the long run potential to sequester carbon on the land using a real options model with uncertain future timber prices we examine the effect on the timing of harvests and the replanting abandonment decision we show that both schemes discourage deforestation compensating growers for actual carbon sequestration leads to longer rotation periods between harvests while basing compensation only on the long run potential level of sequestration induces shorter rotation periods the former scheme leads to greater benefits of carbon sequestration at lower cost than the latter scheme although inducing moderate levels of sequestration is expensive under both schemes the cost falls dramatically when the level of payments climbs above some threshold indeed providing the payments are sufficiently generous carbon credit payment schemes offer an effective means of increasing carbon sequestration

global potential for carbon sequestration geographical distribution country risk and policy implications abstract we have provided a framework for identifying least cost sites for afforestation and reforestation and deriving carbon sequestration cost curves at a global level in a scenario of limited information special attention is given to country risk in developing countries and the sensitivity to spatial datasets our model results suggest that within 20 years and considering a carbon price of us 50 tc tree planting activities could offset 1 year of global carbon emissions in the energy sector however if we account for country risk considerations associated with political economic and financial risks carbon sequestration is reduced by approximately 60 with respect to the geography of supply illustrated by grid scale maps we find that most least cost sites are located in regions of developing countries such as the sub sahara southeast brazil and southeast asia

on the impossibility of informationally efficient markets comment in a recent paper in this review sanford grossman and joseph stiglitz challenge the efficient markets notion that in an asset market at any time prices fully reflect all available information p 404 the purpose of this comment is to argue that certain theorems and comments of grossman and stiglitz do not necessarily follow when an error in the specification of the informed trader s demand function for the risky asset is corrected in theorem 5 b p 401 grossman and stiglitz show that when informed traders have perfect information concerning a risky asset s yield no overall equilibrium will exist that is there will be no equilibrium value for the proportion of informed traders x inspection of equations 8 8 and 9 p 396 helps to give intuitive reasons why this is so if no individual purchases an observation of the information point 0 that is if x 0 then for a sufficiently small value of c the cost of obtaining an observation of the information point 0 an individual could increase his expected utility by purchasing the information if some fraction of traders purchase the information point 0 that is if x 0 from equation 8 it is seen that as 0 2 0 as informed traders obtain better information small movements in 0 have a nearly infinite effect upon the informed trader s demand for the risky asset and hence upon the asset s price thus according to grossman and stiglitz for a fixed x 0 as q2 0 the price system becomes perfectly informative as to the informed trader s observation of 0 thus for x 0 and a 2 0 no individual will wish to purchase 0 at cost c but for xa c2 0 and small c it pays an individual to purchase 0 clearly then for q 2 0 no equilibrium exists equation 8 plays a crucial role in theorem 5 b however equation 8 ignores the fact that x1i the ith informed trader s demand for the risky asset is constrained by his wealth woi in fact if the informed trader has perfect information so that 0 is the return on the risky asset then the informed trader simply invests in the asset with the higher yield thus for ue2 0 equation 8 ought to read

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

how feasible is carbon sequestration in korea a study on the costs of sequestering carbon in forest in recent years carbon sequestration has become a more attractive policy in korea due to the increasing trend of marginal cropland and enhanced public awareness on adverse climate change phenomena this study aims to calculate the unit costs of carbon sequestration programs through afforestation in korea and examine the cost effectiveness of programs the basis of our simulation is an econometric land use share model and province level of aggregated panel data are used for model estimation four scenarios are considered depending on whether the program includes the harvest and which tree species are planted the approach of sequestration program is to pay the landowners to convert their lands to forest for a period of time in exchange of fixed annual payment in addition to tree establishment cost our results show that the unit cost varies from 122 to 486 per ton of carbon stored depending on the scenarios and payment levels we found that the carbon sequestration can be a cost effective mitigation policy in korea although it is not the least cost option

addressing climate change with a comprehensive us cap and trade system there is growing impetus for a domestic us climate policy that can provide meaningful reductions in emissions of carbon dioxide co2 and other greenhouse gases i describe and analyse an up stream economy wide co2 cap and trade system which implements a gradual trajectory of emissions reductions with inclusion over time of non co2 greenhouse gases and includes mechanisms to reduce cost uncertainty initially half of the allowances are allocated through auction and half through free distribution with the share being auctioned gradually increasing to 100 per cent over 25 years the system provides for linkage with emission reduction credit projects in other countries harmonization over time with effective cap and trade systems in other countries and regions and appropriate linkage with actions taken in other countries in order to establish a level playing field among domestically produced and imported products

creating incentives for the adoption of sustainable agricultural practices in developing countries the role of soil carbon sequestration sustainable agricultural development is widely acknowledged as a critical component in a strategy to combat both poverty and environmental degradation yet sustainable agricultural development remains an elusive goal particularly in many of the poorest regions of the world soil degradation continues to be a key factor in unsustainable production systems despite decades of research on soil conservation and other sustainable practices hudson scherr barrett place and aboud sanchez various studies stress the role played by resource poor farmers in human induced natural resource degradation bruntland commission reardon and vosti barbier the prevailing economic explanation for the continuing trend toward resource degradation in many parts of the world is that economic incentives often encourage degradation and discourage conservation these incentive problems have been attributed to poor farmers high discount rates lack of capital markets high transport costs and other market imperfections adverse government policies insecure property rights and limited availability of fodder for grazing or fuel for cooking and heating e g lutz pagiola and reiche heath and binswanger from this perspective the challenge facing researchers and policy analysts is to understand the factors and processes causing the use

spatial heterogeneity contract design and the efficiency of carbon sequestration policies for agriculture abstract in this paper we develop methods to investigate the efficiency of alternative contracts for carbon c sequestration in cropland soils taking into account the spatial heterogeneity of agricultural production systems and the costs of implementing more efficient contracts we describe contracts being proposed for implementation in the united states and other countries that would pay farmers for adoption of specified practices per hectare contracts we also describe more efficient contracts that would pay farmers per tonne of soil c sequestered and we show how to estimate the costs of implementing these more efficient contracts in a case study of a major agricultural region in the united states we confirm that the relative inefficiency of per hectare contracts varies spatially and increases with the degree of spatial heterogeneity the results also show that per hectare contracts are as much as five times more costly than per tonne contracts a degree of inefficiency similar to that found in assessments of command and control industrial emissions regulations measurement costs to implement the per tonne contracts are found to be positively related to spatial heterogeneity but are estimated to be at least an order of magnitude smaller than the efficiency losses of the per hectare contract for reasonable error levels this finding implies that contracting parties could afford to bear a significant cost to implement per tonne contracts and achieve a lower total cost than would be possible with the less efficient per hectare contracts

hot air in kyoto cold air in the hague the failure of global climate negotiations abstract why did the climate negotiations in the hague fail our contribution is to argue that the conflict between the european union eu and the united states us stems mainly from disagreement on the cost issue we argue that the three main concerns promoted by the eu in the hague first a 50 national emission ceiling the supplementarity principle second the use of carbon sinks and third an international market control system these issues can be solved by removing all restrictions on free greenhouse gas ghg trade and by establishing the world trade organization as an international authority the us will face considerably higher costs than foreseen at the negotiations in kyoto and will have strong incentives to free ride our main hypothesis is that the eu proposal on supplementarity made the us turn to free riding thus to make the us stay in an international ghg emission trading scheme the eu must reconsider and acknowledge us claims for cheaper reduction options and the right to trade hot air this point is important if the us does not participate the increase in emissions will be much higher than the emission reduction following the eu supplementarity proposal

afforestation and timber management compliance strategies in climate policy a computable general equilibrium analysis abstract this paper analyzes the role of forest based carbon sequestration in a unilateral eu27 emissions reduction policy under a global computable general equilibrium cge framework forestry mitigation is introduced into the model relying on carbon sequestration curves provided by a global forestry model the structure of the original cge is extended to consider land use change and timber supply effects resulting from the use of forest sinks to reduce carbon emissions results show that afforestation and timber management could lead to substantially lower policy costs by using forest carbon sinks it is possible to achieve the 30 emissions reduction target with an additional european effort of only 0 2 of gdp compared with the cost of a 20 emissions reduction without forestry carbon price is also reduced by approximately 30 in 2020 european forest carbon sequestration may have however the perverse effect of increasing timber production in areas of the world which already have high deforestation rates a sensitivity analysis on main parameters confirms the robustness of our results

has democratization reduced infant mortality in sub saharan africa evidence from micro data does democracy help babies survive in sub saharan africa by using retrospective fertility surveys conducted in 28 african countries i compare the survival of infants born to the same mother before and after democratization to disentangle the effect of democracy from that of changes in population characteristics which is infeasible with country level statistics on infant mortality i find that infant mortality falls by 1 2 percentage points 12 of the sample mean after democratization in the post cold war period relevant aspects of democracy appear to be the combination of multiparty elections and leadership change

efficiency of second generation biofuel crop subsidy schemes spatial heterogeneity and policy design policy schemes that aim to stimulate the cultivation of biofuel crops typically ignore the spatial heterogeneity in costs and benefits associated with their production because of spatial heterogeneity in biophysical and current agricultural production factors potential gains from stimulating biofuel crops are non uniformly distributed across space this paper explores implications of this type of heterogeneity for the net benefits associated with different subsidy schemes we present a simple framework based on discounted cash flows to assess potential gains from introducing the notion of heterogeneity into stimulation schemes we show that agricultural subsidy spending can be reduced in a pareto efficient way and simultaneously improve the total stimulation potential of biofuel policies when schemes 1 are production based instead of land based 2 accommodate differences in opportunity costs and 3 target sites where subsidies for conventional agricultural land use types are high these results are robust for a range of different bioenergy prices and the relative gains of addressing these key elements in policy compared to conventional stimulation schemes increase with lower bioenergy prices and are largest when low prices coincide with high emission reduction ambitions

enduring impacts of land retirement policies evidence from the conservation reserve program we examine the persistence of cropland retirements induced by the conservation reserve program crp the largest u s conservation program we analyze micro data on observed land use choices following crp contract expiration over 1995 1997 and predict that 42 of crp acres would not have been returned to crops within a year if the program had expired in 1997 these results indicate that temporary cropland retirement payments under crp generate land use changes that often extend beyond contract periods the analysis suggests that targeted signing bonuses for first time enrollees would increase the longer term impacts of crp and perhaps other incentive based land use programs

disease and development the effect of life expectancy on economic growth we exploit the major international health improvements from the 1940s to estimate the effect of life expectancy on economic performance we construct predicted mortality using preintervention mortality rates from various diseases and dates of global interventions predicted mortality has a large impact on changes in life expectancy starting in 1940 but no effect before 1940 using predicted mortality as an instrument we find that a 1 percent increase in life expectancy leads to a 1 7 2 percent increase in population life expectancy has a much smaller effect on total gdp however consequently there is no evidence that the large increase in life expectancy raised income per capita

the additionality problem with offsets optimal contracts for carbon sequestration in forests abstract carbon offsets are a frequently discussed tool for reducing the costs of an emissions reduction policy however offsets have a basic problem stemming from asymmetric information sellers of offsets have private information about their opportunity costs leading to concerns about whether offsets are additional non additional offsets can undermine a cap and trade program or if the government purchases them directly result in enormous government expenditures we analyze contracts for carbon sequestration in forests that mitigate the asymmetric information problem landowners are offered a menu of two part contracts that induces them to reveal their type under this scheme the government is able to identify ex post how much additional forest each landowner contributes and minimize ex ante its expenditures on carbon sequestration to explore the performance of the contracting scheme we conduct a national scale simulation using an econometric model of land use change the results indicate that for an increase in forest area of 61 million acres government expenditures are 5 3 billion lower under the contracting approach compared to a uniform subsidy offered to all landowners this compares to an increase in private opportunity costs of just 110 million dollars under the contracts thus the contracting scheme is preferable from society s perspective

speculation optimism and differential information speculative trading has for quite some time been an important question for at least two reasons firstly as a positive question of whether speculative behavior basically is caused by differences in information or by differences in aversion to risk secondly the question is related to the informational efficiency of decentralized market systems if access to information not currently available to the market makes possible a speculative profit the incentive to acquire information may be too excessive from a social point of view the aim of this paper is to clarify the relationship between information and speculation in his seminal article on information acquisition in decentralized market economies hirshleifer 12 showed that the private value of acquiring information depends critically on the speculative profits to be made from this information hirshleifer 12 distinguished between information foreknowledge which affects productive decisions and information which only has implications for exchange similarly fama and laffer 5 distinguish between operational information which improves a firms operating decisions and trading information which only affects trading decisions it is argued due to the speculative profits to be made from having access to information not available to the market that there are excessive private incentives to acquire information without any relevance for productive decisions

information diversity and market behavior the paper addresses two major issues raised by information diversity in a speculative market first we analyze what property of an investor s information leads to an expected speculative profit and show that independence is more important than accuracy second we consider whether the market price must become fully efficient in the sense that every investor s information is accurately discounted when traders use it rationally as an information source we prove that for any information structure there is a unique equilibrium weighting of investor beliefs at which the price is fully efficient and also every trader s expected profit is zero except for special structures however this equilibrium need not be attained in finite time much of modern capital market theory depends heavily on the assumption that investors know the expected values variances and covariances of asset returns although the assumption of homogeneous expectations is a conventional one and necessary for many theoretical results it is not one which can be offered with much confidence real world investors have access to differing information and may also disagree on the correct interpretation of widely held information when asset returns are assumed to be governed by a known probability distribution many features of trading in real world markets are eliminated from consideration there is no role for information gathering and no way for an investor to profit from having superior information indeed this term has no real meaning since all relevant information is contained in the known returns distribution speculative trading is also hard to explain without divergence of opinion a speculator who thought the market price impounded all available information would never trade against it with heterogeneous information we lose some of the neat results of standard capital market theory but new questions can be addressed about how information diversity among investors affects the markets in which they participate one issue concerns the impact of informational differences on investor profits investors who are better informed than others or are better able to evaluate widely held information should be able to earn higher returns all effort devoted to security analysis and market research depends on the belief that this is so but what makes one investor s information superior to another s beyond the circular observation that those investors with consistent profits must be better informed than those with losses do investors with inferior information however measured continually lose money until they are squeezed out of the market or can an

slippage in the conservation reserve program or spurious correlation a rejoinder the conservation reserve program crp pays farmers about 2 billion per year to retire cropland under ten to fifteen year contracts recent research by wu found that slippage an unintended stimulus of new plantings offsets some of crp s environmental benefits wu does not account for the endogeneity of crp enrollments furthermore the data used by wu cannot be used to estimate slippage arising from a price feedback effect we replicate wu s findings demonstrate the possible presence of spurious correlation and construct new estimates with corrections for endogeneity and other econometric problems we find no convincing evidence of slippage

explaining irrational land use risk aversion and marginal agricultural land abstract when land users make dynamic land conversion decisions to maximize profits persistent dedication of marginal land to agricultural uses can be explained as a consequence of risk aversion and expected capital gains land conversion increases in response to cost sharing rental payments and technical assistance that reduces uncertainty about land benefits when correlation between benefits is nonpositive risk aversion leads the land user to diversify land among uses unless subsidy payments outweigh the sum of risk and capital gains costs payments which appear potentially successful may fail when payments succeed the cost of accomplishing acreage targets may be higher than anticipated

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

options uncertainty and sunk costs an empirical analysis of land use change abstract in a real option model of land conversion incorporating return uncertainty and sunk costs optimal conversion thresholds are significantly higher than those from expected net present value models not accounting for these factors empirical tests of conversion from agriculture to forest suggest that landowners value the option to convert when making conversion decisions higher uncertainty in returns to all potential uses and lower correlation between shocks to agricultural and forest returns decreases the likelihood of conversion estimates indicate a significant impact on conversion decisions with approximations of option values ranging from 7 to 81 of the expected value of the land asset

modeling linkages between climate policy and land use an overview agriculture and forestry play an important role in emitting and storing greenhouse gases for an efficient and cost effective climate policy it is therefore important to include land use land use change and forestry lulucf explicitly in economy climate models this article gives an overview and assessment of existing approaches to include lulucf into partial and general equilibrium economy climate models for each class of models we describe different examples their treatment of land and their potential for and applicability to policy analysis as well as their shortcomings we identify data requirements and conceptual problems and provide suggestions for future research

conservation payments under risk a stochastic dominance approach conservation payments can be used to preserve forest and agroforest systems to explain landowners land use decisions and determine appropriate conservation payments it is necessary to focus on revenue risk marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates an empirical application to shaded coffee protection in the biologically important choco region of west ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk neutral assumptions further the extant distribution of land has strong impacts on the required payments

dynamic incentives of environmental regulations the effects of alternative policy instruments on technology diffusion abstract we develop a framework for comparing empirically the effects of alternative environmental policy instruments on the diffusion of new technology market based and command and control approaches can he quantitatively compared by estimating the economic penalty that firms through their actions reveal to be associated with violation of standards in the context of concerns about global climate change we empirically examine the likely effects of pigouvian taxes technology adoption subsidies and technology standards we employ state level data on the diffusion of thermal insulation in new home construction comparing the effects of energy prices insulation cost and building codes

the social costs of second best policies evidence from agricultural ghg mitigation abstract this paper investigates the social costs of second best agricultural greenhouse gas ghg mitigation policies adjustments along the land use and input intensity margins are represented within a regionalized optimization model of california crop production calibrated to economic and agronomic information second best policies relying on spatially aggregated ghg emission factors lead to small abatement efficiency losses while policies targeting a single ghg lead to moderate losses in contrast policies targeting a single input entail large abatement efficiency losses which nonetheless can be reduced by combining instruments

designing efficient markets for carbon offsets with distributional constraints abstract this paper presents an assessment of the relative efficacy of three key instruments baselines trade ratios and limits which are under policy discussion in the design of carbon offset programs we rank the instruments by their implications for total emissions economic efficiency and efficiency gain relative to a distributional transfer from capped to uncapped sectors we find that the baseline is the best instrument for maximizing welfare as it directly reduces the share of offsets that are non additional and that second best policies do not sacrifice much welfare relative to the standard first best policy prescription

climate change interactions with agriculture forestry sequestration and food security climate change can negatively affect crop productivity decreasing food production in many regions across the world literature suggests forest carbon sequestration fcs is a good alternative to mitigate climate change due to its ability to sequester carbon at low cost nevertheless fcs subsidies have not been addressed together with impacts on food security and climate change reduced crop yields in our multidisciplinary work we collected the crop yield shocks from global circulation crop modeling we also developed a new version of a computable general equilibrium model for the economic analysis thus we evaluate the global economic impacts of using carbon taxes and fcs to achieve 50 emission reductions we find that implementing an aggressive fcs incentive can cause substantial increases in food prices because of land competition between forest and crop production without climate induced yield reductions fcs is attractive but not with the yield reductions with the climate induced yield shocks food price increases are huge so large that it is clear this approach could not be adopted in the real world the results cry out for investment in agricultural research on climate adaptation our findings suggest economic well being falls more without mitigation than with 50 emission reductions

economic determinants of democracy the relationship between the level of economic development and the level of democracy found in most quantitative cross national research implies that the largest gains in democracy are experienced by countries at intermediate levels of development during the 1960s and 1970s however middle income countries were more likely to register declines in democracy than increases i explain this anomaly with the hypothesis that income inequality affects democracy and this effect often counteracts the positive influence of economic development because intermediate levels of economic development are associated with the highest levels of income inequality the independent negative effect of income inequality on change in level of democracy explains the declines in democracy in middle income countries cross national data from a sample of 58 countries support the hypothesis of a negative effect of income inequality on change in level of democracy from 1965 to 1980 this effect is robust when noneconomic determinants of democracy are taken into account and when sample size is increased

the costs of carbon sequestration a revealed preference approach increased concem by policy makers with the threat of global climate change has brought with it considerable attention to the possibility of encouraging the growth of forests as a means of sequestering carbon dioxide national academy of sciences nas 1992 james p bruce et al 1996 1 the kyoto protocol to the united nations framework convention on climate change 1997 which establishes emission reduction targets for the united states and other industrialized nations states that carbon sequestration can be used by participating nations to achieve their targets moreover even before the kyoto agreement this approach had become an explicit element of both u s and intemational climate policies u s department of energy 1991 united nations general assembly 1992 william j clinton and albert gore 1993 this high level of interest has been due in part to suggestions that sufficient lands are available to use the approach to mitigate a substantial share of annual carbon dioxide c02 emissions greg marland 1988 daniel a lashof and dennis a tirpak 1989 mark c trexler 1991 and claims that growing trees to sequester carbon is a relatively inexpensive means of combating climate change roger a sedjo and allen m solomon 1989 daniel j dudek and alice leblanc 1990 nas 1992 in other words the serious attention given by policy makers to carbon sequestration can partly be explained by implicit assertions about respective marginal cost functions i develop and demonstrate a method by which the costs of carbon sequestration can be estimated on the basis of evidence from landowners behavior when confronted with the opportunity costs of alternative land uses the simplest of previous economic analyses derived single point estimates of average costs associated with particular sequestration levels marland 1988 sedjo and solomon 1989 dudek and leblanc 1990 edwin s rubin et al 1992 omar masera et al 1995 often it has been assumed that land opportunity costs are zero g van kooten et al 1992 j k winjum et al 1992 new york state energy office 1993 robert k dixon et al 1994 another set of studies essentially engineering costing models has constructed marginal cost schedules by using information on revenues and costs of production for altemative uses on representative types or locations of land and then sorting these in ascending order of cost robert j moulton and kenneth r richards 1990 richards et al 1993 simulation models include a model of the lost profits due to removing land from agricultural production peter j parks and ian w hardie 1995 a mathematical programming model of the agricultural sector and the timber market richard m adams et al 1993 a related model incorporating the effects of agricultural price support programs j m callaway and bruce mccarl 1996 and a dynamic simulation model of forestry susan swinehart 1996 lastly an analysis by andrew j plantinga 1995 adopts land use elasticities from an econometric study to estimate sequestration costs we draw on some of the best features of the previous studies including the carbon levelization method of moulton and richards john f kennedy school of government harvard university 79 john f kennedy street cambridge ma 02138 and resources for the future richard newell supplied excellent research assistance and valuable comments on a previous version were provided by lawrence goulder william nordhaus andrew plantinga kenneth richards two anonymous referees participants in seminars at the universities of california at los angeles and santa barbara the university of maryland the university of michigan the university of texas harvard university stanford university yale university resources for the future and the national bureau of economic research the author alone is resdonsible for any errors 1 after fossil fuel combustion deforestation is the second largest source of carbon dioxide emissions estimates of annual global emissions from deforestation range from 0 6 to 2 8 billion tons compared with slightly less than 6 0 billion tons annually from fossil fuel combustion cement manufacturing and natural gas flaring combined r a houghton 1991 t m smith et al 1993

the global configuration of a speculative trading operation an empirical study of foreign exchange trading this paper proposes a theory of firm boundaries based on fore knowledge development and exploitation in speculative or informed trading foreign exchange trading provides this study s empirical context from research on information economics we suggest optimal speculative trading operations are multiunit and globally dispersed alternatively transaction cost economics suggests atomistic actors prevail in the market for fungible commodities like currencies we also develop competing hypotheses about information technology s effects on foreign exchange trading operations speculation arguments predict that the global scope of trading operations will expand after the introduction of generic information technologies transaction cost economics proposes that when atomistic actors do not prevail trading operations will contract after this introduction we test competing predictions with models of the expansion contraction and net change in a firm s global dispersion we estimate these models with data from the population of banks worldwide engaged in interbank foreign exchange currency fx trading from 1974 to 1993 our results uncover two types of firms those that approach the atomistic actor of transaction cost economics and those that resemble the globally dispersed multiunit configuration from our speculation discussion these results encourage reflection on how the theory of the firm differs when firms trade to produce versus speculate

deforestation in the amazon a unified framework for estimation and policy analysis deforestation is a matter of pressing global concern yet surprisingly little is known about the relative efficacy of various policies designed to combat it this article sets out a framework for measuring the cost effectiveness of alternative policies both command and control and incentive based in the brazilian amazon first i estimate the demand for deforestation on private properties exploiting regional variation in transportation costs as a means to recover farmers responses to permanent policies here rescaling transportation costs using local yields allows me to express changes in farmers valuations in dollars per hectare i then use the estimated demand to infer farmers willingness to deforest under different counterfactual policies such as payments to avoid deforestation and taxes on land use along with the corresponding potential farmers lost surpluses the results indicate that payment programmes and land use taxes on agricultural land can be highly effective in preserving the rainforest and also be substantially less expensive than command and control policies approximately 8 times less costly a carbon tax equal to the social cost of carbon could virtually eliminate all agricultural land in the amazon given the low agricultural returns there

comparative democracy the economic development thesis in comparative politics an established finding that economic development fosters democratic performance has recently come under challenge we counter this challenge with a dynamic pooled time series analysis of a major but neglected data set from 131 nations the final generalized least squares autoregressive moving averages estimates n 2 096 appear robust and indicate strong economic development effects dependent in part on the nation s position in the world system for the first time rather hard evidence is offered on the causal relationship between economics and democracy according to granger tests economic development causes democracy but democracy does not cause economic development overall the various tests would seem to advance sharply the modeling of democratic performance

permanent and temporary policy incentives for conservation under stochastic returns from competing land uses rapid conversion of private land for agricultural and urban use has raised concern worldwide over the loss of ecological services to inform conservation policy we model privately optimal land use decisions using a real options framework that assumes both the ecological and commercial values of land are stochastic and that land conversion is irreversible we analyze permanent and temporary land conservation policy incentives using this dynamic framework to guide policy makers interested in designing efficient payment mechanisms to achieve ecological preservation goals we find that while the financial cost of temporary policy incentives is generally much lower than permanent policy incentives this difference is very small in scenarios with high discount rates and lower uncertainties in conversion returns and lower expected trend in conservation returns alternately the financial cost of temporary conservation is substantially lower than that of permanent conservation when the expected trend in conservation returns and uncertainties in conservation and conversion returns is high and the discount rate is low comparison with net present value and single source uncertainty models indicates that the presence of a second uncertainty increases the option value of delaying conversion and shows that permanent and temporary policy incentives based on either of the two simpler models can be seriously misguided if multiple uncertainties are present we illustrate the analytical results with a case study of tropical deforestation in indonesia where private landowners can either conserve forests and earn carbon credits or convert to palm oil agriculture and earn profits from the sale of palm oil

are renewable energy policies climate friendly the role of capacity constraints and market power abstract this paper studies the impacts of renewable energy support policies on energy prices fossil fuel supply and thus carbon emissions from fossil fuels such supports are climate friendly if the renewables are already competitive against fossil fuels but if the renewables are not yet competitive the climate change impacts are often ambiguous and are sensitive to capacity constraints of renewables production and to the fossil fuel market structure if the renewables do not have capacity constraints then the subsidies are subject to the green paradox under perfect competition but might be climate friendly under monopoly supports for capacity constrained renewables under perfect competition lead to more current fossil fuel supply but delay fossil fuel exhaustion time and these effects are reversed under monopoly our results highlight the importance of considering the long term effects on fossil fuel supply as well as capacity constraints and market power in designing renewable energy policies and evaluating their carbon footprints

renewable resources with endogenous age classes and allocation of land it is shown that if it is optimal to allocate all land to forestry the long run stationary state is a cyclical solution around an equilibrium with an even timber flow the equilibrium cycles vanish when it is optimal to allocate some fraction of land outside forestry we present numerical examples on the transitional dynamics and long and short run timber supply when land conversion is costly the cycles do not vanish and the long run equilibrium between forestry and agriculture is represented by a continuum

forestry and the carbon market response to stabilize climate abstract this paper investigates the potential contribution of forestry management in meeting a co2 stabilization policy of 550 ppmv by 2100 in order to assess the optimal response of the carbon market to forest sequestration we couple two global models an energy economy climate model for the study of climate policies is linked with a detailed forestry model through an iterative procedure to provide the optimal abatement strategy results show that forestry is a determinant abatement option and could lead to significantly lower policy costs if included linking forestry management to the carbon market has the potential to alleviate the policy burden of 50 ppmv or equivalently of 1 4 c and to significantly decrease the price of carbon biological sequestration will mostly come from avoided deforestation in tropical forest rich countries the inclusion of this mitigation option is demonstrated to crowd out some of the traditional abatement in the energy sector and to lessen induced technological change in clean technologies

economic potential of biomass based fuels for greenhouse gas emission mitigation use of biofuels diminishes fossil fuelcombustion thereby also reducing net greenhousegas emissions however subsidies are neededto make agricultural biofuel productioneconomically feasible to explore the economicpotential of biofuels in a greenhouse gasmitigation market we incorporate data onproduction and biofuel processing for thedesignated energy crops switchgrass hybridpoplar and willow in an u s agriculturalsector model along with data on traditionalcrop livestock production and processing andafforestation of cropland net emissioncoefficients on all included agriculturalpractices are estimated through crop growthsimulation models or taken from the literature potential emission mitigation policies ormarkets are simulated via hypothetical carbonprices at each carbon price level theagricultural sector model computes the newmarket equilibrium revealing agriculturalcommodity prices regionally specificproduction input use and welfare levels environmental impacts and adoption ofalternative management practices such asbiofuel production results indicate no rolefor biofuels below carbon prices of 40 perton of carbon equivalent at these incentivelevels emission reductions via reduced soiltillage and afforestation are more costefficient for carbon prices above 70 biofuels dominate all other agriculturalmitigation strategies

mortality decline human capital investment and economic growth abstract we examine the role of increased life expectancy in raising human capital investment during the process of economic growth we develop a continuous time overlapping generations model in which individuals make optimal schooling investment choices in the face of a constant probability of death we present analytic results followed by results from a calibrated version of the model using realistic estimates of the return to schooling mortality decline produces economically significant increases in schooling and consumption allowing schooling to vary endogenously produces a much larger response of consumption and capital to mortality decline than is observed when schooling is held fixed

land based greenhouse gas emission offset and leakage discounting this paper examines leakage from agricultural greenhouse gas reduction programs stimulated by reductions in regional commodity supply this paper develops an extension of the leakage discount formula in murray et al 2004 that incorporates changes in input land usage rather than product output crop or forest product quantity additionally the leakage discount developed here allows for land conversion and production replacement involving multiple alternative uses in an empirical application in the southeast texas we compute leakage discounts of 14 8 for the conversion of rice to no till sorghum and 14 9 for rice to pasture program most of the sources of ghg offset leakage come from conversions of cotton to rice and pasture to rice in the other regions

research needs and challenges in the few system coupling economic models with agronomic hydrologic and bioenergy models for sustainable food energy and water systems on october 12 13 a workshop funded by the national science foundation was held at iowa state university in ames iowa with a goal of identifying research needs related to coupled economic and biophysical models within the few system approximately 80 people attended the workshop with about half representing the social sciences primarily economics and the rest from the physical and natural sciences the focus and attendees were chosen so that findings would be particularly relevant to sbe research needs while taking into account the critical connectivity needed between social sciences and other disciplines we have identified several major gaps in existing scientific knowledge that present substantial impediments to understanding the few system we especially recommend research in these areas as a priority for future funding 1 economic models of decision making in coupled systems deliberate human activity has been the dominant factor driving environmental and land use changes for hundreds of years while economists have made great strides in modeling and understanding these choices the coupled systems modeling literature with some important exceptions has not reflected these contributions several paths forward seem fruitful first baseline economic models that assume rationality can be used much more widely than they are currently moreover the current generation of iams that include rational agents have emphasized partial equilibrium studies appropriate for smaller systems to allow this approach to be used to study larger systems the potential for and consequences of general equilibrium effects should be studied as well second it is important to address shortcomings in these models of economic decision making valuable improvements could be gained from developing coupled models that draw insights from behavioral economics many decision makers deviate systematically from actions that would be predicted by strict rationality but very few iams incorporate this behavior potentially leading to inaccurate predictions about the effects of policies and regulations improved models of human adaptation and induced technological change can also be incorporated into coupled models particularly for medium to long run models decisions about adaptation and technological change will have substantial effects on the conclusions and policy implications but more compelling methods for incorporating these changes into modeling are sorely needed in addition some economic decisions are intrinsically dynamic yet few coupled models explicitly incorporate dynamic models economic models that address uncertainty in decision making are also underutilized in coupled models of the few system 2 coupling models across disciplines despite much recent progress established models for one component of the few system often cannot currently produce outcomes that can be used as inputs for models of other components this misalignment makes integrated modeling difficult and is especially apparent in linking models of natural phenomena with models of economic decision making economic agents typically act to maximize a form of utility or welfare that is not directly linked to physical processes and they typically require probabilistic forecasts as an input to their decision making that many models in the natural sciences cannot directly produce we believe that an especially promising approach is the development of bridge models that convert outputs from one model into inputs for another such models can be viewed as application specific reduced form distillations of a richer and more realistic underlying model ideally these bridge models would be developed in collaborative research projects involving economists statisticians and disciplinary specialists and would contribute to improved understanding in the scientific discipline as well 3 model validation and comparison there is little clarity on how models should be evaluated and compared to each other both within individual disciplines and as components of larger iams this challenge makes larger integrated modeling exercises extremely difficult some potential ways to advance are by developing statistical criteria that measure model performance along the dimensions suitable for inclusion in an iam as well as infrastructure and procedures to facilitate model comparisons focusing on the models out of sample distributional forecasting performance as well as that of the iam overall is especially promising and of particular importance moreover applications of iams tend to estimate the effect of hypothetical future policy actions but there have been very few studies that have used these models to estimate the effect of past policy actions these exercises should be encouraged they offer a well understood test bed for the iams and also contribute to fundamental scientific knowledge through better understanding of the episode in question the retrospective nature of this form of analysis also presents the opportunity to combine reduced form estimation strategies with the iams as an additional method of validation

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

the informational effects of restrictions on short sales some empirical evidence in a world of heterogeneous investors a competitive financial market has two major functions first it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors this is the role which is analyzed in detail by the standard capital asset pricing model capm and its many extensions the second important market function is to aggregate the diverse information held by different investors into a single price most versions of the capm eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns exceptions which deal with some aspects of the problem are lintner 7 grossman 4 grossman and stiglitz 5 and figlewski 1 3

improving behavioral realism in hybrid energy economy models using discrete choice studies of personal transportation decisions hybrid energy economy models combine top down and bottom up approaches to explore behaviorally realistic responses to technology focused policies this research uses empirically derived discrete choice models to inform key behavioral parameters in cims a hybrid model the discrete choice models are estimated for vehicle and commuting decisions from a survey of 1150 canadians with the choice models integrated into cims we simulate carbon taxes gasoline vehicle disincentives and single occupancy vehicle disincentives to show how different policy levers can motivate technological change we also use the empirical basis for the choice models to portray uncertainty in technological change costs and emissions

from education to democracy the conventional wisdom views high levels of education as a prerequisite for democracy this paper shows that existing evidence for this view is based on crosssectional correlations which disappear once we look at within country variation in other words there is no evidence that countries that increase their education are more likely to become democratic

was weber wrong a human capital theory of protestant economic history max weber attributed the higher economic prosperity of protestant regions to a protestant work ethic we provide an alternative theory protestant economies prospered because instruction in reading the bible generated the human capital crucial to economic prosperity we test the theory using county level data from late nineteenth century prussia exploiting the initial concentric dispersion of the reformation to use distance to wittenberg as an instrument for protestantism we find that protestantism indeed led to higher economic prosperity but also to better education our results are consistent with protestants higher literacy accounting for most of the gap in economic prosperity

does poverty constrain deforestation econometric evidence from peru this paper examines the relationship between income and land clearing for households living in tropical forest regions a simple model of the agricultural household that clears land for agriculture is developed to investigate the relationship between lagged income and cleared land holdings analysis of panel data from peru suggests that lagged income is positively correlated with clearing though at a decreasing rate and because of labor market constraints clearing is positively correlated with household labor availability this work suggests that small increases in the incomes of the poorest are unlikely to reduce deforestation in this context

analysis of the carbon sequestration costs of afforestation and reforestation agroforestry practices and the use of cost curves to evaluate their potential for implementation of climate change mitigation abstract carbon sequestration in forest sinks is an important strategy to remove greenhouse gases and to mitigate climate change however its implementation has been limited under the clean development mechanism of the kyoto protocol which has not created the incentives for widespread implementation the objective of this paper is to analyze the sequestration costs of agroforestry afforestation and reforestation projects arps following a partial market equilibrium using average cost curves and economic break even analysis to identify the supply costs the modelling done in this work contrasts the voluntary and clean development mechanism transaction costs data is based on the voluntary project scolel te being implemented in mexico cost curves are developed for seven different sequestration options considering transaction and implementation costs information from agricultural production in chiapas mexico is used to integrate opportunity costs of two agroforestry practices suggesting that sequestration costs may follow a u shape with an initial reduction due to economies of scale and a subsequent increase caused by high opportunity costs the widespread implementation of agroforestry options not requiring complete land conversion e g living fences and coffee under shade might be cost effective strategies not generating high opportunity costs results also suggest that payments in the early years of the project and lower transaction costs favour the development of arps in the voluntary market especially in marginal rural areas with high discount rates

how costly is mitigation of non co2 greenhouse gas emissions from agriculture a meta analysis this text reviews the assessments of marginal abatement costs of methane and nitrous oxide emissions from agriculture we use agricultural emissions and the corresponding prices collected from 21 studies that have assessed abatement potentials and costs using various modeling approaches and assumptions we first highlight the implications of the modeling approach for marginal abatement costs harmonized abatement rates for three emission prices 10 20 and 50 2005 tco2eq are regressed on variables that reflect various modeling assumptions and study characteristics in a second step the emission price is introduced as an explanatory variable when controlling for a few key characteristics of the studies the models explain an important share of the observed variability in abatement rates the type of modeling approach is found to have a significant effect in particular we find that equilibrium models lead to higher abatement rates for a given price the flexibility in nitrogen use and its effect on crop yields also plays a significant role in lowering marginal abatement costs the results of the second step indicate that the price elasticity of the abatement rate is about 0 6 this estimate is found to be robust to several specifications and consistent with previous assessments covering other economic sectors

biofuel economics in a setting of multiple objectives unintended consequences this paper examines biofuels from an economic perspective and evaluates the merits of promoting biofuel production in the context of the policies multiple objectives life cycle implications pecuniary externalities and other unintended consequences the policy goals most often cited are to reduce fossil fuel use and to lower greenhouse gas emissions but the presence of multiple objectives and various indirect effects complicates normative evaluation to address some of these complicating factors we look at a several combinations of policy alternatives that achieve the same set of incremental gains along the two primary targeted policy dimensions making it possible to compare the costs and cost effectiveness of each combination of policies for example when this approach is applied to u s produced biofuels they are found to be 14 31 times as costly as alternatives like raising the gas tax or promoting energy efficiency improvements the analysis also finds the scale of the potential contributions of biofuels to be extremely small in both the u s and eu mandated u s corn ethanol production for 2025 reduces u s petroleum input use by 1 75 and would have negligible net effects on co2 emissions and although eu imports of brazilian ethanol may look better given the high costs of other alternatives this option is equivalent at most to a 1 20 reduction in eu gasoline consumption

rural land use traditional agriculture or forestry the signing of the kyoto protocol and the official recognition of forestry s capacity to sequester carbon has prompted considerable interest within the european union in forestry as a competing land use application however despite large increases in grants to forestry afforestation rates in certain eu countries are below national targets in this paper we employ a real options model to theoretically explain why farmers may be slow to switch land from traditional agriculture to forestry the theoretical model is then used to motivate an empirical dynamic panel data model and both models are applied to irish data

the economic consequences of substituting carbon payments for crop subsidies in u s agriculture there is a growing body of literature on the costs of sequestering carbon however no studies have examined the interplay between farm commodity programs and carbon sequestration programs this study investigates two dimensions of the interaction between farm commodity programs and afforestation programs using a price endogenous sector model of agriculture in the united states first this study compares the fiscal and welfare costs of achieving specific carbon targets through afforestation with and without current farm programs second it examines the welfare fiscal and carbon consequences of replacing existing farm subsidies wholly or in part with payments for carbon two approaches hicksian and marshallian are investigated in the first the sector model is used to quantify the carbon consequences and fiscal costs associated with various combinations of farm commodity and carbon sequestration programs that leave consumers and producers in the u s agricultural sector no worse off than under existing farm programs the second approach focuses on the carbon and welfare consequences of various farm commodity and carbon sequestration programs that hold total program fiscal costs constant at current levels althouth the methodology and data are applied to the united states the issues addressed are common in a number of developed nations particularly within the european union eu adapting existing sector models in these nations to perform similar analyses would provide policy makers with more precise information about the nature of the trade offs involved with second best policies for replacing farm commodity subsidies with tree planting subsidies

confronting the food energy environment trilemma global land use in the long run economic agronomic and biophysical drivers affect global land use so all three influences need to be considered in evaluating economically optimal allocations of the world s land resources a dynamic forward looking optimization framework applied over the course of the coming century shows that although some deforestation is optimal in the near term in the absence of climate change regulation the desirability of further deforestation is eliminated by mid century although adverse productivity shocks from climate change have a modest effect on global land use such shocks combined with rapid growth in energy prices lead to significant deforestation and higher greenhouse gas emissions than in the baseline imposition of a global greenhouse gas emissions constraint further heightens the competition for land as fertilizer use declines and land based mitigation strategies expand however anticipation of the constraint largely dilutes its environmental effectiveness as deforestation accelerates prior to imposition of the target

permanence discounting for land based carbon sequestration abstract one major concern regarding land based carbon sequestration involves the issue of permanence sequestration may not last forever and may either be released in the future or require expenditures to maintain the practices that keep it sequestered in this paper we investigate the differential value of offsets in the face of impermanent characteristics by forming a price discount that equalizes the effective price per ton between a perfect offset and one possessing some with impermanent characteristics we find this discount to be a function of the future needs to replace offsets in the face of lease expiration quantity or volatilization upon activities such as timber harvest and the magnitude of any needed maintenance costs we investigate the magnitude of the discounts under alternative agricultural tillage and forest management cases in those studies we find that permanence discounts in the range of 50 are not uncommon this means that in the market place an impermanent sequestration offset may only receive payments amounting to 50 of the market carbon price furthermore we find that in the face of escalating carbon prices that offsets may prove to be worthless

energy environment policy modeling of endogenous technological change with personal vehicles combining top down and bottom up methods abstract the transportation sector offers substantial potential for greenhouse gas ghg emission abatement but widely divergent cost estimates complicate policy making energy economy policy modelers apply top down and bottom up cost definitions and different assumptions about future technologies and the preferences of firms and households our hybrid energy economy policy model is technology rich like a bottom up model but has empirically estimated behavioral parameters for risk and technology preferences like a top down model unlike typical top down models however it simulates technological change endogenously with functions that relate the financial costs of technologies to cumulative production and adjust technology preferences as market shares change we apply it to the choice of personal vehicles to indicate first the effect on cost estimates of divergent cost definitions and second the possible response to policies that require a minimum market share for low emission vehicles

revisiting the modernization hypothesis longevity and democracy summary modernization theory claims that changes in economic fundamentals like e g income per capita and education levels affect the political structure of a country in a causal way as an important marker of development life expectancy can also be conjectured to have a direct effect on political structures in this paper we estimate the impact of improvements in life expectancy on democracy for the purpose of identification we use data from the international epidemiological transition to construct an instrument for life expectancy we find a statistically and economically significant positive causal effect of improvements in life expectancy on democracy

the causes of tropical deforestation in ecuador a statistical analysis abstract this paper reports a statistical analysis of the causes of agricultural colonization and land clearing in eastern ecuador the results bolster many of the arguments that have been made about the social forces driving tropical deforestation in general the prospect of capturing agricultural rents stimulates settlement of tree covered hinterlands accordingly the presence of roads and urban centers attracts rural settlement colonists also prefer to go where soils are suitable for crop or livestock production all else remaining the same in addition to being a function of population pressure the extent of land clearing is shown to be a consequence of tenure insecurity these results suggest that institutional reform is needed to encourage conservation of tropical forests

stochastic carbon sinks for combating carbon dioxide emissions in the eu abstract this paper carries out numerical calculations on the potential of carbon sinks in the eu emissions trading scheme ets and national commitments under conditions of stochastic carbon dioxide emissions from fossil fuels and carbon sequestration by forests chance constraint programming is used to analyze the role of stochastic carbon sinks for national and eu wide compliance costs the analytical results show that the inclusion of the carbon sink option can reduce costs for low enough marginal cost and risk discount but also that costless carbon sinks as by products from forestry are not part of a cost effective solution under a high reliability concern cost savings are reduced due to risk discounting under a reliability concern in particular when assigning chebyshev s inequality as compared with a normal probability distribution it is also shown that the supply of forest sinks on the market depends on the differences in marginal abatement cost between the trading and the non trading sectors and in risk discounting between achievements of the ets cap and the national commitment relatively low marginal abatement cost in the non trading sector and high risk discounting of national commitment achievements increase the supply of sinks in the market and hence reduces the equilibrium price the empirical application illustrates the importance of risk discounting for the magnitude of cost savings obtained from introducing forest carbon sinks in the eu ets and national commitments

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

incentives for carbon sequestration using forest management this research uses an econometric model to analyze the factors affecting non industrial private forest landowners choice of intermediate forest management practices and to examine how these choices might change in response to incentives for carbon sequestration we also use parameter estimates to simulate the carbon sequestration potential for different combinations of management practices and compare the effectiveness and costs of carbon sequestration based and practice based incentive payment schemes our results suggest that incentive payments increase the probability that desirable combinations of management practices are adopted simulation results indicate that incentives targeting fertilization yield the highest carbon sequestration potential and that a carbon based payment scheme produces higher carbon sequestration than a practice based payments scheme

unintended impacts of public investments on private decisions the depletion of forested wetlands by affecting relative economic returns infrastructure investments can induce major changes in private land use the authors find that 30 percent of forested wetland depletion in the mississippi valley has resulted from private decisions induced by federal flood control projects despite explicit federal policy to preserve wetlands the model aggregates individual land use decisions using a parametric distribution of unobserved land quality dynamic simulations are used to quantify the impacts on wetlands of federal projects and other factors copyright 1990 by american economic association

carbon sequestration or abatement the effect of rising carbon prices on the optimal portfolio of greenhouse gas mitigation strategies abstract existing projections of the optimal share of carbon sequestration in an overall portfolio of greenhouse gas mitigation strategies almost all assume the carbon price to be constant over time this paper shows analytically that if the price instead increases over time consistent with projections from integrated assessment models it becomes optimal to delay certain sequestration projects whereas the optimal timing of energy based abatement projects remains unchanged as a result the optimal share of sequestration falls and significantly so calibrating our analytical model we find that a modest 3 rate of price increase results in about a 60 reduction in the optimal sequestration share relative to constant price projections numerical simulations based on predicted carbon price paths from nordhaus rice01 model indicate quantitatively similar reductions under an economically efficient scenario and much larger reductions 80 100 for up to 80 years under a scenario that aims to limit the atmospheric co 2 concentration to double its pre industrial level