Lobbying for size and slice of the quota

The formation and allocation of an emission quota are analyzed in a common agency framework with two stages. First, the principals lobby for the size of the aggregate quota. Second, the principals lobby for the individual slices of the quota. It is shown that the slices are allocated such that the marginal profits of the principals are equalized and that the size of the aggregate quota is either set at the efficient level characterized by the Samuelson’s rule for public goods or distorted from that level. When the quota is distorted from the efficient level it is set such that the aggregate marginal profit is less than the marginal damage, resulting in an overallocation of individual and aggregate quotas. However, efficient level of the quota is obtained in a reasonable special case in which countries take the role of the principals. The results are extended to cover tradable emission permits.

Strategic environmental policy and international market share rivalry under differentiated Bertrand oligopoly

We analyse strategic environmental policies under international Bertrand oligopoly when firms in different industries, located in different countries, produce differentiated products. Under cooperation, emission prices always exceed the joint marginal damage from pollution. Under non-cooperation, internationally nontradable and tradable emission permit prices are always higher than the domestic marginal damage from emissions (the Pigovian tax); emission taxes can also exceed the Pigovian tax. The non-cooperative emission prices under all instruments can exceed the joint pollution damage. Internationally tradable permits generate outcomes closest to cooperation — they result in the lowest pollution and the highest welfare among all instruments under non-cooperation. Pollution is the highest and welfare the lowest with taxes. Our results provide support for allowing international trade in emission permits even when governments choose their permit levels non-cooperatively.

ENVIRONMENTAL POLICY OF RENEWABLE ENERGY INDUSTRY UNDER OPEN CONDITIONS

<p>Renewable energy has two environmental externalities: one is the positive externality as an alternative to fossil energy consumption; the other is the negative externality with its production process consuming fossil energy. If the domestic renewable energy products export to foreign country with not only generating but importing renewable energy, what the environmental policy of both domestic and foreign governments should be? To this end, this paper establishes a renewable energy trade model of the two countries having only one firm for each other. Under the Cournot competition, the results show: first, if the two governments have no cooperation, the best environmental policy for domestic government would be taxation, but not necessarily the Pigouvian tax; foreign government not only impose on foreign manufacturer equal to pollution marginal damage, but also subsidize it over the marginal revenue of renewable energy; Second, if the two governments cooperate, the joint pollution tax is Pigouvian tax equal to the marginal damage of total pollution emissions, while joint subsidy is higher than the marginal revenue of total renewable energy.</p>

Estimation of Damage Cost to Building Façades per kilo Emission of Air Pollution in Norway

This work reports marginal damage costs to façades due to air pollution exposure estimated “bottom up,” for Norway and Oslo (Norway) by the use of exposure response functions (ERFs) and impact pathway analysis from the emission to the deteriorating impact. The aim of the work was to supply cost estimates that could be compared with reported damage costs to health, agriculture, and ecosystems, and that could be used in cost-benefit analysis by environmental authorities. The marginal damage costs for cleaning, repair, and in total (cleaning + repair) were found to be, in Norway: eight, two, and 10, respectively, and for a traffic situation in Oslo: 50 (77), 50 (28), and 100 (105), (×/÷ 2.5) Euro/kg emission of PM10, SO2, and NO2 in total. For Oslo, the values represent a recorded façade materials inventory for 17–18th century buildings, and in the brackets the same façade inventory as for Norway. In total, 5–10% of the marginal damage cost was found to be due to NO2. The total marginal cost was found to be shared about equally between the impact of PM10 and SO2 in Norway (50 and 42% of the impact) and for the 17–18th century buildings in Oslo (45% and 49% of the impact), but for a similar façade materials inventory in Oslo as Norway, the total marginal cost due to PM10 was about two-thirds and that due to SO2 about one-third of the total, with about 5% of the cost still being due to NO2. The division of the costs between the separate pollutant influences on the cleaning and repair was, however, found to be significantly different in Norway and Oslo. In Norway, about 60% of the marginal cleaning cost was found to be due to PM10, 30% due to SO2, and 10% due to NO2. In Oslo, about 85% of the marginal cleaning costs were found to be due to PM10, 10% due to SO2, and 5% due to NO2. For the marginal repair cost, the opposite situation was found, in both Norway and Oslo, with 80–90% of the cost being due to SO2, 5–10% being due to PM10, and 5–10% due to NO2. As other factors than air pollution deteriorates façades and influences maintenance decisions, the expenses that can be attributed to the air pollution could be significantly lower.

COMPARATIVE ANALYSIS OF EMISSION REDUCTION TARGETS TOWARD INDC IMPLEMENTATION IN MALAYSIA, INDONESIA AND THAILAND BY 2050

Global warming is becoming increasingly evident as greenhouse gas emissions increase worldwide and affect the environment, health and economy. Many Southeast Asian countries face this reality and hence they are concerned about setting and achieving an effective emission reduction strategy. As such, this study analyzes and compares emission reduction targets on selected Southeast Asian countries, including Malaysia, Indonesia and Thailand, by using a long-run Regional Dynamic Integrated Model of the Climate and Economy (RdICME). This study considers the comparative outcomes of BAU (Business as Usual: base case) and INDC (Intended Nationally Determined Contributions) scenarios for the 40-year period from 2010 to 2050. According to BAU scenario, carbon emissions are projected to gradually increase in all countries; however, if Malaysia, Indonesia and Thailand apply their INDC targets as agreed upon in the 2015 Paris Agreement, all three countries will experience significant emissions reductions after 2030. Specifically, by 2050, total emissions will be reduced by 33.88%, 42.50% and 41.68% in Malaysia, Indonesia and Thailand, respectively, if the countries implement their INDCs. According to the INDC targets, all three countries will experience a net reduction of per capita emission intensity by 2030 and onwards; however, Malaysia is projected to face lower marginal damage costs whereas Indonesia and Thailand will face higher marginal damage costs for 2010–2050. This study also finds that the amount of planned investment for INDC emissions reduction is currently insufficient to achieve planned targets. The findings from this study would help country-specific policymakers to oversee the likely gaps to be fulfilled within 2030–2050.

Challenging pollution and the balance problem from rare earth extraction: how recycling and environmental taxation matter

Rare earth element extraction induces environmental damages and the balance problem. In this article, we show that recycling can challenge both problems in a two-period framework. We also find other results depending on the amount of scrap that can be recycled. If the recycling activity is not limited by available scrap, it does not change extraction in the first period. Environmental taxes on extracted quantities reduce extraction and favor recycling. But if the recycling is limited, the extractor reduces extraction in period one, adopting a foreclosure strategy, and environmental taxes can decrease recycling. In all cases, environmental taxes are never equal to the marginal damage from pollution, in order to take into account the recycling effect.

Pollution and city size: can cities be too small?

We study optimal and equilibrium sizes of cities in a city system model with pollution. Pollution is a function of population size. If pollution is local or per-capita pollution increases with population, equilibrium cities are too large under symmetry; with asymmetric cities, the largest cities are too large and the smallest too small. When pollution is global and per-capita pollution declines with city size, cities may be too small under symmetry; with asymmetric cities, the largest cities are too small and the smallest too large if the marginal damage of pollution is large enough. We calibrate the model to US cities and find that the largest cities may be undersized by 3–4%.