Understanding the Improbable: A Survey of Fat Tails in Environmental Economics

We survey the growing literature on fat-tailed distributions in environmental economics. We then examine the theoretical and statistical properties of such distributions, focusing especially on when these properties are likely to arise in environmental problems. We find that a number of variables are fat tailed in environmental economics, including the climate sensitivity, natural disaster impacts, spread of infectious diseases, and stated willingness to pay. We argue that different fat-tailed distributions arise from common pathways. Finally, we review the literature on the policy implications of fat-tailed distributions and controversies over their interpretation. We conclude that the literature has made great strides in demonstrating when fat tails matter for optimal environmental policy. Yet, much is less well understood, including how alternative policies affect fat-tailed distributions, the optimal policy in a computational economy with many fat-tailed problems, and how to account for imprecision in empirical tests for fat tails. Expected final online publication date for the Annual Review of Resource Economics, Volume 13 is October 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

Rational ideas of new Enlightenment project and the contours of achieving a safe future

The authors of this article reveal the main risks and dangers of a consumer society that has turned reason into a utilitarian means of violence against nature, which can be overcome on the way to the new Enlightenment based on the implementation of the strategy of sufficient development and the formation of a noospheric worldview. Substantiates the idea that to overcome the ecological difficulties in the relationship between man and nature purely technical means is just one of the necessary conditions for achieving a sustainable future the essence of the new Enlightenment as a prerequisite for the harmonization of relations between society and nature through the implementation of adequate strategy of development and implementation of an optimal environmental policy in overcoming the crisis and combining actions for progressive development and security into a single system.

The Strategic Use of Innovation to Influence Environmental Policy: Taxes versus Standards

This paper evaluates the strategic behavior of a polluting monopolist to influence environmental policy, either with taxes or with standards, comparing two alternative policy games. The first of the games assumes that the regulator commits to an ex-ante level of the policy instrument. The second one is the time-consistent policy game. We find that the strategic behavior of the firm is welfare improving and leads to more environmental innovation than under regulatory commitment if a tax is used to control pollution. However, the contrary occurs if an emission standard is used. Under commitment, it is shown that both policy instruments are equivalent. We conclude that the optimal environmental policy is to use an emission tax since it yields the same welfare level than an emission standard for a committed regulator yet a larger welfare for a non-committed regulator.