Environmental policy negotiations, transboundary pollution and lobby groups in small open economies

This paper analyzes the consequences of lobby group activity for policy outcomes in economies with transboundary pollution and international environmental policies. In our framework, international environmental policies are characterized as pollution taxes determined in a negotiation between two countries. We find, among other things, that the presence of local lobbying tends to reduce the level of pollution taxes. We also find that an increase in the environmental concern (i.e. stronger preferences for a clean environment) may reduce the pollution tax in both countries. It is also possible that increased environmental concern in one country reduces the pollution tax in the other country.transboundary pollution; lobbying; taxes; pollution; Nash bargain; negotiations; environmental policy

Environmental regulation and competitiveness: Evidence from Romania

According to the pollution haven hypotheses differences in environmental regulation affect trade flows and plant location. Specifically, environmental stringency should decrease exports and increase imports of “dirty” goods. This paper estimates a gravity model to establish whether the implementation of more stringent regulations in Romania has indeed affected its competitiveness and decreased exports towards its European trading partners. Our findings do not provide empirical support to the pollution haven hypothesis, i.e. environmental stringency is not found to affect significantly total trade, or its components (pollution intensive trade and pollution intensive trade related to non-resource-based trade)

Polution linked to consumption: a study of policy instruments in an environmental differentiated oligopoly.

In this paper we evaluate tlle effeetiveness of alternative regulatory policies on redueing aggregate pollution in an environmental1y differentiated market. Two frrms frrst ehoose their environmental quality and then their priees in a market where eonsumers differ in their valuations of the environmental features of the produets. We frrst show that environmental standards may have an adverse impaet on aggregate pollution. Moreover, we fmd that a uniform ad-valorem tax rate unambiguously increases the level of pollution in the market. When the tax rate is set in favor of the environmentally eleaner produet, aggregate pollution deereases. Finally, direet subsidies on the abatement technology always decrease pollution.Aggregate pollution; Vertical Diferentiated Oligopoly; Environmental Consciousness; Environmental Policy;

Measuring the health effects of air pollution : to what extent can we really say people are dying from bad air?

Estimation of the effects of environmental impacts is a major focus of current theoretical and policy research in environmental economics. Such estimates are used to set regulatory standards for pollution exposure; design appropriate environmental protection and damage mitigation strategies; guide the assessment of environmental impacts; and measure public willingness to pay for environmental amenities. It is a truism that the effectiveness of such strategies depends crucially on the quality of the estimates used to inform them. However, this paper argues that in respect to at least one area of the empirical literature - the estimation of the health impacts of air pollution using daily time series data - existing estimates are questionable and thus have limited relevance for environmental decision-making. By neglecting the issue of model uncertainty - or which models, among the myriad of possible models researchers should choose from to estimate health effects - most studies overstate confidence in their chosen model and underestimate the evidence from other models, thereby greatly enhancing the risk of obtaining uncertain and inaccurate results. This paper discusses the importance of model uncertainty for accurate estimation of the health effects of air pollution and demonstrates its implications in an exercise that models pollution-mortality impacts using a new and comprehensive data set for Toronto, Canada. The main empirical finding of the paper is that standard deviations for air pollution-mortality impacts become very large when model uncertainty is incorporated into the analysis. Indeed they become so large as to question the plausibility of previously measured links between air pollution and mortality. Although applied to the estimation of the effects of air pollution, the general message of this paper - that proper treatment of model uncertainty critically determines the accuracy of the resulting estimates - applies to many studies that seek to estimate environmental effects

Testing Increasing Returns to Pollution Abatement in Pesticides

According to the Environmental Kuznets Curve (EKC) hypothesis, economic growth and the reduction of environmental degradation are compatible goals. An inverted U-shaped relationship between economic performance and environmental pollution suggests that, empirically, an economy is associated with smaller levels of pollution after some threshold income point. One potential explanation for the empirical evidence of an EKC is increasing returns to pollution abatement, where the abatement efficiency rises with an increase in the scale of abatement. Doubling the clean-up efforts more than doubles the abatement of pollution. As this efficiency gain makes abatement less expensive, pollution might fall as more abatement is undertaken. This study tests the hypothesis that there are increasing returns to abating pollution. Empirical evidence on environmental risks in the US agricultural sector since 1970 support the existence of increasing returns. In addition, I estimate the productivity of pollution abatement using refined empirical productivity measurement methods and explicitly control the level of technology. The results show the importance of including an environmental productivity variable in the EKC framework.Environmental Economics and Policy,

Double Irreversibility and Environmental Policy Design

The design of environmental policy typically takes place within a framework in which uncertainty over the future impact of pollution and two different kinds of irreversibilities interact. The first kind of irreversibility concerns the sunk cost of environmental degradation; the second is related to the sunk cost of environmental policy. Clearly, the two irreversibilities pull in opposite directions: policy irreversibility leads to more pollution and a less/later policy while environmental irreversibility generates less pollution and a more/sooner policy. Using a real option approach and an infinite time horizon model, this paper considers both irreversibilities simultaneously. The model first is developed by paying particular attention to the option values related to pollution and policy adoption. Solving the model in closed form then provides solutions for both the optimal pollution level and the optimal environmental policy timing. Finally, the model is "calibrated" with the purpose of appraising which irreversibility has the prevailing effect and what is the overall impact of both irreversibilities on pollution and policy design.Environmental Policy, Environmental Irreversibility, Policy Irreversibility

Pollution, mortality and optimal environmental policy

We study an overlapping generations economy in which environmental degradation results from economic activity and affects agents' uncertain lifetimes. Life expectancy depends positively on economic activity and negatively on the stock of pollution. This can make the growth-survival relationship convex over some region and lead to two non-trivial steady states, with one a poverty trap. Uniform abatement taxes can cause the poverty trap to widen while increasing incomes at the high steady state. We also study the properties and dynamics of an optimal second-best abatement tax. It is non-homogeneous and increasing in the capital stock, and leads to a variety of dynamic possibilities, including non-existence and multiplicity of steady states, and cycles around some of the steady states, where there were none under exogenous taxes. Thus, optimal taxes can be an independent source of non-linearities

Strategic Environmental Policy Under Free Trade with Transboundary Pollution

�We analyze the effects of trade liberalization on environmental policies in a strategic setting when there is transboundary pollution. Trade liberalization can result in�a race to the bottom in environmental taxes, which makes both countries worse off.�This is not due to the terms of trade motive, but rather the incentive, in a�strategic setting, to reduce the incidence of transboundary pollution. With command and control policies (emission quotas), countries are unable to influence foreign�emissions by strategic choice of domestic policy; hence, there is no race to the bottom. However, with internationally tradable quotas, unless pollution is a pure global�public bad, there is a race to the bottom in environmental policy. Under free trade,�internationally nontradable quotas result in the lowest pollution level and strictly�welfare-dominate taxes. The ordering of internationally tradable quotas and pollution�taxes depends, among other things, on the degree of international pollution spillovers.Free trade; Transboundary pollution; Strategic environmental policy; Carbon leakage; Race to the bottom.

The relationships between corruption and pollution on corruption regimes

Previous studies have focused mainly on the effect of corruption on pollution. The results of these studies show an inverted U-shaped relationship between economic growth and pollution. In addition, some researchers have suggested that corruption plays an important role in determining pollution. This study proposes the hypothesis of a nonlinear long-run relationship between pollution and corruption. The goal of the study is to investigate the threshold cointegration effect of pollution on corruption using panel data for 62 countries over the period from 1997 to 2004. The results show that the effect of the Corruption Perceptions Index (CPI) on pollution is insignificant in low-corruption regimes. This implies that corruption does not slow down environmental pollution in countries with low corruption. The impact of the CPI on environmental pollution is also insignificant in high-corruption regimes. This result implies that corruption has no adverse impact on environmental pollution in countries with high corruption.Corruption, Pollution, Threshold, Error-Correction Model