What is the growth potential of green innovation? An assessment of EU climate policy options

This paper provides a model-based analysis of the cost-efficiency of different EU climate policy options that could direct innovation in the private sector towards an environmentally sustainable growth path. Our objective is to assess different policy options in order to identify an appropriate policy-mix of environmental and innovation market instruments in terms of their cost-effectiveness. For this purpose, we develop a fully-dynamic, multisectoral DSGE model with endogenous technological change where we specifically identify its environmental content and we calibrate the model for the EU and the rest of the world. Our results suggest that an appropriate policy mix should intensively stimulate R&D in the green sectors in the short-run and phase-it out by spreading the R&D support to all sectors of the economy in the medium-term. Although intuitive, the orders of magnitude presented in this paper should be interpreted with caution by taking into account the underlying assumptions of the model and identification of green innovation data.Carbon revenue recycling, climate change, directed technical change, double dividend, dynamic general equilibrium model, endogenous growth, R&D

Improving the Foreign Direct Investment Capacity of the Mountainous Provinces in Viet Nam

The main purpose of this research is to suggest policies to improve the foreign direct investment attraction capacity in Northern Mountainous Provinces of Vietnam in short and medium-term. Though this region has huge potentials to develop, but poor infrastructure, remote location and bad FDI climate have hindered the FDI inflows. This research focuses on FDI climate factors, pays attention on region’s constraints, and suggests policy for three levels consisting of national, regional and provincial levels.Vietnam, International investment, Long-term capital movements, Foreign investments, Local economy, Foreign Direct Investment (FDI)

Carbon taxes, the greenhouse effect, and developing countries

The authors evaluate the case for carbon taxes in terms of national interests. They reach the following conclusions. (A) A global carbon tax involves issues of international resource transfers and would be difficult to administer and enforce. It is thus unlikely to be implemented in the near future. (b) National carbon taxes can raise significant revenues cost-effectively in developing countries and are not likely to be as regressive in their impact as commonly perceived. Such taxes can also enhance economic efficiency if introduced as a revenue-neutral partial replacement for corporate income taxes or in cases where subsidies are prevalent. The welfare costs of carbon taxes generally vary directly with the existing level of energy taxes, so a carbon tax should be an instrument of choice for countries such as India and Indonesia, which have few or no energy taxes. A carbon tax can significantly reduce local pollution and carbon dioxide emissions. Cost-benefit analysis shows countries with few or no energy taxes substantially gaining from carbon taxes in terms of an improved local environment. A carbon tax of $10 a ton produces very small output losses for Pakistani industries analyzed in this paper, and the output losses are fully offset by health benefits from reduced emissions of local pollutants - even ignoring the global implications of a reduced greenhouse effect. Tradable permits are preferable to carbon taxes where the critical threshold of the stock of carbon emission beyond which temperatures would rise exponentially is known. Given our current ignorance on the costs of reducing carbon emissions and the threshold effect, a carbon tax appears to be a better and more flexible instrument for avoiding large unexpected costs.Environmental Economics&Policies,Energy and Environment,Montreal Protocol,Carbon Policy and Trading,Public Sector Economics&Finance

Distortionary effects of state trading in agriculture : issues for the next round of negotiations

The Uruguay Round agreements on agriculture were intended to move member countries toward a fair and market-oriented agricultural trading system. By progressively reducing domestic government support and export subsidies, converting nontariff barriers to tariffs, and reducing barriers to market access, members were committed to reducing distortions in world agricultural trade and in preventing new distortions from arising. But state trading enterprises with monopoly power or exclusive rights in agricultural trade in major products are still prevalent in both industrial and developing countries. In many countries, the operations of these state trading agencies tend in practice to nullify the intended objectives of the concessions on market access reached in the Uruguay Round. And there are still significant price distortions in trade in products subject to state trading.Economic Theory&Research,Markets and Market Access,Payment Systems&Infrastructure,Environmental Economics&Policies,Rules of Origin,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Environmental Economics&Policies,Access to Markets,Markets and Market Access

Subsidizing the Federal German economy: Figures and facts, 1973-1984

Governmental policies of subsidizing the economy have become one of the most contentious issues on the international agenda throughout the past years. For a long time, the debate about the rights and wrongs of subsidization has often been conducted in the Federal Republic of Germany as though it were a peculiar non-German phenomenon rather applied by less market-oriented economies. Gradually, however, it is being realized how far this is from the truth, and that like many other countries the Federal Republic, too, established an intensive array of subsidy programmes. At the Kiel Institute quite a lot of efforts have been undertaken to investigate the volume, the structure, and the effect of German subsidization policy. Since most of those studies were published in German language and since many inquiries from an English reading public turned out to come in, this summarising paper was started to meet the international demand. Meanwhile, calculations were improved and figures were updated, thus slight differences as against previous publications do occur

Asset Booms and Tax Receipts: The case of Spain, 1995-2006

At about 3¾% for more than 10 years in a row, Spain is enjoying the longest period of sustained growth above the euro area since the late sixties. This period is also characterised by a combination of persistently low real interest rates and a dynamic demography, which has been feeding unprecedented growth in asset markets. In parallel, total-tax receipts have grown by about 4¼ percentage points of GDP, thus recording an elasticity with respect to GDP of 1.2. This paper discusses and assesses the extent to which the increase in tax receipts can be associated to changes in the composition of GDP, which would fade out after the current expansion tapers off. Econometric analyses provide evidence that 50 to 75 percent of the increase in tax revenues, observed in Spain between 1995 and 2006, might be of a transitory nature and would disappear with the asset boom. On this basis, in a context of significant composition effects, using standard tax elasticities may lead to an overestimation of structural revenues and to an incorrect assessment of the fiscal stance. This may be relevant in EMU because the likelihood of occurrence of asset booms may be relatively high when the monetary-policy stance is far from consistent with the country's inflation. Furthermore, in the specific case of Spain, the size of transitory composition effects associated to the current asset boom highlights the interest for the policymakers of the country to carefully assess the implementation of unfunded tax cuts and/or expenditure increases, especially those more difficult to revert in bad times.Fiscal policies, tax revenues, deficits, asset prices, composition effects, Spain, Martinez-Mongay, Maza Lasierra, Yaniz Igal

Assessment of the impact of the Economic Partnership Agreement between the ECOWAS countries and the European Union

The present study consists of eight sections. After the introduction, we present in the first section, the profile of the ACP-EU cooperation agreements from Lomé to Cotonou. We also show how a certain “grey areas” in the WTO rules on regional agreements can enable African countries to benefit more from the EPAs by taking advantage of greater flexibility. The next section presents some graphical data on Africa’s trade flows in general and on trade flows of ECOWAS in particular. The third section deals with the analytical framework in general equilibrium. It contains a presentation of the Global Trade Analysis Project (GTAP) model used for assessing the impact of different partnership agreement options. In the fourth section, we focus on the characteristics of African economies, which are drawn from the GTAP database and which play a key role in the operative interactions in this kind of liberalization. The fifth section deals with the analytical framework in partial equilibrium which is complementary to the general-equilibrium modelling. The assessments of the economic impacts of the EPAs for Africa, using the general-equilibrium model, are analysed in the sixth section, while those particularly concerning the ECOWAS countries, using the partial-equilibrium framework, are presented in the penultimate section. Finally, the last section comprises concluding remarks.EPA-European Union-Africa-Trade Policy

Computational Analysis of the Free Trade Area of the Americas (FTAA)

We use the Michigan Model of World Production and Trade to assess the economic effects of the Free Trade Area of the Americas (FTAA) that is currently being negotiated among the 34 countries in the region. The model covers 18 economic sectors in each of 22 countries/regions and is based on Version 5.4 of the GTAP database for 1997 together with specially constructed estimates of services barriers and other data on sectoral employment and numbers of firms. The distinguishing feature of the model is that it incorporates some aspects of trade with imperfect competition in the manufacturing and services sectors, including monopolistic competition, increasing returns, and product variety. The modeling focus is on the effects of the bilateral removal of tariffs on agriculture and manufactures and services barriers. Rules of origin and other restrictive measures and the non-trade aspects of the FTAA are not taken into account due to data constraints. The computational results indicate that the FTAA would increase the economic welfare of the FTAA member countries by $118.8 billion, with the largest increases accruing to the United States,$67.6 billion, and to South America, $31.0 billion. The FTAA is trade diverting for most of the rest-of-world, with a welfare reduction of$9.3 billion. In comparison, if the FTAA countries were to adopt unilateral free trade, total FTAA member welfare would increase by $476.8 billion and global welfare by$812.7 billion. If multilateral free trade were adopted by all countries/regions in the global trading system, the welfare effects would be considerably larger, $751.2 billion for the FTAA members and$2.7 trillion globally.Trade liberalization, Globalization

Mitigating carbon emission through economic instruments: An Indian Perspective

EnergyEnergy ResourcesCarbon Emission