Incentives for Environmental R&D

Since governments can influence the demand for a new abatement technology through their environmental policy, they may be able to expropriate innovations in new abatement technology ex post. This suggests that incentives for environmental R&D may be lower than the incentives for market goods R&D. This in turn may be used as an argument for environmental R&D getting more public support than other R&D. In this paper we systematically compare the incentives for environmental R&D with the incentives for market goods R&D. We find that the relationship might be the opposite: When the innovator is able to commit to a licence fee before environmental policy is resolved, incentives are always higher for environmental R&D than for market goods R&D. When the government sets its policy before or simultaneously with the innovator’s choice of licence fee, incentives for environmental R&D may be higher or lower than for market goods R&D.R&D, environmental R&D, innovations, endogenous technological change

Climate Policy without Commitment

Climate mitigation policy should be imposed over a long period, and spur development of new technologies in order to make stabilization of green house gas concentrations economically feasible. The government may announce current and future policy packages that stimulate current R&D in climate-friendly technologies. However, once climate-friendly technologies have been developed, the government may have no incentive to implement the pre-announced future policies, that is, there may be a time inconsistency problem. We show that if the government can optimally subsidize R&D today, there is no time inconsistency problem. Thus, lack of commitment is not an argument for higher current R&D subsidies. If the offered R&D subsidy is lower than the optimal subsidy, the current (sub-game perfect) climate tax should exceed the first-best climate tax.time consistency, carbon tax, climate policy, R&D, endogenous technological change

The Resource Rent in Norwegian Aquaculture from 1984 to 2020 – Is the Rent Ripe for Taxation?

This study uses the National Accounts and the definitions of the UN System of Environmental-Economic Accounting to calculate the resource rents in Norwegian aquaculture in the period 1984-2020. If we know the remuneration of all input factors such as capital, labour, and inter-mediates except the remuneration of the ecosystem services used in aquaculture, the resource rent will appear as the difference between the value of output and the remuneration of all other input factors. This resource rent is a combination of a Ricardian rent and regulation rent. To as-sess the size of the rent, we perform various sensitivity analysis as introducing higher rates of return, applying alternative wage costs and by treating the stock of growing fish as real capital. A robust conclusion is that there has been a significant resource rent in aquaculture since 2000 and that it has risen markedly since 2012. In the period 2016-2020 it has averaged 18-20 billion NOK per year. Hence, both from an allocative justice and economic efficiency perspective, the Norwegian aquaculture industry seems ripe for resource rent taxation.publishedVersio

Internalizing negative environmental impacts from wind power production: Coasian bargaining, offsetting schemes and environmental taxes

On the one hand, wind power production is necessary for decarbonizing the electricity sector. On the other hand, we risk replacing one environmental problem with other environmental problems, that is, stopping climate change in exchange with increased loss of pristine land and biodiversity. The present paper provides a novel contribution to the literature on how to regulate the development of wind power plants (WPPs). Current regulation is largely based on a concession system, where both environmental taxes and offset schemes are left unexplored. We develop a theoretical model of WPP development with offsets and environmental taxes. We show that if additional loss of pristine nature and biodiversity is acceptable at some monetary price, establishing an offset market for WPP development and combining it with an environmental tax will be socially desirable. In fact, this solution is preferable to both only having an environmental tax or only having a compulsory offset market. However, if no more loss of pristine land and biodiversity can be tolerated, compulsory and complete offsetting should be the norm. We look at two restoration projects in Norway and evaluate to what extent they could have been used as offsets for a recent WPP development in Norway. We conclude that they can, but an offset scheme demands good measurement methods and regulations to ensure equivalence in the values of ecosystem services lost and gaine

Sustaining Welfare for Future Generations: A Review Note on the Capital Approach to the Measurement of Sustainable Development

Measuring sustainable development based on analytical models of growth and development and modern methods of growth accounting is an economic approach—often called the capital approach – to establishing sustainable development indicators (SDIs). Ecological approaches may be combined with the capital approach, but there are also other approaches to establishing sustainable development indicators—for example the so-called integrated approach. A recent survey of the various approaches is provided in UNECE, OECD and Eurostat [1]. This review note is not intended to be another survey of the various approaches. Rather the objective of this paper is twofold: to present an update on an economic approach to measuring sustainable development—the capital approach—and how this approach may be combined with the ecological approach; to show how this approach is actually used as a basis for longer-term policies to enhance sustainable development in Norway—a country that relies heavily on non-renewable natural resources. We give a brief review of recent literature and set out a model of development based on produced, human, natural and social capital, and the level of technology. Natural capital is divided into two parts—natural capital produced and sold in markets (oil and gas)—and non-market natural capital such as clean air and biodiversity. Weak sustainable development is defined as non-declining welfare per capita if the total stock of a nation's capital is maintained. Strong sustainable development is if none of the capital stocks, notably non-market natural capital, is reduced below critical or irreversible levels. Within such a framework, and based on Norwegian experience and statistical work, monetary indexes of national wealth and its individual components including real capital, human capital and market natural capital are presented. Limits to this framework and to these calculations are then discussed, and we argue that such monetary indexes should be sustainable development indicators (SDIs) of non-market natural capital, and physical SDIs, health capital and social capital. Thus we agree with the Stiglitz-Sen-Fitoussi Commission [2] that monetary indexes of capital should be combined with physical SDIs of capital that have no market prices. We then illustrate the policy relevance of this framework, and how it is actually being used in long term policy making in Norway—a country that relies heavily on non-renewable resources like oil and gas. A key sustainability rule for Norwegian policies is to maintain the total future capital stocks per capita in real terms as the country draws down its stocks of non-renewable natural capital —applying a fiscal guideline akin to the Hartwick rule

Ressursrenten i naturressursnæringene i Norge 1984-2021

Norge er et land rikt på naturressurser. Ekstraordinær høy avkastning i en kommersiell sektor som baserer seg på en naturressurs omtales som grunnrente eller ressursrente. Denne rapporten bruker nasjonalregnskapstall fra Statistisk sentralbyrå for å undersøke om det har vært ressursrente i de naturressursbaserte næringene i perioden fra 1984 til 2021. Disse næringene omfatter kraftproduksjon, akvakultur, skogbruk, fiske og fangst, jordbruk, bergverk og olje- og gassutvinning. Holder vi jordbruket utenom ligger samlet gjennomsnittlig ressursrente for de fem siste årene i perioden 1984-2021 nesten 260 milliarder 2021-kroner over gjennomsnittet for de fem første årene. Holder vi også olje- og gassektoren utenom ligger samlet årlig ressursrente over 60 milliarder kroner høyere mot slutten i forhold til i begynnelsen av perioden. Det er særlig kraftproduksjon, akvakultur og fiske og fangst som har bidratt til denne økninge

Directed technical change and the resource curse

The "resource curse" is a potential threat to all countries relying on export income from abundant natural resources such as fossil fuels. The early literature hypothesized that easily accessible natural resources would lead to lack of technological progress. In this article we instead propose that abundance of fossil fuels can lead to the wrong type of technological progress. In order to inquire into our research question, we build a model of a small, open economy having specialized in export of fossil fuels. R&D in fossil fuel extraction technology competes with R&D in clean energy technologies. Moreover, technological progress is path dependent as current R&D within a technology type depends on past R&D within the same type. Finally, global climate policy may reduce the future value of fossil fuel export. We find that global climate policy may either lead to a resource curse or help the country escaping a potential resource curse. The ripeness of the clean energy technologies is essential for the outcomes: If the clean technology level is not too far beyond the fossil fuel technology, a shift to exporting clean energy is optimal independent of global climate policy and climate policy can accelerate this shift. While if the clean technology is far behind, a shift should only happen as a response to global climate policy, and the government should intervene to accelerate this shift

Optimal CO2 abatement and technological change : should emission taxes start high in order to spur R&D?

Abstract: Many European politicians argue that since technological development is needed to solve the climate problem, the EU should take the lead and set tougher emission targets than what is required by the Kyoto protocol. Moreover, emission trading with other countries outside EU should be limited so as to keep emission quota prices high. However, the policy of spurring R&D by setting high emission taxes today is not suggested by the literature on climate change and R&D. In this paper we investigate this result further by modeling innovation activity explicitly. In our model both the amount of R&D and the amount of CO2 abatement are decided in a decentralized way by the market as a response to an emission tax. Moreover, we introduce three distinct failures in the market for new innovations; monopolistic pricing behavior, insufficient patent protection and dynamic knowledge spillovers. Our findings suggest that governments should under some circumstances set a higher carbon tax today if we have technological change driven by R&D than if we have pure exogenous technological change. Based on numerical simulations these circumstances are i) "a standing on shoulders" type of externality in R&D or ii) weak patent protection. Keywords: Climate policy, technological change, emission tax JEL classification: Q28, D21, C6

Resource Rent in Norwegian Fisheries: Trends and policies

A nation’s natural-resources wealth can be estimated via the System of National Accounts (SNA). Because the values of all parameters entering the calculation are conditional on the existing management regime, the optimal value of the natural resources may be masked. This is the case for the Norwegian fishery sector. Using the SNA the Norwegian fisheries contributed negatively to the actual national wealth in the period 1984-2014 with the exception of 2010-2011. By exploring the development of the actual resource rent for the same time period applying the SNA, we find that the rent has increased over time as a result of a consolidation of the industry. However, the costs of extracting the fish is much higher than necessary, implying that the resource rent is lower than it could have been, and this means that we are in a situation of resource waste. Using a numerical optimization model we find the contra factual resource rent if 2011’s quotas where harvested efficiently with the available technology to be close to 9.3 billion NOK, which is 7 billion NOK more than the observed resource rent in 2011.publishedVersio