Green Taxes and Administrative Costs: The Case of Carbon Taxation

This paper explores the trade-off between incentive effects and administrative costs associated with the implementation of various environmental tax instruments, with special reference to carbon taxes. In a simple model, we show under what conditions it is optimal to use input rather than emission taxes to internalize environmental externalities. Mixed tax regimes are also studied. If linkage of emissions to inputs is close, if abatement possibilities are costly, and if administrative costs of emission taxes are high, emission taxes should not be introduced. It is shown that these conditions directly apply to current tax policies toward CO2 emissions in several European countries that harness pre-existing energy taxes. First, there is a one-to-one correspondence between carbon content of energy and CO2 emissions. Second, only few possibilities exist to abate CO2 emissions separately. Third, energy excises allow to save on administrative costs. Broadening the carbon tax base by removing certain widely-used exemptions for energy production (and possibly adding emission taxes or abatement subsidies for selected industries) is likely to increase incentives for carbon reduction without significant additional administrative costs.

Reducing Rents from Energy Technology Adoption Programs by Exploiting Observable Information

In this CPB Discussion Paper, we study how regulators may improve upon the efficiency of their energy technology adoption programs by exploiting readily observable information to limit rent extraction by firms. Using panel data on 862 investment decisions in the Netherlands, we find that rent extraction is closely linked not only to technology characteristics, but also to the firm's capital budgetting technique. In particular, we find that rms are more likely to extract rent when either the technology's pay-back period or its required investment is lower, but less likely if they do not use a formal capital budgeting technique. Standard firm characteristics, such as size and sector, correlate with firms' use of capital budgeting techniques, thereby partly resolving the regulator's asymmetric information problem.

Burn or Bury? A Social Cost Comparison of Final Waste Disposal Methods

This paper uses private and environmental cost data for the Netherlands to evaluate the social cost of two final waste disposal methods, landfilling versus incineration using waste-to-energy (WTE) plants. The data only provide some support for the widespread policy preference for incineration over landfilling if the analysis is restricted to environmental costs alone. Private costs, however, are so much higher for incineration, that landfilling is the social cost minimizing option at the margin even in a densely populated country such as the Netherlands. Implications for waste policy are discussed as well. Proper treatment of and energy recovery from landfills seem to be the most important targets for waste policy. WTE plants are a very expensive way to save on climate change emissions

An Economic Analysis of Mixing Wastes

Using a general equilibrium model with heterogeneous waste, this paper studies optimal waste policy when households have to exert separation effort to produce near-homogeneous waste streams suitable for recycling. Our model explicitly allows for changes in the composition (quality) of waste streams depending on how much effort households are willing to spend on separating different types of waste. Accordingly, we are able to generalize some earlier contributions to the waste management literature and demonstrate that with both mixing and effort included, a first-best optimum is feasible under reasonable conditions. In particular, we find that a (modified) deposit-refund system still provides the optimal incentives to guide recycling as well as legal disposal (landfilling) and illegal dumping. Both the number and level of taxes and subsidies needed to reach the first-best depend crucially on the socially optimal level of dumping as well as the socially optimal composition of the mix

On the variation of hedging decisions in daily currency risk management

Internationally operating firms naturally face the decision whether or not to hedge the currency risk implied by foreign investments. In a recent paper, Bos, Mahieu and van Dijk evaluate the returns from optimal and alternative currency hedging strategies, for a series of 7 models, using Bayesian inference and decision analysis. The models differ in the way time-varying means, variances or the unconditional error distributions are incorporated. In this extension, we compare the hedging decisions and financial returns and utilities as they result from the modelling assumptions and the attitudes towards risk

Daily exchange rate behaviour and hedging of currency risk

Exchange rates typically exhibit time-varying patterns in both means and variances. The histograms of such series indicate heavy tails. In this paper we construct models which enable a decision-maker to analyze the implications of such time series patterns for currency risk management. Our approach is Bayesian where extensive use is made of Markov chain Monte Carlo methods. The effects of several model characteristics (unit roots, GARCH, stochastic volatility, heavy tailed disturbance densities) are investigated in relation to the hedging decision strategies. Consequently, we can make a distinction between statistical relevance of model specifications, and the economic consequences from a risk management point of view. The empirical results suggest that econometric modelling of heavy tails and time-varying means and variances pays off compared to a efficient markets model. The different ways to measure persistence and changing volatilities appear to strongly influence the hedging decision the investor faces

Proton pump inhibitors and gastroenteritis

An association between proton pump inhibitor (PPI) therapy and bacterial gastroenteritis has been suggested as well as contradicted. The aim of this study was to examine the association between the use of PPIs and occurrence of bacterial gastroenteritis in the prospective Rotterdam Study. The Rotterdam Study is a population-based cohort study among 14,926 subjects aged 45 years and older with up to 24 years of follow-up. Analyses were performed with a generalized estimating equations method in participants who handed-in a diagnostic stool sample. Furthermore, a nested case–control analysis was performed using the total cohort as a reference group. A bacterial microorganism was isolated in 125 samples, whereas 1174 samples were culture negative. In the generalized estimating equations analysis, we found that participants with a bacterial gastroenteritis were more likely than controls to be current users of PPIs (adjusted OR 1.94; 95 % CI 1.15–3.25). Different sensitivity analyses did not change this result. A considerably higher effect was observed (adjusted OR 6.14; 95 % CI 3.81–9.91), using the total cohort as a reference in a nested case–control analysis. Current PPI therapy is associated with an increased risk of bacterial gastroenteritis. However, by reducing the risk of selection and information bias in our study design, we demonstrated that the effect is lower than previously assumed

Heat kernel and number theory on NC-torus

The heat trace asymptotics on the noncommutative torus, where generalized Laplacians are made out of left and right regular representations, is fully determined. It turns out that this question is very sensitive to the number-theoretical aspect of the deformation parameters. The central condition we use is of a Diophantine type. More generally, the importance of number theory is made explicit on a few examples. We apply the results to the spectral action computation and revisit the UV/IR mixing phenomenon for a scalar theory. Although we find non-local counterterms in the NC $\phi^4$ theory on \T^4, we show that this theory can be made renormalizable at least at one loop, and may be even beyond

Unconventional Gas and the European Union: Prospects and Challenges for Competitiveness

This article studies the likely impact of unconventional gas developments in the U.S. on EU competitiveness. We find, first of all, little evidence for a prosperous unconventional gas development in Europe. Second, the U.S. boom has already a strong impact on both world and European energy markets. In particular, lower U.S. gas and coal prices have changed relative energy prices both at home and abroad. Finally, competitiveness impacts in some (sub)sectors will be considerable. These impacts are not only related to production based on gas use as a feedstock but also on the byproducts' from unconventional gas production, such as ethylene, propane and butane. However, several indirect impacts, such as lower coal import prices, may soften the adverse competitiveness impact in the EU