Regulation through revelation:The effect of pollution monitoring on labour demand

For any environmental regulation to be effective it requires adequate monitoring and enforcement. This paper aims at studying the causal effects of a real-time pollution monitoring programme on the level of firms’ employment. Employing entropy balancing on a unique firm-level dataset, we find that the enhanced regulatory monitoring has a significant and robust positive impact on the employment of monitored firms. Further investigations suggest that positive employment effects are primarily driven by changes in capital investment and subsequent output increase. Our results are independent from ownership and other energy policies during the same period. The study sheds new light into the benefits of regulatory monitoring and enforcement activities

Directed Technical Change and Climate Policy

Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/).This paper studies the cost effectiveness of climate policy if there are technology externalities. For this purpose, we develop a forward-looking CGE model that captures empirical links between CO2 emissions associated with energy use, directed technical change and the economy. We find the cost-effective climate policy to include a combination of R&D subsidies and CO2 emission constraints, although R&D subsidies raise the shadow value of the CO2 constraint (i.e. CO2 price) because of a strong rebound effect from stimulating innovation. Furthermore, we find that CO2 constraints differentiated toward CO2-intensive sectors are more cost effective than constraints that generate uniform CO2 prices among sectors. Differentiated CO2 prices, through technical change and concomitant technology externalities, encourage growth in the non-CO2 intensive sectors and discourage growth in CO2-intensive sectors. Thus, it is cost effective to let the latter bear relatively more of the abatement burden. This result is robust to whether emission constraints, R&D subsidies or combinations of both are used to reduce CO2 emissions

GEO-6 assessment for the pan-European region

Through this assessment, the authors and the United Nations Environment Programme (UNEP) secretariat are providing an objective evaluation and analysis of the pan-European environment designed to support environmental decision-making at multiple scales. In this assessment, the judgement of experts is applied to existing knowledge to provide scientifically credible answers to policy-relevant questions. These questions include, but are not limited to the following:• What is happening to the environment in the pan-European region and why?• What are the consequences for the environment and the human population in the pan-European region?• What is being done and how effective is it?• What are the prospects for the environment in the future?• What actions could be taken to achieve a more sustainable future?<br/

Computable General Equilibrium Models for Sustainability Impact Assessment: Status Quo and Prospects

Sustainability Impact Assessment (SIA) of economic, environmental, and social effects triggered by governmental policies has become a central requirement for policy design. The three dimensions of SIA are inherently intertwined and subject to trade-offs. Quantification of trade-offs for policy decision support requires numerical models in order to assess systematically the interference of complex interacting forces that affect economic performance, environmental quality, and social conditions. This paper investigates the use of computable general equilibrium (CGE) models for measuring the impacts of policy interference on policy-relevant economic, environmental, and social (institutional) indicators. We find that operational CGE models used for energy–economy–environment (E3) analyses have a good coverage of central economic indicators. Environmental indicators such as energy-related emissions with direct links to economic activities are widely covered, whereas indicators with complex natural science background such as water stress or biodiversity loss are hardly represented. Social indicators stand out for very weak coverage, mainly because they are vaguely defined or incommensurable. Our analysis identifies prospects for future modeling in the field of integrated assessment that link standard E3-CGE-models to themespecific complementary models with environmental and social focus.JRC.J.2-Competitiveness and Sustainabilit

Promoting Renewable Energy in Europe: A Hybrid CGE Approach

In this paper, we illustrate the use of a hybrid large-scale computable general equilibrium (CGE) model to investigate the economic and environmental effects of renewable energy promotion within the European Union. Our hybrid CGE model incorporates technological explicitness of bottom-up (engineering) energy system models for the electricity sector while representing aggregate technological options in other sectors in the conventional CGE approach by means of constant elasticities of substitution (transformation). The bottom-up technology foundation of top-down CGE models is possible when adopting the so-called mixed complementarity problem (MCP) approach – a flexible mathematical representation of market equilibrium conditions (Rutherford 1995). In the following section, we provide a non-mathematical characterization of the MCP approach. We then demonstrate along a stylized example how the MCP framework can be exploited to combine a simplistic macroeconomic general equilibrium model with a bottom-up technology-based model of energy supply. A large-scale implementation of a hybrid CGE model for the EU-15 is subsequently used to investigate the impacts of renewable energy promotion.JRC.J.2-Competitiveness and Sustainabilit

Efficiency Gains from "What"-Flexibility in Climate Policy: An Integrated CGE Assessment

The primary objective of this paper is to ascertain the relative importance of a multi-gas emission control strategy (in our case: CO2 and CH4) vis-à-vis a CO2-only abatement strategy. In other words: We want to sort out how much can be gained if we put “what”-flexibility on top of “where”- and “when”-flexibility. The explanatory power of such a comparison depends crucially on the proper design of the overall analytical framework. Therefore, we place special emphasis on the description of the baseline calibration and the integration of climate relationships into PACE, a dynamic multi-sector, multi-region computable general equilibrium (CGE) model of global trade and energy use. Based on numerical simulation with this integrated assessment model we find that “what”-flexibility substantially reduces the compliance costs under alternative emission control schemes. When comparing policies that simply involve long-term temperature targets against more stringent strategies that include additional constraints on the rate of temperature increase, it turns out that the latter involve huge additional costs. These costs may be interpreted as additional insurance payments if damages should not only dependent on absolute temperature change but also the rate of temperature change. Our calculations also confirm the shortcomings of the global warming potential (GWP) approach to represent the contribution of different greenhouse gases to global temperature change because the relative contribution may vary substantially over time.JRC.J.2-Competitiveness and Sustainabilit

Energy Biased Technical Change: A CGE Analysis

This paper studies energy bias in technical change. For this purpose, we develop a computable general equilibrium model that builds on endogenous growth models. The model explicitly captures links between energy, the rate and direction of technical change, and the economy. We show the importance of feedback in technical change, substitution possibilities between final goods, and general-equilibrium effects for energy bias in technical change. If the feedback effect is strong, or the substitution elasticity large, or both, our model tends to a corner solution in which only technologies are developed that are appropriate for production of non-energy intensive goods.JRC.J.2-Competitiveness and Sustainabilit

Decomposing the Integrated Assessment of Climate Change

We present a decomposition approach for integrated assessment modeling of climate policy based on a linear approximation of the climate system. Our objective is to demonstrate the usefulness of decomposition for integrated assessment models posed in a complementarity format. First, the complementarity formulation cum decomposition permits a precise representation of post-terminal damages thereby substantially reducing the model horizon required to produce an accurate approximation of the infinite-horizon equilibrium. Second, and central to the economic assessment of climate policies, the complementarity approach provides a means of incorporating second-best effects that are not easily represented in an optimization model.JRC.J.1-Economics of Climate Change, Energy and Transpor

EU enlargement and environmental policy

Die osteuropaeischen Beitrittskandidaten haben sich dazu verpflichtet, die Treibhausgasemissionen gemaess den im Kyoto-Protokoll festgelegten Zielen zu verringern. Ueberdies hat sich der Handel zwischen der EU und den osteuropaeischen Beitrittskandidaten seit 1993 liberalisiert. Es gibt inzwischen viel Literatur zu den oekonomischen Effekten der vollstaendigen Integration der Beitrittskandidaten, genauso wie auch zum Kyoto-Protokoll. Jedoch mangelt es an quantitativen Untersuchungen zur Verknuepfung von Handel und Umwelt im Kontext der EU-Erweiterung. In diesem Beitrag wird die Wechselwirkung von unterschiedlicher Umweltpolitik gemaess dem Kyoto-Protokoll und Handelsliberalisierung im Verlauf der EU-Osterweiterung mit Hilfe eines allgemeinen Gleichgewichtsmodells analysiert. Die Autoren vertreten die Ansicht, dass die Handelsliberalisierung einen grossen Gewinn fuer die osteuropaeischen Beitrittskandidaten darstellt, waehrend die EU-Mitgliedstaaten nur einen bescheidenen Gewinn aus der Liberalisierung ziehen. Die Integration zeigt keinen bedeutsamen Einfluss auf die Klimaschutzpolitik, mildert aber damit zusammenhaengende volkswirtschaftliche Kosten. (ICBUebers)'The Eastern European Associates (EEA) have committed to reduce greenhouse gas emissions according to their targets set in the Kyoto Protocol. Furthermore since 1993 trade liberalization has taken place between all associated countries and the EU. There is meanwhile a large quantitative literature on the economic effects of full integration of the associated countries into the EU as well as on the Kyoto Protocol. However, there is a lack of quantitative research on the linkage of trade and the environment in the context of the EU enlargement. In this paper we analyze the interactions of different environmental policies under the Kyoto Protocol and trade liberalization in the process of eastern enlargement using a computable general equilibrium model. The authors find that trade liberalization provides large gains for EEAs while it holds only modest gains for EU member states. Integration does not show a significant impact on carbon abatement policies, but mitigates associated welfare losses.' (author's abstract)German title: EU-Erweiterung und UmweltpolitikAvailable from ftp://ftp.zew.de/pub/zew-docs/dp/dp0152.pdf / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekSIGLEDEGerman