ENVIRONMENTAL PROTECTION WITH POLICIES FOR SALE

This paper generalizes the Grossman-Helpman political economy model to characterize the structure of environmental and industry protection for a small open economy when domestic and/or trade policies are the outcome of a noncooperative common agency game between sector-specific producer lobbies and the government. For a consumption externality, the political equilibrium results if domestic and trade policies are available, are production-enhancing protection of organized industries, but the same environmental protection as Pigouvian taxes. Subsidies to organized industries counterbalance environmental taxes when there is a production externality, and it is ambiguous whether domestic or trade policy alone leads to more environmental protection. In addition, this paper demonstrates that the original Grossman-Helpman results arise as a special case that rests on the assumption that only trade policies are available to the government.Environmental Economics and Policy,

Determinants of residential water demand in Germany

In this paper we econometrically analyze the impact of several economic, environmental and social determinants for the average per capita demand for water and sewage in about 600 water supply areas in Germany. Besides prices, income and household size, we also consider the effects of population age, the share of wells, and rainfall and temperature during the summer months on water demand. We also attempt to explain regional differences in per capita residential water consumption, which is currently about 30 % lower in the new federal states than in the old states. Our estimate for the price elasticity of -0.229 suggests that the response of residential water demand in Germany is rather inelastic, but no significant difference could be found between both regions. In contrast, the income elasticity in the new states is found to be 0.685 which is more than double that of the old states. Differences in prices and income alone explain the largest part of the current gap in residential water use between the two regions. Our results further suggest that household size, the share of wells and summer rainfall have a negative impact on water demand. In contrast, higher age appears to be associated with higher water use. We also find (weak) evidence for an impact of rainfall but not of temperature on residential water use. Our findings imply that future research should include analyses of household- level data to further explore the effects of socio-economic determinants, and analyses of panel data to adequately study the effects of climate change on residential water use. --

Exploring the factors driving automotive exports in OECD countries

Based on data for eight OECD countries this paper empirically explores the factors driving exports in the automotive sector between 1991 and 2008. The factors considered explicitly account for possible lead market effects which have recently been identified in the literature as relevant factors in studying the export potentials of certain technologies. Econometric results suggest that exports in the automotive sector are positively related to the general strength of a country in terms of exports, to higher GDP per capita and to a lower labour cost share in the automotive sector. However, domestic market size and R&D in the automotive sector appear to have no effect on exports. Hence, the results provide only limited rationale for policy intervention. --Lead markets,export potentials,automotive industry

Using benchmarking for the primary allocation of EU allowances - an application to the German power sector

Basing allocation of allowances for existing installations under the EU Emissions Trading Scheme on specific emission values (benchmarks) rather than on historic emissions may have several advantages. Benchmarking may recognize early action, provide higher incentives for replacing old installations and result in fewer distortions in case of updating, facilitate EU-wide harmonization of allocation rules or allow for simplified and more efficient closure rules. Applying an optimization model for the German power sector, we analyze the distributional effects of various allocation regimes across and within different generation technologies. Results illustrate that regimes with a single uniform benchmark for all fuels or with a single benchmark for coal- and lignite-fired plants imply substantial distributional effects. In particular, lignite- and old coal-fired plants would be made worse off. Under a regime with fuel-specific benchmarks for gas, coal, and lignite 50 % of the gas-fired plants and 4 % of the lignite and coal-fired plants would face an allowance deficit of at least 10 %, while primarily modern lignite-fired plants would benefit. Capping the surplus and shortage of allowances would further moderate the distributional effects, but may tarnish incentives for efficiency improvements and recognition of early action. --

Exploring the drivers behind automotive exports in OECD countries: An empirical analysis

The conceptual part of this paper ties the recently developed Lead Market concept to the international trade theory literature including neoclassical trade theory, new trade theory, neotechnological approaches and systems of innovation concepts. The empirical part explores the factors driving exports in the automotive sector in eight OECD countries between 1991 and 2008, explicitly accounting for possible Lead Market factors. Econometric results suggest that exports in the automotive sector are positively related to the general strength of a country in terms of exports, to higher GDP per capita and to a lower labour cost share in the automotive sector. However, domestic market size and R&D in the automotive sector do not exhibit statistically significant effects on exports. --lead markets,international trade,export potential,automotive industry

EU Emission trading – better job second time around?

The EU Emission Trading Scheme (EU ETS) for CO2-emissions from energy and industry installations reflects a paradigm shift towards market-based instruments for environmental policy in the EU. The centerpieces of the EU ETS are National Allocation Plans (NAPs), which individual Member States (MS) design for each phase. NAPs state the total quantity of allowances available in each period (ET-budget) and determine how MS allocate allowances to individual installations. The NAPs thus govern investments and innovation in energy efficient technologies and the energy sector. In terms of distribution, they predetermine winners and losers. In this paper we analyze and evaluate 25 NAPs submitted to the European Commission (EC) for phase 2 (2008-2012) of the EU ETS. At the macro level,we assess whether the submitted ET-budgets are stringent, and whether they imply a cost-efficient split of the required emission reductions between the EU ETS sectors (energy and industry) and the remaining sectors (transportation, tertiary and households). Comparing the submitted ET-budgets with those already approved by the EC suggests that the EC’s decisions significantly improved the effectiveness and economic efficiency of the EU ETS. But given the high share of Kyoto Mechanisms companies are allowed to use, the EU ETS is unlikely to require substantial emission reductions within the EU. At the micro level, we assess (across countries and phases) the allocation methods for existing and new installations, for closures and for clean technologies. A comparison of the NAPs for the second phase and the first phase (2005-2007) provides insights into the (limited) adaptability and flexibility of the scheme. The findings provide guidance for the future design of the EU ETS and applications to other sectors and regions

An early assessment of national allocation plans for phase 2 of EU emission trading

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Why don't households see the light? Explaining the diffusion of compact fluorescent lamps

Many countries are currently considering bans on incandescent light bulbs and other policies to enhance the residential diffusion of energy-saving compact fluorescent lamps (CFLs). However the reasons for currently limited diffusion of CFLs are largely unknown. This paper employs a Double Hurdle model to identify distinct barriers to household consideration of CFLs and the subsequent intensity of adoption using a large survey of German households. The results reveal that barriers to CFL consideration are low for all, except households with very low incomes. Further, barriers to CFL consideration are strongly linked to the characteristics of the residences of low-income households. Thus, the greatest potential for increasing the diffusion of CFLs lies not in addressing barriers to consideration, but in augmenting the intensity of household adoption particularly within high income groups. --

Economic and environmental effects of border tax adjustments

Taxing imports from regions which are not subject to climate policy and subsidizing exports into these regions have recently been proposed to address presumed negative effects of the EU Emissions Trading Scheme (EU ETS) on industry competitiveness and carbon leakage. This paper analyzes the economic and environmental effects of alternative border tax adjustment (BTA) mechanisms using an extended version of the GTAP-E model that explicitly includes domestic trade and transport margins. The BTAs are imposed on regions which have not committed to emission targets under the Kyoto Protocol or which failed to ratify the Kyoto Protocol. The analyses distinguish between effects of the BTAs on the EU15 countries and on the rest of the EU (REU). Likewise, the analyses single out the effects of climate policy with and without BTAs on domestic output changes which are due to changes in import competition and export competitiveness. Implementing a BTA whose power is equal to the percentage change in production costs in the energy-intensive sectors in the EU has different impacts for those sectors in the EU15 countries compared with the REU countries. In the EU15, the BTA effectively neutralizes import competition in the energy-intensive sectors while enhancing the export competitiveness of these sectors. Conversely, in the REU, the BTA is not effective in neutralizing increased import competition or decreased export competitiveness because the majority of trade by the REU is with countries/regions that are not included in the BTA. Overall, implementing a BTA has little effect on the marginal abatement costs of achieving the emission reductions in the Kyoto Protocol and does little in reducing carbon leakage. --

Private provision of public goods: Do individual climate protection efforts depend on perceptions of climate policy?

This paper extends the economic literature on the private provision of public goods by exam-ining the relevance of perceptions of climate policy to voluntary contributions to the public good of climate protection. Based on an analytical model which allows for perceptions of cli-mate policy such as justification of international climate policy, procedural trust and proce-dural justice to affect voluntary climate protection activities, we examined data from repre-sentative surveys among citizens in the USA and Germany. Our microeconometric analysis confirmed the prediction that the perceived justification of international climate policy is posi-tively related to voluntary contributions to climate protection in both countries. We also found empirical support (mainly for the USA) that higher perceived procedural justice lowers citi-zens’ propensity to adopt climate protection activities. In contrast, we found no support that higher perceived procedural trust reduces citizens’ propensity to adopt such measures. In a broad interpretation, our empirical results imply that individuals’ perceptions about the pro-cess of providing public goods should also be considered when analyzing the factors explain-ing voluntary individual contribution to public goods