Assessing the Effectiveness of Tradable Landuse Rights for Biodiversity Conservation: An Application to Canada's Boreal Mixedwood Forest

Ecological reserve networks are an important strategy for conserving biodiversity. One approach to selecting reserves is to use optimization algorithms that maximize an ecological objective function subject to a total reserve area constraint. Under this approach, economic factors such as potential land values and tenure arrangements are often ignored. Tradable landuse rights are proposed as an alternative economic mechanism for selecting reserves. Under this approach economic considerations determine the spatial distribution of development and reserves are allocated to sites with the lowest development value, minimizing the cost of the reserve network. The configuration of the reserve network as well as the biodiversity outcome is determined as a residual. However cost savings can be used to increase the total amount of area in reserve and improve biodiversity outcomes. The appropriateness of this approach for regional planning is discussed in light of key uncertainties associated with biodiversity protection. A comparison of biodiversity outcomes and costs under ecological versus economic approaches is undertaken for the Boreal Forest Natural Region of Alberta, Canada. We find a significant increase in total area protected and an increase in species representation under the TLR approach

Accounting for Extreme Events in the Economic Assessment of Climate Change

Extreme events are one of the main channels through which climate and socio- economic systems interact. It is likely that climate change will modify their probability distributions and their consequences. The long-term growth models used in climate change assessments, however, cannot capture the effects of short-term shocks; they thus model extreme events in a very crude manner. To assess the importance of this limitation, a non-equilibrium dynamic model (NEDyM) is used to model the macroeconomic consequences of extreme events. Its conclusions are the following: (i) Dynamic processes multiply the extreme event direct costs by a factor 20; half of this increase comes from short-term processes; (ii) A possible modication of the extreme event distribution due to climate change can be responsible for significant GDP losses; (iii) The production losses caused by extreme events depend, with strong non-linearity, both on the changes in the extreme distribution and on the ability to fund the rehabilitation after each disaster. These conclusions illustrate that the economic assessment of climate change does not only depend on beliefs on climate change but also on beliefs on the economy. Moreover, they suggest that averaging short-term processes like extreme events over the five- or ten-year time step of a classical long-term growth model can lead to inaccurately low assessments of the climate change damages

Asymmetric Labor Markets, Southern Wages, and the Location of Firms

This paper studies the behavior of firms towards weak labor rights in developing countries (South). A less than perfectly elastic labor supply in the South gives firms oligopsonistic power tempting them to strategically reduce output to cut wages. In an open economy, competitors operating in perfectly competitive labor markets meanwhile enjoy less aggressive competitors and raise output. Finally, competition effect reduces the ex-post output of a relocating firm. These effects reduce relative profitability of the South casting doubts on traditional beliefs that multinationals are attracted to regions with lower wages. Adopting a minimum wage unambiguously enhances Southern competitiveness and welfare

Emissions Trading, CDM, JI, and More - The Climate Strategy of the EU

The objective of this paper is to assess the likely allocation effects of the current cli-mate protection strategy as it is laid out in the National Allocation Plans (NAPs) for the European Emissions Trading Scheme (ETS). The multi-regional, multi-sectoral CGE-model DART is used to simulate the effects of the current policies in the year 2012 when the Kyoto targets need to be met. Different scenarios are simulated in or-der to highlight the effects of the grandfathering of permits to energy-intensive instal-lations, the use of the project-based mechanisms (CDM and JI), and the restriction imposed by the supplementarity criterion

Environmental Resources Depletion and Interplay Between Negative and Positive Externalities in a Growth Model

We analyse growth dynamics in an economy where the well-being of economic agents depends on three goods: leisure, a free access environmental good and a private good which can be produced by each agent through his own labour input. The private good can be consumed as a substitute for the environmental resource. The production process of the private good by each agent generates negative externalities on the other agents, by depleting the free access natural resource; but it also produces positive externalities by increasing the productivity of labour via a learning-by-doing mechanism of accumulation of knowledge [which is a pure public good]. In this context, we show that attracting steady states may exist which are Pareto-dominated by others where aggregate private consumption and labour productivity are lower. However, negative externalities can also be an engine of desirable growth: the deterioration of the environmental good can play the role of a coordination device leading economic agents to a wider exploitation of positive externalities