THE EFFECTS OF TRADE LIBERALIZATION ON THE ENVIRONMENT: AN EMPIRICAL STUDY

We seek to contribute to the emerging economic theory on trade, the environment and development. Using panel data across countries, econometric models are estimated to predict the effects of openness on organic water pollutant (BOD) and carbon dioxide (CO2) emissions. Results indicate that freer trade significantly increases emissions of both pollutants, thus reducing environmental quality. Moreover, the panel nature of the data allows heterogeneity across countries to be controlled, so that comparisons can be made of how different national characteristics influence the environmental impact of freer trade. By testing the effects of democratic versus autocratic governance, it is found that while greater democracy can induce significant reductions in BOD emissions as openness increases, it may also lead to increased CO2 levels. Meanwhile, by testing for and failing to reject the pollution haven hypothesis, it is suggested that environmental gains from openness in relatively rich countries may be coming at the expense of environmental degradation in poorer countries.Environmental Economics and Policy, International Relations/Trade,

IMPLICATIONS OF A MARKET FOR CARBON ON TIMBER AND NON-TIMBER VALUES IN AN UNCERTAIN WORLD

Despite considerable interest in the potential for forests to sequester carbon, the impact of carbon management on the provision of timber and non-timber resources has received relatively little attention in the literature. The introduction of value for stored carbon may result in modifications to traditional forest management objectives, generating trade-offs with other forest resources depending on the incentives provided by carbon markets. This paper investigates these issues by examining the impact of a particular form of carbon market on timber and non-timber values in a managed forest. An integrated modeling framework, developed for the incorporation of carbon management into operational timber management modeling tools, is also described. There is still substantial debate over how to properly credit carbon sequestered in forests. To date, there has been little research on how the form of a carbon market will impact the operations and objectives of forestry firms. Alternative market structures could produce very different responses in terms of rotation age, net present value and harvest policy. Here, a specific form of carbon market, the specified level contract, is investigated. Forestry firms are assumed to reach contracts with carbon-seeking agents which "guarantee" that a specified level of carbon stock will be maintained over a defined time period. Optimal forest management decisions are examined by implementing an optimization model for a specific land base in Alberta. The Woodstock forest modeling package is used for optimization. Analysis of trade-offs is based on the work of Armstrong et al. (1999, 2003) which assess non-timber resources using the natural disturbance approach to forest management. The analysis is then expanded to include a more rigorous, and realistic, depiction of carbon and carbon stock changes. Using the Carbon Budget Model of the Canadian Forest Sector (CBM-CFS3), carbon yield curves are developed which are integrated directly into the Woodstock forest management ii model. These carbon yields capture dynamics specific to separate biomass and dead organic matter (DOM) carbon pools and are represented for individual forest cover types. Interestingly, the inclusion of DOM carbon generates unexpected relationships between non-timber resources and incentives to sequester carbon. Results show that the presence of co-benefits will depend upon forest cover type, the harvest flow regulation faced by the managing firm and the incentives for timber supply provided by the market. Furthermore, firms that agree to enter contracts for carbon sequestration appear to do so at the expense of a decline in timber supply, with estimates of the opportunity cost of carbon management falling within the range of those found in recent literature.Resource /Energy Economics and Policy,

Paleoclimate histories improve access and sustainability in index insurance programs

Proxy-based climate reconstructions can extend instrumental records by hundreds of years, providing a wealth of climate information at high temporal resolution. To date, however, their usefulness for informing climate risk and variability in policy and social applications has been understudied. Here, we apply tree-ring based reconstructions of drought for the last 700 years in a climate index insurance framework to show that additional information from long climate reconstructions significantly improves our understanding of the underlying climate distributions and variability. We further show that this added information can be used to better characterize risk to insurance providers, in many cases providing meaningful reductions in long-term contract costs to farmers in stand-alone policies. The impact of uncertainty on insurance premiums can also be reduced when insurers diversify portfolios, and the availability of long-term climate information from tree rings across a broad geographic range provides an opportunity to characterize spatial correlation in climate risk across geographic regions. Our results are robust to the range of climate variability experienced over the last 400 years and in model simulations of the twenty-first century, even within the context of changing baselines due to low frequency variability and secular climate trends. These results demonstrate the utility of longer-term climate histories in index insurance applications. Furthermore, they make the case from a climate-variability perspective for the continued importance of such approaches to improving the instrumental climate record, even into a non-stationary climate future

Paleoclimate histories improve access and sustainability in index insurance programs

Proxy-based climate reconstructions can extend instrumental records by hundreds of years, providing a wealth of climate information at high temporal resolution. To date, however, their usefulness for informing climate risk and variability in policy and social applications has been understudied. Here, we apply tree-ring based reconstructions of drought for the last 700 years in a climate index insurance framework to show that additional information from long climate reconstructions significantly improves our understanding of the underlying climate distributions and variability. We further show that this added information can be used to better characterize risk to insurance providers, in many cases providing meaningful reductions in long-term contract costs to farmers in stand-alone policies. The impact of uncertainty on insurance premiums can also be reduced when insurers diversify portfolios, and the availability of long-term climate information from tree rings across a broad geographic range provides an opportunity to characterize spatial correlation in climate risk across geographic regions. Our results are robust to the range of climate variability experienced over the last 400 years and in model simulations of the twenty-first century, even within the context of changing baselines due to low frequency variability and secular climate trends. These results demonstrate the utility of longer-term climate histories in index insurance applications. Furthermore, they make the case from a climate-variability perspective for the continued importance of such approaches to improving the instrumental climate record, even into a non-stationary climate future

THE EFFECTS OF TRADE LIBERALIZATION ON THE ENVIRONMENT: AN EMPIRICAL STUDY

We seek to contribute to the emerging economic theory on trade, the environment and development. Using panel data across countries, econometric models are estimated to predict the effects of openness on organic water pollutant (BOD) and carbon dioxide (CO2) emissions. Results indicate that freer trade significantly increases emissions of both pollutants, thus reducing environmental quality. Moreover, the panel nature of the data allows heterogeneity across countries to be controlled, so that comparisons can be made of how different national characteristics influence the environmental impact of freer trade. By testing the effects of democratic versus autocratic governance, it is found that while greater democracy can induce significant reductions in BOD emissions as openness increases, it may also lead to increased CO2 levels. Meanwhile, by testing for and failing to reject the pollution haven hypothesis, it is suggested that environmental gains from openness in relatively rich countries may be coming at the expense of environmental degradation in poorer countries

The Effects of Trade Liberalization of the Environment: An Empirical Study

We seek to contribute to the emerging economic theory on trade, the environment and development. Using panel data across countries, econometric models are estimated to predict the effects of openness on organic water pollutant (BOD) and carbon dioxide (CO2) emissions. Results indicate that freer trade significantly increases emissions of both pollutants, thus reducing environmental quality. Moreover, the panel nature of the data allows heterogeneity across countries to be controlled, so that comparisons can be made of how different national characteristics influence the environmental impact of freer trade. By testing the effects of democratic versus autocratic governance, it is found that while greater democracy can induce significant reductions in BOD emissions as openness increases, it may also lead to increased CO2 levels. Meanwhile, by testing for and failing to reject the pollution haven hypothesis, it is suggested that environmental gains from openness in relatively rich countries may be coming at the expense of environmental degradation in poorer countries

The Effects of Trade Liberalization of the Environment: An Empirical Study

We seek to contribute to the emerging economic theory on trade, the environment and development. Using panel data across countries, econometric models are estimated to predict the effects of openness on organic water pollutant (BOD) and carbon dioxide (CO2) emissions. Results indicate that freer trade significantly increases emissions of both pollutants, thus reducing environmental quality. Moreover, the panel nature of the data allows heterogeneity across countries to be controlled, so that comparisons can be made of how different national characteristics influence the environmental impact of freer trade. By testing the effects of democratic versus autocratic governance, it is found that while greater democracy can induce significant reductions in BOD emissions as openness increases, it may also lead to increased CO2 levels. Meanwhile, by testing for and failing to reject the pollution haven hypothesis, it is suggested that environmental gains from openness in relatively rich countries may be coming at the expense of environmental degradation in poorer countries.Trade, Environment, Growth, Pollution, Governance, Policy, Environmental Economics and Policy, International Relations/Trade, C23, Q53, Q56,

IMPLICATIONS OF A MARKET FOR CARBON ON TIMBER AND NON-TIMBER VALUES IN AN UNCERTAIN WORLD

Despite considerable interest in the potential for forests to sequester carbon, the impact of carbon management on the provision of timber and non-timber resources has received relatively little attention in the literature. The introduction of value for stored carbon may result in modifications to traditional forest management objectives, generating trade-offs with other forest resources depending on the incentives provided by carbon markets. This paper investigates these issues by examining the impact of a particular form of carbon market on timber and non-timber values in a managed forest. An integrated modeling framework, developed for the incorporation of carbon management into operational timber management modeling tools, is also described. There is still substantial debate over how to properly credit carbon sequestered in forests. To date, there has been little research on how the form of a carbon market will impact the operations and objectives of forestry firms. Alternative market structures could produce very different responses in terms of rotation age, net present value and harvest policy. Here, a specific form of carbon market, the specified level contract, is investigated. Forestry firms are assumed to reach contracts with carbon-seeking agents which "guarantee" that a specified level of carbon stock will be maintained over a defined time period. Optimal forest management decisions are examined by implementing an optimization model for a specific land base in Alberta. The Woodstock forest modeling package is used for optimization. Analysis of trade-offs is based on the work of Armstrong et al. (1999, 2003) which assess non-timber resources using the natural disturbance approach to forest management. The analysis is then expanded to include a more rigorous, and realistic, depiction of carbon and carbon stock changes. Using the Carbon Budget Model of the Canadian Forest Sector (CBM-CFS3), carbon yield curves are developed which are integrated directly into the Woodstock forest management ii model. These carbon yields capture dynamics specific to separate biomass and dead organic matter (DOM) carbon pools and are represented for individual forest cover types. Interestingly, the inclusion of DOM carbon generates unexpected relationships between non-timber resources and incentives to sequester carbon. Results show that the presence of co-benefits will depend upon forest cover type, the harvest flow regulation faced by the managing firm and the incentives for timber supply provided by the market. Furthermore, firms that agree to enter contracts for carbon sequestration appear to do so at the expense of a decline in timber supply, with estimates of the opportunity cost of carbon management falling within the range of those found in recent literature

Measuring the Impact of Educational Insurance Games on Index Insurance Take-up

We evaluate the effects of a randomly administered educational game on index insurance conducted with 400 households in Ethiopia in the 2010 growing season. Our game teaches farmers about the benefits and limitations of index insurance. All village members were then offered the choice to purchase real index insurance, designed with the input of local communities. We find that financial education, in the form of an experimental game, has a positive and significant effect on take-up for a real index insurance product. These effects are driven by cash purchasers, as labor purchasers' demand exceeded the quota for total allowable labor purchases. Cash purchasers in the game, while more likely to purchase insurance, purchase less coverage than labor purchasers, and even less if exposed to the educational game. As a result, the game had a significant and positive impact on insurance take-up, but an overall negative effect on the amount of insurance purchased, driven by the relatively larger increase in cash purchasers. Financial education is effective at increasing overall take-up, but purchasers who are cash constrained and educated on index insurance purchase less than those similar cash purchasers are not educated on these matters