Benoit Laplante

Inspections, pollution prices, and environmental performance: evidence from China

In environmental economics, monitoring and enforcement issues have attracted relatively little research effort. Moreover, the bulk of the literature on these issues has been of a theoretical nature. Few have empirically analysed the impact of monitoring and enforcement activities on the environmental performance of polluters. Moreover, all existing studies have been performed in the context of developed countries. A purpose of the current paper is to partially fill this important gap by exploring the impact of both inspections and pollution charges on the environmental performance of polluters in China. While pollution charges represent an important pillar of the Chinese environmental regulatory system, our results indicate that inspections dominate and better explain the environmental performance of industrial polluters.

Monitoring of Pollution Regulation: Do Local Conditions Matter?

Economists have greatly criticized regulations that impose uniform environmental standards. Such a critic ignores that the implementation of the standards may vary significantly across plants, thus giving rise in fact to non-uniform standards. The purpose of this paper is to analyze the determinants of the regulators monitoring activities. We show that greater inspection effort, ceteris paribus, is allocated towards those plants whose emissions are likely to generate a higher level of damages. On the other hand, we show that the behavior of the regulator is also a function of variables that may not be directly related to abatement cost and damages. In particular, we show that variables pertaining to local labor market conditions have an impact on the monitoring strategy adopted by the regulator.

Environmental Policy and Time Consistency: Emissions Taxes and Emissions Trading

The authors examine policy problems related to the use of emissions taxes, and emissions trading, two market-based instruments for controlling pollution by getting regulated firms to adopt cleaner technologies. By attaching an explicit price to emissions, these instruments give firms an incentive to continually reduce their volume of emissions. Command, and-control emissions standards create incentives to adopt cleaner technologies only up to the point where the standards are no longer binding (at which point the shadow price on emissions falls to zero). But the ongoing incentives created by the market-based instruments are not necessarily right, either. Time-consistency constraints on the setting of these instruments limit the regulators ability to set policies that lead to efficiency in adopting technology options. After examining the time-consistency properties of a Pigouvian emissions tax, and of the emissions trading, the authors find that: 1) If damage is linear, efficiency in adopting technologies involves either universal adoption of the new technology, or universal retention of the old technology, depending on the cost of adoption. The first best tax policy, and the first-best permit-supply policy are both time-consistent under these conditions. 2) If damage is strictly convex, efficiency may require partial adoption of the new technology. In this case, the first-best tax policy is not time-consistent, and the tax rate must be adjusted after adoption has taken place (ratcheting). Ratcheting will induce an efficient equilibrium if there is a large number of firms. If there are relatively few firms, ratcheting creates too many incentives to adopt the new technology. 3) The first-best supply policy is time-consistent if there is a large number of firms. If there are relatively few firms, the first-best supply policy may not be time-consistent, and the regulator must ratchet the supply of permits. With this policy, there are not enough incentives for firms to adopt the new technology. The results do not strongly favor one policy instrument over the other, but if the point of an emissions trading program is to increase technological efficiency, it is necessary to continually adjust the supply of permits in response to technological change, even when the damage is linear. This continual adjustment is not needed for an emissions tax when damage is linear, which may give emissions taxes an advantage over emissions trading.

Sea-Level Rise and Storm Surges: High Stakes for a Small Number of Developing Countries

As the climate changes during the 21st century, larger cyclonic storm surges and growing populations may collide in disasters of unprecedented size. As conditions worsen, variations in coastal morphology will magnify the effects in some areas, while largely insulating others. In this article, we explore the implications for 31 developing countries and 393 of their cyclone-vulnerable coastal cities with populations greater than 100,000. Combining the most recent scientific and demographic information, we estimate the future impact of climate change on storm surges that will strike coastal populations, economies, and ecosystems. We focus on the distribution of heightened impacts, because we believe that greater knowledge of their probable variation will be useful for local and national planners, as well as international donors. Our results suggest gross inequality in the heightened impact of future disasters, with 50% of the burden falling on the residents of 10 Asian cities and over 40% falling on Manila, Karachi, and Jakarta alone. In light of these huge asymmetries, we believe that careful targeting of international assistance will be essential for the effective and equitable allocation of resources for coastal protection and disaster prevention.

The Economics of Adaptation to Extreme Weather Events in Developing Countries

This paper attempts to assess the economics of adaptation to extreme weather events. The author address several questions that are relevant for the international discussion: how will climate change alter the incidence of these events, and how will their impact be distributed geographically? How will future socioeconomic development affect the vulnerability of affected communities? And, of primary interest to negotiators and donors, how much would it cost to neutralize the threat of additional losses in this context? The remainder of the paper is organized as follows. Section two provides a summary of losses from extreme weather events in developing countries during the period 1960-2006. In section three, author review recent projections of climate impacts, economic growth, and demographic change. The author focus particularly on projections by integrated assessment models that incorporate links between climate change and economic activity. Section four specifies a set of risk equations for weather-related disasters and estimates them by fixed effects. In section five, author develops country-specific projections for female education. Section six uses our econometric results and education projections to forecast future risks under alternative assumptions about climate change. In section seven, author uses these projections to estimate the cost of reducing future weather related risks through more intensive investment in female education. Section eight summarizes and concludes the paper.

Estimating Willingness-to-Pay with Random Valuation Models: An Application to Lake Sevan, Armenia

This paper presents a case study of willingness-to-pay (WTP) estimation using random valuation models. A contingent valuation survey was conducted in Yerevan, Armenia to estimate peoples WTP for the protection of Lake Sevan. Three elicitation formats-open-ended, closed-ended, and the stochastic payment card (SPC) approach-were used with split random samples. WTP models with heterogeneous errors were constructed and estimated with the survey data. The SPC approach produces a higher estimation of the mean WTP than both the open-ended and closed-ended approaches, while results from the open-ended and closed-ended elicitation formats are similar. Furthermore, contrary to research findings obtained in the United States, this study finds higher WTP estimations with mail surveys than with personal interviews.

Public Disclosure of Environmental Violations in the Republic of Korea

Since 1989, environmental authorities of the Republic of Korea have published on a monthly basis a list of enterprises violating the countrys environmental rules and regulations. This may be the longest environmental public disclosure program currently in existence. Over the period 1993-2001 in excess of 7,000 violations have been recorded in these monthly violation lists, involving more than 3,400 different companies. In this paper, the authors provide a comprehensive descriptive analysis of this dataset. Results suggest that the news media have given an important, though perhaps declining coverage, to the violation lists, with a focus on publicly traded companies, failures to operate pollution abatement equipment, and prosecutions.

Environmental Inspections and Emissions of the Pulp and Paper Industry: The Case of Quebec

Since the early 1970s, industrial countries have enacted (or amended) many environmental laws and regulations to control and improve air and water quality. Developing countries are increasingly enacting similar legislation. But imposing a ceiling on a plants emissions does not guarantee reduced emissions or an improved environment. Ensuring the attainment of the regulations objectives requires monitoring the behavior of the regulated facility and enforcing environmental standards. Most of the literature in environmental economics is theoretical and simply assumes that polluters comply with regulations. Although monitoring and enforcement problems are clearly a pitfall of environmental regulation, little empirical work has been done about the effect of current monitoring strategies on pollution emissions. The authors supply an empirical framework for measuring the impact of environmental inspections on plant emissions. They apply it to pulp and paper plants in Quebec for which reliable data were available. The results suggest that both inspection and the threat of inspections reduce pollution emissions. They also show that a plants decision whether to report its emissions levels to the regulator is not random. Inspections improve the frequency of reporting.

Equilibrium incentives for adopting cleaner technology under emissions pricing

Policymakers sometimes presume that adopting a less polluting technology necessarily improves welfare. This view is generally mistaken. Adopting a cleaner technology is costly, and this cost must be weighed against the technologys benefits in reduced pollution and reduced abatement costs. The literature to date has not satisfactorily examined whether emissions pricing properly internalizes this tradeoff between costs and benefits. And if the trend toward greater use of economic instruments in environmental policy continues, as is likely, the properties of those instruments must be understood, especially for dynamic efficiency. The authors examine incentives for adopting cleaner technologies in response to Pigouvian emissions pricing in equilibrium (unlike earlier analyses, which they contend, have been generally incomplete and at times misleading). Their results indicate that emissions pricing under the standard Pigouvian rule leads to efficient equilibrium adoption of technology under certain circumstances. They show that the equilibrium level of adopting a public innovation is efficient under Pigouvian pricing only if there are enough firms that each firm has a negligible effect on aggregate emissions. When those circumstances are not satisfied, Pigouvian pricing does not induce an efficient (social welfare-maximizing) level of innovation. The potential for inefficiency stems from two problems with the Pigouvian rule. First, the Pigouvian price does not discriminate against each unit of emissions according to its marginal damage. Second, full ratcheting of the emissions price in response to declining marginal damage as firms adopt the cleaner technology is correct expost but distorts incentives for adopting technology ex ante. The next natural step for research is to examine second-best pricing policies or multiple instrument policies. The challenge is to design regulatory policies that go some way toward resolving problems yet are geared to implementation in real regulatory settings. Clearly, such policies must use more instruments than emissions pricing alone. Direct taxes or subsidies for technological change, together with emissions pricing, should give regulators more scope for creating appropriate dynamic incentives. Such instruments are already widely used: investment tax credits (for environmental research and development), accelerated depreciation (for pollution control equipment), and environmental funds (to subsidize the adoption of pollution control equipment). Such direct incentives could be excessive, however, if emissions pricing is already in place. All incentives should be coordinated.

Welfare measurement convergence through bias adjustments in general population and on-site surveys: an application to water-based recreation at lake sevan, Armenia.

Abstract This paper compares household survey with on-site survey data for estimating the access value of a unique natural resource using a single-site travel cost model. The household survey model is adjusted for inflated zero observations for respondents who would not visit the site at any observable positive price. The on-site survey model is corrected for truncation and endogenous stratification, the latter being an adjustment for avidity bias. In an application to recreation at Lake Sevan (Armenia), consumer surplus estimates were not statistically different between the household model and the on-site model when zero-inflation and truncation and endogenous stratification are corrected In the respective models. This leads us to believe that either method can be used to derive a consistent welfare measure of access to a recreational site after appropriate adjustments and corrections are made. These results are somewhat reassuring as the choice between household and on-site surveys is often dictated by time and resource availability.