Daan P. van Soest

Bringing ecosystem services into economic decision-making

Monitoring Land Use Land-use decisions are based largely on agricultural market values. However, such decisions can lead to losses of ecosystem services, such as the provision of wildlife habitat or recreational space, the magnitude of which may overwhelm any market agricultural benefits. In a research project forming part of the UK National Ecosystem Assessment, Bateman et al. (p. 45) estimate the value of these net losses. Policies that recognize the diversity and complexity of the natural environment can target changes to different areas so as to radically improve land use in terms of agriculture and greenhouse gas emissions, recreation, and wild species habitat and diversity. The value of using land for recreation and wildlife, not just for agriculture, can usefully factor into planning decisions. Landscapes generate a wide range of valuable ecosystem services, yet land-use decisions often ignore the value of these services. Using the example of the United Kingdom, we show the significance of land-use change not only for agricultural production but also for emissions and sequestration of greenhouse gases, open-access recreational visits, urban green space, and wild-species diversity. We use spatially explicit models in conjunction with valuation methods to estimate comparable economic values for these services, taking account of climate change impacts. We show that, although decisions that focus solely on agriculture reduce overall ecosystem service values, highly significant value increases can be obtained from targeted planning by incorporating all potential services and their values and that this approach also conserves wild-species diversity.

Spatial Impacts of Agglomeration Externalities

This article examines the extent to which agglomeration economies in one location affect employment growth and establishment births, using data from the Dutch province of South-Holland. The data are of particular interest because they represent a census, rather than a sample, of all establishments and the location of establishments can be pinpointed to within 416 (postal) zip code areas averaging less than 6 km2 in size. Results suggest that agglomeration economies positively affect employment growth and the location of new establishments, but with the possible exception of manufacturing, this effect dies out quickly with distance. Thus, the main finding is that for many industries, agglomerative forces may well operate at a geographic scale that is smaller than a city.

Environmental degradation in developing countries: households and the (reverse) Environmental Kuznets Curve

Abstract We propose an alternative explanation for the inverted U-shape relationship between income and environmental degradation. In developing countries, production and consumption patterns of (rural) households are the main cause of environmental damage. With a conventional household model, we demonstrate that the so-called Environmental Kuznets Curve may arise when the restrictive assumption of a set of perfect markets for factors and commodities is relaxed. Depending on the criterion or indicator that is used to represent environmental pressure, however, we demonstrate that the reverse may also hold. This finding highlights the importance of selecting the appropriate dependent variable in regression analyses.

Forest Conservation in Costa Rica when Nonuse Benefits are Uncertain but Rising

Stochastic dynamic programming is used to investigate optimal holding of primary tropical forest in humid Costa Rica when future nonuse benefits of forest conservation are uncertain and increasing. The quasi-option value of maintaining primary forests is included as a component of investment in natural capital. Although the impact of uncertainty on conservation incentives is substantial, our results indicate that a rising trend in future benefits and compensation by the international community for beneficial spillovers are more important factors in determining optimal holdings of forest stocks. Without compensatory payments, however, further deforestation may be warranted.

From the Lab to the Field: Cooperation among Fishermen

We conduct a field experiment to measure cooperation among groups of recreational fishermen at a privately owned fishing facility. Group earnings are greater when group members catch fewer fish. Consistent with classical economic theory, though in contrast to prior results from laboratory experiments, we find no cooperation. A series of additional treatments identifies causes of the difference. We rule out the subject pool and the laboratory setting as potential causes and identify the type of activity involved as the source of the lack of cooperation in our field experiment. When cooperation requires reducing fishing effort, individuals are not cooperative.

International comparisons of domestic energy consumption

Abstract Governments of many industrialized countries have committed themselves to substantially reduce their domestic emissions of greenhouse gases. Emission reductions can be achieved through technology- and/or sector-specific policies. To decide which part of the economy environmental policy should be concentrated at, insight must be gained into the relative importance of the various factors determining domestic aggregate fossil fuel consumption. By applying structural decomposition analysis (SDA) across nations, the factors causing per capita energy use to differ between countries can be identified, which sheds light on where potential energy-saving options can be found. To demonstrate the usefulness of between-country SDA, we apply the technique to a set of 8 OECD countries.

A method for the deliberate and deliberative selection of policy instrument mixes for climate change adaptation

Policy instruments can help put climate adaptation plans into action. Here, we propose a method for the systematic assessment and selection of policy instruments for stimulating adaptation action. The multi-disciplinary set of six assessment criteria is derived from economics, policy, and legal studies. These criteria are specified for the purpose of climate adaptation by taking into account four challenges to the governance of climate adaptation: uncertainty, spatial diversity, controversy, and social complexity. The six criteria and four challenges are integrated into a step-wise method that enables the selection of instruments starting from a generic assessment and ending with a specific assessment of policy instrument mixes for the stimulation of a specific adaptation measure. We then apply the method to three examples of adaptation measures. The methods merits lie in enabling deliberate choices through a holistic and comprehensive set of adaptation specific criteria, as well as deliberative choices by offering a stepwise method that structures an informed dialog on instrument selection. Although the method was created and applied by scientific experts, policy-makers can also use the method.

Path-dependency and input substitution: implications for energy policy modelling

In most policy-oriented energy models, the effectiveness of energy policy instruments crucially depends both on the values of the substitution elasticities between the various inputs and on the rates of technological progress. In this paper, we argue that due to the fixed-cost nature of adjustments to relative price changes, these technological parameters are affected by past developments. Failing to account for the role of history will result in biased parameter estimates, and hence the implication for energy policy modelling is that the estimation period should be carefully selected. We provide an empirical illustration using data for the Netherlands.

Towards the Optimal Management of the Northeast Arctic Cod Fishery

The objectives pursued by governments managing fisheries may include maximizing profits, minimizing the impact on the marine ecosystem, or securing employment, which all require adjusting the composition of the fishing fleet. We develop a management plan that can be adapted to those objectives and allows the regulator to compare the long-run profits between the various management options. We apply the model to the case of Northeast Arctic cod, and estimate the cost and harvesting functions of various vessel types, the demand function, and a biological model to provide key insights regarding the optimal management of this valuable fish species.

On the effect of high energy prices on investment

Empirical analyses of firm behaviour typically assume that there is a stable relationship between investment on the one hand and changes in the relative prices of inputs, output demand and other determinants on the other hand. However, because of the lumpy nature and irreversibility of investments and the presence of uncertainty about future economic developments, a specific percentage change in relative prices and output demand may not always lead to the same percentage change in capital stocks. That means that different regimes may exist in investment behaviour. We test whether such regimes exist using high-quality data on eight manufacturing industries in the Netherlands. Three different regimes can be identified that are characterized by differences in the relative input price levels and we find that if relative prices take on extreme values, the propensity to adjust the scale of production to changes in demand is very low.