Gregmar I. Galinato

Trade Policies, Economic Growth, and the Direct Causes of Deforestation

This paper combines elasticities from microstudies with estimates from a cross-country analysis to identify structural relationships explaining deforestation in Brazil, Indonesia, Malaysia, and the Philippines. Economy-wide factors such as trade openness and economic growth explain an important portion of the variation in three key factors of deforestation: poverty, agricultural expansion, and road building. Trade increases forest cover in Brazil and in the Philippines, but has no significant effect in Indonesia and Malaysia. An important channel through which trade policy affects forests in all four countries is agricultural expansion. Economic growth has a negative and relatively large impact on forest cover. (JEL Q23, F43)

Deforestation and Forest-Induced Carbon Dioxide Emissions in Tropical Countries: How Do Governance and Trade Openness Affect the Forest-Income Relationship?:

The objective of this article is to study the implications of changes in land use induced by economic growth, economy-wide policies, and governance on deforestation and forest-induced atmospheric carbon dioxide emissions. Economic growth, democracy, and trade policy explain an important share of the variation in two key determinants of deforestation: agricultural expansion and road building. The resulting shape of the Environmental Kuznets Curve for forests is influenced by governance as well as trade openness. Trade shifts the forest-income curve up (down) for countries that have a comparative disadvantage (advantage) in the production of crops encroaching on forest areas, such as Brazil and the Philippines (Indonesia and Malaysia). Amore democratic country will have a farther turning point than a less democratic country, but whether the Environmental Kuznets Curve shifts up or down is country specific.

The effects of corruption control, political stability and economic growth on deforestation-induced carbon dioxide emissions

This article formulates an empirical model that measures the short- and long-run effects of political stability, corruption control and economic growth on CO2 emissions from deforestation. Political stability and corruption have significant effects on forest cover in the short run and have lingering long-run effects. We derive a U-shaped forest–income curve where forest cover initially declines as per capita income increases, but starts to rise after an income turning point. Political stability and corruption control do not significantly affect the income turning point but both variables shift the forest–income curve up or down. The resulting CO2 emission–income curve is downward sloping and is based on changes in the levels of variables affecting forest cover. Increased political stability flattens the CO2 emissions–income curve, leading to smaller changes of CO2 emissions per unit change in income.

Long‐term versus temporary certified emission reductions in forest carbon sequestration programs

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, forest projects can receive returns for carbon sequestration via two crediting instruments: temporary or long-term certified emission reductions (tCERs or lCERs). This study shows the effect of lCERs on the private owner’s forest rotation intervals decision and carbon credit generation in afforestation and reforestation projects. A credit verification mechanism with a harvest penalty implemented under the lCERs policy distorts the timber harvesting decision and the corresponding carbon credit supply. Two opposing incentives are created by the lCERs mechanism which leads to either longer or shorter rotations compared to the Faustmann rotation, depending on which incentive prevails. Our numerical results show that both lCERs and tCERs seem to have similar impacts on harvesting incentives, but the resulting carbon supply differs among the instruments owing to the credit verification mechanism. The tCERs carbon supply curve is monotonically increasing in the carbon price, while a lCERs carbon supply is non-monotonic and may have a backward bending region over a range of carbon prices.

Evaluating Temporary Certified Emission Reductions in Reforestation and Afforestation Programs

This article investigates the efficiency of the temporary certified emission reductions (tCERs) system that attempts to internalize the carbon sequestration function of the forest under the Clean Development Mechanism of the Kyoto Protocol. We find that the regulations creating tCERs partially internalize the carbon sequestration function of the forest. The amount of carbon re-released into the atmosphere, due to timber harvest, and sequestered, after the project period, is not internalized in the private landowner’s decision, which induces shorter rotation intervals than socially optimal. Furthermore, the carbon sequestered during the project is over-credited because credits are counted based on accumulated carbon instead of marginally sequestered carbon, which induces longer rotations intervals. Simulation results for the Philippines and Tanzania show that the difference in social welfare between the tCERs system and a socially optimal policy is only about 2% because of the countervailing effect of the inefficiencies on rotation interval choices.

Endogenous Property Rights Regimes, Common Pool Resources and Trade

A model is developed where opening to trade affects a dynamic common-pool resource stock and welfare through a communitys voting decision to institute a property rights regime regulating the stock. The model finds that resource stock levels can decline even when a Markov perfect equilibrium path for labor and property rights regimes are chosen to maximize welfare. Thus, opening to trade can be welfare maximizing even when resource stock declines. Experimental results show that under certain conditions, subjects briefly follow a Markov perfect equilibrium path for property rights regime choice but labor allocations are myopically chosen indicating that some resource dynamics may be considered by subjects.

The Effect of Temporary Certified Emission Reductions on Optimal Forest Rotations and the Supply of Sequestered Carbon

This paper examines the effect of the regulations under the Clean Development Mechanism (CDM) in creating temporary certified emission reductions (tCERs) on optimal harvesting decisions and supply of carbon removal services in forest plantations. The paper develops a theoretical model examining optimal harvesting strategies when revenues from sequestered carbon dioxide are considered under the CDM guidelines. We find that the current CDM rules with 5-year verification intervals of tCERs may result in socially inefficient timber rotations because they do not fully internalize the carbon sequestration function of trees. Decreasing the intervals between carbon credit verification periods increases the optimal rotation lengths. Other factors that lengthen rotation intervals, such as decreasing timber price and increasing harvesting cost, will increase the supply of tCERs. Fast growing tree species with shorter rotation intervals have relatively more inelastic carbon credit supply curves than slow growing tree species with longer rotation intervals.

The amenity value of climate change across different regions in the United States

ABSTRACT This article estimates the effect of climatic variables on house prices near ski resorts in different regions in the United States. We find that among the climate variables we test, average winter temperature has the most significant and robust effect where an increase in this climate variable increases house prices near ski resorts at a decreasing rate. At the mean average winter temperature levels, an increase in average winter temperature reduces housing prices for all regions except the Northeast. The consumer surplus from projected average winter temperature changes is negative across all regions and the largest negative effects are in the Midwest and Mountain regions.

Making Friends to Influence Others: Entry and Contribution Decisions That Affect Social Capital in an Association

We examine factors affecting entry and contribution to an association that provides different goods using social capital formed by heterogeneous firms in a political economy environment. We model and solve a game that explains investments to form social capital within associations and determine the effect on the intensive and extensive marginal contributions to the association related to the government’s susceptibility to influence. Association products such as capital goods for members or lobbying the government to influence regulation affect membership and contribution decisions. Government influenceability also affects the decision to contribute to social capital, but it varies with agent productivity and association output. Often, an increase in government influenceability increases social capital in associations composed of high productivity agents because they prefer to influence policy while low productivity agents focus on production.