Katheline Schubert

A NOTE ON THE CONSEQUENCES OF AN ENDOGENOUS DISCOUNTING DEPENDING ON THE ENVIRONMENTAL QUALITY

Our intention is to study, in the framework of a very simple optimal growth model, the consequences on the optimal paths followed by consumption and the environmental quality of an endogenous discounting. Consumption directly comes from the use of environmental services and so is a direct cause of environmental degradation. The environment is valued both as a source of consumption and as an amenity. For a sustainability concern, we introduce an endogenous discount rate growing with the environmental quality, and compare the optimal growth paths with the ones obtained in the usual case of exogenous and constant discounting. We show that the convergence of the environmental quality towards a steady state occurs only for a very special configuration of the parameters in the exogenous discounting case, while it occurs generically in the endogenous discounting one. This happens for a utility discount rate becoming suficiently high when the environmental quality is high and suficiently low when the environmental quality is poor. In this case then, endogenous discounting with a positive marginal discount rate allows us to avoid the depletion of the environment.

Optimal use of a polluting non renewable resource generating both manageable and catastrophic damages

We consider a model with two energy sources, a non-renewable one, cheap but polluting, and a renewable one, expensive but clean, lets say coal and solar. The aim of environmental policy is to maintain atmospheric carbon concentration under a given ceiling, chosen to prevent an excessive rise of the temperature and catastrophic damages. Before the ceiling damages exist but remain small, hence manageable. We show first that costs matter a lot. Whatever abundant or rare, if solar is more expensive than coal at the ceiling, it will never be used before the end of the phase at the ceiling, when coal becomes so scarce that the ceiling will never be reached again. On the contrary, if solar is less expensive than coal at the ceiling, it may even be sufficiently cheap to be exploited before the ceiling, in which case first coal is exploited alone, next both resources are used together before, at and after the ceiling, and finally solar is exploited alone, after the exhaustion of coal. Second, the carbon shadow value is first increasing until the ceiling is reached, next decreasing during the phase at the ceiling, and finally is stabilized at a constant level after the ceiling. The initial carbon shadow cost is an increasing function of the value of the marginal damage, and a decreasing function of the ceiling. Lastly, contrary to intuition, higher marginal damages and/or a lower ceiling induce a delay in the penetration of solar and also a delay in the transition towards a totally clean energy.

With Exhaustible Resources, Can A Developing Country Escape From The Poverty Trap?

This paper studies the optimal growth of a developing non-renewable natural resource producer, which extracts the resource from its soil and produces a single consumption good with man-made capital. Moreover, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domestic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We study the optimal extraction and depletion of the exhaustible resource and the optimal paths of accumulation of capital and of domestic consumption. We show that the extent to which the country will optimally escape from the poverty trap and the exhaustible resource will be a blessing depends on the characteristics of its technology and of the revenues from the resource function, on its impatience, on the level of its initial stock of capital and on the abundance of the natural resource. If the marginal productivity of capital at the origin is greater than the sum of the social discount rate and the depreciation rate, the country will accumulate capital along the entire growth path and will escape from the poverty trap, whatever its initial stocks of capital and resource, and provided that the marginal revenue obtained from the exportation of the resource is finite at the origin. On the contrary, if the marginal productivity of capital is lower than the depreciation rate whatever the level of capital and if moreover the initial stock of capital is small, then the country will never accumulate ; it will consume the revenues obtained from selling abroad the extracted resource, until there is no resource left and the economy collapses. We also show that any optimal path may be decentralized in a competitive equilibrium by using a tax/subsidy scheme for firms.

The Zero discounting and maximin optimal paths in a simple model of global warming

Following Stollery (1998), we extend the Solow-- Dasgupta--Heal model to analyze the effects of global warming The rise of temperature is caused by the use of fossil resources so that the temperature level can be linked to the remaining stock of these resources. The rise of temperature affects both productivity and utility. We characterize optimal solutions for the maximin and zero-discounting cases and present closed form solutions for the case where the production and utility functions are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight of temperature in intratemporal preferences or a larger intertemporal elasticity of substitution both lead to postpone resource use.

A Stylized Applied Energy-Economy Model for France

We build, calibrate and simulate a stylized energy-economy model designed to evaluate the magnitude of carbon tax that would allow the French economy to reduce by a factor of four its CO2 emissions at a forty-year horizon. We estimate the substitution possibilities between fossil energy and other factors for households and firms. We build two versions of the model, the first with exogenous technical progress, and the second with an endogenization of the direction of technical progress. We show that if the energy-saving technical progress rate remains at its recent historical value, the magnitude of the carbon tax is quite unrealistic. When the direction of technical progress responds endogenously to economic incentives, CO2 emissions can be reduced by more than that allowed by the substitution possibilities, but not by a factor of four. To achieve this, an additional instrument is needed, namely a subsidy to fossil energy-saving research. The redirection of technical progress, which is a driver of energy transition, comes at a small cost in terms of the overall growth rate of the economy.

Carbon Tax and OPEC's Rents Under a Ceiling Constraint

We study the Markov-perfect Nash equilibrium (MPNE) of a game between oil-importing countries, who seek to maintain the atmospheric carbon concentration under a given ceiling, and oil-exporting countries. The oil-importing countries set a carbon tax and the oil-exporting countries control the producer price. We obtain implicit feedback rules and explicit non-linear time paths of extraction, carbon tax, and producer price. Consumers are always able to reap some share of the scarcity and monopoly rents, whereas producers partially pre-empt the carbon tax only if the marginal damage under the ceiling is small. We compare the MPNE to the efficient, open-loop, and cartel-without-tax equilibria.

A Stylized Energy-Economy Model for France

We build, calibrate and simulate a stylized energy-economy model designed to evaluate the magnitude of carbon tax that would allow the French economy to reduce by a factor of four its CO2 emissions at a forty-year horizon. We estimate the substitution possibilities between fossil energy and other factors for households and firms. We build two versions of the model, the first with exogenous technical progress, and the second with an endogenization of the direction of technical progress. We show that if the energy-saving technical progress rate remains at its recent historical value, the magnitude of the carbon tax is quite unrealistic. When the direction of technical progress responds endogenously to economic incentives, CO2 emissions can be reduced by more than that allowed by the substitution possibilities, but not by a factor of four. To achieve this, an additional instrument is needed, namely a subsidy to fossil energy-saving research. The redirection of technical progress, which is a driver of energy transition, comes at a small cost in terms of the overall growth rate of the economy. [ABSTRACT FROM AUTHOR]

To What Extent Is Aquaculture Socially Beneficial? A Theoretical Analysis

&NA; This article offers a theoretical analysis of the impact that the introduction of aquaculture has on wild fish stocks and consumer utility, taking into account three key components: (1) the dependence of aquaculture on reduction fisheries for the feeding of the farmed species; (2) biological interactions between the wild edible species—the predator—and the wild feed species—the prey; and (3) consumer preferences for wild and farmed fish. Fisheries are in open access, while the aquaculture sector is competitive. We show that when biological interactions are moderate, the introduction of aquaculture is beneficial in the long run: it improves consumer utility and alleviates the pressure on the edible fish stock. Results are deeply modified when biological interactions are strong: the stock of edible wild fish is reduced and the introduction of aquaculture may even cause a decrease in consumer utility. We then explore the consequences of improving aquaculture efficiency and the sensitivity of consumer preferences to the farmed fish characteristics, in the case where biological interactions are absent. Lastly, we analyze how our outcomes on the entry of aquaculture are affected when the wild edible fishery is optimally regulated, in combination with different assumptions on the regulation of the feed fishery. Results are again conditional on the intensity of biological interactions.

Opinion paper: prospects for the fed-aquaculture sector.

Since the 1970s, global demand for fish has kept increasing, particularly in developing countries where population and income growth constitute the main drivers of the rise in world fish consumption. Although output from capture fisheries stagnates, total production of fish continues to rise, thanks to aquaculture. In 2010, aquaculture contributed up to 47% of world food fish production against 9% in 1980. The optimistic view is that aquaculture is going to replace – at least partially – open sea fishing, helping to make fisheries sustainable and providing food security to many developing countries. However, there are concerns that the ecological and socio-economic impacts of aquaculture jeopardize its own sustainability. In particular, open water aquaculture is a polluting industry, that spills effluents (feeds including fertilizers, feces or chemicals) into the wild. Besides, aquaculture increasingly faces problems of space and feed scarcity. The favored locations for farms are coastal areas, where the likelihood of interfering with other human activities is high (fishing, mining, tourism, etc.). Fish feed is probably the most controversial aspect of the aquaculture production process. Aquaculture relies on fish protein for the feeding of an important share of its production. In 2008, fed-aquaculture contributed to 81.2% of global farmed fish and crustacean production (Food and Agriculture Organization, 2012). Fish meal and fish oil are key ingredients in aquaculture feed. They are made from small oily fish belonging to low-trophic levels (LTL) for about 80% and waste from processed fish for 20%. The FIFO (fish in–fish out) ratio gives the number of tons of wild fish used to produce 1 ton of farmed fish. The overall FIFO ratio was estimated to be close to 0.7 in 2006. At the carnivorous species-group level the FIFO ratio varies quite a lot between surveys, but is clearly >1. For instance, Tacon and Metian (2008) and Naylor et al. (2009) on the one hand, and the International Fishmeal and Fish Oil Organization on the other reported a salmon FIFO ratio of 4.9 and 2.2, respectively. The expansion of aquaculture urges to find substitutes to fish meal and fish oil. Some plant and terrestrial animal by-product nutrients are sources of high-quality proteins, but do not present all the properties allowing to maintain the flesh quality of carnivorous species. In our paper ‘Is aquaculture really an option?’ (Regnier and Schubert, 2013), we develop a theoretical framework to investigate the impact of the introduction of aquaculture on fish consumption, consumer utility and wild fish stocks, taking into account the sector’s dependence on feed fish and consumer preferences. The theoretical model (see Figure 1) consists of two wild fish stocks in open access and a competitive aquaculture sector. Although the general trend of tightening regulations goes against the assumption of open access, resource management schemes are far from being implemented or efficient worldwide, and this assumption seems reasonable as a benchmark. The wild species 1 is harvested for direct human consumption, whereas the other one (species 3) is used to feed farmed fish. Biological interactions of the predator–prey type take place between the two wild species: the withdrawal of the prey species 3 affects the abundance of the predator species 1, which is higher in the food chain. Consumers may choose to consume wild or farmed fish, which are assumed to be strong substitutes, according to their preferences. Finally, market interactions refer to the competition between farmed and wild fish products on the fish counter, and the resulting prices of both products. We find that the long-run impacts of the aquaculture entry are conditional on the degree of dependence of the wild edible species on the feed fish stock, and on the level of consumer spending on fish. When biological interactions are moderate and consumer spending remains below a certain threshold, the introduction of aquaculture is of benefit to consumers, whose utility increases. By providing an alternative source of food fish, aquaculture makes the price of the wild product decrease. Fishing effort decreases, allowing the edible stock to recover despite the fact that aquaculture exploits the prey species as an input. In contrast, when biological interactions are high, the introduction of aquaculture leads to a decline in the two wild fish stocks, a decrease in wild edible fish supply and an increase in its price. At high levels of consumer spending, it First published online 2 March 2015

Biodiversity: a promising area for future research

The most challenging topic in the area of EDE is, to my point of view, the understanding of the various issues related to biodiversity and their modeling. We do not know much about the reasons why we would want to prevent ecosystem and species losses, but we suspect that preventing large-scale loss is indeed a tremendously important task we should undertake rapidly. We need tools to help us evaluate the costs of these losses and the benefits of preventing them, and to provide guiding principles for environmental policy.