Lars Gårn Hansen

A Damage Based Tax Mechanism for Regulation of Non-Point Emissions

In a recent paper Segerson (1988) proposed a novel incentive mechanism for stochastic non-point emissions based on ambient pollution concentrations in nature. For specification of the mechanism when the damage function is nonlinear, the regulator must know polluters’ cost and emission functions. The mechanism also gives incentives to form coalitions among polluters, which, if they are formed, render the mechanism inefficient. In this paper we propose a revised mechanism which eliminates the need for knowledge of polluters’ cost and emission functions and reduces the probability of coalition forming. A standards and pricing version of the revised mechanism with both properties mentioned is also developed.

Environmental Regulation through Voluntary Agreements

Voluntary agreements with polluting industries are becoming a popular alternative to traditional environmental regulation. One reason may be that voluntary agreements can reduce compliance costs of polluting industries. In this paper we develop a family of simple policy formulation and implementation models enabling us to formally characterize the policy environments that make voluntary agreements possible. The main message of this paper is one of caution. Voluntary agreements that increase compliance costs and reduce social welfare can not be ruled out. The analyses also suggests that giving the legislative branch of government an effective power of veto reduces (but does not eliminate) the possibility of welfare reducing voluntary agreements.

Regulation of Non-Point Emissions – A Variance Based Mechanism

Non-point emission problems such as pesticide, nitrate, and phosphorus pollution of lakes and ground water are often characterised by a small number of polluters, convex damage functions, and stochastic emissions. Some regulatory mechanisms proposed in the literature for stochastic non-point emissions implement the optimal abatement vector in dominant strategies (ensuring that non-Nash conjectures cannot be rationalized). However, specification of these mechanisms requires firm level information and differentiated rates when the damage function is convex. Other mechanisms eliminate the need for firm level information and rate differentiation, but only implement optimum in Nash strategies (where non-Nash conjectures, that cause equilibrium to stray from optimum, can be rationalized). In this paper we propose a mechanism which eliminates the need for firm level information and rate differentiation, while retaining implementation in dominant strategies.

A deposit-refund system applied to non-point nitrogen emissions from agriculture

The purpose of this paper is to describe a nitrogen-based deposit-refund system for regulating non-point nitrogen emissions from agriculture. I develop a formal model of a polluting production sector with substance content of inputs and outputs as an explicit quality dimension. Within this framework two input-output based tax schemes for regulation of agricultural nitrogen emissions are compared, while taking regulator monitoring costs into account. Incentive regulation of nitrogen emissions from Danish agriculture is discussed in this light. It is concluded that a nitrogen-based deposit-refund system seems a logical focal point of analysis for a policymaker considering introduction of incentive regulation of non-point nitrogen emissions from agriculture.

Aspects of the Political Economy of Environmental Voluntary Agreements

Environmental voluntary agreements with industries are becoming a popular alternative to traditional regulation. One reason may be that such agreements increase implementation cost efficiency. On the other hand, models of the political economy of environmental voluntary agreements point out that efficiency reducing agreements are also possible under certain conditions. In this paper we interpret empirical evidence from case studies of environmental voluntary agreements using one such policy formulation and implementation model. When our sample is interpreted in this light the data suggests that environmental voluntary agreements may often be chosen in order to shift the responsibility for implementation to industrial organizations that are less sensitive to criticism from powerful environmental interest groups. When this explanation of an environmental voluntary agreement applies, the model predicts that the agreement will be less cost effective and achieve lower environmental performance than the traditional regulatory alternative which would otherwise have been adopted. Although our findings are not conclusive nor necessarily representative they do suggest the worrying possibility that many of the environmental voluntary agreements being established today achieve lower environmental performance less cost effectively than the most likely traditional regulatory alternative.

Prices versus Quantities in Fisheries Models: Comment

Jensen and Vestergaard (2003) compare price regulation with quantity regulation under economic uncertainty in the spirit of Weitzman (1974). For a schooling fishery without search cost, they find that price regulation is preferred over quantity regulation, when demand for fish is elastic. However, this finding is based on an assumption that does not hold and, in fact; quantity regulation is always preferred for this type of fishery, irrespective of the demand elasticity. In this note, we show that a pro quota result always applies for a schooling fishery without search costs. (JEL Q22)

Providing Free Autopoweroff Plugs: Measuring the Effect on Households' Electricity Consumption through a Field Experiment

Experimental evidence of the effect of providing households with cheap energy saving technology is sparse. We present results from a field experiment in which autopoweroff plugs were provided free of charge to randomly selected households. We use propensity score matching to find treatment effects on metered electricity consumption for different types of households. We find effects for single men and couples without children, while we find no effect for single women and households with children. We suggest that this could be because of differences in saving potential (e.g. some households do not have appliances where using a plug is relevant), differences in the skills relevant for installing the technology and differences in the willingness to spend time and effort on installation. We conclude that targeting interventions at more responsive households, and tailoring interventions to target groups, can increase the efficiency of programs.

Shiftable Externalities: A Market Solution

In this paper we propose a regulatory scheme for what has become known as ‘shiftable’ externalities (‘Not In My Backyard’ type garbage location problemswhere the externality is characterized by the absence of jointness in supply).The scheme facilitates the establishment of a market for the externality, and it isfeasible for a wider class of regulation problems and more information efficientthan the other regulatory schemes that have been proposed for this type ofexternality. Finally, we show that it is possible to decentralize the participationdecision so as to take account of verification costs.

Regulating groundwater use in developing countries: a feasible instrument for public intervention

Worldwide groundwater is a common-pool resource that is potentially subject to the tragedy of the commons if water extraction is not adequately regulated. In developing countries the regulatory infrastructure is often too weak to allow detailed monitoring of individual groundwater extraction. For this reason, classical public intervention instruments, such as consumption fees or tradable quotas, are infeasible. Here we present a theoretical foundation for a new public regulatory instrument that can potentially generate the same efficiency-inducing incentives as fees and tradable quotas, but without their information and monitoring requirements. The instrument we propose is a tax based on aggregate extraction rather than on individual extraction measures.

Heterogeneous Consumer Reactions to Health News

Abstract We investigate heterogeneity in how consumers react to health‐related media information. Our specific focus is on news relating to fish and the consumption of different types of fish. We specify a dynamic empirical model that allows for pervasive heterogeneity in all basic parameters of consumer behavior, as well as in how consumers react to information. We estimate the model using a unique household panel tracking consumption, prices, news stories, and media habits over 24 quarters. We find that only 16% of consumers react to news that is specific to fatty fish. These consumers have a large reaction to such news, with a modest initial over‐reaction. Furthermore, these consumers are also more attentive to general media information about the healthiness of fish.