Mauricio G. Villena

The optimal pricing of pollution when enforcement is costly

We consider the pricing of a uniformly mixed pollutant when enforcement is costly with a model of optimal, possibly firm-specific, emissions taxes and their enforcement. We argue that optimality requires an enforcement strategy that induces full compliance by every firm. This holds whether or not regulators have complete information about firms’ abatement costs, the costs of monitoring them for compliance, or the costs of collecting penalties from noncompliant firms. Moreover, ignoring several unrealistic special cases, optimality requires discriminatory emissions taxes except when regulators are unable to observe firms’ abatement costs, the costs of monitoring individual firms, or any firm-specific characteristic that is known to be jointly distributed with either the firms’ abatement costs or their monitoring costs. In many pollution control settings, especially those that have been subject to various forms of environmental regulation in the past, regulators are not likely to be so ill-informed about individual firms. In these settings, policies that set or generate a uniform pollution price like conventional designs involving uniform taxes and competitive emission trading with freely-allocated or auctioned permits will not be efficient.

The Choice of Policy Instruments to Control Pollution under Costly Enforcement and Incomplete Information

We analyze the cost of enforcing a system of firm specific emissions standards vis a vis a transferable emissions permit system in the context of complete and incomplete information. We also examine the optimality of a transferable emissions permit system when abatement costs and enforcement costs are considered. We show that under incomplete information, regulation based on each firm-specific emissions standards cannot be less costly than a transferable emissions permit system. In addition, we find that the distribution of emissions that minimize aggregate program costs differ from the distribution of emissions generated by a competitive transferable emissions permit system.

COSTOS DE CUMPLIMIENTO DE REGULACIÓN AMBIENTAL CON INFORMACIÓN INCOMPLETA: APLICACIÓN A FUENTES FIJAS DEL PCE DE SANTIAGO, CHILE

Estudiamos la propiedad de costo-efectividad de un sistema de permisos de emision transferibles (SPET) frente un sistema de estandares de emision. Nuestro analisis agrega a los costos de abatimiento, los costos de fiscalizacion para inducir cumplimiento. Consideramos, ademas, escenarios de informacion completa e incompleta. Las simulaciones numericas se basan en datos de las fuentes fijas que operan en el Programa de Compensacion de Emisiones (PCE) en Santiago de Chile. Los resultados muestran que un SPET no permite obtener mejoras en calidad del aire al minimo costo de fiscalizacion, pero mantiene su costo-efectividad en terminos de los costos totales de cumplimiento.

The unintended consequences of childcare regulation: Evidence from a regression discontinuity design

In several countries governments fund childcare provision but in many others it is privately funded as labor regulation mandates that firms have to provide childcare services. For this later case, there is no empirical evidence on the effects generated by the financial burden of childcare provision. In particular, there is no evidence on who effectively pays (firms or employees) and how (e.g., via wages and/or employment). Our hypothesis is that in imperfect labor markets, firms will transfer childcare cost on to their workers. To analyze this, we exploit a discontinuity in childcare provision mandated by Chilean labor regulation.

Transportation costs, agricultural expansion and tropical deforestation: Theory and evidence from Peru

The growth of urban areas adjacent to forest areas, as well as international trade growth, has accelerated the demand for food. These areas of growth have led to the deforestation of tropical forests, a process that contributes negatively to climate change, and a decline in the provision of environmental services and biodiversity. This article seeks to propose and simulate a theoretical model of optimal control at the household level. This model is used to explain the dynamics of forest loss by expansion of the agricultural frontier. Under these conditions, based on tradable permanent crops, farmers decide whether to install new areas for cultivation or manage existing ones in a context of increasing transportation costs. We simulate a theoretical model using data on permanent crops in the high forest of Peru. The results of the model establish that there is a limit to the expansion of the agricultural frontier of the rainforest due to transportation costs. This limit can be surpassed in the context of the free movement of labor whenever these costs cause a decrease and/or increase in the price of land cultivation. Finally, the main policy recommendations of this study emphasize the subordination of transport policy to agroforestry and the conservation of forest ecosystems policies. Agroforestry design forest policies should consider the differential impact of the construction of highways and rural roads on the loss of tree cover as well as on sustainable food production, given that deforestation is not accelerated by the mere existence of roads but by the incentives that are presented to settlers to guide their efforts toward clearing new forest areas. El crecimiento de las areas urbanas adyacentes a las zonas forestales, ademas del crecimiento del comercio internacional, ha acelerado la demanda de alimentos y por lo tanto la deforestacion de los bosques tropicales, un proceso que contribuye negativamente al cambio climatico, a la disminucion de la provision de los servicios ambientales y a la biodiversidad. Este articulo tiene como objetivo proponer y simular un modelo teorico de control optimo a nivel de hogares para explicar la dinamica de la perdida de bosques por la expansion de la frontera agricola que hace que un agricultor, en base a cultivos permanentes transables, quien decide en cada momento si expander a nuevas areas para el cultivo o si maneja las ya existentes en un contexto de aumento de los costos de transporte. Simulamos el modelo teorico a partir de datos sobre los cultivos permanentes en la selva alta del Peru. Los resultados del modelo establecen que hay un limite a la expansion de la frontera agricola en la selva dado por los costos de transporte. Este limite puede ser superado en un contexto de libre disposicion de mano de obra cada vez que estos costos disminuyen y/o aumentan el precio pagado para el cultivo de la tierra. Por ultimo, las principales recomendaciones de este trabajo destacan la subordinacion de la politica de transportes a la agroforesteria y a la conservacion de las politicas de los ecosistemas forestales. Politicas forestales de diseno agroforestales deben considerar el impacto diferencial de la construccion de carreteras y caminos rurales por la perdida de la cobertura forestal, y tambien en la produccion sostenible de alimentos, teniendo en cuenta que la deforestacion no es acelerada por la mera existencia de caminos, sino por los incentivos presentados a los colonos para orientar sus esfuerzos hacia la limpieza de nuevas areas forestales.

Applying a bioeconomic optimal control model to charcoal production: the case of slash-and-burn agriculture in Mexico

F. Arrocha, and M.G. Villena. 2012. Applying a bioeconomic optimal control model to charcoal production: the case of slash-and-burn agriculture in Mexico. Cien. Inv. Agr. 39(3): 489-504. This paper analyzes the relationship between rural poverty and forest land management for the case of charcoal production under slash-and-burn agriculture. An optimal control model is used to determine how a representative household makes decisions about the allocation of labor and about the forest areas to exploit. In turn, these decisions affect the renewable resource base available to the community. The proposed optimal control model for charcoal production is based on the Pascual and Barbier (2007) model of slash-and-burn agriculture. This theoretical model is calibrated with data from the community of Chunkanan, Campeche, Mexico. The simulation and comparison of the traditional slash-and-burn approach to forest management with the Forest Management Program for the Exploitation of Timber Resources (FMPETR), developed by the regulatory authority as a policy for the use and conservation of forest resources, showed that the traditional approach, but not the FMPETR, is sustainable from an ecological point of view and efficient from an economic point of view, implying that households allocate an optimal amount of labor and forest biomass. This result suggests that the FMPETR is a suboptimal policy and shows that there is room for improvement in terms of the design and implementation of policies aimed at providing economic and social incentives leading to the sustainable management of natural resources.