Richard B. Howarth

Discourse-based valuation of ecosystem services: establishing fair outcomes through group deliberation

Discourse-based methods involving small groups of citizens have yet to be thoroughly engaged in the practice of ecosystem valuation. This remains true despite the fact that many ecosystem goods and services—such as clean air, biodiversity, and unpolluted lakes and rivers—are considered to be public goods. The conventional application of ecosystem valuation relies heavily on methodologies such as contingent valuation, in which individuals are asked to express the value they attach to ecosystem goods and services in social isolation. The difference between the public nature of ecosystem services and their valuation through individual expression has thus recently led to calls for more deliberative forms of environmental valuation. Because the allocation of ecosystem services directly affects many people and raises normative questions about social equity, it is argued that carefully designed discursive methods will help ensure the achievement of social equity goals. In this paper, we examine the theoretical and normative assumptions that rest beneath the proposed turn towards discourse-based methods, and identify procedures for testing their application in the field.

`Normal' markets, market imperfections and energy efficiency

Abstract The conventional distinction between ‘economic’ and ‘engineering’ approaches to energy analysis obscures key methodological issues concerning the measurement of the costs and benefits of policies to promote the adoption of energy-efficient technologies. The engineering approach is in fact based upon firm economic foundations: the principle of lifecycle cost minimization that arises directly from the theory of rational investment. Thus, evidence that so-called ‘market barriers’ impede the adoption of cost-effective energy-efficient technologies implies the existence of market failures as defined in the context of microeconomic theory. Problems of imperfect information and bounded rationality on the part of consumers, for example, may lead real world outcomes to deviate from the dictates of efficient resource allocation. A widely held contrary view, that the engineering view lacks economic justification, is based on the fallacy that markets are ‘normally’ efficient.

Accounting for the value of ecosystem services

Abstract A ‘value of ecosystem services’ (VES) may be calculated by multiplying a set of ecosystem services by a set of corresponding shadow prices. This paper examines the role of the VES concept in measuring trends in human well-being. Under conventional arguments from applied welfare economics, standard measures of market consumption may be extended to include the value of direct environmental services, which affect welfare in ways that are not mediated by the consumption of purchased goods. The VES concept does not capture values such as ecological sustainability and distributional fairness that are not reducible to individual welfare. And its operationalization is constrained by the well-known limitations of nonmarket valuation methods. Nonetheless, attempts to calculate the value of environmental services can provide insights into the tradeoffs between market activity and environmental quality that are implicit in the process of economic growth. Such efforts can promote informed debate concerning the achievement of sustainable development.

Manufacturing energy use in eight OECD countries: Decomposing the impacts of changes in output, industry structure and energy intensity

This paper examines trends in manufacturing energy use in eight OECD countries, decomposing the changes that occured between 1973 and 1987 into the effects of changes in aggregate manufacturing activity, industry structure and energy intensities measured at the industry group level. While manufacturing production grew in every country except the UK, the rate of growth was variable from nation to nation. Structural change led to modest reductions in energy use in most countries, although in Norway structural change led to substantial growth in energy use. The reduction in energy intensities was strikingly uniform across all nations, ranging from 20% (Norway) to 36% (Japan) over the period of the analysis. While other studies have used Divisia decomposition techniques, we use an alternative method based on Laspeyres indices. A comparison of the two techniques shows that they yield closely similar empirical results, although the Laspeyres approach is more easily interpreted. While the interactions between changes in structure and intensity are arbitrarily assigned to the two factors by the Divisia approach, the Lapeyres method yields interaction terms that explicitly account for such effects.

The economics of energy efficiency: insights from voluntary participation programs

Abstract This paper reviews experience with two programs sponsored by the US Environmental Protection Agency — the Green Lights and Energy Star Office Products programs — that promote the adoption of energy-efficient technologies through voluntary agreements with private sector firms. The evidence suggests that Green Lights has induced firms to make investments in cost-saving lighting systems that firms failed to exploit prior to the programs implementation. Energy Star Office Products, in contrast, has led suppliers of computers and electronic equipment to substantially improve the energy efficiency of their products in ways that confer net cost savings on equipment users. The paper argues that the success of these programs is based on their ability to reduce market failures related to problems of imperfect information and bounded rationality that impair the effectiveness of both intra-firm organization and the coordination between equipment suppliers and their customers. Given the nature of the technologies in question, these programs should have little effect on the demand for energy services so that energy efficiency improvements should lead to one-to-one reductions in the level of energy use.

Market barriers to energy efficiency

Abstract Discussions of energy policy in an environmentally constrained world often focus on the use of tax instruments to internalize the external effects of energy utilization or achieve specified reductions in energy use in the most cost-effective manner. A substantial literature suggests, however, that significant opportunities exist to reduce energy utilization by implementing technologies that are cost-effective under prevailing economic conditions but that are not fully implemented by existing market institutions. This paper examines the theory of the market for energy-using equipment, showing that problems of imperfect information and transaction costs may bias rational consumers to purchase devices that use more energy than those that would be selected by a well-informed social planner guided by the criterion of economic efficiency. Consumers must base their purchase decisions on observed prices and expectations of post-purchase equipment performance. If it is difficult or costly for individuals to form accurate and precise expectations, the level of energy efficiency achieved by competitive markets will vary from the socially efficient outcome. Such ‘market barriers’ suggest a role for regulatory intervention to improve market performance at prevailing energy prices.

A Theoretical Approach to Deliberative Valuation: Aggregation by Mutual Consent

In deliberative valuation, a small group of selected persons explores the values that should guide collective decisions through a process of reasoned discourse. Proponents argue that deliberative techniques enhance the effectiveness and perceived legitimacy of policy making by facilitating public participation. This paper outlines an approach to deliberative valuation that is grounded in democratic theory, social psychology, and cooperative game theory, emphasizing applications to the monetary valuation of environmental services. The analysis suggests that deliberative groups that employ consent-based choice rules may aggregate individual values in a manner that systematically departs from the additive aggregation procedures of standard cost-benefit analysis. (JEL Q20)

Pro‐environmental behavior

The determinants of individual behaviors that provide shared environmental benefits are a longstanding theme in social science research. Alternative behavioral models yield markedly different predictions and policy recommendations. This paper reviews and compares the literatures from two disciplines that appear to be moving toward a degree of convergence. In social psychology, moral theories of pro‐environmental behavior have focused on the influence of personal moral norms while recognizing that external factors, such as costs and incentives, ultimately limit the strength of the norm‐behavior relationship. Rational choice models, such as the theory of planned behavior in social psychology and the theories of voluntary provision of public goods in economics, have sought to incorporate the effects of personal norms and to measure their importance in explaining behaviors, such as recycling and the demand for green products. This paper explores the relationship between these approaches and their implications for the theory and practice of ecological economics.

Policy implications of human-accelerated nitrogen cycling

The human induced input of reactive N into the globalbiosphere has increased to approximately 150 Tg N eachyear and is expected to continue to increase for theforeseeable future. The need to feed (∼125 Tg N) andto provide energy (∼25 Tg N) for the growing worldpopulation drives this trend. This increase inreactive N comes at, in some instances, significantcosts to society through increased emissions of NOx,NH3, N2O and NO3− and deposition of NOy and NHx.In the atmosphere, increases in tropospheric ozone andacid deposition (NOy and NHx) have led toacidification of aquatic and soil systems and toreductions in forest and crop system production. Changes in aquatic systems as a result of nitrateleaching have led to decreased drinking water quality,eutrophication, hypoxia and decreases in aquatic plantdiversity, for example. On the other hand, increaseddeposition of biologically available N may haveincreased forest biomass production and may havecontributed to increased storage of atmospheric CO2 inplant and soils. Most importantly, syntheticproduction of fertilizer N has contributed greatly tothe remarkable increase in food production that hastaken place during the past 50 years.The development of policy to control unwanted reactiveN release is difficult because much of the reactive Nrelease is related to food and energy production andreactive N species can be transported great distancesin the atmosphere and in aquatic systems. There aremany possibilities for limiting reactive N emissionsfrom fuel combustion, and in fact, great strides havebeen made during the past decades. Reducing theintroduction of new reactive N and in curtailing themovement of this N in food production is even moredifficult. The particular problem comes from the factthat most of the N that is introduced into the globalfood production system is not converted into usableproduct, but rather reenters the biosphere as asurplus. Global policy on N in agriculture isdifficult because many countries need to increase foodproduction to raise nutritional levels or to keep upwith population growth, which may require increaseduse of N fertilizers. Although N cycling occurs atregional and global scales, policies are implementedand enforced at the national or provincial/statelevels. Multinational efforts to control N loss tothe environment are surely needed, but these effortswill require commitments from individual countries andthe policy-makers within those countries.

An Overlapping Generations Model of Climate-Economy Interactions

A numerically calibrated overlapping generations model of climate change and the world economy is examined in this paper. In the absence of intergenerational transfers, efficient rates of greenhouse gas emissions abatement rise from 16 percent in the present to 25 percent in the long run, while mean global temperature increases by 7.4 degrees C to the preindustrial norm. A utilitarian optimum, which attaches equal weight to each generations life-cycle utility, yields abatement rates that rise from 48 percent to 89 percent, with a long-run temperature increase of 3.4 degrees C second-best utilitarian path, in which intergenerational transfers are by assumption institutionally infeasible, also supports stringent abatement measures. Copyright 1998 by The editors of the Scandinavian Journal of Economics.