Runar Brännlund

Carbon tax simulations using a household demand model

The main objective of this paper is to analyse consumer response due to changes in energy or environmental policy. To achieve the objective we for-mulate and estimate an econometric model for non-durable consumer demand in Sweden that utilises micro- as well as macro-data. The micro-economic model is conditional on male and female labour supply. A 100 percent increase of the Swedish CO2 tax will, according to the simulations, result in an increased tax payment of SEK 630 or 0.7 percent of disposable income for the households with the lowest disposable incomes. The corre-sponding numbers for the richest households are SEK 990 and 0.3 percent.

Environmental regulation and profitability: An application to Swedish pulp and paper mills

In this paper we analyze the impact on firm profits of the environmental regulations in the Swedish pulp and paper industry. The approach taken is a non-parametric programming model of the technology. A feature of this industry is that environmental regulations are determined individually for each mill. A question, then, is if these individual regulations have a similar impact on firm profits. The approach in this paper allows us to calculate both the regulated and unregulated profits, which means that the severity of the regulations, in terms of foregone profits, can be calculated for each mill. The empirical result shows that the impact on the mills varies substantially, and that the burden from the regulations is less severe in 1990 than in 1989.

Too hot to handle?: Benefits and costs of stimulating the use of biofuels in the Swedish heating sector

This paper evaluates the impact of changes in current Swedish energy taxation by analyzing a panel of approximately 150 district heating plants in Sweden. We estimate plant-specific production functions and derive the economic repercussions of the tax. We also estimate the resulting changes of emissions of Sulfur, NOx, particulates and CO2 and assess the externality costs. Our results raise the issue of whether or not the Swedish tax system needs to be complemented with additional environmental taxes, covering, say, emissions of particulates. However, because the geographical variation of damages is likely to be substantial, an overall assessment of current regulatory schemes seems preferable. The current system of using both taxes and regulations needs to be re-structured, in particular in the case of global environmental problems.

Centralised reallocation of emission permits using DEA

In this paper a data envelopment analysis (DEA) approach to the problem of emission permits reallocation is presented. It can be used with conventional command and control as well as with an allowance market. It uses a centralized point of view, which represents the common good. In the model it is assumed that firms produce two types of outputs: desirable outputs (i.e. good outputs with positive value for consumers) and undesirable outputs (i.e. bad outputs with negative value for consumers, such as emissions of pollutants). The proposed approach has three phases, which correspond to three objectives that are pursued lexicographically. The three objectives are maximizing aggregated desirable production, minimizing undesirable total emissions and minimizing the consumption of input resources. The relative priority of these objectives is defined by the regulator. The whole approach is units-invariant and does not require information on input and output prices. The approach is applied on a dataset from the Swedish pulp and paper industry.

Environmental Policy Without Costs? A Review of the Porter Hypothesis

This paper reviews the theoretical and empirical literature connected to the so called Porter Hypothesis. That is, to review the literature connected to the discussion about the relation between environmental policy and competitiveness. According to the conventional wisdom environmental policy, aiming for improving the environment through for example emission reductions, do imply costs since scarce resources must be diverted from somewhere else. However, this conventional wisdom has been challenged and questioned recently through what has been denoted the “Porter hypothesis”. Those in the forefront of the Porter hypothesis challenge the conventional wisdom basically on the ground that resources are used inefficiently in the absence of the right kind of environmental regulations, and that the conventional neo-classical view is too static to take inefficiencies into account. The conclusions that can be made from this review is (1) that the theoretical literature can identify the circumstances and mechanisms that must exist for a Porter effect to occur, (2) that these circumstances are rather non-general, hence rejecting the Porter hypothesis in general, (3) that the empirical literature give no general support for the Porter hypothesis. Furthermore, a closer look at the “Swedish case” reveals no support for the Porter hypothesis in spite of the fact that Swedish environmental policy the last 15-20 years seems to be in line the prerequisites stated by the Porter hypothesis concerning environmental policy.

Measuring Oligopsony Power* An Application to the Swedish Pulp and Paper Industry

An empirical test of oligopsony power is developed, where the conjectural and supply elasticities are estimated simultaneously. A Generalized Leontief profit function is used to represent the production structure. The test is applied to the Swedish pulpwood market. Support is found for the hypothesis that the degree of market power varies over time.

Welfare Measurement in Single and Multimarket Models: Theory and Application

In this paper we provide an analysis of tax reforms along the lines of the multimarket welfare measurement techniques suggested by Just, Hueth, and Schmitz. A key purpose of our analysis is to shed light on the approximating features of partial equilibrium models. We derive a result on the difference between single and multimarket welfare measurement, showing how the difference boils down to a set of key parameters. We use our approach to analyze a proposal put forward by the Swedish Commission of Environmental Charges regarding chlorine emissions from the Swedish pulp and paper industry. Copyright 1996, Oxford University Press.

Is Human Fear Affecting Public Willingness to Pay for the Management and Conservation of Large Carnivores

From an interdisciplinary approach, this study aims at analyzing self-reported animal fear, specifically large carnivore fear, in relation to public willingness to pay to fulfill a governmental policy on large carnivore-induced costs. In a survey in Sweden involving more than 2,000 respondents, it was found that people whose animal fear was directed particularly toward large carnivores were less likely to be willing to pay these costs, or were likely to be willing to pay a lower amount of money. In the prediction of willingness to pay (WTP), the contribution of the fear variable was as equally important as previously addressed socioeconomic factors.

The Economics of Biofuels

Biofuels are increasingly regarded as energy sources with the potential to solve diverse problems related to serious concerns, including climate change, environmental degradation, energy supply, and energy security. Here we examine biofuels, primarily biofuels used for transportation (e.g., ethanol and biodiesel), through the lens of modern resource economics and address fundamental questions, such as: Why biofuels? We then review some of the relevant literature and present a framework for analysis drawn mainly from the green accounting literature. The literature reviewed indicates that the effects of policies promoting conversion from fossil fuels to biofuels do not necessarily promote welfare. Our theoretical framework provides indications of possible reasons for this. Based on findings obtained using the framework we propose policies that not only penalize emissions of CO 2 from all sources, but also stimulate biomass growth. Finally, we identify issues for further research.

To tax, or not to tax: preferences for climate policy attributes

Many countries around the world respond to global warming and its consequences with various policy instruments. In the economic literature, policy instruments have typically been analysed with respect to efficiency, but little effort has been expended to understand public preferences for these instruments. In an internet-based choice experiment to address this shortcoming, Swedes were asked to choose between two alternative hypothetical policy instruments, each of which reduces CO2 emissions by the same amount. The hypothetical policy instruments were characterized by a number of specific attributes. By varying the levels of each of the attributes, respondents indirectly reveal their preferences for these attributes. Half of the respondents are faced with choices labelled ‘tax’ and ‘other’, and the other half are faced with unlabelled choices (hypothetical instruments). The results show that Swedes tend to dislike the term ‘tax’ and show a preference for instruments with a positive effect on environment-friendly technology and climate awareness. A progressive-like cost distribution is preferred to a regressive cost distribution, and the private cost is negatively related to the choice of policy.