Climate Change: National and Local Policy Opportunities in China
By: Fei Teng (Tsinghua University)
Alun Gu (Tsinghua University)
Climate Change poses a wide range of potentially very severe threats in China. This aggravates the existing vulnerability of China and is one of the big challenges faced by the Chinese government. Adaptation programmes and projects are being developed and implemented at national and local level. As China is engaged in heavy investment in infrastructure development as a consequence of the rapid process of development and urbanization, mainstreaming adaptation into such development process is a priority for China. China has also made positive contributions to reducing greenhouse gas emissions through participations in the CDM under the Kyoto Protocol framework. Although mitigation is not a priority at national or local level, it has been integrated into national and local development plans explicitly. This paper addresses the following questions: What is the policy space for climate change mitigation and adaptation policy at national and local level and what is already being done? The three case studies at local level - Beijing, Guangdong and Shanghai – presented here, highlight the local benefits in terms of local pollution of integrating mitigation policies into local development. However, financial constraints usually prevent such a positive policy integration. National policies and international cooperation aiming at bridging the financial gap and promoting technology transfer would help in integrating local pollution control and mitigation efforts in China today.
Keywords: Climate Change, Local Policy, National Policy, Mitigation, Local Pollution
JEL: H7 Q54 Q56 O53
Voluntary Environmental Regulation in Developing Countries: Mexico's Clean Industry Program
By: Blackman, Allen (Resources for the Future)
Pizer, William A. (Resources for the Future)
Planter, Marisol Rivera
Piña, Carlos Muñoz
Because conventional command-and-control environmental regulation often performs poorly in developing countries, policymakers are increasingly experimenting with alternatives, including state-sponsored voluntary regulatory programs that provide incentives, but not mandates, for pollution control. Although the literature on this trend is quite thin, research in industrialized countries suggests that voluntary programs are sometimes ineffective because they mainly attract relatively clean participants seeking to free-ride on unrelated pollution control investments. We use plant-level data on more than 60,000 facilities to identify the drivers of participation in the Clean Industry Program, Mexico’s flagship voluntary regulatory initiative. Our results suggest that the threat of regulatory sanctions drives participation in the program. Therefore, the program does appear to attract relatively dirty firms. We also find that plants that sold their goods in overseas markets and to government suppliers, used imported inputs, were relatively large, and were in certain sectors and states were more likely to participate in the program, all other things equal.
Keywords: voluntary environmental regulation, duration analysis, Mexico
JEL: Q56 Q58 O13 O54 C41
Environmental Policy, Innovation and Performance : New Insights on the Porter Hypothesis
By: Paul Lanoie (IEA, HEC Montréal)
Jaffe and Palmer (1997) present three distinct variants of the so- called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards. Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance and commercial performance). The analysis is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, and qualified support for the “strong” version as well.
Keywords: Porter hypothesis, environmental policy, innovation, environmental performance, business performance.
JEL: L21 M14 Q52 Q55 Q58
An Even Sterner Review: Introducing Relative Prices into the Discounting Debate
By: Sterner, Thomas
Persson, U. Martin
The Stern Review has had a major influence on the policy discussion on climate change. One reason is that the report has raised the estimated cost of unmitigated climate damages by an order of magnitude compared to most earlier estimates, leading to a call for strong and urgent action on climate change. Not surprisingly, severe criticism has been levied against the report by authors who think that these results hinge mainly on the use of a discount rate that is too low. Here we discuss the Ramsey rule for the discount rates and its implications for the economics of climate change. While we find no strong objections to the discounting assumptions adopted in the Stern Review, our main point is that the conclusions reached in the review can be justified on other grounds than by using a low discount rate. We argue that nonmarket damages from climate change are probably underestimated and that future scarcities that will be induced by the changing composition of the economy and climate change should lead to rising relative prices for certain goods and services, raising the estimated damage of climate change and counteracting the effect of discounting. We build our analysis on earlier research (Hoel and Sterner 2007) that has shown that the Ramsey discounting formula is somewhat modified in a two-sector economy with differential growth rates. Most importantly, such a model is characterized by changing relative prices, something that has major implications for a correct valuation of future climate damages. We introduce these results into a slightly modified version of the DICE model (Nordhaus 1994) and find that taking relative prices into account can have as large an effect on economically warranted abatement levels as can a low discount rate.
Keywords: discounting, relative prices, Ramsey, climate damage
JEL: H43 Q32 Q54
Technology, International Trade, and Pollution from U.S. Manufacturing
By: Arik Levinson (Department of Economics, Georgetown University)
Total pollution emitted by U.S. manufacturers declined over the past 30 years, while manufacturing output increased. This improvement must result from one of two trends: (1) change in production or abatement processes ("technology"); or (2) change in the mix of goods manufactured in the U.S, which itself may result from increased net imports of pollution-intensive goods ("international trade"). This paper first shows that most of the decline in pollution from U.S.manufacturing has been due to changing technology, rather than changes in the mix of goods produced, although the pace of that technological change has slowed over time. Second, the paper provides evidence that increases in net imports of pollution-intensive goods are too small to explain more than about half of the pollution reductions from the changing mix of goods produced in the U.S. Together, these two findings demonstrate that shifting polluting industries overseas has played at most a minor role in the cleanup of the U.S. manufacturing sector. Classification-JEL Codes: F14, F18, and F22
Keywords: International Trade, Pollution Haven, Industrial Flight
Does Pollution Increase School Absences?
By: Janet Currie
E. Megan Kahn
We examine the effect of air pollution on school absences using unique administrative data for elementary and middle school children in the 39 largest school districts in Texas. These data are merged with information from monitors maintained by the Environmental Protection Agency. To control for potentially confounding factors, we adopt a difference-in-difference-in differences strategy, and control for persistent characteristics of schools, years, and attendance periods in order to focus on variations in pollution within school-year-attendance period cells. We find that high levels of carbon monoxide (CO) significantly increase absences, even when they are below federal air quality standards.
JEL: I18 Q51