This paper develops a dynamic theory of circular taxation in an economy with heterogeneous capital durability, waste accumulation, and material recovery. The key insight is that capital depreciation is not only a replacement cost, but also a physical flow into the waste stock. Assets with similar productive value but different depreciation rates therefore embody different intertemporal waste liabili- ties. We formulate a continuous-time planner’s problem in which produced capital, waste, and natural capital evolve jointly. The Hamiltonian implies that the user cost of capital must include a durability-specific circular wedge, yielding a time- varying effective circular depreciation rate. Fast-turnover assets therefore face larger socially efficient fiscal wedges than more durable assets. We show that the planner’s allocation can be implemented through standard Pigouvian flow taxes combined with a durability-adjusted deposit-refund mechanism. The resulting upstream capital levies are strictly increasing in depreciation rates, providing a formal foundation for eco-modulated Extended Producer Responsibility (EPR). We further show that eco-modulated fees improve private durability choice when product lifetime is endogenous, and we derive a second-best pooled refund when regulators cannot perfectly distinguish reuse from recycling. Efficient circular pol- icy therefore requires a dynamic and differentiated fiscal architecture that prices product durability and intertemporal waste liabilities jointly.
Using data on up to 127 countries, this paper finds robust evidence that economic freedom has enlarged the ecological footprint per capita between the 1970s and the early 2020s. The magnitude of the effect is substantial, both in the full sample and in the subsample of developed countries. The results also suggest that the impact of economic freedom is likely to have intensified over time. Moreover, the paper finds that the adverse effect of economic freedom is probably driven by a small government sector, the rule of law and secure property rights as well as by market-friendly regulations. Finally, it finds that the indirect effect of economic freedom on the ecological footprint via GDP per capita is small. The paper adds to the previous literature in several respects. It is one of the first to account for endogeneity of economic freedom. Its sample covers many more countries and years than previous studies. Additionally, in contrast to all previous studies it performs a battery of robustness checks and controls for almost all major determinants of the ecological footprint as well as for unobserved country and year effects.
This paper estimates the causal impact of municipal property tax exemptions on the adoption of solar photovoltaic (PV) systems in Catalonia. Using a balanced monthly panel of municipalities from 2015 to 2022, we employ a difference-in-differences (DiD) framework with staggered policy implementation. The exemption increased installed PV capacity by 34%-50% and led to roughly one additional installation per treated municipality per month. We find that 68% of the tax exempt installations would have occurred even without the policy, implying an implicit abatement cost of e102 per tonne of CO2. Heterogeneity analysis shows limited variation across structural and socioeconomic contexts. Overall, the policy was moderately effective but only partially efficient, suggesting that more targeted design could enhance its cost-effectiveness.
The application of the classic market-level, age-structured forest model is strongly limited by the assumption of clearcut-only management. We extend the model by accounting for the volume distribution of stands within each age class, enabling flexible optimization of both clearcut timing and thinning within the rotation. Optimal thinning can increase timber yield and decrease timber price, forest area, and bare land value compared with solutions without thinning. Including forest regeneration costs can lead to uneven age-class structures despite constant timber yields. Besides saddle-point stability, steady-state instability may arise with thinning. In specific cases, higher interest rates extend the optimal rotation.
This paper investigates the spillover effect of an environmental campaign aimed at inducing behavioral change on the support for policies within and across domains. Using data from a randomized controlled trial with 1312 subjects, we find that an environmental campaign focused on single-use plastics increases support for stricter plastic policies, such as a full ban on the use and taxation of plastic products. However, support for environmental policies in other domains, such as climate policy, is largely unaffected or even decreasing, suggesting a tendency toward a negative spillover effect on support for policies in domains not targeted by the campaign. Developing and evaluating policies targeting a specific issue, such as plastic pollution, requires a comprehensive approach and careful consideration of potential negative spillover effects.
This article shows that accounting for the growing interdisciplinary literature supporting the causality between energy efficiency and health and the empirical evidence re-assessing the importance of health on workforce productivity, could explain a part of the paradoxal relationship found between energy efficiency and energy consumption.We build a 2-period overlapping generations model where (i) residential energy inefficiency induces chronic disease for adults and bad health for elderly, (ii) workers’ health has an effect of their labor productivity and (iii) energy efficiency is endogenously defined by individual’s choices. This framework helps explain the rebound effect by identifying new channels through which energy efficiency affects energy use: notably, a general equilibrium effect driven by changes in savings and income, and a health expenditure channel related to the costs of illness. In particular, our findings suggest that the rebound effect may be amplified when the health impact on labor productivity is sufficiently strong, implying that, under certain conditions, improvements in energy efficiency can paradoxically lead to higher overall energy consumption.In policy terms, by showing that the link between energy efficiency and energy consumption is far from being just associated with technical conditions about preferences and/or production technology, our research emphasizes how crucial and complex are for governments the discussion and policy action dealing with the connection between energy conservation policies, health insurance system and growth.
This paper employs a Structural Vector Autoregressive (SVAR) model to analyze the impact of supply and demand shocks on European emission allowance (EUA) prices. We decompose EUA price changes into five components: (1) policy surprises, identified through a high-frequency approach, (2) demand shocks driven by economic activity, (3) shocks to the electricity sector's expected demand linked to fossil fuel price fluctuations, (4) shocks to the electricity sector's realized demand, measured using a novel metric based on electricity generation data, and (5) market-specific shocks, primarily reflecting precautionary demand driven by expectations of future policy tightening. Our results show that all these shocks significantly impact EUA prices. However, post-2019, the introduction of the Market Stability Reserve (MSR), which tackled excessive oversupply in the system, decreased the influence of policy interventions and precautionary shocks, aligning EUA prices more closely with the other demand-side factors. While only 33.5% of the variance in EUA prices can be attributed to the three real-time demand shocks before 2019, this figure almost doubled to 58.4% after the MSR's introduction. This shift suggests that a mechanism to address oversupply can be a crucial step towards achieving a more efficient, real-time demand-driven carbon pricing in emissions trading systems.
The growing trend of urbanization has important environmental implications, as it is often associated with rising emissions. In theory, urbanization can affect the environment in both beneficial and adverse ways. On the one hand, it can increase energy demand, contributing to environmental harm. Urban-driven economic growth can lead to increased energy consumption, potentially exacerbating environmental degradation. On the other hand, urbanization has the potential to mitigate environmental harm by fostering agglomeration effects, economies of scale, improved education, technological innovation, and the development of sustainable infrastructure. Empirical studies on the relationship between urbanization and emissions present mixed results, consistent with the theory. To address heterogeneity across empirical studies, we conducted a meta-analysis of 172 studies, resulting in 1598 effect sizes. Our funnel asymmetric test and precision effect test (FAT-PET) analysis suggests publication bias in previous research, but we do not find an overall significant effect of urbanization on emissions. However, when we disaggregated studies by region, we found that urbanization decreases emissions in Latin America, whereas it has no significant impact in Africa, Asia, and the West.
This paper analyses, for the first time in Norway, the effects of onshore wind farms on residential property prices by using a hedonic price model in combination with difference-in-differences analysis and spatial fixed effects to estimate homeowners' preferences for (avoiding) living near a wind farm. The analysis utilizes data on all 60 concessioned wind farms in Norway and over 160,000 observations of property transactions in the period 2010-22. We find that residential property prices decline in proximity to operating wind farms. The magnitude and spatial extent of the estimated price effects are uncertain and vary across model specifications, from-4 to-14 % for properties within 2 km. The effect diminishes with distance and converges to zero at 3-7 km. An event study analysis indicates that property prices are primarily affected after wind farms become operational, with some impact during the construction phase. We find no evidence of price adjustments over time consistent with adaptation or diminishing sensitivity. Heterogeneity analyses indicate that price reductions may be larger near wind farms with more turbines. Within 2 km, a substantial share of the effect appears to be driven by turbine visibility: using a digital elevation model combined with data on forest and vegetation cover, we isolate visibility from proximity through a difference-in-differences-in-differences design. The paper contributes to a surging literature on hedonic analysis of renewable energy infrastructure and the ongoing discussions on trade-offs between climate benefits and local disamenity costs.
Volumetric Choice Experiments (VCE) offer a novel approach to studying individual behavior, traditionally explored through Discrete Choice Experiments. This study assesses the efficacy of VCE in understanding farmers' preferences regarding new results-based and practice-based agri-environmental contracts, using a comprehensive international stated preference survey. Recognizing that farmers often act as households maximizing utility rather than purely profit-driven producers, we provide justification for applying a utility-based framework in this context. The subsidy-driven nature of agri-environmental contracts poses a challenge for the use of multiple discrete-continuous choice models suited for VCE data. Conventionally, these models utilize an income-based budget equation, which would not be binding given the willingness-to-accept format of the experiment. To operationalize our model, we adopt a land-based budget equation, facilitating the development of a novel compensating variation measure for welfare analysis. Our findings reveal insightful contrasts between VCE-derived data and traditional DCE results, highlighting the complexities encountered and the comparability of outcomes. By delving into the distinct attributes of VCE and justifying the utility-based approach for farmers, this research not only bridges a critical gap in the literature but also enhances our understanding of farmer behavior, with significant implications for the design and implementation of future agri-environmental policies.
It is widely acknowledged that oil and gas firms' investment plans are largely incompatible with the Paris Agreement, yet empirical evidence on how climate policies influence their extraction behavior remains scarce. This contribution assesses the impact of climate policies on the investments of oil and gas firms using a large international firm-level panel. The identification strategy leverages an econometric model of corporate investments in exploration and production activities (E&P), integrating internationally harmonized data on the tightening of climate policy instruments and information on the geographic distribution of companies' upstream assets. The main findings reveal a strongly heterogeneous firm-level response across policy instruments and firm types. Globally, due to incomplete carbon pricing mechanisms, firms with domestic upstream oil and gas assets have adjusted to the strengthening of national renewable energy subsidy policies by accelerating extractive investments over the long run. In contrast, domestic European firms' E&P investments have been strongly and durably negatively impacted by the tightening of national commitments to phase out fossil fuel heating systems in buildings. European and North American international firms react to the tightening of carbon pricing instruments by reducing E&P investments, consistent with managers adjusting their internal price of carbon upward. However, these effects are short-lived, indicating that their internal price of carbon is set too low to durably shift them away from fossil fuel extraction. Furthermore, while many international oil and gas firms own renewable energy segments, there is limited evidence that the strengthening of renewable energy subsidy policies shifts them away from fossil fuel extraction.
The stability of people’s preferences for ecosystem services over long time periods remains underexplored. We examine the dynamics of willingness to pay (WTP) to prevent coastal ecosystem damage using two identical contingent valuation surveys administered to a high-quality Norwegian panel in 2015 and 2020. The 2020 sample includes new respondents and re-testers, yielding a large test-retest sample across a five-year period. We find evidence that neither mean WTP nor underlying preferences are temporally stable. Comparing the 2015 sample to new respondents in 2020, we estimate an increase in WTP driven by heterogeneity in both respondent characteristics and preference parameters. A modest decrease in WTP is estimated for the test-retest sample, which we ascribe to shifting preferences. Investigation of respondent-level dynamics in WTP highlights potential mechanisms behind the negative preference shift. Our study highlights important factors to consider when transferring stated preferences across long time periods, and demonstrates the need for future research on how environmental preferences evolve over time.
Agri-environment schemes (AES) are typically measure-based, meaning that farmers are rewarded based on the implementation of specified conservation measures. However, result-based schemes have emerged as a promising alternative, whereby farmers are rewarded based on the achievement of specified conservation goals such as the occurrence of a particular species on their land. An advantage of result-based AES, which has received insufficient attention in the literature, is that they incentivise the spatial targeting of farmers to areas with most suitable habitat conditions. In our analysis, we focus on the presence of pre-existing landscape elements such as hedges, trees and water bodies, as an important habitat condition that positively impacts many species and therefore increases the likelihood of their occurrence. Farmers are likely to consider this aspect in their decision-making process and conduct spatial targeting when participating in result-based schemes. In contrast, the presence of landscape elements and the resulting likelihood of species occurrence does not play a role in farmers’ participation in measure-based schemes. This paper develops a generic ecological-economic model to gain an understanding of the extent to which different ecological and economic parameters affect the comparative cost-effectiveness of result-based and measure-based AES against this newly analysed aspect of landscape elements as an example of spatial targeting. In terms of policy recommendations, the paper provides general insights into the extent to which the analysed parameters affect the comparative cost-effectiveness of the two schemes.
This paper investigates how political corruption moderates the effectiveness of public investment in research and development (R&D) for energy technologies in driving decarbonisation. Using annual panel data for 25 OECD countries (1990-2022), we apply a two-stage instrumental variable approach that accounts for endogeneity and unobserved common factors. Our results show that increased public R&D investment in energy technologies significantly reduces greenhouse gas emissions. However, this effect is weakened in countries with higher levels of political corruption, suggesting that it shapes the returns to energy innovation. A sector-level analysis reveals heterogeneous emission responses to R&D, particularly within hard-to-abate sectorst. These findings underscore the need for integrated climate strategies that also address political corruption as a key barrier to accelerating the clean-energy transition.
Understanding the spatial distribution of preferences for both use and non-use values of biodiversity is crucial for designing environmental policies that maximise social value. Yet, integrating spatial factors that influence these preferences into stated preference research remains challenging. This includes designing studies that control for, vary, and accurately represent multiple spatial factors simultaneously—such as spatially heterogeneous characteristics of policy sites and spatial relationships between these sites and respondents. This paper introduces a novel approach designed to enable this. It employs a functionality through which realistic locations for change are selected from a database of all possible policy locations that fit the experimental design situation allocated to each respondent. The real-time generated, respondent tailored choice situations are then presented on individualised maps. This allows the creation of numerous, respondent-specific choice scenarios that exhibit a high degree of variation in spatial factors, both among and within respondents. The approach increases the generalisability of insights into spatial effects on stated preferences, while enhancing the realism and credibility of the choice scenarios. The methodology is implemented at a national level. Analysis of respondents’ choices shows that preferences are spatially driven, but that spatial patterns differ depending on the type of intervention. By focusing on generic terms of quantity and quality across space, we aim to demonstrate that the presented approach can be applied to a wide range of valuation problems where spatial context matters.
We study the design of fair allocation rules for the abatement of riparian pollution. To do so, we consider a stylized model to distribute a budget of emissions permits among agents located along a river. In such a model, each agent claims to be allowed the discharge of a certain amount of pollutants into the river, possibly subject to grandfathering, and the issue is to allocate among them a budget that is lower (or equal) than the aggregate claim. The specific location along the river where pollutants are discharged is an important concern (the more upstream the location is the higher the damage of polluting the river). On the other hand, drastic departures from claims (which may act as reference points) might be considered unfair. Consequently, we characterize a class of geometric rules that adjust proportional allocations to compromise between fairness and environmental concerns. We provide an illustration of how geometric rules perform for the case study of the Tuojiang Basin in China.
Travel cost data used in recreation demand analysis are assumed to reflect actual behavior. However, these data are typically collected through surveys, which raises concerns about the accuracy of respondents’ self-reports. Recall issues and associated biases, such as rounding bias and telescoping error, are well documented in empirical research and affect estimates of the benefits of recreation. We study whether trip recall can be improved through dedicated survey tools. We implement split-sample treatments to examine how response formats for trip-number elicitation and recall aids influence reported trip behavior and associated welfare estimates. The survey of more than 3,000 Polish residents asked about their past trips to the Baltic seaside. Our findings indicate that a drop-down response format lowers the frequency of round numbers of trips compared to a commonly used text-box response format, arguably increasing the precision of the number. We also observe that providing a timeline graph illustrating the recall period may increase the number of zero-trip responses and decrease the overall reported number of trips, which suggests a possible reduction in telescoping error. We further find these two recall-aiding approaches lead to lower estimated consumer surplus derived from recreation demand models.
This paper analyses emissions trading (cap-and-trade) in a political economy model with endogenous lobby group formation. The lobby group targets the initial allocation of permits for its members and each firm makes a decision as to whether to take part in such a group. It is found that, without full participation, the initial allocation of permits is extreme in the sense that either the lobbying firms obtain their maximal business-as-usual emissions or the non-lobbying firms are given zero permits. With full participation, the initial allocation of permits induces the same emission allocation as emission limits and the greatest aggregate emissions among all the possible lobby groups. In addition, a simple condition is derived for the existence of a non-null lobby group. Furthermore, it is shown that a full lobby group is stable when lobby group participation costs are relatively small. The analysis is extended to other instruments including emission limits and an emission tax, and it is shown that with these instruments aggregate emissions are increasing in lobby group size in contrast to emissions trading, where they can be non-monotonic.
Based on an online survey of 1,200 individuals, we examine support for new mining projects in the United States, opinions on mining governance, and preferences for various strategies to access battery minerals. We find support for domestic mining more so at the national (54% support) than local level (32% support), with a strong emphasis on environmental protection and multi-level governance. Respondents generally support government intervention to secure access to battery minerals, with over half agreeing with subsidizing electric vehicle (EV) producers and consumers to prioritize the use of domestic minerals in EV batteries. However, there is measurable opposition to mandates requiring prioritizing domestic minerals. Analysis based on regression models reveals that (1) respondents who support more new mining at the national or state levels are more likely to support them within a 25-mile radius of their home than the average respondent, reflecting consistency in support across levels, and (2) preferences for a variety of policy interventions to access battery minerals are shaped by support for new mining and mining governance opinions.
Rising CO2 emissions are projected to increase future temperatures, which reduces household heating energy demand and increases cooling demand. This leaves the overall effect, on both energy consumption and future CO2 emissions, unknown. Using a household-level discrete choice estimation strategy, this paper finds the more extreme warming scenario reduces annual U.S. CO2 emissions from residential space heating and cooling by 61 million tons annually by the 2070 s, compared to a scenario without rising temperatures. Rising emissions from space cooling are more than offset by the reduction in emissions from space heating, leading to $19.4 billion in annual reduced damages. JEL Q54 Q41 L90
