We explore the impacts of commodity price volatility, the adoption of new technology andenvironmental risks on the long-term sustainability of a stylized mining firm and examine theimplications for government policy intervention. We first analyze whether a mine should remain open or be closed when premature closing is costly due to land rehabilitation and reclamation resulting from an environmental accident. We then go on to investigate alternative resource policy instruments for by which the government may extract resource rents, examples being an ad valorem tax on output, a mining industry-specific corporate tax rate and a royalty on the amount of ore removed. Furthermore, we evaluate the potential of a number of means to correct for environmental externalities and compensate for damages that a mine causes during its lifetime, specifically a Pigou tax on effluents, fines on environmental accidents, mandatory up-front payments to an environmental liability fund and a surety bond to cover closure and reclamation costs. Our simulation results for government revenues from alternative policy packages over the lifecycle of the mine provide important information for policy implementation and the design of taxation and liability payments.

Growing demand for materials required in the construction of renewable technologies and zeroemission infrastructure may signal significant changes for the minerals and metals market. These in turn might exacerbate the social and environmental risks associated with the mining industry. We explore the impacts of commodity price volatility, the adoption of new technology and environmental risks on the long-term sustainability of a stylized mining firm and examine the implications for government policy intervention. We first analyze whether a mine should remain open or be closed when premature closing is costly due to land rehabilitation and reclamation resulting from an environmental accident. We then go on to investigate alternative resource policy instruments for by which the government may extract resource rents, examples being an ad valorem tax on output, a mining industry-specific corporate tax rate and a royalty on the amount of ore removed. Furthermore, we evaluate the potential of a number of means to correct for environmental externalities and compensate for damages that a mine causes during its lifetime, specifically a Pigou tax on effluents, fines on environmental accidents, mandatory up-front payments to an environmental liability fund and a surety bond to cover closure and reclamation costs.

The book attempts to shed light on the preconditions for Finnish economic growth in the next 10–15 years. Based on economic research, we discuss the central determinants of economic growth and assess how these determinants fare in Finland. The time span is longer than one business and electoral cycle, but it is still relatively short, so that most of technologies on which growth relies are already present. The book contains 12 chapters and each chapter has its own authors. On one hand, the central message of the book is encouraging. Finnish economic and political institutions and the knowhow of people are in good shape. Finland has all preconditions to utilize well new technology in order to increase the well-being and do so after taking into account the constraints imposed by the environment. On the other hand, it is evident that good outcomes will not be reached without determined and patient policies. The most important policy challenges concern strengthening of education and research, transformation of the economy toward carbon neutrality, prevention of exclusion, increase of work-based immigration and the ability of labor markets to adjust to different kinds of shocks.

The preferences expressed in voting on nuclear reactor licenses and the risk perceptions of citizens provide insights into social costs of nuclear power and decision making in energy policy. We show analytically that these costs consist of disutility caused by unnecessary anxiety - due to misperceived risks relating to existing reactors - and where licenses for new nuclear reactors are not granted, delayed or totally lost energy production. Empirical evidence is derived from Finnish surveys eliciting explicitly the importance of risk perceptions on preferences regarding nuclear power and its environmental and economic impacts. We show that the estimated marginal impact of a high perceived risk of nuclear accident is statistically significant and that such a perception considerably decreases the probability of a person supporting nuclear power. This result holds across a number of robustness checks including an instrumental variable estimation and a model validation by observed voting behavior of the members of Parliament. The public's risk perceptions translate into a significant social cost, and are likely to affect the revenues, costs and financing conditions in the nuclear power sector in the future.

The Water Framework Directive (WFD) seeks to achieve good ecological status of surface waters across the European Union by 2027. The WFD guidelines explicitly recognize the economics of water management by providing exceptions to water areas with disproportionately high restoration costs. This calls indirectly for estimations of benefits lost due to non-attainment. We employ a hedonic property pricing approach on waterfront recreational properties to estimate the welfare impacts of attaining the good ecological status described by the WFD. The empirical challenge is that the quality measure proposed by the WFD specifically denotes ecological quality, whereas economically measurable water quality values are heavily dependent on recreation impacts. Intuitively, the choice of water quality measure should have an effect on estimating the value of water quality. Our data provide a unique chance to compare three alternative indicators of water quality: (1) a usability-based index, (2) subjectively reported measure and (3) the ecological status determined by the WFD. We find that an improvement in water quality is associated with a statistically significant, non-linear change in recreational property values. We show how the ecological status compares with the other two indicators, and discuss the justifiability of using revealed preference methods when the valued good is defined purely on the basis of ecological criteria.

This paper develops and applies a spatially explicit bioeconomic model to study transboundary nutrient pollution of the Baltic Sea. We combine catchment, marine and economic models covering the entire Baltic Sea region to weigh the costs of nutrient abatement and the benefits of improved water quality and solve for the optimal level of water protection. The overall benefits of the Baltic Sea Action Plan, the present convention on nutrient abatement, clearly outweigh the costs. Nevertheless, the total cost could be almost halved if the mix of measures and the regional targets were planned in a spatially cost–effective manner and if the consequent reductions of nitrogen and phosphorus, the two nutrients causing eutrophication, were better balanced. Policy optimizations, however, suggest that the optimal level of nutrient abatement is somewhat lower than the more ambitious level envisaged by the convention. The welfare gains from cost sharing that makes the optimal level of nutrient abatement worthwhile for all littoral countries would be 170 million euros annually.

The preferences expressed in voting on nuclear reactor licenses and the risk perceptions of citizens provide insights into social costs of nuclear power and decision making in energy policy. We show analytically that these costs consist of disutility caused by unnecessary anxiety - due to misperceived risks relating to existing reactors - and where licenses for new nuclear reactors are not granted, delayed or totally lost energy production. Empirical evidence is derived from Finnish surveys utilizing alternative risk rating scales and framing in elicitation of risk perceptions associated with nuclear power across contexts. We find a considerable negative impact of a high perceived risk of nuclear accident on the probability to support nuclear power. This result holds across a number of robustness checks including an instrumental variable estimation and a model validation by observed voting behavior of the members of Parliament. The public’s risk perceptions translate into a significant social cost, and are likely to affect the revenues, costs and financing conditions in the nuclear power sector in the future.

This paper presents the results of an internationally coordinated contingent valuation study on the benefits of reducing marine eutrophication in the Baltic Sea according to current policy targets. With over 10,500 respondents from the nine coastal states around the sea, we examine public willingness to pay (WTP) for reduced eutrophication and its determinants. There are considerable differences in mean WTP between countries, with Swedes being willing to pay the most and Latvians the least. The aggregate annual WTP is approximately (sic)3600 million. In addition, we find that countries are heterogeneous in terms of the effects of income, attitudes and familiarity on WTP. Income elasticities of WTP are below 1 for all countries, ranging between 0.1 and 0.5. Attitudes and personal experience of eutrophication are important determinants of WTP, but the specific effects differ between countries. The findings can be used in economic analyses for the European Union (EU) Marine Strategy Framework Directive and to justify additional eutrophication reduction measures in the Baltic Sea.

Targeted environmental policies for farmlands may improve the cost efficiency of conservation programmes if one can identify those farms that produce public goods with the least cost. We derive shadow values of producing crop diversity for a sample of Finnish conventional and organic crop farms in the period 19942002 in order to examine their opportunity costs of conservation. Our results of Data Envelopment Analysis show that there is variation in the shadow values between farms and between the technologies adopted. The degree of cost heterogeneity and farms potential for specialisation in producing environmental outputs determine whether voluntary programmes such as auctions for conservation payments are economically reasonable.

We use Finnish data to estimate the extent of the recreation benefits obtained from visits to second homes. Special emphasis is placed on how environmental attributes of second homes influence the recreation value of visits. The impacts are valued using the travel cost method. We estimate the recreation value to be about approximately (sic)170-205 per trip. The aggregate non-market benefits of the use of the current summer home stock are considerable - approximately (sic)500 million per annum. The presence of algae that prevent aquatic recreation decreases the value per trip by 40%, and the lack of a beach reduces it by 45%; electrification increases the value by 3-5%. These impacts should be balanced against the social costs of second homes when designing environmental policies on leisure-time housing.

Targeted environmental policies for farmlands may improve the cost-efficiency of conservation programs if one can identify those farms that produce public goods with the least cost. We derive shadow values of producing crop diversity for a sample of Finnish conventional and organic crop farms in the period 1994-2002 in order to examine their opportunity costs of conservation. Our results of Data Envelopment Analysis show that there is variation in the shadow values between farms and between the technologies adopted. The degree of cost heterogeneity and farms’ potential for specialization in the production of environmental outputs determine whether voluntary programs such as auctions for conservation payments are economically reasonable.

In this study we evaluate the profitability of nutrient abatement measures in eutrophied coastal areas exposed to a risk of frequent oil spills. The case studied is the Gulf of Finland, which forms part of the Baltic Sea. We present a dynamic model that integrates land loads of nitrogen and phosphorus, cost of nutrient abatement measures in agriculture, nutrient dynamics in the sea basins adjoining the Finnish coast, exogenous risk of oil spills, and recreational value of the sea, which faces environmental damage of uncertain magnitude and duration. Monte Carlo simulation is applied to evaluate the profitability of nutrient abatement measures carried out unilaterally by Finland or as a joint effort by Estonia, Finland and Russia. We demonstrate that a high exogenous risk of oil damage may render investments in nutrient abatement economically infeasible. On the other hand, several components of the model entail uncertainties owing to the scarcity of data and our limited understanding of the relationship between the ecological processes involved and the values people place on natural resources. For example, the uncertainties related to the curvature of the value function outweigh the uncertainties connected with the oil spills and their potential consequences.

Although spending time in a summer home is a popular leisure activity in many developed countries, little is known about the welfare impacts of such recreation in monetary terms. We use data from Finland to provide first estimates of the extent of the recreation benefits obtained from visits to second homes. Special emphasis is placed on how environmental attributes of second homes, such as the presence of algae, the availability of a beach, and electricity, influence the recreation value of visits. The impacts are valued through revealed preferences using the travel cost method. We estimate the recreation value to be about EUR 170 – 205 per trip if a summer home is electrified, if a beach is available and if algae do not prevent aquatic recreation. The aggregate nonmarket benefits of the use of the current summer home stock are considerable – about EUR 500 million per annum. The presence of algae that prevent aquatic recreation decreases the value per trip by 40 percent, and the lack of a beach reduces it by 45 percent; electrification increases the value by 3–5 percent. These impacts should be balanced against the social costs of second homes when designing environmental policies on leisure-time housing.

Absent or weak income effects reported in many contingent valuation studies have cast doubt on the reliability of the survey method. We find that the income effect depends on the type of public good in question: there is a negative income effect for willingness to pay for recycling, which requires time and effort for sorting, but a positive effect for the more convenient incineration. Hence, high-income (low-income) individuals may display less (more) effort on environmental behavior. This stresses the importance of comprehensive distributional analyses when assessing alternative environmental policies.