- Home
- A-Z Publications
- Annual Review of Resource Economics
- Previous Issues
- Volume 5, 2013
Annual Review of Resource Economics - Volume 5, 2013
Volume 5, 2013
- Preface
-
-
-
Competition in the US Meatpacking Industry
Vol. 5 (2013), pp. 1–12More LessThis article reviews and evaluates the recent literature on competition in the US meatpacking industry. Studies on market power in meatpacking indicate that concentration in procurement of livestock (cattle or hogs) has not adversely affected prices received by producers or prices paid by consumers. Indeed, there is evidence that producers may be better off because of lower processing costs due to the concentration and introduction of new technical innovations. Policies to restrict alternative marketing arrangements such as those proposed by GIPSA would make producers and consumers worse off. The beef and pork industries are quite complex and contain both spatial and temporal dimensions that can affect the level of competition. Fringe producers because of locational shift of industry and thin markets may be worse off. Establishment of niche enterprises may benefit these producers. In the future, incentives are to maintain steady long-run supplies of livestock to fully operate slaughtering and processing facilities.
-
-
-
Growing Resource Scarcity and Global Farmland Investment
Vol. 5 (2013), pp. 13–34More LessRecent strong commodity prices have led to increased investor interest in farmland. Global analysis indicates that suitable land to bring into cultivation is available but concentrated in a limited number of land-abundant countries in Africa, Latin America, and Southeast Asia. In a much larger number of countries, productivity on currently cultivated land is significantly below potential. Higher returns to farming and relatively cheap land have contributed to a wave of investments into farming, mostly through very large ventures in land-rich countries. If land and other markets work well and a regulatory framework is in place, there are opportunities to generate considerable benefits by providing access to capital, technology, and new markets. However, investments have often been controversial because poor land governance and weak institutional capacity have made many of these ventures economically, socially, or environmentally unsustainable. Strengthening land governance and institutions and increasing public investment to raise smallholder productivity are major priorities for most countries to improve development outcomes from these investments.
-
-
-
The Environmental Consequences of Subsidized Risk Management and Disaster Assistance Programs
Vol. 5 (2013), pp. 35–60More LessFederal subsidized crop insurance has been a major fixture of US agricultural policies for the past several decades. In recent years, the program has expanded rapidly and now constitutes the largest and most expensive agricultural subsidy initiative in the United States. Similar programs have been introduced around the world. All these programs have one common denominator: Absent generous subsidies, participation is minimal. Such subsidies introduce the potential for a wide range of distortions. Intensive margin distortions may result from moral hazard as insured growers alter their production practices. Distortions at the extensive margin may arise as acreage decisions reflect the presence of subsidized risk management, resulting in lands with alternative uses being planted to crops. A range of environmental effects may arise as a result of these distortions. Not all those effects are negative, because subsidized insurance may result in less intensive use of chemical and fertilizer inputs. We review the history and operation of the current program and discuss the options currently being deliberated for future crop insurance programs.
-
-
-
The Future of Agricultural Cooperatives
Vol. 5 (2013), pp. 61–91More LessCooperatives are of particular interest to economists because of their unique ownership structure and the incentives this structure creates. In addition to the so-called property rights problems (e.g., free-rider, horizon, and portfolio problems), the analysis of agricultural cooperatives has focused on issues of market power, agency, product quality, and increasingly producer and consumer heterogeneity. These last three elements are important features of the industrialization of the agrifood system. This article highlights the key concepts required for examination of cooperatives now and in the future and incorporates these concepts into a framework that can be used to examine the myriad situations and problem settings in which agricultural cooperatives are likely to be found. A key finding of the paper is that the procompetitive and distributional impacts of cooperatives depend critically on the sensitivity of price in the downstream retail market, the nature of the cooperative’s governance structure, and the open or closed nature of cooperative membership. The article also provides a discussion of new areas in which an understanding of cooperatives and collective action would be valuable, as well as a discussion of the applicability of the proposed framework to these areas.
-
-
-
On Nonparametric Estimation: With a Focus on Agriculture
Vol. 5 (2013), pp. 93–110More LessWe review nonparametric estimation of efficiency and productivity, by which we mainly mean activity analysis, or data envelopment analysis (DEA). The review covers topics that we hope will be of special interest to those doing research in the realm of agriculture. We also include a brief appendix addressing nonparametric estimation from an econometric perspective.
-
-
-
Policy Instruments for Water Quality Protection
Vol. 5 (2013), pp. 111–138More LessWe examine policy instruments for ambient water quality protection. One objective is to illustrate the unique and complex informational challenges that must be addressed in constructing instruments that are effective and efficient for point and nonpoint sources. A second objective is to describe developments in real-world policies. Crucial to solving contemporary water quality challenges and improving the efficiency of water quality protection are reducing nonpoint pollution and efficiently integrating point management and nonpoint management. Accordingly, particular attention is given to instruments for nonpoint sources and to instruments that integrate point and nonpoint management. Our review of the literature in this area indicates that practical approaches will necessarily be second best but that careful instrument design and coordinated control across all sources can enhance the effectiveness and efficiency of water pollution control.
-
-
-
Payment for Environmental Services: Hypotheses and Evidence
Vol. 5 (2013), pp. 139–159More LessThe use of payment for environmental services (PES) is not a new type of contract, but PES programs have become more in vogue because of the potential for sequestering carbon by paying to prevent deforestation and degradation of forestlands. We provide a framework utilizing transaction costs to hypothesize which services are more likely to be provided effectively. We then interpret the literature on PES programs to see the extent to which transaction costs vary as predicted across the type of service and to assess the performance of PES programs. As predicted, we find that transaction costs are the least for club goods like water and greatest for pure public goods like carbon reduction. Actual performance is difficult to measure and varies across the examples. More work and experimentation are needed to gain a better outlook on what elements support effective delivery of environmental services.
-
-
-
Voluntary Approaches to Environmental Protection and Resource Management
Vol. 5 (2013), pp. 161–180More LessPolicy makers around the world seem to have widely endorsed the use of voluntary approaches as a means to address concerns about environmental protection and resource degradation. Voluntary approaches have been adopted in many developed countries, as well as in a number of developing countries. However, economists have not uniformly endorsed this policy approach. The economic literature suggests that in some contexts voluntary approaches can be effective if carefully designed but are not likely to be effective otherwise. This article provides an overview of the economics of voluntary approaches, with a particular focus on issues related to design. It seeks to highlight the features that are important determinants of both their success in improving environmental outcomes and their efficiency. Although the discussion focuses on environmental protection, it is also relevant in other contexts such as conservation and fisheries management.
-
-
-
Equity Impacts of Environmental Policy
Vol. 5 (2013), pp. 181–196More LessThis article surveys recent literature on the equity impacts of environmental policy. We focus on studies that look at the distribution of costs and benefits of alternative environmental policies. We also examine potentially important trade-offs between efficiency and equity that arise in the context of environmental policy, as well as transition effects. In many of the applications surveyed here, environmental policies can be regressive. Strategies are discussed to reduce this regressivity through the use of revenues from certain policy instruments. With regard to the distribution of the benefits of environmental policy, we conclude that there is a need for more spatially disaggregated studies that simultaneously capture the spatial and socioeconomic impacts of environmental policy.
-
-
-
Environmental Macroeconomics: Environmental Policy, Business Cycles, and Directed Technical Change
Vol. 5 (2013), pp. 197–210More LessEnvironmental economics has traditionally fallen in the domain of microeconomics, but approaches from macroeconomics have recently been applied to studying environmental policy. We focus on two macroeconomic tools and their application to environmental economics. First, real-business-cycle models can incorporate pollution and pollution policy and can be used to answer several questions. For example, how should environmental policy adjust to business cycles? How do different types of policies fare in a context with business cycles? Second, endogenous technological growth is an important component of environmental policy. Several studies ask how policy can be designed both to tackle emissions directly and to influence the adoption of clean technologies. We focus on these two aspects of environmental macroeconomics but emphasize that there are many other potential applications.
-
-
-
Social Networks and the Environment
Vol. 5 (2013), pp. 211–226More LessThis review discusses empirical research on social networks and the environment; it summarizes findings from representative studies and the conceptual frameworks social scientists use to examine the role of social networks. The article presents basic concepts in social network analysis, summarizes common challenges of empirical research on social networks, and outlines areas for future research. Finally, the article discusses the normative and positive meanings of social networks.
-
-
-
Heterogeneity in Environmental Demand
Vol. 5 (2013), pp. 227–244More LessHeterogeneity is a defining characteristic of environmental demand studies that use household-level data. People make different choices due to observed and unobserved differences in preferences and constraints, choice elements are quality-differentiated commodities that can be consumed in different ways, and observed characteristics of people are often import for policy. In this review I examine how environmental economists have responded to the challenges and opportunities this heterogeneity implies. I categorize the types of heterogeneity that can be present, provide examples of each, and propose criteria to use in deciding when explicit attention should be paid to the different types. I then show how a variety of economic and econometric models have been used to accommodate the various dimensions of observed and unobserved heterogeneity, and I discuss opportunities for further research on the topic.
-
-
-
Valuing Reductions in Environmental Risks to Children’s Health
Vol. 5 (2013), pp. 245–260More LessThis article reviews the economics literature dealing with valuation of reduced environmental risks to children’s health. We describe conceptual models together with results from a number of empirical studies. The conceptual models analyze valuation issues from the perspective of parents; treat health risk as endogenously determined; and demonstrate that in equilibrium, marginal willingness to pay to reduce risk for the child relative to marginal willingness to pay to reduce risk for the parent should equal the ratio of marginal risk reduction costs. Empirical studies treat both mortality and morbidity associated with exposure to environmental health risks. These studies generally find that parents are willing to pay more for absolute risk reductions for their children than they are willing to pay for corresponding risk reductions for themselves. Possible reasons for this outcome along with suggestions for further research are discussed.
-
-
-
What Can We Learn from Hedonic Models When Housing Markets Are Dominated by Foreclosures?
Vol. 5 (2013), pp. 261–279More LessHedonic property value models have been frequently used to value environmental amenities because markets for these goods usually do not exist. Typically, researchers cite Rosen’s (1974) seminal work, which allows one to interpret functions of the hedonic regression coefficients as the marginal willingness to pay for the environmental good. A key assumption needed for the Rosen result to hold is market equilibrium. Recent years have witnessed extreme circumstances—such as wild swings in housing prices, high levels of mortgage default, and, most significantly, high levels of foreclosure—in which this assumption is unlikely to hold. In this article, we address the issue of how we interpret the coefficient estimates for environmental goods in hedonic property value models when markets are dominated by foreclosures. We then focus on housing market conditions when interpreting the hedonic literature on (airport) noise, Superfund sites, air quality, and flood risk.
-
-
-
Cumulative Carbon Emissions and the Green Paradox
Vol. 5 (2013), pp. 281–300More LessThe green paradox states that a gradually more ambitious climate policy such as a renewables subsidy or an anticipated carbon tax induces fossil fuel owners to extract more rapidly and accelerate global warming. However, if extraction becomes more costly as reserves are depleted, such policies also shorten the fossil fuel era, induce more fossil fuel to be left in the earth, and thus curb cumulative carbon emissions. These consequences are relevant, as global warming depends primarily on cumulative emissions. There is no green paradox for a specific carbon tax that rises at less than the market rate of interest. Because this is the case for the growth of the optimal carbon tax, the green paradox is a temporary second-best phenomenon. There is also a green paradox if there is a chance of a breakthrough in renewables technology occurring at some random future date. However, there will also be less investment in opening up fossil fuel deposits, and thus cumulative carbon emission will be curbed.
-
-
-
The European Union Emissions Trading Scheme: Issues in Allowance Price Support and Linkage
Vol. 5 (2013), pp. 301–324More LessIn 2008, the European Union established what seemed like an ambitious cap (−21% from 2005 levels) for the third phase (2013–2020) of the European Union Emissions Trading Scheme (EU ETS). Ex ante modeling—which took account of the reductions in emissions resulting from meeting the renewables target and the inflow of project-based credits—indicated that this would result in an approximate allowance price of €30 per tonne of CO2, which was judged to provide the necessary financial incentive to abate emissions, to support carbon capture and storage and innovation in alternative energy supplies, and to discourage member states from doing their own thing in terms of price support and other measures. The only linkage was the acceptance for compliance purposes of Clean Development Mechanism and Joint Implementation credits. But in 2013, all has changed; the allowance price is approximately 75% less than what was anticipated, a friends-of-coal lobby has emerged in the EU, and opportunities to link with other ETS are now becoming a reality. This article tells the story of the allowance price collapse, emerging opportunities for linkage—including promising developments in China—and what recent literature has to offer in both understanding the past and informing the future.
-
-
-
What Can We Learn from the End of the Grand Policy Experiment? The Collapse of the National SO2 Trading Program and Implications for Tradable Permits as a Policy Instrument*
Vol. 5 (2013), pp. 325–348More LessThe 1990 amendments to the Clean Air Act created a trading program in sulfur dioxide (SO2) emissions that has served as the seminal example of how an emissions trading program could be designed. Yet despite its success, the trading program was essentially brought to an end by a series of regulatory and judicial actions. We begin with a brief discussion of the theoretical and historical antecedents to the SO2 trading program. We then describe the events that led to the program’s effective end in 2011. We argue that the SO2 trading program had two key vulnerabilities: SO2 emissions cause multiple environmental impacts, some with local consequences, and internal conflicts within the Clean Air Act. Because of these vulnerabilities, in the end, the program was unsustainable. We close with a discussion of the lessons that can be drawn from this history for future emissions trading programs.
-
-
-
Theory and Empirical Evidence for Carbon Cost Pass-Through to Energy Prices
Vol. 5 (2013), pp. 349–367More LessSimulation models of emissions trading performance are generally based on the assumption that carbon prices are fully (or almost fully) passed through to energy prices (with pass-through rates equal or very close to one). Unfortunately, empirical analyses of wholesale electricity spot markets do not confirm this simple rule. Pass-through rates can be much lower or much higher than one and can sharply vary over time or across countries and markets. In several cases, such rates are not significantly different from zero and can even be negative. Until now, only a few authors have tried to offer a theoretical justification for the divergence between the assumptions used in simulation models and the results of empirical evidence. The main finding of these theoretical studies is that, when the characteristics of specific energy markets (e.g., organization, vertical and horizontal structure, technology mix, firms’ strategies) are adequately taken into account, the existence and degree of imperfect competition can explain why pass-through rates can vary widely and can even assume negative values. Therefore, if the models carried out to estimate the performance and costs of environmental policies are used to support policy decisions, ignoring the role of imperfect competition and the characteristics of energy markets may induce significant distortions in estimations of the impact of public action and may lead to incorrect policy calibration.
-
-
-
The Political Economy of Fishery Reform
Vol. 5 (2013), pp. 369–386More LessDespite compelling evidence that property rights–based management can improve the economic and ecological performance of fisheries, reform proposals are often met with political opposition. Moreover, the opposition sometimes comes from incumbent fishermen and fishing communities that would ostensibly gain the most from rent-enhancing reforms. We flesh out this puzzle by describing the political economy of past and present institutional changes in North America such as bans on fish traps, limited-entry regulations, and individual transferable quotas (ITQs). Our review identifies patterns of distributional concerns surrounding property rights; many of the same groups that opposed limits on entry and fish traps also oppose ITQs. We provide examples of how political opposition to ITQs is mollified by modifications in program design, although these design compromises may have efficiency costs. We conclude by pointing to the need for more research on equity-efficiency trade-offs and for greater attention to fishermen heterogeneity in economic analysis.
-