Economic Analysis for the UK National Ecosystem Assessment: Synthesis and Scenario Valuation of Changes in Ecosystem Services

We combine natural science modelling and valuation techniques to present economic analyses of a variety of land use change scenarios generated for the UK National Ecosystem Assessment. Specifically, the agricultural, greenhouse gas, recreational and urban greenspace impacts of the envisioned land use changes are valued. Particular attention is given to the incorporation of spatial variation in the natural environment and to addressing issues such as biodiversity impacts where reliable values are not available. Results show that the incorporation of ecosystem services and their values within analyses can substantially change decisions.     

The merits of new pollutants and how to get them when patents are granted

The performance of market based environmental regulation is affected by patents and vice versa. This interaction is studied for a type of innovation where a new technology reduces emissions of a specific pollutant but at the same time causes a new type of damage. If the new pollutant associated with this technology is sufficiently different from existing ones such that marginal damage is increasing in each of them but additive across pollutants, a diversification of the pollution portfolio is socially desirable. In a situation where the incentives to develop such a technology are created by patents, the efficiency of permits is affected by monopoly pricing of the patent-holding firm. This result carries over to other types of innovation. The performance of taxes is limited by either the inability to implement specific pollution mixes or monopoly pricing. For constant returns to scale at the industry level the combined use of taxes and permits ensures the first best mix of technologies and provides positive research incentives.      

How delegation improves commitment

McCallum (1995, American Economic Review Papers and Proceedings 85 (2), 207-211) conjectures that delegation merely relocates the commitment problem but does not solve it. This holds if optimal ex-ante policies do not change if additional information becomes available. However, with a flexibility-credibility trade-off delegation improves credibility.     

Stock Price Response to News of Securities Fraud Litigation: An Analysis of Sequential and Conditional Information

This study examines investor response to three events that help define a federal class action securities lawsuit, specifically, the announcement that names an issuer as a defendant in the lawsuit (at the class action filing date), the disclosure or accounting restatement that 'corrects' the information deficiency (at the end of the class period), and the date at which the fraud on the market allegedly begins (at the beginning of the class period). We document a significant and predictable stock price response at each of these three events. Our tests also indicate that the market interprets these events not in isolation but as sequential and conditional events. Investor response differs on the basis of the characteristics of the issuer, the allegations in the complaint, and the outcome of the litigation. These results and the fact that we observe no systematic price momentum in investor response beyond the announcement dates imply that the market is reasonably efficient with respect to information about securities fraud litigation. Our results are robust to alternative definitions and procedures, and are based on a proprietary database that includes almost all federal securities class action lawsuits since 1990.     

The Warden Attitude: An Investigation of the Value of Interaction with Everyday Wildlife

Using a discrete choice experiment, we elicit valuations of engagement with ‘everyday wildlife’ through feeding garden birds. We find that bird-feeding is primarily but not exclusively motivated by the direct consumption value of interaction with wildlife. The implicit valuations given to different species suggest that people prefer birds that have aesthetic appeal and that evoke human feelings of protectiveness. These findings suggest that people derive wellbeing by adopting a warden-like role towards ‘their’ wildlife. We test for external validity by conducting a hedonic analysis of sales of bird food. We discuss some policy implications of the existence of warden attitudes.     

The Value of Urban Green Space in Britain: A Methodological Framework for Spatially Referenced Benefit Transfer

A meta-analysis of studies valuing urban greenspace in the UK is undertaken to yield spatially sensitive marginal value functions. A geographical information system (GIS) is used to apply these functions to spatial data detailing the location of such greenspace resources in five British cities. Changes in monetary values are computed for the six future scenarios used in the UK National Ecosystem Assessment for the period 2010–2060. Different degrees of substitutability between urban greenspaces are considered. These findings are then extrapolated to all major British cities to obtain per household and aggregate valuation estimates for each scenario both with and without distributional weights. While subject to a number of shortcomings in both data availability and methodology, this represents the first systematic and comprehensive attempt to value marginal changes in urban greenspace while accounting for spatial heterogeneity.     

The Climate Policy Hold‐Up: Green Technologies,Intellectual Property Rights,and the Abatement Incentives of International Agreements

The success of global climate policies over the coming decades depends on the diffusion of “green” technologies. Using a simple model, we highlight a conflict between international environmental agreements (IEAs) on emissions reductions and international systems of intellectual property rights (IPRs) on abatement technologies. When IPRs are strong and global, IEA signatories anticipate rent extraction by innovators. This hold‐up effect reduces abatement, potentially to levels below those of non‐signatories, and it reduces the number of signatories to self‐enforcing IEAs. We explore policy options that respect existing property rights, but avoid the strategic interaction between signatories to an IEA and innovators.     

Instrument Choice and Motivation: Evidence from a Climate Change Experiment

Are prices or quantities the best regulatory instrument to align private actions with public interests in the presence of externalities? We add another dimension to this ongoing debate by experimentally analyzing the interaction between instrument choice and intrinsic motivation of regulated agents. The response of subjects facing a trade-off between real CO₂ emissions and private monetary payoffs to both a price and a quantity instrument are tested. We find evidence that taxes crowd out intrinsic motivation while emission standards are neutral. Crowding is short term persistent and not well explained by established cognitive theories of motivational crowding.     

Technology Diffusion with Market Power in the Upstream Industry

This paper compares taxes and tradable permits when used to regulate a competitive and polluting downstream industry that can purchase an abatement technology from a monopolistic upstream industry. Second-best policies are derived for the full range of the abatement technology’s emission intensities and marginal abatement costs. The second-best permit quantity can be both above or below the socially optimal emission level. Explicit consideration of the output market provides further insights on how market power distorts the allocation in the downstream industry. The ranking between permits and taxes is ambiguous in general, but taxes weakly dominate permits if full diffusion is socially optimal. In addition, it is analysed how a cap on the permit price affects the diffusion of an abatement technology.