How Should An Accumulative Toxic Substance be Banned?

The harmful effects on human health or ecosystems of many toxic substances depend on their cumulative concentration in the carrying medium (water, soil, or air), not just on the annual deposition rates of the substances. Accumulative toxic substances pose challenges to regulatory policy that are not faced when controlling pollutants whose damaging effects are though to depend primarily on annual emission flows. An increasingly common response is to phase out offending uses or production of the substance. In this paper we take as given the goal of phasing out an accumulative pollutant and examine different ways this could be done using a simple, partial-equilibrium dynamic model. We focus on phaseout measures in which the cumulative production and release of the offending substance over the transition period is fixed. Once this cumulative volume is reached, users must convert to a known but higher-cost substitute that is assumed to be benign. The key to the analysis is the observation that the quota on cumulative production makes production of the toxic substance during the transition analogous to extraction of an exhaustible resource with a higher-cost, nonexhaustible ‘backstop’ technology. Using this framework, we first describe the cost-effective outcome when the ‘sunset’ date is chosen to maximize product market surplus subject to the cumulative production constraint. This outcome is compared to one in which the regulator fixes the sunset date, and one in which the regulator limits annual production as well as cumulative production out of concern for acute exposure effects. Finally, we discuss the kinds of market-based policy instruments that would be appropriate for supporting a cost-effective outcome.     

Research Frontiers in the Economics of Climate Change

Academic and policy debates over climate change risks and policies have stimulated economic research in a variety of fields. In this article I briefly discuss eight overlapping areas of current research in which further effort is particularly warranted. These areas include decision criteria for policy; risk assessment and adaptation; uncertainty and learning; abatement cost and the innovation and diffusion of technology; and the credibility of policies and international agreements. Further analysis in these areas not only will advance academic understanding but also will provide insights of considerable importance to policymakers.     

Few Opportunities, Much Desperation: The Dichotomy of Non-Agricultural Activities and Inequality in Western Kenya

Using data from Western Kenya, we confirm the existence of a dichotomous non-agricultural sector. The poverty and inequality implications of the differently motivated diversification strategies only partly correspond to expected patterns. While high-return activities are indeed confined to richer households, low-return activities constitute an important income source for households across the entire income distribution. Finally, we examine the wider implications of our findings for rural livelihoods. We find that only engagement in high-return non-agricultural activities is significantly associated with increased agricultural productivity. It seems that such high-return activities play a key role in triggering cumulative effects of relative livelihood success.     

Market-based regulation of natural gas pipelines

We argue that some forms of market-based regulation allowed within current statutory constraints can outperform traditional rate-setting regulation now used for interstate natural gas pipelines. In particular, a resale market for pipeline capacity rights can yield efficient choices in the short term, even for a natural monopoly pipeline. We also propose applying market mechanisms to setting the pipeline's original rates. The paper reviews experimental evidence on the performance of some of the proposed rate-setting institutions and describes some specific proposals made by pipelines that are consistent with those described here.     

Optimal Investment in Clean Production Capacity

For the mitigation of long-term pollution threats, one must consider that both the process of environmental degradation and the switchover to new and cleaner technologies are dynamic. We develop a model of a uniform good that can be produced by either a polluting technology or a clean one; the latter is more expensive and requires investment in capacity. We derive the socially optimal pollution stock accumulation and creation of nonpolluting production capacity, weighing the tradeoffs among consumption, investment and djustment costs, and environmental damages. We consider the effects of changes in the pollution decay rate, the capacity depreciation rate, and the initial state of the environment on both the steady state and the transition period. The optimal transition path looks quite different with a clean or dirty initial environment. With the former, investment is slow and the price of pollution may overshoot the long-run optimum before converging. With the latter, capacity may overshoot.     

An analysis of rhetorical figures and other linguistic devices in corporation brand slogans

Brand slogans can provide an important supplemental role to brand names and logos in building and cultivating brand images. Research suggests that including some type of rhetorical figure or linguistic device in the design of slogans makes them more influential in eliciting favorable consumer responses. The purpose of this study is to determine whether this suggestion is reflected by slogans being currently and recently used in the marketplace, and if so, which types of linguistic devices are most commonly used. Results indicate that a variety of phonetic, syntactic, and semantic devices are commonly used. Some of the more frequently appearing devices include alliteration, initial plosive, word/phrase repletion, pun, and well-known phrase. The sampling frame for this study was the 2011 Fortune 500.     

Accumulative pollution, “clean technology,” and policy design

This paper addresses the optimal long-term management of an accumulative but assimilable pollutant through economic incentive policies that restrict more damaging production processes and induce more benign alternatives. Using a simple general equilibrium approach, we consider the possibility that the assimilative capacity of the environment is eventually exhausted by pollution accumulation. In this case, there is a nonconvexity in the problem that gives rise to multiple potential optima; environmental quality may be preserved or completely degraded in the long term. We characterize the circumstances under which phasing out dirty production is consistent with an intertemporally optimizing path and we discuss the design of price-based and quantity-based policies for supporting an optimal solution with the nonconvexity.     

Alternative standards and instruments for air pollution control in Poland

Like other Central European countries, Poland faces the twin challenges of improving environmental quality while also fostering sustainable economic development. In this study we examine the costs of different standards for air pollution control, and the cost savings from using incentive-based policy instruments in lieu of more rigid command-and-control policies. The comparisons are based on the results of a simulation model of energy use and air pollution control for the Polish economy over 1990–2015. The model simulates least-cost energy supply decisions under different environmental policy assumptions, the corresponding emissions, and the cost of achieving the specified policy objectives. The model results suggest that incentive-based policies will have efficiency gains over command policies that are at least worthy of consideration and may be quite substantial. The size of the gains in practice depends in part on how much flexibility is built into the command approach, e.g., capacity for intrafirm trading as well as alack of technology-specific requirements. To achieve these gains, an increase in the current levels of emissions fees is desirable both to strengthen abatement incentives and to improve the capacity of the Polish government to overcome past environmental damages. However, it seems highly unlikely in practice that fees could be raised to the levels necessary to meet current Polish emissions standards. To make further headway, an evolutionary approach to emissions trading patterned after (and profiting from the experience with) emissions trading in the U.S. seems useful. The program could start out relatively modestly and increase in ambitiousness as the Polish economic transition proceeds.     

Designing price caps for gas distribution systems

We examine the applicability of price-cap mechanisms to the regulation of gas distribution company rates for gas supply and transportation services. Although distribution companies will continue to be regulated for the foreseeable future, we argue that a hybrid of price and profit regulation of transportation rates will increase allocative efficiency and provide greater incentives for productive efficiency. The design of incentives for cost minimization in long-term gas supply contracts is more challenging, but an index cap, based on the cost of gas acquired by other distribution companies, merits attention.