In this paper, we develop a simple two-period model of natural capital investment under Knightian uncertainty and analyze the effects of changes in the degree of ambiguity on the optimal natural capital investment. We find that the degree of Knightian uncertainty affects a government's natural capital investment. Moreover, we find that the direction of the effect of the Knightian uncertainty depends on the nature of uncertainty, that is, on whether the uncertainty is about the future level of natural capital or about the return from saving.

While a large body of the literature on environmental policies has focused on the productivity impacts of regulations, less attention has been given to the link between environmental policies and market competition. In this paper, I develop a tractable model that incorporates variable mark-ups to study how a competitive environment is affected by environmental policies in a market with firm heterogeneity and endogenous abatement technology choice. The findings of this study are consistent with the Porter Hypothesis in the sense that environmental regulations motivate abatement technology adoption and enhance productivity and environmental quality. However, the productivity gain is mainly driven by reallocation of resources across firms rather than the induced abatement technological change. Tougher regulations harm the competitive environment by increasing average prices and market concentration. Social welfare also drops because in the absence of strong competition fewer variates are produced in equilibrium.

This paper translates the concepts of sustainable production to three dimensions of economic, environmental and ecological sustainability to analyze optimal production scales by solving optimizing problems. Economic optimization seeks input-output combinations to maximize profits. Environmental optimization searches for input-output combinations that minimize the polluting effects of materials balance on the surrounding environment. Ecological optimization looks for input-output combinations that minimize the cumulative destruction of the entire ecosystem. Using an aggregate space, the framework illustrates that these optimal scales are often not identical because markets fail to account for all negative externalities. Profit-maximizing firms normally operate at the scales which are larger than optimal scales from the viewpoints of environmental and ecological sustainability; hence policy interventions are favoured. The framework offers a useful tool for efficiency studies and policy implication analysis. The paper provides an empirical investigation using a data set of rice farms in South Korea.

This paper evaluates how the marginal abatement cost (MAC) and the efficiency cost of policies will change at the regional and global level if reduction targets are based on consumption-based emissions (CBEs) rather than on production-based emissions (PBEs). Using a CGE model, this paper finds that the MAC of CBEs is in general higher than that of PBEs, mainly due to limited substitution possibilities between energy and non-energy goods in final consumption compared to those in the choice of inputs in production activities under PBEs. Interestingly, when policies such as border carbon adjustments (BCAs) are introduced to reduce CBEs, net importers of emissions are better off, while net exporters of emissions are worse off in this approach compared to the PBEs target. If border tariffs are not allowed, the CBEs target turns out to be worse both for net importers and exporters of emissions.

The article analyzes the links between poverty, forest use and dependence, and forest degradation by combining household and forest resource data from two sites in the Zagros Mountains, Iran: Ghamishale and Tange Tamoradi. At both sites, traditional forms of forest management are practised; in Ghamishale management is mainly family based, whereas in Tange Tamoradi it is village based. The poverty–forest dependence link is strongly influenced by population density, carrying capacity and institutions for forest management. In addition, the study revealed the tradeoff between equity and sustainable resource use as outputs of different institutional arrangements. We do not find any evidence that poor households or households with high forest dependence contribute more to forest degradation than others. The results therefore raise concerns about the potential consequences of policies globally that address forest degradation only through poverty alleviation and forest-dependence reduction.

A national campaign of well testing through 2003 enabled households in rural Bangladesh to switch, at least for drinking water, from high-arsenic wells to neighboring lower arsenic wells. We study the well-switching dynamics over time by re-interviewing, in 2008, a randomly selected subset of households in the Araihazar region who had been interviewed in 2005. Contrary to concerns that the impact of arsenic information on switching behavior would erode over time, we find that not only was 2003–2005 switching highly persistent but also new switching by 2008 doubled the share of households at unsafe wells who had switched. The passage of time also had a cost: 22 per cent of households did not recall test results by 2008. The loss of arsenic knowledge led to staying at unsafe wells and switching from safe wells. Our results support ongoing well testing for arsenic to reinforce this beneficial information.

The trade-off between short-term welfare and long-term agricultural development in the highlands of Ethiopia represents a challenge to successful economic development in a predominantly agriculture-based economy. We employ nearest neighbor and kernel-based matching techniques to measure the impact of sustainable land and watershed management (SLWM) on the value of production at the plot level. Analysis suggests that plots that received SLWM investments (terraces, bunds, check dams) within the first study period (1992–2002) had a 24 per cent higher value of production in 2010. In addition, continuous treatment effects analysis provides a robustness check and suggests that plots with existing SLWM infrastructure have a positive and increasing value of production seven years after construction. Although value of production increases over time, net benefits may not outweigh costs, and mechanisms to incentivize maintenance may be needed.