For guidance in determining which items should be included in comprehensive NDP (net domestic product) and how they should be included, reference is often made to the linearised Hamiltonian from an optimal growth problem. The paper gives a rigorous interpretation of this procedure in terms of a money-metric utility function linked to familiar elements of standard welfare theory. A key insight is that the Hamiltonian itself is a quasilinear utility function, so imposing the money-metric normalisation is simply equivalent to using Marshallian consumer surplus as the appropriate measure of welfare when there are no income effects. The twin concepts of the ‘sustainability-equivalence principle’ and the ‘dynamic welfare-comparison principle’ are explained, and it is indicated why these two principles are important for the theory of national income accounting.

Many Mediterranean-type climates around the world will face increased risks of wildfires as a consequence of climate change. In this study we consider the case of Portugal and estimate the impact of the increasing risk of forest fires on tourism. Using data for 278 municipalities for the 2000–2016 period, we find a considerable negative impact of burned areas on the number of tourist arrivals, both domestic and inbound. We go beyond the traditional impact analysis and provide predictions for 2030 and 2050. The estimated annual costs to the Portuguese economy due to the impact of burned areas in 2030 range between €17.03 and 24.18 million for domestic tourist arrivals and between €18.26 and 38.08 million for inbound ones. In 2050, those costs will increase at least fourfold. These findings underscore the importance of taking the forest fire risks into account when planning local investments.

This paper analyses the role that companion policies have had in the reduction of emissions regulated by the EU Emissions Trading System (EU ETS) and the related policy interactions, with a view to identifying relevant insights for China's forthcoming Emissions Trading System (ETS). The investigation rests on: (a) the observation of the EU's and China's ETSs and policy mixes; (b) economic theory concerning companion policies and ETS design; and (c) empirical ex-post evidence from the EU ETS. Three main conclusions emerge from the analysis. First, China's ETS, while not imposing a fixed cap on emissions, will not be immune to waterbed effects of companion policies. Second, the European experience stresses the importance of making explicit the objectives pursued by companion policies, and of balancing policies for innovation and policies for adoption of low-carbon technologies. Third, in the presence of a major market surplus, only permanent adjustments to allowance supply can be effective in raising prices.

The sudden collapse of the centrally planned economies of Central and Eastern Europe (CEE) and the former Soviet Union (FSU), has created economic and environmental disequilibria of historically unprecedented dimensions throughout the region, as well as a process of gradual transition from plan to market. This historical ‘experiment’ provides a unique opportunity to study economyÐenvironment interactions and the adjustment process towards a new equilibrium, as well as the implications for conventional and novel policy instruments under transitional conditions. The changes that have taken place have been so many and so large that they defy many of the tools of marginal analysis. Privatization, industrial restructuring, market competition, price reform, and trade liberalization among others have suddenly been introduced where none existed and have so radically altered the fundamentals of these economies that they could be considered as new economies rather than simply reformed economies. However, underlying these radical changes, are many legacies of the centrally planned economy that persist or change only gradually. Furthermore, not all countries in CEE and the FSU have reformed their economies at the same pace. The northern tier countries of CEE moved faster than the southern tier and the latter faster than most FSU republics.

Using China's provincial economic and pollution data from 1992 to 2008, we employ data envelope analysis and econometric analyses to explicitly estimate technical efficiency and examine the role of technical efficiency, pollution control instruments (pollution levy and pollution quantity control) and prices of production inputs on pollution intensity. We find that an increase of labor wage and a decrease of capital cost are associated with an improvement in technical efficiency. The levy rates of air pollution improve technical efficiency but pollution quantity control targets have no statistically significant effect on technical efficiency. On the other hand, technical efficiency, the effective levy rates, pollution quantity control targets and capital cost have a negative effect but wage has a positive effect on pollution intensity. The importance of production input prices in pollution intensity and technical efficiency suggests alternative channels for industrial pollution control as well as cautions for the unintended consequence on the environment if any policy changes are made relating to labor and capital costs.

This paper provides a conceptual and empirical general equilibrium framework for the analysis of the impact of trade reform on welfare and the environment. The analysis is applied to Côte d'Ivoire explicitly considering externalities affecting biomass (natural vegetation), which is shown to be an important factor determining agricultural productivity.

The simulation general equilibrium analysis shows that the agricultural output composition effect dominates the agricultural expansion effect for the case of complete trade liberalization. Thus, in this case trade liberalization causes a significant improvement in the rural biomass stock by cutting land area cultivated, increases agricultural productivity, and induces dramatic welfare gains. That is, trade liberalization is a win–win type of policy in this case. However, partial trade liberalization that only reduces protection to non-agricultural goods (and does not reduce tariffs to agricultural import substitutes and does not reduce export taxes) causes a further deterioration of the biomass resources and reduces welfare.

We use farm survey data and a damage control framework to analyze impacts of Bt cotton on yields and pesticide use in Pakistan. We also derive optimal levels of pesticide use with and without Bt, taking into account health and environmental externalities. This has not been done previously in the literature. Conventional cotton growers suffer from significant insect crop damage; they underuse pesticides from a profit-maximizing perspective. Yet, the picture is reversed when externalities are also considered. The social optimum of pesticide use is much lower than the private optimum, and both optima are lower with Bt than without this technology. Bt controls pest damage more effectively. Hence, yields on Bt farms are about 20 per cent higher in spite of lower pesticide use. Large pest damage is a typical phenomenon in developing countries. In such situations, Bt can contribute to productivity growth, while reducing pesticide applications and associated negative externalities.

The effects of economic development on the exploitation of renewable resources are investigated in settings where property rights are ill defined or not enforced. This paper explores potential conservation implications from labor and product market developments, such as enhanced transportation infrastructure. A model is developed that predicts individual fish catch per unit effort based on characteristics of individual fishermen and the development status of their villages. The econometric model is estimated using data from a cross-sectional household survey of artisanal coral reef fishermen in Minahasa, Indonesia, taking account of fishermen heterogeneity. Variation across different villages and across fishermen within the villages is used to explore the effects of development. Strong evidence is found for the countervailing forces of product and labor market effects on the exploitation of a coral reef fishery.

This paper builds a multi-generation household model of consumption, accumulation, and risk management to assess the dynamic consequences of climate risk exposure. The model incorporates long-term impacts of consumption shortfalls, induced by optimal ‘asset smoothing’ coping behavior of the vulnerable, on poverty. The analysis shows the long-term level and depth of poverty can be improved by incorporating ‘vulnerability-targeted social protection’ into a conventional social protection system. The paper further shows insurance-based vulnerability-targeted social protection dominates (in economic growth and poverty reduction measures) both in-kind transfers and asset-based vulnerability-targeted protection. We then stress test social protection mechanisms and find the relative performance of insurance-based vulnerability-targeted social protection improves when subjected to current pessimistic projections about increasing drought risk. However, if drought risk increases beyond current climate change projections, then even the vulnerability-targeted policy loses its ability to stabilize the extent and depth of poverty.

Having enterprises engaged in environmentally friendly behavior is an important part of reducing negative environmental impacts. This study makes a quantitative analysis against the backdrop of China's transitional economic system. The results show that politically-connected enterprises significantly reduce environmental expenditure, but this only holds for state-owned enterprises; private enterprises with political connections spend significantly more. Analysis of the efficiency of environmental expenditure indicates that, for private enterprises, environmental spending is used as a way to maintain political connections, with rent-seeking as the likely motivation. Politically-connected private enterprises have not reduced their emissions to the same extent as state-owned enterprises, despite increased expenditure. Given the scale of environmental degradation in China during a period of massive economic and social upheaval, the results of this analysis provide a quantitative case for policy change: governments should shift focus to the results that environmental spending produces.

Programs that provide incentives to induce conservation are often ineffective, leading farmers to abandon conservation once assistance is withdrawn. An alternative to incentives is to offer conservation technologies in conjunction with measures that enhance the short-term profitability of agriculture. Our results indicate that CARE, an international non-governmental organization, has used this approach successfully to promote resource conservation in the Ecuadorian Andes. In particular, the adoption of terraces was found to increase significantly when accompanied by alterations to the agricultural system, such as new crops, biological barriers, and improved agricultural production.

Quantitative research on household participation in the Payments for Environmental Services (PES) programme remains scarce. This paper aims to determine the key factors influencing household participation in a PES programme in Mozambique. Questionnaire-based quarterly surveys were conducted with 290 randomly selected households. We used the instrumental variables technique to identify the factors influencing household participation. The instrumental variables used for forest dependence were: household head born in the village, duration of residence of the household head in the village, ethnicity of the household head, business ownership of the household head and off-farm income of the household. The results show that education of household head and households' trust towards community members positively influenced household participation in PES, while forest dependence influenced it negatively. Future PES projects may thus need to focus more on developing social capital and the resource dependence of households.

This paper examines the effects of the Brazilian governments' title granting policies on the efficiency of agricultural and timber production in the Brazilian Amazon. A two-stage procedure is used that combines Data Envelopment Analysis (DEA) and a Tobit regression. Provision of private land titles before 1995 is found to positively affect the technical efficiency of agricultural and joint agriculture–timber production in 1995. Governmental expenditures, including expenditures to secure property rights, also are found to increase technical efficiency in the agricultural industry. The analysis indicates that revenue efficiency can be improved by producing more roundwood and less agricultural product. Land-granting policies may favorably affect environmental conservation by intensifying land use in agriculture, but they also may harm development by discouraging timber production.

Previous research suggests that forest-dependent households tend to be poorer than other groups, and that extreme reliance on forest resources might constitute a poverty trap. We provide an example in which a non-timber forest product – charcoal – appears to be providing a pathway out of poverty for some rural households in Uganda. Data come from households living adjacent to natural forests, some of whom engage in charcoal production. We use a semi-parametric method to identify the determinants of participation in charcoal production and a quantile regression decomposition to measure the heterogeneous effect of participation on household income. We find that younger households and those with few productive assets are more likely to engage in charcoal production. We also show that, as a result of their participation, charcoal producers are better off than non-charcoal producers in terms of income, even though they are worse off in terms of productive assets.

This paper undertakes a quantitative analysis of the socioeconomic and environmental impacts of different trade agreements for Chile. A dynamic general equilibrium model is used to compare the consequences of unilateral liberalization and trade agreements with the European Union (EU) and the United States (USA). The results show that economic gains under the trade agreements are only significant if foreign investment increases or value added taxes are modified. Winners and losers depend on the agreement; however, unskilled labor-intensive sectors always progress. Consequently, these agreements seem to be good for the poorest groups. Some natural resource intensive sectors significantly increase their production with the EU and the US agreements, also increasing the environmental pressures. CO2 and PM-10 emissions are not very different under these agreements as compared to business as usual – under which environmental pressures increase significantly. The results show the importance of economy-wide analysis of trade agreements in developing contexts.

This paper analyzes behavioral change spurred by better common property forest management (CPFM), with a focus on on-farm tree planting. Results from our theoretical household model suggest that on-farm trees, which provide products that can substitute for those from common forests, should be stimulated by better CPFM systems. We test this finding using data from a household survey conducted in the Bolivian Andes in 2000. We find that better CPFM at its highest level of aggregation is positively correlated with more and higher quality on-farm trees. In terms of less aggregated indices, relatively few variables are significant, though two particularly important aspects of forest property rights – access clarity and the existence of formal penalties for overuse – actually reduce on-farm tree planting. We therefore conclude that in general synergies between individual CPFM components are most critical for behavioral change, but improvement of property rights aspects of CPFM may give counter-intuitive results.

Based on multiple rounds of household survey data collected in the year after the 1998 massive flooding in Bangladesh, we investigate the role of private transfers as a social coping response to natural disasters. We also explore the role of private transfers (gifts) as an informal insurance mechanism to smooth consumption in the face of an adverse covariate shock caused by the flooding. The level of transfers made is shown to be altruistically calibrated to the severity of flood exposure. As an indicator of the economic importance of such gifts, the amount of transfers received is shown to significantly contribute to reducing household consumption variability. We discuss the policy implications of our findings in a developing country context.

The objective of the study is to construct forest resource accounts for the state of Maharashtra in India and incorporate the value of depletion and degradation of forest resources into the system of national accounts (SNA). The net state domestic product (NSDP) is adjusted for the depletion of the forest resources to obtain Environmentally adjusted net state domestic product (ESDP). The results show that the value added by forests is 3.56 per cent of NSDP and the value of depletion is 19.8 per cent of the estimated value added. The ESDP of Maharashtra is found to be 99.3 per cent of the estimated NSDP. The study has demonstrated that, although the existing database needs further improvement, forest resource accounting is feasible for the state of Maharashtra in India and can serve as an indicator of economy's performance.

The growing disenchantment with state management of natural resources has led to increasing reliance on co-management. This involves devolution of the rights to manage and control access to the resource from the state to the resource appropriators. Co-management has been introduced in many Third World countries with varying success. Co-management programmes have typically assumed that the resource community wants to conserve the resource and is prevented from doing so by their inability to form a collective choice arena. Hence such programmes have attempted to provide a collective choice arena. However, these attempts overlook the need to change the attitudes of resource users and create a demand for the resource regime. In this paper we have presented two case studies of Joint Forest Management in India to illustrate this point.

This paper explores the interrelationship between poverty, risk, and deforestation by small farmers in the low-income tropics. A nonseparable household model reveals how exogenous shocks to the mean or variance of a food price distribution might affect peasants' incentives to clear forest. The resulting links between food price policy, farmer behavior, and deforestation offer an innovative explanation of the vicious cycle of peasant immiserization and tropical deforestation. An intriguing, testable hypothesis also emerges: that market-oriented reforms that increase the mean and variance of food prices may inadvertently stimulate deforestation in economies in which a sizable proportion of farmers are net buyers.