International conservation investments are often made in the form of subsidies to purportedly eco-friendly enterprises rather than as payments conditional on habitat protection. Previous research demonstrated that direct payments for habitat protection are more cost effective than indirect subsidies for the acquisition of com-plementary inputs used in eco-friendly enterprises. In contrast to this earlier research, we assume in this paper that an ‘eco-entrepreneur’ may have market power. Market power is shown to compound the advantage of direct payments. Through a simple numerical example, we show that subsidies intended to achieve habitat conservation by encouraging the acquisition of complementary inputs can be spectacularly inefficient. In some cases it would be cheaper simply to buy the land outright. In other plausible cases, the indirect subsidy approach would simply be unable to achieve habitat conservation objectives no matter how much funding were available.

This paper develops an approach to assess the political risk associated with implementation of institutional reforms in the water sector, while providing insights into the interrelationship of institutional arrangements, power structure, and policy outcome. The analytical approach consists of a two-tier process to assess the institutional feasibility of reform implementation. The first tier is a structured analysis of power distribution among the power groups interested in the outcome of the reform. The second tier is a Delphi process, reflecting the opinions of experts. The approach was applied to the case of the National Drainage Program Project (NDP) in Pakistan, currently in the early stages of implementation. Several hypotheses regarding likely progress were tested, using the feedback provided by a panel of experts in the Delphi process.

Efforts to identify the determinants of environmental policy success have largely been anecdotal and case study based. This article seeks to shift environmental policy analysis on to more analytically rigorous and empirical foundations. Using statistical analysis, we identify a set of factors that drive environmental performance as measured by levels of urban particulates, sulfur dioxide, and energy use per unit of GDP. Although the data are imperfect and causal linkages cannot be definitively established, the statistical analysis presented suggests that environmental results vary not only with income levels as suggested by the environmental Kuznet's curve literature but also with both the sophistication of a nation's regulatory regime and perhaps more notably, its broader economic and social circumstances.

This special issue covers several important aspects of China's environmental policy, ranging from evaluation of government programs (biogas and the Sloping Land Conversion Program) that aim directly to enhance the rural environment, to the reform of natural resource sectors (collective and state forest reforms) that set foundations for the sustainable use of natural resources, and to the impacts of urban environmental policies (including urban transportation management and industrial pollution control policy). We provide an overview of the topic and a brief introduction to each of the contributed papers.

Cash-constrained wildlife departments must increasingly look towards revenue-generating activities such as sales of permits for hunting common species combined with fines for those caught with rare species. Pertinent to west Africa, an optimal enforcement model demonstrates the conditions under which a department with neither external budget nor tourism revenue can fully protect a rare species, and the impact on other species and local hunters' livelihoods. The department's effectiveness is shown to depend critically on the extent to which hunters can discriminate among different species. Improvements in hunting technology selectivity are therefore a substitute for increased enforcement spending.

This paper focuses on the interactions between local communities having at least some degree of informal claims over natural resources and firms interested in commercially exploiting such resources, explicitly allowing for interventions by third parties interested in community welfare and environmental outcomes. Integrating conflict and bargaining theories, we develop a bargaining model with endogenous inside and outside options, in which the feasibility and outcomes of a potential bargaining game depend on the unraveling of a conflict stage and vice versa. The model implies that, contrary to the conventional bargaining model, distribution and efficiency cease to be separable. We show that certain third-party interventions in the bargaining process may have unexpected and counterproductive effects.

The Philippine forest plantation lease is modelled as an option whose value arises from market uncertainty and the irreversibility inherent in sunk costs required to establish plantations. The value of this option could be a significant factor in the planting decisions of leaseholders. Real options theory could help explain why in spite of the prospects of adequate financial returns, Filipino leaseholders are slow to establish plantations. The opportunity cost of investing is demonstrated to be highly sensitive to uncertainty of the future value of the plantation. Real options analysis is also utilized to evaluate policies intended by the Philippine government to promote plantation development.

The relationship between temperature and agriculture outcomes in Brazil has been widely explored, overlooking the fact that most of the country's labor force is employed in non-agriculture sectors. We use monthly individual-level panel data spanning the period from January 2015 to December 2016 to ask whether temperature shocks impact non-agriculture wages in formal labor markets. Our results show that additional days in a month that fall within high-temperature ranges have significant adverse effects on real wages. Assuming a uniform climate change scenario where the daily temperature distribution shifts by 2$^{\circ }$C, we calculate income losses for formal workers in non-agriculture markets equivalent to 0.12 per cent of 2015 GDP.

This paper analyses the implications of government control over public information about air pollution. First, we model the incentives for a local government with control over the media to affect popular perception concerning pollution. We argue that biased announcements can influence the inflows of labour force in a municipality beyond economic factors. Then, we examine some evidence on information misreporting in the context of Beijing, China. We show that official air pollution announcements diverge systematically from an alternative source of information, provided by the US Embassy. The results point at a manipulation of popular perception consistent with the motives indicated in our model. Furthermore, using an original household survey, we examine whether the distorted public signal affects agents' behaviour. We find that households that depend upon government-controlled media are significantly less responsive to pollution peaks.

Area fees have become an increasingly important component of forest revenue systems in tropical developing countries. They are commonly viewed as having a neutral impact on decisions by timber concessionaires. This view is incorrect. Using both theoretical and empirical models, we demonstrate that area fees can induce concessionaires to accelerate timber harvests and to harvest more selectively. In Cameroon, area fees at recent levels create an incentive for concessionaires to harvest forests in half the estimated sustained-yield period. Countries that wish to encourage concessionaires to comply with sustained-yield requirements must implement measures that counter the depletion-accelerating effects of area fees.

An energy-focused macro-micro approach is used to assess the poverty implications of government policy response to increases in international oil prices in South Africa. The first scenario assumes that increases in international oil prices are passed on to end users with no changes in government policy instruments. In this scenario, poverty indicators increase. The second scenario assumes that the world price increases are nullified by a price subsidy by the government. This scenario still leads to an increase in poverty as the beneficial price effect is cancelled out by a decline in households’ income induced by the financing method used. While revenue generated from a 50 per cent tax on windfall profit of the petroleum industry helps to minimize the loss in government revenue, it does not contribute to mitigating the increasing poverty trend, since the decline in saving and investment under this scenario restricts the country's growth, employment and income distribution perspectives.

Well-functioning factor markets play an important role in improving the performance of the agricultural sector. Our paper examines both technical and allocative efficiencies at the household level, with an application to a cross-section sample of rural households in three provinces of China in 2009. In a first step, we use nonparametric methods to estimate household efficiency. In a second step, we examine econometrically the role of land rental market and its linkages with household-level efficiencies. We find that participation in the land rental market does not affect technical efficiency but has large positive effects on allocative efficiency. This stresses the need to distinguish between technical efficiency and allocative efficiency in the analysis of land tenure issues. The improvements in allocative efficiency from land-leasing contribute to significant increases in household income in rural China.

This study estimates the benefits from adopting Bt cotton seeds in Punjab, Pakistan over two cropping seasons - 2008 and 2009. The study uses the panel modeling approach to determine the average effects of Bt cotton technology on short-run profits, yields and farm inputs. This approach controls for biases resulting from self-selection and endogenous farm inputs. The study shows that, on average, Bt adopting farmers receive 9 per cent higher yields per hectare (ha), reduce per-ha pesticide use by 21.7 per cent, and increase per-ha use of irrigation water by 6 per cent. Our estimates of the increase in cotton yield are far below estimates from previous studies conducted in Pakistan and India, which do not use panel methods. Allowing more Bt cotton varieties and ensuring the availability of quality Bt cotton seeds in the market is likely to lead to further increase in the private benefits from Bt cotton.

This paper investigates how openness resulting from the adoption of the open-door policy influences air quality in urban China. City-level information is used to minimise the impacts of data inconsistency and data measurement problems. The intensity of international trade is used as a proxy for openness to examine how freer trade influences urban air quality. Several alternative measures of openness are adopted to investigate how different forms of openness can influence urban air quality. Our findings show that technique effects are the key to reversing the degradation of urban air quality and that openness is not necessarily a problem for urban air quality in China.

The current paper offers a new explanation of the emergence of multiple equilibria, for which the high (low) income equilibrium is associated with high (low) environmental quality. This new explanation rests on endogenous technological choice in the presence of emission taxes – an idea whose foundations find strong support from existing empirical evidence. Thus, the interactions between environmental policy and technology choice, within a framework that accounts for the health effects of pollution, may suggest a possible mechanism behind some of the observed differences in income, life expectancy and environmental quality among countries.

This paper investigates firm incentives for developing environmentally clean technologies in a simple two-country model with international oligopoly and lack of regulatory commitment, and compares the incentives under price and quantity regulations with and without policy cooperation between governments. We examine whether policy coordination (choices of policy instruments or policy harmonization) encourages environmental innovation when firms have strategic innovation incentives that may influence future regulation. In a case where policies are non-cooperatively set by governments, quantity regulations yield a greater static benefit for countries; however, dynamically, price regulations encourage more innovation than quantity regulations when environmental damages are not so large. Under both price and quantity regulation regimes, cooperative policy harmonization necessarily enhances net benefits in each country, whereas it discourages firms' innovation incentives when environmental damages are not so small.

With the aid of a lab experiment, we explored how imperfect monitoring and punishment networks impacted appropriation, punishment and beliefs in a common pool resource appropriation dilemma. We studied the differences between the complete network (with perfect monitoring and punishment, in which everyone can observe and punish everyone else) and two ‘imperfect’ networks (that systematically reduce the number of subjects who could monitor and punish others): the directed and undirected circle networks. We found that free riders were punished in all treatments, but the network topology impacted the type of punishment: the undirected circle induced more severe punishment and prosocial punishment compared to the other two networks. Both imperfect networks were more efficient because the larger punishment capacity available in the complete network elicited higher punishment amount.

Through a dynamic model of energy system change the paper examines the role of innovation in bringing about a low carbon energy system. The processes of innovation and technological substitution are cumulative, dynamic, and highly non-linear processes such that how the energy system evolves in the long term is extraordinarily sensitive to the strength and duration of the initial policies. It is possible, under some policy assumptions, that energy systems would continue to depend on fossil fuels for so long as fossil fuels remain abundant and the least cost resource; and under other assumptions, after allowing for the unavoidable lags associated with investment and the building up of a new capital stock, that fossil fuels would become almost wholly displaced by the non-carbon alternatives. The implication is that the external benefits of innovation, which include the creation of options and the reduction of costs arising directly from innovation itself, and the reduction of environmental damage, are far greater, perhaps by orders of magnitude, than the traditional cost–benefit models used for the analysis of climate change mitigation. The analysis suggests why a focus on discovery and innovation offers a promising way forward for national and international policies on climate change.

The relationship between productive efficiency and sustainable development of fishing industries in developing countries has received little attention. Ill-structured property rights in common-pool resources lead to a contradiction between private and social technical efficiency, with private and social costs dependent on the level of technical efficiency. Development policies that increase private efficiency can increase the social cost with ill-structured property rights and common-pool resources, and thereby increase social inefficiency. This paper examines this relationship through a case study of the mini purse seine fishery of the Java Sea, and finds that private technical efficiency does not depend on any measurable attributes of human capital, diverges substantially between the peak and off seasons, and differs between vessels more within the off season.