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.

Nigeria is endowed with abundant sunshine year-round; thus, solar PV would solve the environmental problems associated with petrol-powered generators. However, it is unclear whether households are willing to transition. Thus, we analyze households’ willingness to pay (WTP) for solar PV under four scenarios: (i) WTP when a solar PV is complemented with a generator, (ii) WTP when a solar PV completely displaces a generator, (iii) WTP when a solar PV is complemented with a generator, plus a subsidy, and (iv) WTP when a solar PV completely displaces a generator, given a subsidy. We find that WTP for solar PV is higher when it can displace generators completely. Subsidy plus monthly rather than upfront payment would scale up the adoption of solar PV by about 6 per cent. Furthermore, the cost benefit analysis results show that solar PV investment is profitable. Thus, there is a need to implement policies aimed at scaling up the energy transition.

In Rwanda, rural water supply is not uniformly distributed. Rural areas are characterized by differences in the distance to the nearest water point and in water quality for domestic water, by watering frequency and water availability for irrigation water, and by the price for both. A household's perception of further improvements in water supply will, therefore, depend heavily on the situation it currently faces. The authors used a choice experiment to model how the individual status quo (SQ) affects preferences. Accounting for individual SQ information improves model significance relative to simply using the generic SQ parameter in the model, and the willingness to pay increases. Not using this information leads to a downward bias – and, in some cases, statistical insignificance – in estimates of households’ valuation of health improvements linked to improved domestic water availability, as well as of increased watering frequency linked to the improved availability of irrigation water.

Early this year, Thomas Friedman (2014) reported on a (Wikileaks) cable sent in 2008 from the US Embassy in Damascus concerning the drought Syria had been suffering from since 2006 (and which was going to last for another couple of years). The Syrian UN food and agriculture representative was seeking assistance for among others 15,000 small-holding farmers, who might otherwise seek jobs in Syrian cities (leaving many women and children behind in poverty) and who could arguably add to already existing social and economic tensions in those cities.

Previous research has found that presenting consumers with information regarding multi-attributes of a product tends to reduce the product's overall evaluation relative to a situation wherein only one attribute is presented. We find that the same phenomenon also holds for consumers' perceptions regarding attributes associated with genetically modified (GM) products. When given information on health (nutrients) and water use of certain crops, consumers reduce their quality perceptions compared to the situation wherein they are given only health or only water use information. In addition to replicating the findings on this phenomenon in another product category – that of GM products – we extend the theory by showing that multi-attribute information results in lower perceptions of attributes in addition to deflated total evaluation. This finding provides another explanation of consumers' resistance to GM products beyond risk and negative predisposition. Our findings can be used to guide policy makers in designing educational campaigns.

Food labelling is costly. Food labelling is often demanded with the introduction of new food products such as genetically modified (GM) food. If consumers do not have trust in the label, scarce resources are wasted. This paper investigates factors affecting the trust in food labels among Ugandan consumers. The results suggest that older, less-educated individuals of smaller household sizes and with trust in government institutions have more trust in food labels. Other factors were also found to be important. The government has to consider those differences in consumer trust when designing a GM labelling policy.

The theoretical definitions of sustainability proposed in EDE's recent symposium, Sustainability and the Measurement of Wealth, are useful for measuring national wealth but not for measuring sustainability. Moreover, because they are based on market prices and extensions to them, the empirical estimates are not indicators of sustainability. Sustainable development is defined and a theoretic indicator is proposed using maximin theory.

William Nordhaus has gone further than any economist to date at building a dynamic integrated model of the world’s climate and economic systems, with some one-way linkages to agricultural systems and ecosystems. Managing the Commons is an admirably readable description of this effort which, in his words, ‘balances the costs of emissions controls in energy policies and other areas against the impacts to agriculture, coastlines, and ecosystem values’. In addition to a detailed description of the Dynamic Integrated Climate and the Economy (DICE) model and several scenarios produced by the model, the book includes large sections on sensitivity analysis of the model’s parameter uncertainty and an analysis of the value of information gained at various times in the future to the decision process.

This study uses household panel data from Malawi's 2010/11 and 2012/13 Integrated Household Panel Survey to investigate the mitigating role of its Farm Input Subsidy Programme (FISP) against the deleterious impacts of negative rainfall shock on households’ welfare in rural Malawi. The study finds that the FISP has a cushioning role on the negative impact of rainfall shocks. The use of a farm input subsidy scheme enables rural households to substantially increase their food consumption and overall food security, despite the increasing threat of climate change. The results of this study highlight the importance of agricultural policy, such as the FISP, in rural households’ mitigation of weather risk.

This paper examines the property rights of the Cochin estuarine fisheries in India, which in spite of having well-defined access and conservation rules imposed by the state, have failed to ensure proper resource management. Considering the resource characteristics and the causes for state's failure, co-management, which requires a redefinition of management functions by state as well as users, has been proposed as an alternative. Analysis of user characteristics, using the two-stage estimation procedure, throws policy signals that under co-management the state can strengthen the licensing system to restrict access to fishing and to impart awareness regarding conservation rules. The logit analysis on users' role indicates that, although certain types of heterogeneities contribute towards the critical mass needed for a collective action, the distributional implications may lead at least some to oppose co-management. This implies that, even if users initially get to agree to co-operate and share any rents from conservation, significant prisoner's dilemma will soon occur returning the resource to its current state, and co-management will have to still grapple with lack of well-defined property rights.

This paper examines the double dividend hypothesis in the presence of labour income uncertainty. Empirical evidence shows that uncertainty over labour income is particularly significant in developing, while not negligible in developed countries. Under uncertainty, and assuming incomplete capital markets, the tax system plays a role in providing social insurance, and a green tax reform influences its effectiveness. We show that the increase in environmental tax reduces consumption risk, while the balanced budget decrease in labour income tax increases income risk. We find that the total welfare effect of a green tax reform differs substantially from the case of certainty. The critical parameters determining the existence of a second dividend are the lump-sum transfers, the relative substitutability of the two goods for leisure, and the initial tax rates relative to their optimal that determine also the response of labour supply to a change in the tax mix.

We study the social discount rate, taking into account inequality within generations, that is, across countries or individuals. We show that if inequality decreases over time, the social discount rate should be lower than the one obtained by the standard Ramsey rule under certain but reasonable conditions. Applied to the global discount rate and due to the projected convergence across countries, this implies that the inequality adjusted discount rate should be about twice as high as the standard Ramsey rule predicts. For individual countries on the other hand, where inequality tends to increase over time, the effect goes in the other direction. For the United States for instance, this inequality effect leads to a reduction of the social discount rate by about 0.5 to 1 percentage points. We also present an analytical formula for the social discount rate allowing us to disentangle inequality, risk, and intertemporal fluctuation aversion.

We analyze the external effects that arise in the decisions of firms on polluting emissions and in the decisions of parents on the number of births in an optimal control model with three stock variables representing population, economic capital, and pollution. We distinguish two different types of households, which represent opposite ends of a spectrum of potential familial structures: ‘dynastic households’, in which the family sticks together forever and ‘micro-households’, in which children leave their parent's household immediately after birth. We show that the decision of parents on the number of births involves an externality that is qualitatively different for both types of familial structure. Hence, population policy should be different, according to the type of household. A first best result may be obtained in the case of dynastic households if an appropriate tax on the household size is applied, or, in the case of micro-households, if an appropriate tax on children is applied.

We study climate change policies using the novel pattern scaling approach of regional transient climate response in order to develop a regional economy–climate model under conditions of deep uncertainty. We associate welfare weights with regions and analyze cooperative outcomes derived by the social planner's solution at the regional scale. Recent literature indicates that damages are larger in low latitude (warmer) areas and are projected to become relatively even larger in low latitude areas than at temperate latitudes. Under deep uncertainty, robust control policies are more conservative regarding emissions and, when regional distributional weights are introduced, carbon taxes are lower in the relatively poorer region. Mild concerns for robustness are welfare improving for the poor region, while strong concerns have welfare cost for all regions. We show that increasing regional temperatures will increase resources devoted to learning, in order to reduce deep uncertainty.

This article investigates whether residents of Mexico City value air quality. Our results suggest that air quality improvement in PM10 is equivalent to a marginal willingness to pay (MWTP) of US$440.31 per property for the period 2006–2013. The corresponding MWTP for PM2.5 is US$880.63, for O3 is US$623.78, and for SO2 is as much as US$2091.50. These estimates are considerably larger in magnitude compared to the few other studies in similar settings. As a percentage of annual household income, these represent 2.44 per cent for PM10, 4.88 per cent for PM2.5, 3.46 per cent for O3 and 11.59 per cent for SO2. Our estimates of land value–pollution elasticities for PM10 (−0.26 and − 0.58) are within range of hedonic estimates for total suspended particulate matter in US cities around the 1970s. The corresponding elasticities range from − 0.55 to − 0.84 for PM2.5, from − 0.06 to − 0.49 for O3 and from − 0.11 to − 0.34 for SO2.

The Indian economy has grown rapidly at 6–8 per cent per year since 1995 and planners aim to sustain an 8 per cent growth rate in the next years. Growth has created considerable optimism about India and its place in the world. After many years of little change, poverty appears to be on the decline with an estimated 5–7 per cent reduction in the late 1990s (Sundaram and Tendulkar, 2003a, b, c; Deaton, 2005). Life expectancy increased from 59 years in 1991 to 64 years in 2008 and the primary school completion rate was at 96 per cent in 2008 (World Bank, 2012). Economic growth has resulted in a boom in the manufacturing and service sectors, large investments in infrastructure and energy projects, and a soaring middle class.

Poverty and environmental degradation or deforestation in developing countries have common determinants in underlying economic and institutional conditions that determine factor and product prices and incentives for migration and resource-depleting activities. These determinants include property rights failures (open access to forest lands) but also ‘government failures’ in the form of policies that indirectly promote resource use and retard poverty alleviation. A general equilibrium analysis identifies influences that such distortions have on poverty and environment. Using a numerical GE model, we consider likely effects of Philippine trade policy reforms of the 1990s on determinants of poverty, deforestation, and agricultural land expansion. These reforms marked a significant shift away from the import substitution industrialization strategy that characterized post-independence Philippine development. The results suggest that though reforms would increase poverty in the short term, in the longer run trade liberalization is poverty reducing. The environmental impact can also be positive, provided liberalized trade is combined with appropriate government action to address market failures.