This paper aims to consider the meaning of the dismal theorem, as presented by Martin Weitzman [(2009) On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics91, 1–19]. The theorem states that a standard cost–benefit analysis breaks down if there is a possibility of catastrophes occurring. This result has a significant influence on debates regarding the economics of climate change. In this study, we present an intuitive similarity between the dismal theorem and the St. Petersburg paradox using a simple discrete probability distribution.

Many developing countries lack universal sanitation services for residents. Years of inappropriate disposal of solid waste and wastewater have increased the potential for devastating environmental and health issues. An economic valuation of sanitation services may help in planning investment projects by demonstrating the benefits that households derive from having access to improved sanitation. We examine Guatemala as a case study and employ a series of hedonic models to estimate the value that households in Guatemala assign to the sanitation services of solid waste collection and connections to sewer infrastructure. Findings indicate that residents are willing to pay higher rents for both wastewater and solid waste removal. Policy implications are discussed.

Previous empirical studies assessing sustainability have adopted the weak sustainability indicator (WSI) which measures changes in the stock of physical and natural capital. Whereas these studies have been retrospective, we use a dynamic general equilibrium model to investigate global and regional sustainability over the period 1985–2050, focusing on fossil fuel extraction. Our standard scenario predicts increasing WSI values suggesting global sustainability in all periods to 2050 as, despite a rising world oil price, the introduction of backstop fuels in 2010 provides an alternative source of energy. A more pessimistic scenario examines possible outcomes in the absence of energy saving technological change and backstops fuels. WSI values still indicate global sustainability, though economic growth is only half that predicted by the more optimistic model, and two countries—USA and Brazil—are unsustainable.

The Pollution Haven Hypothesis (PHH) states that with weak environmental policies a country can create comparative advantage in the polluting sector. This paper formulates a 3-good-3-factor model where the abatement input is a pure intermediate good. In our model, the PHH as well as the neoclassical trade theorems are valid only when environmental policies are distribution neutral. Inspired by the US Clean Air Act, we develop and estimate a dynamic panel model. We find that US environmental policies are consistent with distribution neutrality. Our results indicate that lowering abatement standards in all industries is the only way the US can become a pollution haven. In the context of our model, the PHH has damaging implications for the world environment.

The non-market values of changes in grassland management stimulated by changes in policies were estimated by choice modeling. Four-hundred twenty-seven residents of Hohhot city in Inner Mongolia were selected using the popular mobile phone application WeChat. Conditional logit (CL) and random parameter logit (RPL) models were estimated to analyze the preference of respondents for environmental and social attributes. Based on the preferred RPL model, the average per household willingness to pay over 10 years for the best policy outcome scenarios was estimated to be CNY892 (US$141). The total willingness to pay for this policy change, extrapolated to the population of Hohhot, was CNY208 million (US$33 million). The findings suggest that environmental and social outcomes are valuable to Chinese residents of a regional urban center. Such values should be viewed as a public financial base for market-based mechanisms for grassland protection both in China and internationally. WeChat proved to be convenient but required the application of extrapolation caveats relating to sample representation.

Most developing countries are increasingly depending on freshwater based aquaculture to supplement the declining catch from capture fisheries. Yet the competition between capture fisheries and cage culture for space, pollution generated by cage culture, and fish markets interaction effects are hardly conceptualized in a bioeconomic framework. Furthermore, the economic viability of cage culture depends on substantial investment thresholds, engendering foreign direct investment in the industry in developing countries. This paper develops a conceptual model for fresh-water-based aquaculture that accounts for these effects. We found that a Pigouvian tax (optimum ad valorem tax) that corrects the externalities depends on economic and biological parameters in both fisheries. Correcting for the externalities results in a reduction in aquaculture production but not optimum wild catch. Furthermore, with foreign capital in aquaculture, the Pigouvian tax equals the ratio of net to total benefit from aquaculture. Numerical values are used to illustrate the results.

This paper examines green alliances between environmental groups (EGs) and polluting firms, which have become more common in the last decades, and analyzes how they affect policy design. We first show that the activities of regulators and EGs are strategic substitutes, giving rise to free-riding incentives on both agents. Nonetheless, the presence of the EG yields smaller welfare benefits when firms are subject to regulation than when they are not. In addition, the introduction of environmental policy yields large welfare gains when the EG is absent but small benefits when the EG is already present.

We analyze non-cooperative environmental policy when the only strategic interaction between countries is through bilateral transboundary pollution, i.e., countries are closed or small open economies. Under simultaneous moves, there is no carbon leakage. However, in the sequential-move game, carbon leakage occurs; the leader sets its pollution tax lower than that in the simultaneous-move game and lower than the marginal damage from own pollution, while the follower sets its tax higher than that in the simultaneous-move game. The only motive behind the leader's underregulation of own pollution is to reduce the incidence of transboundary pollution from the follower. If pollution is a pure global public bad, aggregate pollution is higher in the sequential-move game than in the simultaneous-move game. The leader (follower) obtains higher (lower) welfare than that under simultaneous moves. Hence, if countries can choose to be leaders or followers, they choose to move first to set environmental taxes.

The outcome of environmental actions from participation in the export market are examined by unpacking some mechanisms that explain the estimated relationship. The empirical strategy utilizes the variation in the distance between the location of the sampled enterprises and the top 25 destinations of Vietnamese exports across sectors, and the weight of each sampled export to total exports in each period, to obtain exogenous variation in the enterprise's export market participation. The result shows a positive relationship between the enterprise's export participation and its overall engagement in environmental actions (such as the sum of its environmental actions, the sum of actions in the investments in equipment towards environmental issues, and total expenditure for the purchase of equipment for environmental actions). Possible mechanisms are international standardization, national certification, and strong enforcement of environmental regulations from export market engagement.

The paper reviews two alternative rules for allocation of property rights in a global greenhouse-gas emissions budget, assuming implementation of a tradablequota arrangement. These are the per capita rule and no-regrets-for-the-South (NRFTS) rule. The operation of a quota market under these alternative regimes is simulated on a spreadsheet, using 1990–1 data from 125 countries. A significant result is that once the South has secured a quota allocation based on the per capita principle, it stands collectively to lose from progress in abatement technology because of the strong link from technical progress to the world market price of quota. The more restricted NRFTS rule gives the South smaller gains from the quota system, but enables it to retain some of the rents from its own technical progress. Some implications for the South's position in future negotiations are noted.

This work examines the interaction between demographic features and environmental constraints in Caribbean small island developing states. Specifically, it aims to clarify human capital dynamics when migration and environmental quality matter. To do so, two main ingredients are introduced in an overlapping generations model: countries may benefit from migration through a brain gain or remittances, and production emits pollution that hinders the accumulation of human capital. Two cases emerge from the analysis. In the first case, an environmental policy is sufficient to correct the externality, and migration should stay at a relatively low level. In the second case, if pollution emissions are high relative to the effectiveness of environmental policy, migration leads to an increase in per capita output and human capital. This only happens if the emigration rate is already high, because it leads to a reduction in demographic pressure on the environment.

This paper explores the short-run impact of work resumption, extensively launched on February 10, 2020 in China, on air quality after the subsiding of COVID-19. Utilizing the data of 1012 air-quality monitoring sites in 233 cities derived from the Real-time Release Air Quality Platform and the difference-in-differences method, we find that alternative measures of air quality index in non-Hubei provinces increase significantly, compared with those in Hubei province which was temporarily not allowed work resumption due to the severity of epidemic. Specifically, our results reveal a rise in AQI of 11.28 per cent, in PM2.5 of 12.47 per cent, in PM10 of 10.49 per cent, and in NO2 of 23.64 per cent, relative to the baseline mean. Moreover, the deterioration of air quality is found to be caused by intracity rather than intercity migration.

In this paper we study the cost-effective allocation of the land in the Cordilleran Protection Area (CPA), Region VIII, Chile, for the conservation of a highly threatened species: the Huemul (Hippocamelus bisulcus). Using a production possibilities frontier (PPF) approach, a linear programming optimization model for a ten-year time period is proposed. Our model takes into account both the preferences of the species for different habitats and the opportunity cost of the land. We evaluate different possibilities of land allocation and identify cost-effective alternatives in the provision of both conservation and income.

The results confirm the hypothesis that both the population of Huemul and income from economic activities can be increased compared with current levels. Therefore the current allocation of the land in the CPA is not cost-effective.

This paper examines the implications of tenancy legislation and privatization of community lands in Goa on the supply of local public goods for soil conservation. In the post-tenancy period our survey reveals an increasing number of farmers being affected by salinity ingress. These findings support the hypothesis that when community institutions break down, individual agents who become new resource owners do not have sufficient incentive to undertake supply of local public goods, which leads to a decline in productivity and affects long-term sustainability.

In this paper, we investigate how different levels of entrance fees affect donations for a public good, a natural park. To explore this issue, we conducted a stated preference study focusing on visitors' preferences for donating money to raise funds for a protected area in Costa Rica given different entrance fee levels. The results reveal that there is incomplete crowding out of donations when establishing an entrance fee.

Hydraulic fracturing (HF) has transformed the North American oil and gas industry, leading to increased consumer surplus and reduced carbon emissions. While HF may have similar potential for the developing world, adoption has been limited to date, plausibly because of perceptions of potential local costs and the need to develop technical proficiency. We empirically evaluate the incremental contribution of HF in the United States. We find considerable evidence of differences in application and productivity across operating firms and vertical pairings of firms, suggesting intellectual property and learning by doing may both play important roles. At the same time, secrecy regarding the chemical composition of fluids used in HF is a potential deterrent to its application for fear of local costs. Developing countries must accommodate these characteristics if adoption of HF is to help meet energy demands and achieve climate policy goals.

The concern for inequality, growth and development is undoubtedly crucial in the context of climate change mitigation and adaptation. However, most studies either rely on the nation-state estimates of carbon emissions to propose a uniform nation-wide growth (or degrowth) strategy, or they tailor the method to assess the inequality of one country at a time, making a cross-country cross-income comparison difficult. To fill this analytical gap, we synthesize the existing methods of emission calculations and calculate the level of carbon emissions associated with given income deciles of household consumption in five countries, namely China, Germany, India, the UK and USA. We find that the within-country inequality varies among countries, with the ratio between the top and bottom income deciles ranging from three to nine at the household level. We also find that the carbon emissions of the top income group in urban China is almost comparable to that of their peer group in the US, UK and Germany. Based on these results, we discuss the use of the remaining global carbon budget in the context of development and inequality.

Low and highly variable prices plague the coffee market, generating concerns that coffee farmers producing in shade systems under natural forests, as in biodiversity hotspot Oaxaca, Mexico, will abandon production and contribute to deforestation and reduced ecosystem services. Using stakeholder information, we build a setting-informed model to analyze farmers' decisions to abandon shade-grown coffee production and their reactions to policy to reduce abandonment. Exploring price premiums for bird-friendly certified coffee, payments for ecosystem services, and price floors as policies, we find that once a farmer is on the path toward abandonment, it is difficult to reverse. However, implementing policies early that are low cost to farmers – price floors and no-cost certification programs – can stem abandonment. Considering the abandonment that policy avoids per dollar spent, price floors are the most cost-effective policy, yet governments prefer certification programs that push costs onto international coffee consumers who pay the price premium.

Natural resource extraction is an important livelihood strategy for poor rural households in developing and emerging countries. Despite the sharp decline in poverty in Vietnam, inequality still exists between the ethnic majority and minority. This paper aims to analyze the impact of natural resource extraction on ethnic inequality. We use panel data from Dak Lak in the Central Highlands of Vietnam. The Oaxaca-Blinder decomposition shows that ethnic differences in extraction are due to different group characteristics and different returns to these characteristics. Endogenous switching regressions find that extraction has heterogeneous effects on consumption across extracting and non-extracting households, and between majority and minority households. Treatment effects suggest that extraction sustains the consumption of extracting minority households because their consumption would decline if they stopped extracting. Our results indicate that it is important to improve the natural resource base and the ability of minorities to cope with shocks.