The paper argues that negotiation costs can prevent the international community from finding a new international climate agreement. To define a feasible way of facilitating the negotiation process, I analyze basic equity principles and their relationship to climate policy and economic development. Based on the most relevant principles, I propose a general synthetic rule for burden sharing in international climate policy. The rule avoids complexity and comprises both egalitarian and cost-sharing aspects, which appears to be crucial for achieving a climate agreement. Carbon budgets for the different countries are calculated under different parameter assumptions.

We analyze the impact of development on flood fatalities using a new data set of 2,171 large floods in 92 countries between 1985 and 2008. Our results challenge the conventional wisdom that development results in fewer fatalities during natural disasters. Results indicating that higher income and better governance reduce fatalities during flood events do not hold up when unobserved country heterogeneity and within-country correlation of standard errors are taken into account. We find that income does have a significant, indirect effect on flood fatalities by affecting flood frequency and flood magnitude, but this effect is nonmonotonic, with net reductions in fatalities occurring only in lower income countries. We find little evidence that improved governance affects flood fatalities either directly or indirectly.

Systems linking people and nature, known as social-ecological systems, are increasingly understood as complex adaptive systems. Essential features of these complex adaptive systems – such as nonlinear feedbacks, strategic interactions, individual and spatial heterogeneity, and varying time scales – pose substantial challenges for modeling. However, ignoring these characteristics can distort our picture of how these systems work, causing policies to be less effective or even counterproductive. In this paper we present recent developments in modeling social-ecological systems, illustrate some of these challenges with examples related to coral reefs and grasslands, and identify the implications for economic and policy analysis.

This paper offers a theoretical and empirical model of ecosystem-based fishery management. A multi-species and multi-fleet model integrating Lotka–Volterra trophic dynamics as well as production and profit assessments is developed and applied to the coastal fishery of French Guiana. This small-scale fishery constitutes a challenging example with high fish biodiversity, several non-selective fleets and a potentially increasing local food demand due to demographic growth. The dynamic model is calibrated with 13 species and four fleets using monthly catch and effort data from 2006 to 2009. Several contrasted fishing scenarios including status quo, total closure, economic and viable strategies are then simulated. They are compared from the viewpoints of both biodiversity preservation and socioeconomic performance, assuming fixed landing prices and fixed costs. We show that fishing outputs, including food supply and fleet profitability, can be sustained on average but a loss of species cannot be avoided.

Small Island Developing States (SIDS) are quite diverse in terms of various development metrics, but are uniformly vulnerable both to macroeconomic shocks and to changes in the biodiversity that supports fisheries and tourism. This special section assembles a set of papers that analyze international demand for the natural resources associated with the two sectors, and the factors that lie behind changes in their supply. Since each stresses the resource base, albeit in different ways, we argue that limits on tourist pressure will be as important as limits on allowable fish catches in the future. We identify the challenge for SIDS as the need to implement an integrated, sustainable resource management strategy that allows biological resources to be allocated to their highest valued uses, while respecting the interests of those with prior rights to those resources.

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 develops a methodology for including ecosystem services in a wealth accounting framework. Accounting for ecosystems and their services leads to adjusting net domestic product (NDP) for the direct benefits provided by the current stock of ecosystems but not for their indirect contributions in terms of protecting or supporting economic activity, property and human lives. When ecosystems are irreversibly converted for economic development, NDP must be further modified to reflect any capital revaluation that occurs with the current conversion of ecological capital to other land uses. The risk of collapse also requires adjustments to NDP, as any capital revaluation associated with ecosystem conversion must be adjusted for this risk, and the discounted minimum value of ecosystems associated with collapse must be subtracted from NDP. These various contributions of ecological capital to wealth accounts are illustrated with the example of mangroves in Thailand over the period 1970–2009.

We consider a two-player differential game of international emissions to represent the interactions between two groups of countries, namely, developed and developing countries. We adopt a broader-than-usual definition of environmental cost for developing countries to account for their evolving involvement in tackling environmental externalities. Cooperative and non-cooperative solutions are characterized and contrasted. We find that it may not be the best course of action to push developing countries to reduce their emissions in the short term, and that cooperation may not create enough dividend, also in the short term, to be implementable.

This paper analyzes individual and group behavior in an experimental commons. Different factors that can help avoid the tragedy of the commons are studied in four experimental settings: separation of a larger commons into smaller commons (two harbors), knowledge/experience available to appropriators, communication within appropriator groups and the possibility of formal and informal sanctioning of group members. Subject populations include undergraduate students as well as professionals working in the Maine lobster and groundfish industries. This design enables a behavioral comparison between students and professionals, as well as a comparison between professionals in these two mutually exclusive fisheries. Results show that group size, communication, geographic separation and subjects' ability to solve the coordination game caused by this separation all contribute to appropriation efficiency on the commons.

Small Island Developing States (SIDS) are characterized by high levels of biodiversity that are under threat. Simultaneously, the tourism sector plays a key role in many of these economies. In this paper, the Hausman-Taylor estimator is used to investigate a tourism demand function in SIDS in which marine and terrestrial biodiversity play a key role, in addition to the traditional economic and price variables. This estimator allows for both the presence of time-invariant variables, a standard feature of environmental data, and the existence of endogenous covariates. Levels of biodiversity are found to have a significant influence on tourism in SIDS and, in particular, a test for redundant variables shows that the biodiversity variables are jointly significant. This justifies their inclusion in a tourism demand function, over and above the conventional economic factors, and points to the importance of national and international policy in protecting the biodiversity of SIDS.

This paper analyzes the optimal mix of adaptation and mitigation expenditures in a cost-effective setting, in which countries cooperate to achieve a long-term stabilization target (550 CO2-eq). It uses an Integrated Assessment Model (AD-WITCH) that describes the relationships between different adaptation modes (reactive and anticipatory), mitigation and capacity building to analyze the optimal portfolio of adaptation measures. Results show that the optimal intertemporal distribution of climate policy measures is characterized by early investments in mitigation followed by large adaptation expenditures a few decades later. Hence, the possibility of adapting does not justify postponing mitigation. Moreover, a climate change policy combining mitigation and adaptation is less costly than mitigation alone. In this sense mitigation and adaptation are shown to be strategic complements rather than mutually exclusive.

This paper integrates soil science variables into an economic analysis of agricultural output among small-scale farmers in Kenya's highlands. The integration is valuable because farmers’ choice of inputs depends on both the status of the soil and socioeconomic conditions. The study uses a stochastic production frontier in which the individual farm's distance to the frontier depends systematically on individual factors. We show the importance of including key soil properties and find that phosphorus has a negative output elasticity, suggesting that farms may be using the wrong fertilizer mix. Hence, the central policy implication is that while fertilizers are generally beneficial, their application needs to be based on better soil information. This highlights the importance of strengthening agricultural extension, increased access to markets and more diversified supply of production inputs.

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.

We apply the target revenue model, a version of prospect theory, to investigate how fishermen adjust their trip length to changes in daily revenue. The key finding is that certain groups of fishermen seem more likely to behave according to the target revenue model rather than to the standard model of labor supply. We also find that vessel capacity has little effect on whether the captains seek target revenue. The study strongly supports the integration of prospect theory into the framework of labor supply analysis.

We employ a laboratory experiment to investigate the effects of environmental context and termination uncertainty on decisions in a dynamic game with a public bad. Every period the subjects decide on their own production level that generates private revenue and ‘emissions’. Emissions accumulate over time and act as a public bad. We characterize and use as benchmarks the Markov perfect equilibrium and social optimum and find that observed decisions are between the two predictions. We find no significant effect of termination uncertainty on decisions in any except the last few rounds where, in a fixed-end setting, subjects allocate their entire endowment to production. We find a strong effect of environmental context which partially substitutes for experience. The effect of experience is most pronounced in the fixed-end treatment where production allocations and the level of the public bad become lower after the restart.

A major problem facing the Seychelles islands is the decline in the quality and the value of marine protected areas (MPAs). Economic valuation can help guide policy makers to understand the value of marine resources and the cost of neglecting MPAs by expressing the value of their goods and services in monetary terms. This paper presents an analysis of the economic value of a group of marine parks in Seychelles. The travel cost method is used to establish willingness-to-pay of international tourists for trips to marine parks in Seychelles from their observed behaviour. The average per-trip consumer surplus is approximately €128 for single-site visitors and €65 for multiple-site visitors. The total social welfare value attributable to the recreational opportunity in marine parks is approximately €3.7 million annually. These results provide policy makers with a strong justification for government investment needed to maintain marine sites in Seychelles.

Much of the debate between the European and US positions about the labeling of genetically modified (GM) foods has been whether consumers perceive labels as a source of information or as a signal to change behavior. In this paper we provide an experimental framework for examining these roles of information and signaling. While previous studies have focused on the impact of labels on consumer behavior, our interest is also in what happens prior to the expression of aversion to GM-labeled foods. In particular, the experiment design allows the researcher to estimate a lower bound of the informational impact of labels on GM food aversion. The other novel feature of this paper is that, unlike earlier studies, it uses subjects from a developing country.

Farmers on the economic frontier often do not have clear titles to their land. Therefore, using an infinite-horizon representative agent model calibrated with data for the Brazilian Amazon, this paper analyzes how improved property rights influence the frontier farmer's investment in the land, as well as the farmer's consumption and debt. Three channels through which property rights affect these variables are identified in the analysis. Two involve the expenditure the farmer incurs to defend the land claim, and the third involves the interest rate premium the farmer faces when borrowing without a clear title to the land. Variants of the model allow for labor to defend the land claim and for endogenous property rights. The findings suggest a need and direction for further, empirical research, particularly with regard to informal institutional arrangements, measures of property rights and the means by which they are defended.

The establishment of a private property regime is often proposed as a solution to the degradation of natural resources. While arguably more efficient than open access, private property often comes at a distributional cost (Weitzman, M. (1974), ‘Free access vs private ownership as alternative systems for managing common property’, Journal of Economic Theory 8(2): 225–234) as traditional users of the resource lose income and employment in the process. The present paper demonstrates that, in the case of renewable resources, traditional users may gain from privatization even if they are denied ownership of the resource. Indeed, a private owner maximizing profits tends to preserve the resource, which results in long-term increases in employment. We derive the conditions under which these long-term gains more than compensate traditional users for the short-run fall in labor demand and resource rents.