2019 World Conference on Natural Resource Modelling

HEC Montréal, Canada, 22 — 24 mai 2019

2019 World Conference on Natural Resource Modelling

HEC Montréal, Canada, 22 — 24 mai 2019

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Environment 2

23 mai 2019 08h30 – 10h30

Salle: Marie-Husny

Présidée par Guiomar Martín-Herrán

4 présentations

  • 08h30 - 09h00

    On optimal extraction under asymmetric information over reclamation costs

    • Pauli Lappi, prés., Ca' Foscari University of Venice and CMCC

    Exhaustible resource extraction ends with costly reclamation and producers have better information about future reclamation costs than the regulator. This paper analyzes the second-best optimal reclamation contract between the firm and the regulator, the optimal pollution tax and the shut-down date in a two-stage model, in which extraction is followed by costly reclamation. It is shown, among other things, that asymmetric information regarding the costs affects the optimal pollution tax and the shut-down date, but the tax and the date are nevertheless identical across different firm types. Optimal tax can be lower or higher than the tax under complete information.

  • 09h00 - 09h30

    Cooperation with asymmetric environmental valuation and responsibility in a dynamic setting

    • Francisco Cabo, prés., Universidad de Valladolid
    • Mabel Tidball, INRAE

    When an environmental agreement between two countries is regarded from a dynamic perspective, very often cooperation does not imply an immediate reward. More to the contrary, an agreement to reduce the emissions of pollutants is usually associated with lower flows of production income. However in a profitable agreement the current costs are more than compensated by a future cleaner environment. While this is true globally (for the two countries), neither the costs from lower emissions nor the value of a cleaner environment need to be identical for the two parts. Because the uneven benefits from cooperation are delayed, it is the cost of compliance what needs to be distributed between the signing countries. This paper analyzes a sharing mechanism satisfying two main properties. First, a benefit-pay-principle: the greater the benefit from cooperation the greater the share of the costs. And secondly, assuming that the responsibility from the initial environmental problem is not even across countries, a polluter’s pay principle axiom requires that a country’s share of the costs increases with its responsibility. Moreover, the sharing scheme must be defined to guarantee time consistency. At any intermediate instant of time, no country can do better by deviating from cooperation with the sharing mechanism presented in the paper.

  • 09h30 - 10h00

    Valuing joint environmental amenities with an irreversible investment

    • Robert Cairns, prés., McGill University
    • Aude Pommeret, Universite Savoie-Mont Blanc

    We consider a forward-looking method of evaluating or accounting for an environmental resource that can be converted into another type of asset at a forward time to be chosen by an economic agent. The accounting is done, with utility as numeraire and with money as numeraire, first under certainty and then under uncertainty using the theory of investment under uncertainty. Since timing of the conversion is the source of capital gains and the potential for capital gains affects decisions, the capital gains should be accounted.

  • 10h00 - 10h30

    On implementation of efficiency-inducing taxation for polluting oligopolists

    • Guiomar Martín-Herrán, Universidad de Valladolid
    • Santiago J. Rubio, prés., University of Valencia

    Benchekroun and Long (1998, JPubE) show that there exists a time-independent tax rule that guides polluting oligopolists to achieve the socially optimum production path. In their paper, a regulation classical approach is followed assuming implicitly a benevolent dictatorship that announces at the initial period the per unit tax rule that is applicable to all firms, at all time. Then, the coefficients of the tax rule are calculated by equalization of the first order conditions that characterize the efficient solution with the first order condition that characterize the regulated market equilibrium. In this paper we address the issue of the implementation of the efficient outcome adopting a strategic approach where the environmental regulator is a player of a policy game. In the first part of the paper, we show that the stagewise feedback Stackelberg equilibrium where the regulator is the leader of the game implements the efficient outcome and that this equilibrium is temporally consistent. Thus, the classical approach and the strategic approach yields the same tax rule provided that the regulator acts as the leader of the game. In the second part of the paper, we compute the global feedback Stackelberg equilibrium and show that not only this equilibrium does not implement the efficient outcome but also that is temporally inconsistent.

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