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This paper examines the impact of changes in the stringency of environmental regulations on productivity growth. We exploit several data sources, including the OECD Environmental Policy Stringency Index and balance sheet information from ORBIS and iBACH, to test the Porter hypothesis, according to which firms' productivity can benefit from more stringent environmental policies. We estimate the regulatory impact over a five-year horizon using panel local projections. To identify the direction of the effects, we estimate CO 2 equivalent emissions for all firms in our sample using a machine learning algorithm. As suggested by the country-level analysis and confirmed by the firm-level analysis, policy tightening negatively affects productivity growth of high-polluting firms and to a larger extent than that of their low-polluting peers. Hence, we do not find support for the Porter hypothesis in general. However, not all policies have the same impact – non-market based policies are the most detrimental to productivity growth – and not all highly polluting firms are affected in the same way – the negative impact is mitigated for large firms, which may benefit from easier access to finance and greater innovativeness. [ABSTRACT FROM AUTHOR]

This paper examines the investment incentives of market-based regulation, focusing on the technology characteristics that different regulatory schemes tend to incentivize. The firms' technology choice is socially optimal if and only if the aggregate emission allowance supply is completely inelastic. Furthermore, in the presence of uncertainty, elastic emission allowance supply, and strictly convex environmental damage, it is optimal to tax investments in technologies that induce a large variance in emissions. Lastly, price elastic supply of emission allowances may either increase or decrease the volatility in the product market, depending on the risk environment the firms face. The results indicate that introduction of permit price-stabilizing measures in an emission trading system will come at the cost of suboptimal technology investments, and may also lead to increased fluctuations in product prices. • I examine investment and technology characteristics induced by environmental regulation. • Firms' technology choice is suboptimal unless the cap on emissions is exogenous. • It is optimal to tax investment in technologies that induce large variance in aggregate emissions. • Elastic emission allowance supply can impact product market volatility. [ABSTRACT FROM AUTHOR]

Economists tend to view a uniform emissions price as the most cost-effective approach to reducing greenhouse gas emissions. This paper scrutinizes the assumptions in general equilibrium which underlie the established view that uniform emissions pricing is optimal, focusing on economies where society values the well-being of future generations more than private actors. When social and private discount rates differ, we show that a uniform carbon price is optimal only under restrictive assumptions about technology homogeneity and intertemporal decision-making. Non-uniform pricing spurs capital accumulation and benefits future generations. Depending on sectoral heterogeneity in the substitutability between capital and energy inputs, we find that optimal carbon prices differ widely across sectors and yield substantial welfare gains relative to uniform pricing. Realizing these welfare gains, however, requires that the regulator has information on the technology heterogeneity across sectors. Differentiated carbon pricing based on imperfect estimates of technology heterogeneity can yield significant welfare losses. [ABSTRACT FROM AUTHOR]

We present a formal model that analyzes the trade-offs between environmental policy and economic growth in a developing economy. The adoption of restrictive environmental policies limits the use of abundant fossil energy resources, which may slow down economic development and thus violate the Right-to-Development. If faster economic growth allows a country to grow out of pollution sooner, less stringent policies are good for growth and even for the environment, having adopted a long-term horizon. Accounting for a ceiling on cumulative emissions can reinforce the argument by providing an additional rationale to phase out pollution. One assumption is crucial for the argument to hold: polluting fossil energy is an essential input over the early phase of economic development, but not in the later phases. Such a discontinuity could result from structural change. We provide empirical evidence for the plausibility of a discontinuity in the elasticity of carbon dioxide emissions with respect to aggregate output, using cross country data, even if it does not appear to be as strong as assumed in the model economy. [ABSTRACT FROM AUTHOR]

The degree of substitutability between clean and dirty energy plays a central role in leading economic analyses of optimal environmental policy. Despite the importance, assuming a constant and exogenous elasticity of substitution has been a dominant theoretical approach. We challenge this assumption by developing a dynamic general equilibrium model with an endogenous elasticity of substitution that interacts with the relative share of clean inputs in the economy. We find strong dynamic feedback effects arising from endogenous substitution capacity that amplifies the impact of directed technical change and accelerates the transition to a green economy. [ABSTRACT FROM AUTHOR]

We study the influence of industrial lobbying on national climate policies and the formation of an international environmental agreement if the coalition countries use border carbon adjustments to protect domestic producers. We find that the effects of this political influence crucially depend on the distribution of carbon tax revenues. If these are transferred to the households, lobbying distorts carbon taxes downwards to reduce the tax burden and does not affect coalition sizes. This leads to higher emissions and lower welfare. By contrast, if tax revenues are given back to the firms, lobbies in the outsider countries favor carbon taxes, whereas lobbies in the coalition countries favor carbon subsidies to raise the international commodity price. This reduces the tax difference and the welfare difference between the countries, which reduces the free-rider incentives. Then, lobbying stabilizes the grand coalition and reduces global emissions compared to a "perfect" world without lobbying if the political influence is sufficiently strong. [ABSTRACT FROM AUTHOR]

Climate policy needs to set incentives for investors who face imperfect, distorted markets and large uncertainties about the costs and benefits of abatement. These investors decide on uncertain investments according to their expected return and risk (carbon beta). We study carbon pricing and financial incentives in a consumption-based asset pricing model distorted by technology spillovers and time-inconsistency. We find that both distortions reduce the equilibrium asset return and delay investment in abatement. However, their effect on the carbon beta and the risk premium for abatement can be decreasing (when innovation spillovers are not anticipated) or increasing (when climate policy is not credible). We show that the distortions can be overcome by modified carbon pricing by a regulator, or by financial incentives, implemented in our model by a long-term investment fund. The fund pays a subsidy to reduce technology costs or offers financial contracts to boost investment returns to complement the carbon price. The investment fund can thus pave the way for carbon pricing in later periods by preventing a capital misallocation that would be too expensive to correct, thus improving the feasibility of ambitious carbon pricing. [ABSTRACT FROM AUTHOR]

The ongoing debate concerning the ranking of taxes versus cap and trade for climate policy begins with Weitzman's (1974) seminal slope-based criterion and concludes that taxes likely dominate quotas. We challenge this conclusion and the intuition behind it. Because technology shocks and pollution stocks are both persistent, a technology shock alters the intercepts of both the marginal damage and abatement cost curves. The ratio of these two intercept shifts is as important as the ratio of slopes in ranking policies. Technology innovations diffuse gradually, strengthening the importance of the ratio of intercept shifts. For plausible parameter combinations, quotas can dominate taxes. [ABSTRACT FROM AUTHOR]

In decentralized environmental governance, local governments are likely to adopt the "beggar-thy-neighbor" strategy to relax regulations at boundaries. This study investigates the impact of China's Joint Atmospheric Prevention and Control Policy (JAPCP) in "2 + 26" cities enforced by the central government on pollution at provincial boundaries. The theoretical model suggests that dual incentives for environmental protection and economic growth may prompt local governments to reduce boundary pollution within the JAPCP-covered area while relocating pollution to uncovered boundaries. Based on Shandong Province data using the difference-in-differences approach, our analysis reveals a 9.6% decline in the air quality at JAPCP-covered boundaries compared to non-boundary areas and a 5.3% increase at JAPCP-uncovered boundaries, which is associated with migration of key regulated industries. Through examining annual work reports, we provide evidence that local governments modify regulatory intensity at various boundaries. These findings indicate that, while regional environmental policies are intended to promote inter-jurisdictional cooperation, the local government responses lead to unintended costs. [ABSTRACT FROM AUTHOR]

The Emission Trading Scheme (ETS) provides a market mechanism to mitigate carbon emissions and has been introduced in many countries. Its fundamental idea is to make carbon emissions costly. Consequently, firms undertaking cross-border expansions may have to consider this extra cost when entering markets with an ETS. They may avoid these countries or relocate their investment to countries without an ETS. Using a large sample of international firms between 2002 and 2019, we investigate this issue via a difference-in-difference approach. Our results show that ETS implementation leads to significantly less cross-border merger and acquisition (M&A) deals in the host countries, indicating an avoidance effect or potential carbon leakage. Further analysis reveals that ETS implementation decreases firms' financial performance and increases market risks, both contributing to cross-border M&A decisions. We demonstrate strong evidence of cross-sectoral differences, where carbon-intensive sectors tend to bear higher costs. This study contributes to the environmental economics and finance literature and provides evidence with policy relevance. • This paper explores the effects of Emission Trading Schemes on cross-border M&As. • ETS implementation is associated with a significant reduction in cross-border M&As. • The introduction of ETS can lead to lower financial performance of the acquiring firms. • Climate policy can significantly influence firms' strategic investment decisions. [ABSTRACT FROM AUTHOR]

In this paper, we assess the effectiveness of early climate policy in emerging economies by causally evaluating the impact of China's Low-carbon City Pilot (LCCP) on city-level per-capita CO 2 emissions and CO 2 intensity of GDP over the period 2003–2017. The idiosyncrasies of the policy design pose significant challenges for causal identification, which we overcome within a synthetic control framework. Contrary to previous contributions, our results suggest that the LCCP had no significant impact on either carbon emissions or intensity. The main takeaway of our empirical investigation is that even in emerging economies, effective environmental policy requires transparent, quantifiable targets, and credible enforcement. [ABSTRACT FROM AUTHOR]

This paper extends the literature on the potential negative employment effects of environmental policy by bringing to the fore a key factor that directly regulates its magnitude: the elasticity of substitution between labor and energy. Using firm-level data from the French manufacturing sector and addressing endogeneity concerns, we provide empirical estimates that point to strong complementarity between labor and energy. We then investigate the empirical relevance of the elasticity of substitution in studying firms' response to changing energy prices. Our findings suggest that the negative employment effects of rising energy prices are largely driven by firms with limited substitution capacity. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of the timing of adaptation on the stability of international environmental agreements (IEAs) for different levels of cooperation. This issue is addressed by solving a three-stage coalition formation game in a Nash-Cournot setting. In the first stage, countries decide non-cooperatively on their participation in an IEA. Then, depending on the timing, countries decide on adaptation and emissions in the second and third stage. The game is solved for three levels of cooperation. Countries can either cooperate on emissions (emission agreement), on adaptation (adaptation agreement), or both actions (complete agreement). When emissions are chosen first, this extension to an emission–adaptation game is a generalization of the pure emission game. However, when adaptation is chosen first, the grand coalition is stable, provided that countries sign a complete agreement. With partial cooperation, stable coalitions are small. The results establish a connection between the strategic role of adaptation, the levels of adaptation of non-signatories and signatories for the different types of agreements and the participation in an IEA. Moreover, the results indicate that the grand coalition is stable even when it significantly enhances net benefits. [ABSTRACT FROM AUTHOR]

This article evaluates if and to which extent policy can steer innovation towards eco-friendly technologies. We construct a cross-country dataset on sectoral green innovation and complement it with data on policies designed to address environmental market failures: environmental taxes, regulation, and R&D subsidies. While all of these tools exert a positive effect on green innovation, our IV estimates reveal substantial heterogeneities across policies. Overall, green innovation reacts most strongly to R&D subsidies for renewables, but interaction effects between different policies need to be considered. [ABSTRACT FROM AUTHOR]

It is widely acknowledged that there is an urgent need for policies that can reduce greenhouse gas emissions. Yet, the policies implemented by governments are far from sufficient to reach their long-term climate targets. In this paper, we propose a theoretical framework to study the implications of political pressure on optimal climate policy. A key feature of the framework is its ability to capture dynamic inconsistency, which naturally arises from the long time horizon of climate policies and their susceptibility to modifications due to political pressure. Our findings offer a new rationale for why green lobbying can make pollution regulation less stringent. We also show that political pressure from the polluting sector leads to a higher rate of clean energy investment chosen by the government and can shift the energy mix towards renewables in the long run. Similarly, this long-run shift can be caused by political pressure from members of the public who care only about immediate consumption. [ABSTRACT FROM AUTHOR]

This paper presents a novel method to quantify the market equilibrium impacts of tighter environmental policies. The approach is taken to evaluate the welfare effects of emerging environmental regulations to protect the biodiversity of river ecosystems that put pressure on reducing hydropower generation capacity. A dataset of 129 million bids in the Nordic electricity market is used to calculate how small reductions in hydropower capacity change market outcomes and surpluses hour-by-hour for the years 2011–2022. Reaching the EU Biodiversity Strategy target of 2030 is estimated to reduce 56 MW of hydropower capacity in Finland. Such a change would lead to quantifiable welfare losses of €62 million over time, not counting environmental benefits. Notably, the producer surplus increases by €318 million over time through electricity market price changes, suggesting that instead of lobbying against biodiversity enhancing regulation, agreeing to an industry-wide implementation could benefit both the environment and the firms. Yet the fact that consumer costs increase more than the mere implementation cost reads as a sign of caution when tighter biodiversity policies are introduced. [ABSTRACT FROM AUTHOR]

Population growth has two potentially counteracting effects on pollution emissions: (i) more people imply more production and thereby more emissions, and (ii) more people imply a larger research capacity which might reduce the emission intensity of production, depending on the direction of research. This study investigates how to achieve a given climate goal in the presence of these two effects. A growth model featuring both directed technical change and population growth is developed. The model allows for simultaneous research in polluting and non-polluting technologies. Both analytical and numerical results indicate that population growth is a burden on the environment, even when all research efforts are directed toward non-polluting technologies. Thus, research subsidies alone cannot ensure environmental sustainability. Instead, the analysis highlights the importance of carbon taxes for climate change mitigation. [ABSTRACT FROM AUTHOR]

Meta-regression models (MRMs) are commonly used within benefit transfer to estimate willingness to pay for environmental quality improvements. In virtually all benefit transfers of this type, a single regression model is fit to all source points in the metadata, and used to produce out-of-sample predictions for all possible policy-site applications. Despite the advantages of this approach over other types of benefit transfer, the predictive accuracy of these MRMs generally leaves room for improvement. In this paper we propose a locally-weighted regression approach to MRM estimation to enhance the accuracy of benefit transfer predictions in an environmental valuation context. We introduce the concept of locally-weighted meta-regression, provide econometric underpinnings, and discuss the construction of weight functions. We illustrate the use of cross-validation to decide between weight functions, and show how this framework can be applied in an actual benefit transfer setting. For our empirical application on willingness-to-pay for water quality improvements, we find that the proposed approach brings substantial gains in predictive accuracy in a leave-one-out setting, and measurable improvements in predictive efficiency for benefit transfer. • Semi-parametric estimation. • Bayesian modeling and methods. • Improved accuracy and efficiency for benefit transfer. • Water quality changes through environmental policy. [ABSTRACT FROM AUTHOR]

We investigate the implications of absolute risk aversion with respect to intertemporal utility, i.e. temporal risk aversion, in the presence of a stylized climate tipping risk affecting productivity irreversibly. Optimal climate policy is more stringent under temporal risk aversion, in order to reduce all present and future probabilities of crossing the tipping point and avoid a situation where all generations are badly off. Temporal risk aversion implies a 30% increase in the social cost of carbon (SCC) under our benchmark calibration and for a 10% irreversible increase in the level of economic damage from climate change. The optimal SCC under temporal risk aversion increases sharply with the level of damage brought by a potential tipping point. [ABSTRACT FROM AUTHOR]

Environmental policies often regulate energy-using durable goods rather than targeting externalities directly. How should such indirect policies be set? In this paper, we model the impact of efficiency incentives (EIs) on consumer behavior and analyze the normative implications of these policies in settings with internalities and externalities. We elucidate how the conditionally-optimal EI depends upon key empirical values and we also demonstrate how EIs can be paired with auxiliary policies to achieve optimality across various settings. Our analysis pinpoints the importance of the rebound effect in determining the net impact of the EI on externalities. Thus, our theoretical exposition provides concrete guidance for policy makers and program managers seeking to implement such policies. We further elucidate these theoretical insights through two empirical examples pertaining to air conditioner and refrigerator replacements. [ABSTRACT FROM AUTHOR]

The present study explores the technological interdependencies between green and non-green inventions. First, we look at whether inventive activities in environmentally-friendly domains depend on patenting in related technological domains that are not green. Based on patent data filed over the 1978–2014 period, we estimate a spatial autoregressive model using co-occurrence matrices to capture technological interdependencies. Our first finding highlights that the development of green technologies strongly relies on advances in other green and in particular non-green technological domains, whose relevance for the green economy is usually neglected. Building on this insight, we detect the non-green interdependent technologies that co-occur with green ones and assess whether environmental policies affect this particular instantiation of technologies at the country level. The results of the instrumental variable approach confirm that while environmental policies spur green patenting, they do not displace the development of the non-green technological pillars upon which green inventions develop. However, at the same time, environmental policies do not enhance patenting in non-green interdependent technologies which would speed-up the transition towards sustainable economies. [ABSTRACT FROM AUTHOR]

Promoting investment in low carbon "clean" sectors has gained popularity over the last years under the heading of sustainable finance, at the same time raising concerns about adverse welfare effects of such policies. We analyze the political economy of subsidizing investment in "clean" industries in a stylized two-sector small open economy model with irreversible investment and reelection risks. We show that sustainable finance has a welfare cost if more targeted climate policy instruments are available. However, sustainable finance may be used by incumbent governments as an instrument to influence environmental policy decisions of future governments, which may have different preferences. Our model also offers an explanation for the political polarization about sustainable finance and climate policy currently observed in the United States. • We analyze impacts of tax-favoring capital invested in "clean" sectors. • Our approach considers a two-sector small open economy model. • Commitment to future environmental policies is preferred to sustainable finance. • Sustainable finance can induce stricter policies of future governments. • Our model sheds light on the polarization in the debate about such policies. [ABSTRACT FROM AUTHOR]

Cap and trade schemes often use a policy of adjustable allowance supply with the intention to stabilize the market for allowances. We investigate whether these policies deliver with a focus on allowance prices. Motivated by existing policies, we study schemes that rely on either the allowance price (price measures) or the surplus of unused allowances (quantity measures) to adjust supply in a dynamic cap and trade market. Compared to emissions trading under a fixed cap, we find that price measures stabilize allowance prices. Quantity measures can be destabilizing. Though phrased in the context of changing interest rates, our results warn more generally against the belief that quantity measures are a suitable instrument to promote a stable cap and trade market. [ABSTRACT FROM AUTHOR]

This study investigates the determinants of participation in environmental agreements, with a special focus on lobbying and regional agreements. To this end, we collated the largest ratification dataset in the literature and identified all countries eligible for membership in each agreement. This feature allows to correct the identification bias associated with the misidentification of the risk set when regional agreements are included in the regression sample. We also improve the treatment of unobserved heterogeneity by using a multilevel survival approach and Markov Chain Monte Carlo (MCMC) estimator. Overall, we find that countries' participation choices are interrelated and primarily driven by the agreements' characteristics. Our findings indicate that regional agreements are two and half times more likely to be ratified than global agreements and that environmental lobbying positively affects participation in environmental agreements, while the effect of industrial lobbying is statistically insignificant. This result is robust to changes in specification and proxies used. Our results motivate several policy suggestions. We emphasise regional agreements' capacity to deliver higher participation than global agreements and the importance of securing the early ratification of key players. [ABSTRACT FROM AUTHOR]

Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best policy rules for CDR subsidies and carbon taxes when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage and a balance of resource trade effect. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, net carbon exporters exacerbate this wedge to increase producer surplus of their carbon resource producers, implying even larger removal subsidies. Third, net carbon importers may set their removal subsidy even below their carbon tax when marginal environmental damages are small, to appropriate producer surplus from carbon exporters. [ABSTRACT FROM AUTHOR]

This paper seeks to better understand the persistent environmental problems in urbanizing economies. We examine the effectiveness of environmental policy in an economy with agglomeration economies and endogenous firm relocation and entry/exit. We show that, although environmental regulation is effective in the short run, in the presence of agglomeration economies, spatial relocation of firms in response to environmental regulation can undermine the effectiveness of regulations, rendering them less effective or even ineffective. In fact, we show that regulation might even be counter-productive, i.e., exacerbate environmental problems, at certain stages of development. We present initial empirical evidence in the context of water pollution in China that demonstrates the importance of agglomeration economies in determining the impacts of environmental regulation. [ABSTRACT FROM AUTHOR]

This paper examines the effect of removing pollutants, mainly polychlorinated biphenyls (PCBs), on home prices in Great Lakes Areas of Concern (AOCs). AOCs are heavily polluted locations identified as priorities for restoration under the Great Lakes Water Quality Agreement (GLWQA) between the United States and Canada. Since the signing of the GLWQA, AOCs have undergone cleanup actions that could encourage local redevelopment and raise nearby property values. This paper focuses on the Milwaukee Estuary AOC and estimates property owner willingness to pay as well as potential differences in willingness to pay for sediment remediation using a sorting model and home sales data before and after cleanup. Results indicate that home prices near the water increased significantly and that remediation did not change pre-existing inequalities generally favoring higher-income, predominantly white households through a process of demographic re-sorting. [ABSTRACT FROM AUTHOR]

This study examines the causal impacts of the Clean Development Mechanism (CDM) on the environmental performance of Indian manufacturing firms, as measured by their energy use, carbon dioxide (CO 2) emissions, and intensities of CO 2 emissions per sales and per energy use. The impacts of CDM projects are estimated using either two-way fixed-effect regressions or an estimator built for an event study with staggered treatment (Sun and Abraham, 2021) combined with a sample of ever-treated firms only or a sample comparing treated to never-treated control firms using semi-parametric matching. We found that CDM projects significantly increased firms' CO 2 emissions and energy use after treatment, but had no effect on CO 2 emission intensity per sales and only a small negative effect on the CO 2 content of energy use (only for the matched sample). These results reveal that CDM projects led to a positive scale effect (increased sales) after investments were made, and that these investments triggered a limited emission-reducing technique effect (decreased CO 2 intensity). [ABSTRACT FROM AUTHOR]

Exemptions from costly policy measures are frequently applied to alleviate financial burdens on specific market participants. Using a stated-choice experiment with around 6000 German household heads, we test how exemptions for low-income households and energy-intensive companies influence the political feasibility of additional cost for the promotion of renewable energies. We find that the policy support is substantially higher when low-income households are exempt rather than the industry. Introducing exemptions for low-income households on top of existing exemptions for the industry increases the acceptability of the policy. We show that the support for exemptions as one example of distributional policy design is associated with individual behavioral measures like inequality aversion and fairness perceptions. [ABSTRACT FROM AUTHOR]

Consider a Hotelling model with exploration investments, a backstop technology and two groups of countries, a climate coalition and a free-riding fringe. If the coalition is price taker in the fossil fuel market, a higher marginal climate damage leads to a reduction of the coalition's cumulative fuel consumption, which reduces the fuel price and, thus, induces carbon leakage. If the coalition is sufficiently small or its energy demand is sufficiently price sensitive, both the initial extraction and the cumulative discounted climate damages decrease (no weak/strong green paradox). This also applies if exploration investments are sufficiently productive, so that a lower fuel price leads to a considerably lower total extraction. If the coalition acts strategically in the fossil fuel market, it accounts for terms-of-trade and carbon-leakage effects. Then, a higher marginal climate damage can lead to an increase of the coalition's cumulative fuel consumption, which prevents a weak green paradox, while a strong green paradox never occurs. In an empirically calibrated economy, we show that a strong green paradox can occur without a weak green paradox and vice versa with a price-taking coalition. With a strategically acting coalition, a weak green paradox can be part of a unilaterally optimal policy reaction. [ABSTRACT FROM AUTHOR]

We analyze environmental policy in a model where some consumers (dubbed green) derive warm glow from buying a good of a higher environmental quality, and where green firms differentiate products on their environmental quality to enjoy market power. For any given pollution level, emission taxes turn out to be less cost-effective than an emission standard because taxation always induces a higher wedge between the environmental qualities of products. By stark contrast, consumers prefer taxes to standards when the warm glow intensity is not too large. Also, the ability of green firms to exert market power makes the tax less attractive to green consumers. When the pollution level is endogenized via majority voting, both neutral and green consumers vote in favor of laxer standards and therefore pollution is higher compared to the case of non-differentiated products. By contrast, the majority chosen tax induces the efficient level of pollution. Green consumerism reduces environmental protection with standards but not with taxes. [ABSTRACT FROM AUTHOR]

In the framework of environmental tax competition, this study analyzes the political delegation of tax decisions in oil-producing and oil-importing countries. The main findings are as follows: (i) with uncoordinated tax competition, voters in oil-producing countries typically choose a policymaker who is less green than the median to drive oil prices in their favor, while voters in the oil-importing countries prefer green policymakers over the median; (ii) when oil-producing countries form an oil cartel to coordinate their policies, in anticipation of such coordination, voters elect green policymakers over the median not only in oil-importing countries but also in oil-producing countries; and (iii) policy coordination by oil-producing countries is more likely to be sustained when policy leaders in those countries are exogenous to citizens for reasons such as royal rule, but it is more likely suffer a breakdown when policy leaders are elected. [ABSTRACT FROM AUTHOR]

Natural resource management often involves social dilemmas which other-regarding preferences and pro-social behaviour can help overcome. Interventions that induce resource users to consider a perspective broader than their own may help promote pro-social behaviour. Such interventions are often applied in participatory resource management approaches. To the best of our knowledge, nonetheless, no previous study has isolated and assessed the effect of inducing perspective-taking on natural resource users' prosocial behaviour. In this study, we do so in the context of watershed management. We conducted a lab-in-the-field experiment with downstream farmers in a Peruvian watershed. In the experiment, participants were induced to imagine the perspective of upstream farmers before deciding on a donation that can help the latter improve their well-being without compromising the water supply downstream. We find that inducing perspective-taking increases unilateral prosocial behaviour. This effect cannot fully be explained by the additional information on the social and ecological characteristics of the watershed received during the perspective-taking experience. Rather the effect of the perspective-taking intervention is likely to work by inducing other-regarding preferences. Our results contribute to the study of pro-social behaviour in natural resource management and the ways in which it could be induced by interventions targeting other-regarding preferences. • We conducted a framed lab-in-the-field experiment with downstream farmers in a Peruvian watershed. • We assess the effect of inducing perspective-taking on downstream farmers' prosocial behaviour towards upstream farmers. • Induced perspective-taking is found to promote prosocial behaviour. • The effect is likely to be produced by the activation of other-regarding preferences. [ABSTRACT FROM AUTHOR]

We examine two potential economic benefits of environmental policy, increased agricultural investment and productivity. This is important because if these benefits are realized, environmental policy could optimize land use for food production while minimizing the negative environmental impacts. We employ multiple empirical techniques to analyze a market-led and a public-led anti-deforestation policy that influence the vast cattle ranching sector in the Brazilian Amazon. We show that both policies increased cattle productivity, while the market-led policy also increased investment. We find no evidence that the two policies were substitutes or complements. Results indicate that the policies were each effective in different market- and land-use-contexts, so that enforcement of both policies increased productivity for a larger set of properties. Our research reveals both indirect and unintended benefits of environmental regulation, which have implications for the design of policies that affect the agricultural sector, a major driver of land-use change. [ABSTRACT FROM AUTHOR]

Voluntary participation can improve multilateral environmental governance. We model voluntary participation of states in unanimously approved federal environmental policy. A Pareto-improving federal emission price coexists with state-level emission pricing. Federal revenues are distributed equally per capita (egalitarian), in proportion to states' historical emission levels (sovereignty), or states' actual payments (juste retour). We find that the existence of Pareto-improving uniform federal prices depends on wealth differences, transfer rules, and on whether or not states anticipate transfers. Sovereignty transfers work in all cases. Differences in wealth can undermine egalitarian transfers. Juste retour transfers render federal policy ineffective if states anticipate them. The richest state prefers the lowest Pareto-optimal federal price ("minimum price") as it becomes the largest net-donor. Adding different population sizes, the richest and largest (smallest) state prefers the minimum price with sovereignty and juste retour transfers (egalitarian transfers). Therefore, rich states brake and simultaneously make possible passing unanimous federal policy. [ABSTRACT FROM AUTHOR]

We present a model of consumer behaviour when consumers value conformity and examine the implications for environmental policy. The model shares a feature set out in Dasgupta et al. (2016) of having a structure of preferences for conformity which induces a mass of consumers to adhere exactly to a norm level of consumption (clumping). However we extend our previous analysis by analysing the conditions for the existence and potential uniqueness of consumption norms. In doing so we introduce threshold effects whereby individuals adhere to a norm only if sufficiently many others do so. Taken together these have striking implications for environmental policy in the case where the norm good generates pollution emissions. Clumping means many individuals will not change behaviour unless the norm changes while threshold effects plus clumping means that it may be hard to change a norm. We show that the use of Pigovian taxes to control behaviour may be either ineffective or welfare reducing, and that the optimal Pigovian tax will work only if it is above some threshold level. There are parameter values for which quantity-based injunctive policies raise welfare relative to no intervention while optimal Pigovian taxes would lower welfare. [ABSTRACT FROM AUTHOR]

This paper evaluates the behavioral spillover effect of organic waste sorting on households' waste reduction. We use an administrative household-level dataset on residential waste from a Swedish municipality. To identify the spillover effects, we utilize a natural experiment triggered by the staggered implementation of a policy that introduced home-based organic waste sorting bins. We find a substantial positive spillover effect of waste sorting on waste reduction. The effect, however, disappears over time. [ABSTRACT FROM AUTHOR]