K. Kato.

Journal of economics [Austria], Vol. 88, No. 3, Sep 2006, pp. 263-284.

We compare the effects of tradable emission permits (TEP) and non-tradable emission permits (NTEP) in a mixed oligopoly, where public firms and private firms compete in a product market. If all technologies and initial endowments of emission permits are symmetric among public and private firms and if the emission constraint is exogenous and binding, social welfare is greater (resp. smaller) under TEP than under NTEP when the weight of social welfare in each public firm's objective function and the degree of convexity of the production cost function and that of the abatement cost function are small (resp. large).; Reprinted by permission of Springer-Verlag

James J. Murphy and John K. Stranlund.

Journal of Economic Behavior and Organization, Vol. 61, No. 2, October 2006, pp. 217-233.

Since firms in an emissions trading program are linked through the permit market, so too are their compliance choices. Thus, enforcement strategies for trading programs must account for the direct effects of enforcement on compliance and emissions decisions as well as the indirect effects that occur due to changes in permit prices. Our experimental results are consistent with theoretical predictions about both a negative direct effect of enforcement on individual violations and a countervailing market effect through the permit price. Furthermore, there is no direct effect of enforcement on the emissions choices of firms, only a negative price effect.

Timothy N. Cason and Lata Gangadharan.

Journal of Economic Behavior and Organization, Vol. 61, No. 2, October 2006, pp. 199-216.

In this laboratory experiment on emissions trading, subjects face exogenous, random emissions shocks after making production and emission control plans. In some sessions subjects can bank their unused permits for future use. After a reconciliation-trading period following the shock realization, subjects report their emissions to the regulatory authority and are placed in different inspection groups depending on their compliance history. We identify important interactions between banking, compliance and enforcement. Banking smoothes out the price variability arising from imperfect emissions control. Price stability comes at a cost, however, since noncompliance and emissions are significantly greater when banking is allowed.

Timothy J. Considine and Donald F. Larson.

Journal of Environmental Economics and Management, Vol. 52, No. 3, November 2006 2006, pp. 645-662.

This paper uses firm-level data about electric utilities to develop an empirical model of how electric utilities use and bank SO2 pollution permits under the Acid Rain Program. The empirical model considers emissions, fuels, and labor as variable inputs with quasi-fixed stocks of permits and capital. Consequently, substitution possibilities between the environment and other production factors can be measured and tested. The results reveal substantial substitution between emissions, permit stocks, capital, fuel, and labor. The empirical findings also indicate that firms bank permits primarily as a hedge against uncertainty and for other firm-specific reasons. Overall, the results suggest that cap-and-trade approaches can reduce the cost of meeting environmental goals by providing a mechanism for addressing regulatory and market risks and by signaling an appropriate price for factor use, especially irreversible capital investments.

Bodo Sturm and Joachim Weimann.

Journal of Economic Surveys, Vol. 20, No. 3, July 2006, pp. 419-457.

It is not only the great number of papers written on environment economics that make it worth dealing with this special branch of experimental research, but the environmental problem in all its facets seems to serve as a catalyst for identifying some methodological problems of the experimental method. For this reason, we will not only try to give an overview of recent experiments in environmental economics but also add some thoughts on the methodological implications of this work. We identify three direct connecting factors for the experimental method and environmental economics. First, social dilemmas are, in many cases, at the core of environmental problems. Experiments are able to test theoretical hypotheses for individual behavior in such social dilemma situations. The second connecting factor comes from the field of applied experimental work and can be characterized as the testbedding of institutional arrangements for the solution of environmental problems. The last direct application of experimental methods to environmental economics concerns the individual evaluation of environmental resources.

Neil J. Buckley, Stuart Mestelman and R. Andrew Muller.

Pacific Economic Review, Vol. 11, No. 2, June 2006, pp. 149-166.

Two approaches to emissions trading are cap-and-trade, with an aggregate cap on emissions distributed as emission allowances, and baseline-and-credit, with firms earning emission reduction credits for emissions below baselines. Theory suggests the long-run equilibria of the plans will differ with baselines proportional to output. To test this prediction we develop a computerized environment in which subjects representing firms can adjust their emission rates and capacity levels and trade emission rights in a sealed-bid auction. Demand for output is simulated. We report on six laboratory sessions with variable emissions rates, but fixed capacity: three each with the cap-and-trade and baseline-and-credit mechanisms.

Jeff Bennett.

Australian Journal of Agricultural and Resource Economics, Vol. 49, No. 3, Sep 2005, pp. 243-261.

Australian and New Zealand environmental economists have played a significant role in the development of concepts and their application across three fields within their sub-discipline: non-market valuation, institutional economics and bioeconomic modelling. These contributions have been spurred on by debates within and outside the discipline. Much of the controversy has centred on the validity of valuations generated through the application of stated preference methods such as contingent valuation. Suggestions to overcome some shortcomings in the work of environmental economists include the commissioning of a sequence of non-market valuation studies to fill existing gaps to improve the potential for benefit transfer.; Reprinted by permission of Blackwell Publishing

Fabian Scholtes.

Zeitschrift für Wirtschafts- und Unternehmensethik, Vol. 5, No. 2, 2004, pp. 199-207.

P. del Rio Gonzalez.

International Journal of Sustainable Development, Vol. 7, No. 2, 2004, pp. 200-216.

Nick Hanley, Mandy Ryan and Robert Wright.

Health Economics, Vol. 12, No. 1, January 2003, pp. 3-16.

In the recent past, considerable effort in health economics has been made on applying stated preference methods such as contingent valuation and choice experiments. Despite this increased use, there is still considerable scepticism concerning the value of these approaches. The application of contingent valuation in environmental economics has a long history and has been widely accepted. Whilst choice experiments were introduced to the environmental and health economics literature at a similar time, the wider acceptance of monetary measures of benefit in environmental economics has meant that they have also been more widely applied. The purpose of this paper is to identify some of the key issues and debates that have taken place in the environmental economics literature, summarise the state of the art with respect to these issues, and consider how health economists have addressed these issues. Important areas for future research in health economics are identified.