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Article

Economic Value of Reducing Exposure to Environmental Health Risks  

W. Kip Viscusi and Rachel Dalafave

Valuing the benefit of reduced exposures to environmental health risks requires assessment of the willingness to pay for the risk reduction. Usual measures typically estimate individual local rates of substitution between money and the reduced probability of the adverse health impact. Benefit-cost analyses then aggregate individuals’ willingness to pay to calculate society’s willingness to pay for the health risk reduction benefit. The theoretical basis for this approach is well established and is similar for mortality risks and health outcomes involving morbidity effects. Researchers have used both stated preference methods and revealed preference data that draw on values implicit in economic decisions. Continuing controversies with respect to valuation of environmental health impacts include the treatment of behavioral anomalies, such as the gap between willingness-to-pay and willingness-to-accept values, and the degree to which heterogeneity in values because of personal characteristics such as income and age should influence benefit values. A considerable literature exists on the value of a statistical life (VSL), the local tradeoff between fatality risk and money, which is used to value mortality risk reductions. Many VSL estimates use data from the United States for regulatory analyses of environmental policies, but several other countries have distinct valuation practices. There are empirical estimates of the benefits associated with reducing the risks of many environmental health effects, including cancer, respiratory diseases, gastrointestinal illnesses, and other health consequences that have morbidity effects.

Article

The Economic Value of Water  

Dale Whittington and Michael Hanemann

In economics, the value of an item—including water—to a person is defined as the most of something else of value (typically money, but sometimes time) the person is willing to give up to obtain that item (willingness to pay) or the minimum compensation the person would want to receive in exchange for forgoing the item (willingness to accept). These are measures of gross value; they are in principle quantitative; and they are subjective and idiosyncratic to the individual and the circumstances. The economic value of an item is not measured by its price. It is likely to vary with the amount of the item and should not be taken as a constant. A core conceptual distinction is between use value and nonuse value. A person’s use value for an item is the value that she places on the item from motives connected with the use of the item by someone, whether her own use or that of someone else. Nonuse value is the value she places on an item from motives not directly connected with the use of that item by anybody in any tangible way. For example, a person may value water to drink (a use value), but he may also value having water remain in its natural state (a nonuse value). Consumptive uses are use values, but nonconsumptive uses can also be use values (e.g., swimming in a lake). Other conceptual distinctions include that between wet water and paper water (water that exists on paper but is not actually accessible or usable), and that between raw water alone versus water accompanied by the infrastructure necessary to store it and convey it so as to make it available for use.

Article

Effects of Meteorological and Air Pollutant Factors on the Deaths from COVID-19 in Chinese Cities: A Spatial Panel Data Analysis  

Faysal Mansouri and Zouheir Mighri

Coronavirus (COVID-19) global pandemic was first identified in Wuhan, China in December 2019. Its human-to-human transmission was confirmed on January 20, 2020 and rapidly escalated into a global pandemic. Coronavirus exponential spread has caused overwhelming challenges to global public health and left households and businesses counting huge economic losses. These unprecedented global circumstances have forced policymakers to work under bilevel pressure: implement successful containment strategies and in the meantime get society and the economy to a new normal path—in other words, a trade-off between successful containment strategy and optimal reopening strategy. As the pandemic evolves, a growing public and academic debate has taken place on the likelihood of the influence of meteorological factors as well as pollution elements on COVID-19 cycle. This potential association between meteorological factors and COVID-19 spread inevitably shapes containment strategies and social and economic reopening policy options. An important growing literature has investigated this relationship using various statistical tools and approaches. Indeed, several researchers have attempted to provide evidence of statistical correlation between meteorological conditions as well as and air pollution factors and COVID-19 reported deaths? Several studies have analyzed the association between meteorological factors and the spread of COVID-19 in local, regional, and global frameworks. A particular focus has been made on the identification of factors that might have impact on COVID-19 mortality rate as well as on the acceleration of diffusion of infection, for various countries including China.

Article

Environmental Accounting and the Management Challenge  

Roger L. Burritt, Stefan Schaltegger, and Katherine L. Christ

There is a need to achieve sustainability through development of economies and companies that operate in the safe operating space of planetary boundaries and contribute to achieving the United Nations Sustainable Development Goals. This requires that decision makers are informed about the state of the natural environment, the environmental impacts being caused, and the effectiveness of improvement measures. Environmental accounting focuses on such environmental issues. It informs decision makers about combined environmental and economic matters and supports improvement processes. Environmental accounts at the national and regional macro level are mostly focused on the environmental condition and changes in condition over time. In contrast, company environmental accounting at the micro level either focuses on reporting on the overall impact in the past, providing detailed internal information for managers to address key problem areas, or identifying aspects for improvement. Transdisciplinary research helps to address the economic and management challenge of linking company-related micro level accounts and activities with macro level environmental objectives.

Article

Environmental Degradation: Estimating the Health Effects of Ambient PM2.5 Air Pollution in Developing Countries  

Ernesto Sánchez-Triana, Bjorn Larsen, Santiago Enriquez, and Andreia Costa Santos

Air pollution of fine particulates (PM2.5) is a leading cause of mortality worldwide. It is estimated that ambient PM2.5 air pollution results in between 4.1 million and 8.9 million premature deaths annually. According to the World Bank, the health effects of ambient PM2.5 air pollution had a cost of $6.4 trillion in purchasing power parity (PPP) adjusted dollars in 2019, equivalent to 4.8% of global gross domestic product (PPP adjusted) that year. Estimating the health effects and cost of ambient PM2.5 air pollution involves three steps: (1) estimating population exposure to pollution; (2) estimating the health effects of such exposure; and (3) assigning a monetary value to the illnesses and premature deaths caused by ambient air pollution. Estimating population exposure to ambient PM2,5 has gone from predominantly using ground level monitoring data mainly in larger cities to estimates of nationwide population weighted exposures based on satellite imagery and chemical transport models along with ground level monitoring data. The Global Burden of Disease 2010 (GBD 2010) provided for the first time national, regional and global estimates of exposures to ambient PM2.5. The GBD exposure estimates have also evolved substantially from 2010 to 2019, especially national estimates in South Asia, the Middle East and North Africa, Sub-Saharan Africa and Latin America and the Caribbean. Estimation of health effects of ambient PM2.5 has also undergone substantial developments during the last two decades. These developments involve: i) going from largely estimating health effects associated with variations in daily exposures to estimating health effects of annual exposure; ii) going from estimating all-cause mortality or mortality from broad disease categories (i.e., cardiopulmonary diseases) to estimating mortality from specific diseases; and iii) being able to estimate health effects over a wide range of exposure that reflect ambient and household air pollution exposure levels in low- and middle-income countries. As to monetary valuation of health effects of ambient air pollution, estimates in most low- and middle-income countries still rely on benefit transfer of values of statistical life (VSL) from high-income countries.

Article

Environmental Degradation, Tropical Diseases, and Economic Development  

John Luke Gallup

It’s complicated. Tropical diseases have unusually intricate life cycles because most of them involve not only a human host and a pathogen, but also a vector host. The diseases are predominantly tropical due to their sensitivity to local ecology, usually due to the vector organism. The differences between the tropical diseases mean that they respond to environmental degradation in various ways that depend on local conditions. Urbanization and water pollution tend to limit malaria, but deforestation and dams can exacerbate malaria and schistosomiasis. Global climate change, the largest environmental change, will likely extend the range of tropical climate conditions to higher elevations and near the limits of the tropics, spreading some diseases, but will make other areas too dry or hot for the vectors. Nonetheless, the geographical range of tropical diseases will be primarily determined by public health efforts more than climate. Early predictions that malaria will spread widely because of climate change were flawed, and control efforts will probably cause it to diminish further. The impact of human disease on economic development is hard to pin down with confidence. It may be substantial, or it may be misattributed to other influences. A mechanism by which tropical disease may have large development consequences is its deleterious effects on the cognitive development of infants, which makes them less productive throughout their lives.

Article

Environmental Economic Instruments in Mexico  

Marisol Rivera-Planter, Carlos Muñoz-Piña, and Mariza Montes de Oca

This is an advance summary of a forthcoming article in the Oxford Research Encyclopedia of Environmental Science. Please check back later for the full article. While most attention on the use of economic instruments for environmental protection has centered on their applications in industrialized countries, middle-income countries have made important inroads as well. Among them, Mexico stands out for its application to the agenda of a wide array of green and brown issues. Starting in 2001, with the introduction of fees to access natural protected areas, followed in 2003, with the establishment of the Payment for Ecosystems Services program for forests, and then in 2014, the introduction of the environmental tax on pesticides, the use of complementary price signals through the fiscal system has sought to influence, in a decentralized manner, the decisions of both consumers and resource owners towards protecting key elements of Mexico’s natural capital. As the central promise from economic instruments is to reduce compliance costs of reaching a certain goal by providing flexibility on how to meet individual obligations, the use of market-based mechanisms in regulations has also been explored with some success in Mexico. Partial incorporation of such a mechanism was applied to the design of its national Federal Fuel Efficiency standards for automobiles, by redefining compliance as meeting a corporate average standard starting from 2006 onwards. More recently, full use of market mechanisms was introduced, in 2016, into the strategy to reach Mexico’s Clean Energy requirement goals. The demonstration by utilities of compliance with the milestone of the national 2024 goal of 35% share of clean energy in power generation can be done either by holding or purchasing Clean Energy Certificates in their secondary market. This allows utilities to separate the decision to purchase energy at the lowest cost, and to meet environmental requirements, also at their lowest cost. Both tax and market mechanisms are converging with Mexico’s Climate Change policy. The Fiscal Reform of 2014 introduced Mexico’s first explicit carbon tax in the form of an excise tax applied to fossil fuels, just as its G20 commitments to phase-out negative carbon pricing (i.e., fossil fuel subsidies) were being fulfilled. With price signals pushing towards more energy efficiency and a lower carbon footprint for the economy, Mexico is on the right track for carbon pricing and is showing leadership at a global scale. It will be interesting to observe how this will mix with a proposed cap-and-trade carbon mechanism, obviously touted as a complementary instrument. The establishment of such a mechanism to meet the emission reduction goals of Mexico’s Climate Change legislation and international commitments is the subject of intense debate and analysis. It represents an interesting decision point for a middle-income country such as Mexico, where all costs are local in nature, the emissions per capita are at the world’s average, and indirect benefits of the energy transition are only partial. In the political economy debate, the linkage to international markets, such as California and Quebec, is not only an option but a central motivation to launch the market, as gains from trade are the driving force.

Article

Environmental Economics and the Anthropocene  

V. Kerry Smith

Geologists’ reframing of the global changes arising from human impacts can be used to consider how the insights from environmental economics inform policy under this new perspective. They ask a rhetorical question. How would a future generation looking back at the records in the sediments and ice cores from today’s activities judge mankind’s impact? They conclude that the globe has entered a new epoch, the Anthropocene. Now mankind is the driving force altering the Earth’s natural systems. This conclusion, linking a physical record to a temporal one, represents an assessment of the extent of current human impact on global systems in a way that provides a warning that all policy design and evaluation must acknowledge that the impacts of human activity are taking place on a planetary scale. As a result, it is argued that national and international environmental policies need to be reconsidered. Environmental economics considers the interaction between people and natural systems. So it comes squarely into conflict with conventional practices in both economics and ecology. Each discipline marginalizes the role of the other in the outcomes it describes. Market and natural systems are not separate. This conclusion is important to the evaluation of how (a) economic analysis avoided recognition of natural systems, (b) the separation of these systems affects past assessments of natural resource adequacy, and (c) policy needs to be redesigned in ways that help direct technological innovation that is responsive to the importance of nonmarket environmental services to the global economy and to sustaining the Earth’s living systems.

Article

Environmental Economics and Uncertainty: Review and a Machine Learning Outlook  

Ruda Zhang, Patrick Wingo, Rodrigo Duran, Kelly Rose, Jennifer Bauer, and Roger Ghanem

Economic assessment in environmental science means measuring and evaluating environmental impacts, adaptation, and vulnerability. Integrated assessment modeling (IAM) is a unifying framework of environmental economics, which attempts to combine key elements of physical, ecological, and socioeconomic systems. The first part of this article reviews the literature on the IAM framework: its components, relations between the components, and examples. For such models to inform environmental decision-making, they must quantify the uncertainties associated with their estimates. Uncertainty characterization in integrated assessment varies by component models: uncertainties associated with mechanistic physical models are often assessed with an ensemble of simulations or Monte Carlo sampling, while uncertainties associated with impact models are evaluated by conjecture or econometric analysis. The second part of this article reviews the literature on uncertainty in integrated assessment, by type and by component. Probabilistic learning on manifolds (PLoM) is a machine learning technique that constructs a joint probability model of all relevant variables, which may be concentrated on a low-dimensional geometric structure. Compared to traditional density estimation methods, PLoM is more efficient especially when the data are generated by a few latent variables. With the manifold-constrained joint probability model learned by PLoM from a small, initial sample, manifold sampling creates new samples for evaluating converged statistics, which helps answer policy-making questions from prediction, to response, and prevention. As a concrete example, this article reviews IAMs of offshore oil spills—which integrate environmental models, transport models, spill scenarios, and exposure metrics—and demonstrates the use of manifold sampling in assessing the risk of drilling in the Gulf of Mexico.

Article

Environmental Economics of Pollination  

Antoine Champetier

The pollination of crops by domesticated bees and wild pollinators is easily and often imagined as an accidental but essential process in agriculture. The notion that pollinators are overlooked despite their essential role in food production is widespread among the general public, as well as in policy debates concerning all issues related to pollinators, ranging from regulation of pesticides to conservation of habitat for wild bees, to support of beekeeping as an industry or as a hobby. Meade was the first to formalize this notion by making pollination a canonical example of beneficial externality in economics and arguing that subsidies should be established to ensure that honeybees are provided in optimal numbers to pollinate crops. In the first two decades of the 21st century, the same argument, but this time focusing on wild pollinators, has been proposed and supported by a large and growing literature in conservation ecology. However, a thorough review of contributions on the economics of pollination reveals several misconceptions behind the appealing fable of pollination externalities. The most striking rebuttal of Meade’s argument comes from the study of pollination markets, where beekeepers and crop growers engage in voluntary transactions called pollination contracts. A small economics literature formalizes the issue of incentives solved by these transactions and provides a detailed empirical analysis of many complex aspects, such as the establishment of standards for the monitoring of bee densities or the impact of seasonality of blooms and bee population dynamics on pollination prices. Outside pollination markets, economists have made rather sparse and partial contributions to several other important issues related to pollination in agriculture, such as valuation of pollination services, conservation of wild pollinators, and regulation of pesticides that impact pollinators. On these topics, studies have largely been published in non-economics journals and economists stand to make valuable contributions by applying and popularizing the concepts of incentive design, information costs, and other key insights of environmental economics in the study of pollination.

Article

The Environmental Kuznets Curve  

David I. Stern

The environmental Kuznets curve (EKC) is a hypothesized relationship between environmental degradation and GDP per capita. In the early stages of economic growth, pollution emissions and other human impacts on the environment increase, but beyond some level of GDP per capita (which varies for different indicators), the trend reverses, so that at high income levels, economic growth leads to environmental improvement. This implies that environmental impacts or emissions per capita are an inverted U-shaped function of GDP per capita. The EKC has been the dominant approach among economists to modeling ambient pollution concentrations and aggregate emissions since Grossman and Krueger introduced it in 1991 and is even found in introductory economics textbooks. Despite this, the EKC was criticized almost from the start on statistical and policy grounds, and debate continues. While concentrations and also emissions of some local pollutants, such as sulfur dioxide, have clearly declined in developed countries in recent decades, evidence for other pollutants, such as carbon dioxide, is much weaker. Initially, many understood the EKC to imply that environmental problems might be due to a lack of sufficient economic development, rather than the reverse, as was conventionally thought. This alarmed others because a simplistic policy prescription based on this idea, while perhaps addressing some issues like deforestation or local air pollution, could exacerbate environmental problems like climate change. Additionally, many of the econometric studies that supported the EKC were found to be statistically fragile. Some more recent research integrates the EKC with alternative approaches and finds that the relation between environmental impacts and development is subtler than the simple picture painted by the EKC. This research shows that usually, growth in the scale of the economy increases environmental impacts, all else held constant. However, the impact of growth might decline as countries get richer, and richer countries are likely to make more rapid progress in reducing environmental impacts. Finally, there is often convergence among countries, so that countries that have relatively high levels of impacts reduce them more quickly or increase them more slowly, all else held constant.

Article

Environmental Policy and the Double Dividend Hypothesis  

Antonio M. Bento

Since the 1990s, the so-called double-dividend debate—that is, the possibility that swaps of newly environmental taxes for existing distortionary taxes such as taxes on labor or capital could simultaneously improve environmental quality and reduce the distortionary costs of tax system—has attracted the attention of policymakers and academics. And while prior to the 1990s environmental economics as a field was not ready to inform this debate, scholars quickly moved to incorporate insights of the theory of second-best from public economics to inform the discussion. The result was a substantial advancement of the field of environmental economics, with the evaluation of the welfare effects of alternative policy instruments relying on general equilibrium models with pre-existing distortions. Initially, scholars casted substantially doubt on the prospects of a double dividend, and suggested that environmental tax reforms would not reduce the distortionary costs of the tax system. This is because studies documented that the tax-interaction effect dominated the revenue-recycling effect. That is, newly environmental taxes interact with pre-existing distortions in labor markets. And even when the revenues of environmental taxes are used to cut the rate of the labor tax, the environmental tax reform exacerbates, rather than alleviate, pre-existing distortions in labor markets. Throughout the 2000s and in more recent decades, the literature has documented many instances where a double dividend is more likely to exist, including in the context of developing countries.

Article

Environmental Regulations in China  

Haitao Yin, Xuemei Zhang, and Feng Wang

China’s environmental challenges are unprecedented in terms of their size and severity. The country’s constantly evolving regulatory systems are a blend of lessons learned from Western market- and information-based regulations, China’s own unique political and administrative context as an authoritarian country, the complex relationship between its central and local governments, and the balance between the needs for environmental protection and economic growth. A close look at China’s environmental regulatory system may offer useful insights to those working toward a more sustainable future. In the 21st century, the environmental regulatory system in China is entering a new era. Over the last three decades, efforts have focused on developing regulatory standards for air, water, and solid waste, among many other pollutants. This regulatory system primarily follows a command-and-control approach and is often criticized for its failure to curb China’s increasingly severe environmental degradation. In the future, the Chinese government may pursue two routes. The first is to increase the use of market mechanisms and information tools to enable and incentivize more stakeholders, such as consumers, nongovernmental organizations, and communities, to engage in the development and enforcement of environmental regulations, for instance, through cap-and-trade systems, information-disclosure programs, and environmental insurance. However, existing evidence shows that the usefulness of these new instruments is limited. Another route is to develop new mechanisms to strengthen the enforcement of traditional command-and-control regulations. Examples include making environmental performance a key performance indicator (KPI) in the performance appraisals of government officials or leveraging the power of financial sectors. These approaches are a footnote to the new argument in favor of environmental authoritarianism, which suggests that authoritarian regimes, setting authoritarian rules, may be more capable of handling complex environmental pressures. More studies need to be conducted on the effectiveness of these new approaches and the mechanisms by which they may achieve success.

Article

Environmental Regulations in India  

Rama Mohana R Turaga and Anish Sugathan

Pollution is one of the greatest causes of premature deaths and morbidity in the world, and this burden of pollution is disproportionately borne by the lower and middle income countries such as India—home to more than one-sixth of humanity. In India, due to the compound effect of its large population and high levels of environmental pollution, the human cost of pollution is among the highest in the world. The environmental degradation is partly a consequence of the development model pursued after independence in 1947 based on large-scale industrialization and exploitative resource utilization, with scant consideration for sustainability. Moreover, it is also due to the failure of the environmental administration, governance, and regulatory infrastructure to keep pace with the magnitude and pace of economic growth in India since economic liberalization in 1991. Ironically, India was also one of the early pioneers of integrating environmental considerations into its legislative and policy-making process beginning in the early 1970s. The federal and state environmental regulation and policy framing institutions set up during this era, along with environmental legislation such as the Environment (Protection) Act 1986, are comparable in design, stringency, and comprehensiveness to other contemporary command-and-control environmental regulatory regimes in many industrially developed economies. However, the widening gap between de jure expectations of environmental compliance and the de facto state of affairs has been a great concern for environmental governance in the country. The ongoing debates discuss several mechanisms to address the regulatory failures. The first is a greater emphasis on strengthening institutions and mechanisms that foster transparency and public disclosure by pollution sources with the intent to increase access to and credibility of information on pollution. Proponents argue this will help mobilize groups such as non-governmental organizations (NGOs) and the general public to pressure the industry and government to improve regulatory enforcement. Second, there have been calls for wider adoption of market-based instruments that are more efficient than the traditional command-and-control approaches on which India relies. Again, information is a prerequisite for the functioning of such market-based regulatory mechanisms. Third, the legal infrastructure to facilitate expedited hearing of environmental litigation is being created. With the establishment of the National Green Tribunal in 2010, India is one of only three other countries in the world to have an exclusive judicial body to hear environmental cases. This is potentially a significant step in providing greater access to environmental justice. An emerging view, however, argues that the prevailing economic development model is incompatible with ensuring sustainable development and requires a radical rethink.

Article

Environmental Regulations in Mexico  

María E. Ibarrarán and Jerónimo Chavarría

In Mexico, the laws and norms that regulate the environment emerged at the end of the 19th century to standardize infrastructure construction and preserve nature. However, it was not until the early 1970s that the first formal government entity dedicated to promote environmental protection, the Vice-Ministry for Environmental Improvement, under the Ministry of Health, was founded, mostly responding to a government initiative rather than social pressure. Other laws were then issued and applied by the Secretariat of Urban Development and Ecology. However, in the 1980s, civil society pressed for more regulations aimed at protecting the environment. In the 1990s, the Ministry of the Environment, Natural Resources and Fisheries (SEMARNAP) was created, focusing on natural resources, biodiversity, hazardous waste, and urban-industrial environmental problems. Its objective was to reduce the trends of environmental deterioration and to promote economic and social development under criteria of sustainability. This and other institutions have evolved since then, covering a larger set of topics and media. Nevertheless, degradation has not been stopped and is far from being reverted, because even though there is a toolbox of policies and instruments, many of them economic, they have not been fully implemented in some cases or enforced in others because of economic and political factors. With the changes in institutions, legislation was also modified. Mexico became part of international environmental agreements and included the rights to a safe environment in the constitution. However, this legislation has not been enough to modify behavior because often the incentives either for regulators or for polluters themselves are not enough. Environmental degradation is a market failure. It can be shaped as an externality that markets alone cannot solve either because of overproduction, abuse of open access resources, or underprovision of public goods. In any of these cases, resolution comes only through government intervention. Regulations must include consideration of the benefits and costs they impose to change behavior. However, regardless of formal regulation, there are still a host of environmental problems that affect both urban and rural communities and Indigenous and non-Indigenous populations, and there is a regulatory vacuum integrating environmental aspects with economic and social development issues. Examples of this are the Energy Reform of 2013 and the Law of Waters, as well as the Law of Biodiversity, where impacts on communities are often left aside, because of a de facto prevalence of economic activity over human rights. On the other hand, legal loopholes prevent adequate management of wildlife resources and sufficient treatment of hazardous waste discarded by industries, even if they are regulated. Furthermore, environmental regulations are based on corrective regulations, such as obligations, restrictions, and sanctions, but these have not strengthened their preventive character. It is still less expensive to pollute or degrade the environment than take measures not to. A shift in the paradigm toward policies that create incentives to protect the environment, both for polluters and regulators, may foster much better environmental quality.

Article

Evaluation of Environmental Policy with Q Methodology  

Jon C. Lovett, Aseel A. Takshe, and Fatma Kamkar

Environmental policy is often characterized by differences of opinion and polarized perceptions. This holds for all groups involved in lobbying, creating, implementing, and researching policy. Q methodology is a technique originally developed by William Stephenson in the 1930s for work in psychology as an alternative to R methodology, which was dominant at the time. R methodology involves gathering scores from subjects being analyzed, such as those generated by intelligence tests, and then correlating the scores with factors such as gender or ethnicity. Obviously, the scores are heavily dependent on the choice of questions set by the researcher in the tests. In contrast, Q methodology commonly uses statements generated by the participants of the study, and it is these that the subjects are asked to score. This helps to avoid the type of bias that might result from a researcher formulating the statements presented to the subjects, though it is important to note that researcher bias is also present in Q methodology through selection of the statements and the type of quantitative analysis used. In studies involving evaluation of environmental policy, Q methodology is typically used to elicit opinions from subjects by scoring participant statements obtained from interviews or statements from secondary sources such as written reports, news articles, or images. These scores are then correlated using factor analysis, and statements that group together are compiled to create discourses about different aspects of the environmental policy under evaluation.

Article

Evolution of the International Climate Change Policy and Processes: UNFCCC to Paris Agreement  

Mostafa Mahmud Naser and Prafula Pearce

Evolution of international climate change policy and processes commenced in 1990 with the United Nations Framework Convention on Climate Change (UNFCCC), which made the first global attempt to provide an intergovernmental platform for addressing the effects of climate change. Since then, major advances in the international dialog occurred from 1995 to 2004 during the Kyoto Protocol. However, the Kyoto Protocol outcome was not considered a major success in terms of reducing global emissions, although it succeeded in advancing global market-based flexible mitigation mechanisms, such as emissions trading, joint implementation, and the clean development mechanism. A turnaround in the global approach occurred with the Paris Agreement in 2015, which represented a major turning point in the climate debate, with a bottom-up approach allowing states to set their own emission targets. In addition, the Paris Agreement was the catalyst for formation of bodies and institutions that promote negotiated climate change themes and has permitted countries to work together to share direct practical approaches for tackling climate change. The success of the Paris Agreement can be seen as more countries commit to nationally determined contribution targets. In addition, the practical implication of the bottom-up approach for institutional investors and corporate engagement is evident from the increase in the number of global climate change litigation cases brought against corporations and financial institutions that breach climate change obligations. Going forward, some of the climate change negotiation issues of concern that have yet to be resolved include the differences in contributions required by developed nations as opposed to developing nations, sometimes referred to as the North–South divide in climate change negotiations, the issue of loss and damage associated with climate change events, such as tropical cyclones and storms, and how to account for non-economic loss and damage caused by climate change events.

Article

Exploring Air Pollution and COVID-19 Linkages in South Asia  

Muthukumara Mani and Takahiro Yamada

South Asia is at the epicenter of the global air pollution problems and still evolving in COVID-19 cases and fatalities. There is growing evidence of increased rates of COVID-19 in areas with high levels of air pollution. Air pollution is found to cause cellular damage and inflammation throughout the body and has been linked to higher rates of diseases, including cancer, heart disease, stroke, diabetes, asthma, and other comorbidities. All these conditions also potentially increase the risk of death in COVID-19 patients. The causal link between the exposure to air pollution and COVID-19 is still under investigation around the world, underpinned by rigorous scientific research and peer-review processes. However, in terms of the approach after a careful review of the literature, the instrumental variable (IV) approach is a prospective candidate to establish causality in a reduced-form analysis to overcome endogeneity and measurement errors of air pollution level. An analysis, therefore, using sufficiently anonymized individual and household level information on COVID-19, household air pollution, and other individual and household socioeconomic endowments in the same primary sampling unit (PSU) of the individual and household survey would be necessary to establish the causality. The PSU data are usually available from demographic health surveys (DHS) with randomly displaced location information to maintain anonymity. Also, for the instrument of the exposure to ambient air pollution, the use of thermal inversions is suggested conditional on weather-related variables—for example, temperature, precipitation, wind velocity and direction, and humidity.

Article

Global and Regional Economic Damages from Climate Change  

Anil Markandya, Elena Paglialunga, Valeria Costantini, and Giorgia Sforna

Economic damage from climate change includes several aspects that need to be considered at the global and regional levels to achieve an equitable common solution to global warming. The economic literature reviewed here analyzes this issue under three general perspectives. First, the analytical estimation of the linkages between damages in monetary terms and climate variables, as projections of temperature, precipitation, and frequency of extreme events, is rapidly evolving. Damage functions are included in complex economic models in order to calculate the economic impact of the climate change on economic output and growth, thus informing the debate on the amount of resources that should be devoted to reducing greenhouse gas (GHG) emissions and limiting climate damages. The choice of the geographical aggregation in this respect is a crucial aspect to be considered if policy advice is to be formulated on the basis of model results. The higher the level of regional detail, the more reliable the results are in terms of geographical distribution of economic damages. Second, the precise estimation of the costs associated with different damages caused by climate change is attracting growing interest. Climate costs present a wide range of heterogeneity for several reasons, such as the different formulation of the damage function adopted, the modeling design of the economic impact, the temporal horizon considered, and the differentiation across sectors. Two broad categories of analysis are relevant. The first refers to the choice of the sectoral dimension under investigation, where some studies cover multiple sectors and their interactions, while others analyze specific sectors in depth. The second classification criterion refers to the choice of the economic aspects estimated, where a strand of literature analyzes only market-based costs, while other analyses also include non-market (or intangible) damages. The most common sectors investigated are agriculture, forestry, health, energy, coastal zones and sea level rise, extreme events, tourism, ecosystems, industry, air quality, and catastrophic damages. Most studies consider market-based costs, while non-market impacts need to be better detailed in economic models. Third, the computation of a single number through the analytical framework of the social costs of carbon (SCC) represents a key aspect of the process of adapting complex results in order to properly inform the political debate. SCC represents the marginal global damage cost of carbon emissions and can also be interpreted as the economic value of damages avoided for unitary GHG emission reduction. Several uncertainties still influence the robustness of the SCC analytical framework, such as the choice of the discount rate, which strongly influences the role of SCC in supporting or not mitigation action in the short term. Although the debate on the economic damages arising from climate change is flourishing, several aspects still need to be investigated in order to build a common consensus within the scientific community as a necessary condition to properly inform the political debate and to facilitate the achievement of a long-term equitable global climate agreement.

Article

How Do Attitudes and Perceptions Affect Environmental Preferences?  

Andy Sungnok Choi

Environmental preferences or willingness to pay (WTP) values tend to be heterogeneous and evolving over time. Attitudes and related theories worked as an alternative observation scope to the more conventional sociodemographic characteristics, explaining preference heterogeneity in environmental economics. Perception as a concept, on the other hand, is too illusive to be exclusively examined so is better treated as an attitude. Although not popular in mainstream environmental economics, the research interest in the attitude–WTP relationship has continued since the late 1990s and has increased and been relatively steady between 2006 and 2020. According to the lessons from the established behavioral models, attitudes are normally categorized as either general or specific. General attitudes are situation-invariant and slow to change, whereas specific attitudes are situational and quick to change. The early pioneering studies of the attitude–WTP relationship used mostly ad hoc measures for environmental attitudes roughly from 1990, followed by the studies of more systematic representation roughly from 2000, and by those of hybrid models roughly from 2010. There were segmentation-based and parameterization-based approaches to incorporating attitudinal characteristics into valuation models. In particular, parameterization has appeared in three generations: indirect inclusion of indicators, sequential estimation using factor analysis, and integrated hybrid models. As future prospects, first, general environmental attitudes might play an important role in the coming decade because of their relative stability (i.e., situation invariant), comparability, and wide influence, determining environmental preferences and behaviors. Second, a potential difference between the segmentation-based and parameterization-based approaches requires further investigation. Third, the role of hybrid models and the payment parameter that is arbitrarily constrained demand more studies for accurate estimation of mean WTP values. The evolving nature of human preferences could be understood only when the observation scope for latent attitudes is enlightened enough to guide studies of environmental economics, to lead environmental policies, and to accomplish sustainable development.