Marjan Hofkes

This paper analyses a model in which both economic and ecological relationships as well as all the interactions between the two are fully specified. It compares the short term and the long term effects of shocks in environmental policies. It appears that short run effects may differ substantially from long run effects, with respect to both levels and growth rates of various variables. Though in the short run growth optimists may be right, in the long run there appears to be, under the chosen specification, a trade-off between economic growth and environmental quality.

This paper can be downloaded without charge at: The Fondazione Eni Enrico Mattei Note di Lavoro Series Index: http://www.feem. it/web/activ/_activ. html Social Science Research Network Electronic Paper Collection: http://papers'ssm'cm/abstract=XXXXXX Corso Magenta, 63, 20123 Milano, tel. +39/02/52036934 - fax +39/02/52036946 E-mail: letterfeem. it C.F. 97080600154 SUMMARY In this paper we develop a simple endogenous growth model with two competing production technologies and learning spillover effects between firms that use the same technology. Investments are directed to the technology with highest current and expected returns. Since current investments increase future returns through learning, the economy will usually lock in, that is specialise in one of the two technologies. In case the economy has selected a relative polluting technology, sustainable growth requires a transition towards the clean technology. We analyse the scope for (environmental) policies that induce such a transition

Abstract: We develop a climate-economy model with active learning. We consider three ways of active learning: improved observations, adding observations from the past and improved theory from climate research. From the model, we find that the decision maker invests a significant amount of money in climate research. Expenditures to increase the rate of learning are far greater than the current level of expenditure on climate research, as it helps in taking improved decisions. The optimal carbon tax for the active learning model is nontrivially lower than that for the uncertainty model and the passive learning model. JEL classification: Q54

This paper analyses ustainable development in an endogenous growth model which inte-grates a dynamic specification of both economic and ecological relations and all the interactions between the economy and the natural environment. It is common practice to solve growth models by looking at a balanced growth solution, which is often associated with sustainable development. We derive the conditions under which sustainable development is feasible and optimal. Finally, we discuss some comparative statics of the balanced growth solution and give a numerical example to illustrate the model and to provide further insight. JEL classification: O41; Q20; D60

De laatste decennia laten een drastische toename van de uitstoot van broeikasgassen zien. Inmiddels wordt algemeen erkend dat het versterkte broeikaseffect in belangrijke mate door de mens wordt veroorzaakt. Het versterkte broeikaseffect zal naar verwachting leiden tot klimaatveranderingen, die overwegend als onwenselijk worden beschouwd. Om te komen tot een stabilisatie van broeikasgassen in de atmosfeer is een reductie van energieverbruik en daarmee gepaard gaande emissies vereist. Dit vraagt om beleid aangezien niet verwacht kan worden dat ‘de markt’ deze reductie tot stand zal brengen, gegeven onder meer het bestaan van afwentelingprocessen (‘externaliteiten’) en gebrek aan prijsprikkels (‘ongeprijsde schaarste’). Om te komen tot een reductie van energieverbruik en daarmee gepaard gaande emissies zijn er in principe drie mogelijkheden. De eerste optie is minder produceren en een lagere economische groei accepteren. De tweede optie is het wijzigen van de samenstelling van ons con...

In this paper we analyse whether it is Pareto Optimal to exclude individuals from using a non-pure public good. It turns out that maximum Social Welfare is attained either when everybody is allowed to use the public good or when just one individual is allowed to use it, depending upon the Social Welfare function. These Social Welfare Optima are also Pareto Optimal allocations. Whenever restrictions are made with respect to equal consumption plans for all users and equal consumption plans for all nonusers so-called Restricted Pareto Optima can be attained for every number of users. These Restricted Pareto Optima are not always also unrestricted Pareto Optima.

This paper investigates the role of emissions control on reducing the tail-effect of the fat-tailed distribution of the climate sensitivity. Through a simple analysis on temperature distributions and some numerical simulations using the well-known DICE model, we find that the option for emissions control effectively prevents the tail-effect. Climate policy based on HARA utility is less sensitive to fat tails than climate policy based on CRRA utility.

We develop a climate-economy model with active learning. We consider three ways of active learning: improved observations, adding observations from the past and improved theory from climate research. From the model, we find that the decision maker invests a significant amount of money in climate research. Expenditures to increase the rate of learning are far greater than the current level of expenditure on climate research, as it helps in taking improved decisions. The optimal carbon tax for the active learning model is nontrivially lower than that for the uncertainty model and the passive learning model. JEL classification: Q54

textabstractThis paper studies the adoption and diffusion of energy-saving technologies in a vintage model. An important characteristic of the model is that vintages are modeled as being complementary: there are returns to diversity of using different vintages. We analyse how diffusion patterns and adoption behaviour are affected by complementarity and learning-by-using. It is shown that the stronger the complementarity between different vintages and the stronger the learning-by-using, the longer it takes before firms scrap (seemingly) inferior technologies. We argue that this is a potentially relevant part of the explanation of the energy-efficiency paradox. Furthermore we explore the effects of energy tax policies.

In this paper an endogenous growth model is analyzed which takes account of environmental deterioration and abatement. The environment plays a role both in production and welfare. It is common practice to solve growth models by looking at a balanced growth solution, which is often associated with sustainable development. We derive the conditions under which sustainable development is feasible. Furthermore, the conditions for optimal balanced growth are derived. Finally, some comparative statics of the balanced growth solutions are discussed and a numerical example is given to illustrate the model and to provide further insight. JEL code

We develop a climate-economy model with active learning. We consider three ways of active learning: improved observations, adding observations from the past and improved theory from climate research. From the model, we find that the decision maker invests a significant amount of money in climate research. Expenditures to increase the rate of learning are far greater than the current level of expenditure on climate research, as it helps in taking improved decisions. The optimal carbon tax for the active learning model is nontrivially lower than that for the uncertainty model and the passive learning model.

In this paper, we present a measure of Sustainable National Income (SNI) , which corrects Net National Income (NNI) for the costs to bring back environmental resource use to a ‘sustainable’ level. The SNI measure is calculated for the Netherlands, for the years 1990 and 1995. We use an applied general equilibrium (AGE) model specifying 27 production sectors. The model includes emissions and abatement cost curves, based on large data sets for 9 environmental themes. The model combines the advantages of a top-down approach (the AGE model) with the information of a bottom-up approach (the environmental data and data on emissions reductions costs). We are specifically interested in the change of SNI in connection to changes in the standard measure of Net National Income (NNI). Economic change over the period 1990-1995 is analysed regarding changes in overall scale, sectoral composition of production and consumption, and technologies used for production. We show that economic growth per ...

This paper analyses a model in which both economic and ecological relationships as well as all the interactions between the two are fully specified. It compares the short term and the long term effects of shocks in environmental policies. It appears that short run effects may differ substantially from long run effects, with respect to both levels and growth rates of various variables. Though in the short run growth optimists may be right, in the long run there appears to be, under the chosen specification, a trade-off between economic growth and environmental quality.

For a preference function U(y), to be a proper representation of the community's well being, y should contain all relevant aspects of life and will therefore be of high dimension. In any analysis to support policy proposals this high dimensionality needs to be reduced to an operational setting. A policy problem is therefore studied in a projection of U(y) into some explicitly defined variables. In this paper it is shown how preference functions can be based upon interviews of political parties. This helps to highlight consequences often ignored.

This paper presents a novel Bayesian Hybrid Choice Model dealing with decision uncertainty in stated choice studies. Treatment of self-reported choice certainty follow-up responses by choice modellers has been limited from a methodological perspective, relying on either a purely one-directional impact, making self-reported choice certainty a result of utility differences across the alternatives in the choice set without recognising that decision uncertainty itself may influence utility, or using self-reported choice certainty directly as an explanatory variable in the utility functions, with potential risk of endogeneity bias as well as measurement error. Endogeneity arises when the alternatives in the choice task are close to each other in terms of their utility levels, then the choice task is perceived as complex and respondents report this in the follow-up question presented jointly with the choice task. Using the self-reported choice certainty response directly as an explanatory...

We use the latest version of the GTAP multi-sector / multi-country model to assess the impact of sea level rise on transport infrastructure. Using DIVA output as input, our results indicate that Global GDP is depressed, but European GDP is less affected compared to the rest of the world. Sea level rise as projected in the IPCC RCP8.5 scenario causes global welfare losses of USD 61 billion in 2050. These losses are mainly caused by productivity losses in sea transport. We show that globally the welfare losses exceed the direct transportation cost changes by 30%, with substantial regional variation. Developed regions adjust better to increases in transportation costs than developing regions. Through transport, sea level rise causes significant changes to the global economy.