A COMPARISON OF THE EFFECTIVENESS OF INCENTIVES AND DIRECTIVES: THE CASE OF DUTCH WATER QUALITY POLICY

The use of effluent charges as an instrument o f regulatory policy has been the object of much dispute. The controversy between advocates and opponents of replacing directives by incentive strategies in various fields of public intervention has always been rather heated, though carried on more in terms of theory than of empirical evidence drawn from experience with policy instruments in actual operation. Much like permit trading in the United States, regulatory effluent charges in The Netherlands more or less "sneaked in through the back door." The Dutch system o f water quality charges had originally been designed to fulfill solely a revenue-raising function.
The unique features of The Netherlands system make it an interesting example of the use of charges. The Dutch system of effluent charges has been in operation since 1970 and, in terms of the level of the charges, is more than twice as large as the more recent German program. Furthermore its use as a regulatory instrument has been "accidental." It did not replace the official intervention strategy of direct regulation. Given this situation, the Dutch case provides a unique opportunity to examine the effects of these two approaches as they were applied to the same case.
Three statistical analyses of the impacts of the policy instrument used, supplemented by two expert assessments of these impacts, show the Dutch effluent charges have had a very remarkable effect on industrial polluters. In Holland, t h e water quality policy i s regarded as one of t h e few examples o f successful governmental intervention. The final section presents some general thoughts on relevance of the Dutch experience with effluent charges for other countries.     

The impact of a gasoline tax on auto exhaust emissions

The EPA implements its policy of exhaust emission control by setting standards specified in terms of grams of pollutants per mile traveled. As a result, the tax must first restrain the vehicle miles traveled (VMT) if it is to have an impact on emission at all. EPA's choice of miles traveled as the medium through which its policy of pollution control must run is unfortunate, because travel is an activity that people resist giving up. This is reflected in a low long-run price elasticity of travel demand. Consequently, it takes substantial increases in the gasoline tax to make an impact on long-run travel demand. Simulation results show that under an alternative policy option, where EPA's standards are specified in terms of grams of pollutant per gallon of fuel burned, the same long-run reduction in exhaust emissions achievable today can be achieved (at an even higher level of confidence) with less than one-tenth of the increase in gasoline price required under the existing policy regime.     

Compensation rules for climate policy in the electricity sector

Most previous cap and trade programs have distributed emission allowances for free to incumbent producers. However, in the electricity sector the value of CO₂ allowances may be far in excess of costs to industry and giving them away to firms diverts allowance value from other purposes. Using a detailed simulation model, this paper shows that compensation to firms losing asset value under a climate cap and trade policy can be achieved for a small fraction of total allowance value, if targeted carefully. However, the economic efficiency cost of providing incremental compensation to reach the fully compensated level is many multiples of that incremental compensation. These considerations might move policymakers away from free allocation of CO₂ emission allowances in the electricity sector. © 2008 by the Association for Public Policy Analysis and Management.     

Introducing “Cooperative Push”: How Inefficient Environmental Policy (Sometimes!) Protects the Global Commons Better

In this paper we argue that the incentive structures of the gamesnations play in international environmental negotiations dependupon the choice of environmental policy instruments. Bargainingon the use of some instrument (e.g. an effluent charge) mayput the players into a dilemma game (like Chicken). Negotiationsto apply a different instrument (say, an emission reductionquota) may lead to a cooperation game (like Stag Hunt). The higherthe incentive to cooperate in the type of game which is built upby a specific instrument, the higher is this instrument's``cooperative push''. Of course, comparing two instruments,the one with the higher cooperative push might well be the lessefficient one. In this Paper, we analyse a situation where thehigher cooperative push of an instrument overcompensates thisinstrument's lower efficiency: Aggregate welfare withbilateral cooperation (the equilibrium of Stag Hunt) is higher than withunilateral cooperation (the equilibrium of the Chicken game).The question remains whether sovereign countries decide to playStag Hunt ending up in the welfare superior equilibrium. It isshown below that they do not in an uncoordinated optimising setting.However, we develop a particular frame where the proposedsolution meets the criteria of individual rationality,stability and fairness. It thereby establishes the politically mostdesired result – international cooperation.     

An Indian story on carbon emission,energy consumption,trade openness,and financial development

This paper empirically studies the impact of energy consumption, financial development, and trade openness on India's carbon emission for 1971 to 2014 and validates the environmental Kuznets curve hypothesis for India. The Autoregressive Distributed‐lagged model (ARDL) bound test is used to test the existence of cointegration among the key variables. The results exhibit a U‐shaped relationship between carbon emission and energy consumption in the long run. Through this study, we find out the maximum threshold value of energy consumption per capita to 757 kg of oil equivalent, which is above the current consumptions levels—indicating a rise in carbon emission shortly. Further, the long‐run results show that a 1% increase in trade openness will decrease carbon emission by 0.11%, which is a display of technological effect over scale effect and composition effect. Financial development does not exhibit a significant relation to carbon emission. The results are in line with the literature on climate change in emerging countries. This empirical work gives some insight into policy issues that have to be looked into further.     

Pigouvian policies in closed behavioral systems

This essay-analyzes the Pigouvian tax-subsidy policy, reviews the traditional justification and several practical and theoretical criticisms of it, and offers three arguments about the Pigouvian policy and the implied structure of effluent charges (as well as subsidies). First, many proponents of a Pigouvian policy misinterpret its purpose. The tax is not designed to reduce pollution to an ‘acceptable’ level, but to maximize joint production value. Second, Pigouvian effluent charges may violate some constructions of the equal protection clause. Third, these charges may violate, also, some constructions of the due process clause, as well as the ethical criteria that the right of due process implies.     

Assessing the role of regulatory quality,favouritism, administrative requirement and licencing restriction in curtailing carbon emissions

The urgent need to achieve the Paris Agreement has compelled countries to set mitigation targets to curtail carbon emissions. Notwithstanding, stakeholders' effort to implement emission-reduction policies is often constrained by institutional challenges. This study provides new evidence about the dynamic relationship between institutional quality and carbon emissions in 63 industrialised economies. Using a reduced-form energy emission model and the system GMM technique, we exploit four institutional quality measures—favouritism, administrative requirement, licencing restriction and regulatory quality—and analyse their impact on carbon emissions. The results show that institutions play a fundamental role in mitigating carbon emissions. However, the abatement effect depends on the regulatory quality, the extent of favouritism, licencing restrictions and administrative requirements. Our findings reveal that stringent regulations such as licencing restrictions reduce carbon emissions in the short and long run. Administrative requirement such as emission reporting inhibits carbon emission in the short and long run, whereas favouritism worsens it. The results are robust to alternative model specifications. The findings from this study highlight the need for policymakers to pay close attention to favouritism, as it tends to reduce the effectiveness of emission policy regulations. Additionally, we argue for the need for stringent administrative requirements given its critical role in internalising carbon emission intensity in industrialised economies.     

Emission Standards,Public Transit,and Infant Health

Transit buses are an integral part of urban life. They reduce externalities generated from private vehicles and increase geographic mobility. However, unlike most private vehicles in the United States, they use diesel fuel and emit higher amounts of toxic pollutants. The U.S. Environmental Protection Agency set emission standards for transit buses starting in 1988 that have been continually updated, but their public health and economic impacts are unclear due to scarce emissions data. I construct a novel panel dataset for the New York City (NYC) Transit bus fleet between 1990 and 2009 and examine the impact of bus pollution on infant health by using bus vintage as a proxy for emissions. I exploit the variation in vintage as older buses are retired and replaced with newer, lower‐emitting buses forced to adhere to stricter emission standards. I then assign maternal exposure to bus vintage at the census block level. Findings suggest that maternal exposure to the oldest, unregulated buses is associated with modest reductions in birth weight and gestational age relative to newer buses that abide by emissions policies. I then conduct a back‐of‐the‐envelope cost‐benefit calculation and find net economic benefits of $53.3 million resulting from improved emission standards for the 2009 birth cohort in NYC. Since the treatment in this study clearly maps to federal emissions policies, these results are the first to provide credible evidence that transit bus emission standards had a positive effect on infant health.     

The political economy of environmental regulation: Towards a unifying framework

There are several theories that attempt to explain various aspects of environmental policy. Building on insights from this theoretical work, and recent advances in our understanding of instrument performance, this paper constructs a more complete theory of environmental regulation. There are two primary contributions of this research. The first is to provide more satisfactory explanations for a number of observed patterns of environmental policy. For example, there is, as yet, no satisfactory theory about the emergence of incentive-based mechanisms, such as marketable permits and effluent fees. The second contribution of this paper is to develop a parsimonious framework for understanding many important aspects of environmental policy. This framework suggests the outputs of environmental policy emerge from a struggle between key interest groups.This research was supported by the National Science Foundation. I would like to thank Gordon Hester for helpful comments. Responsibility for the final product rests solely with the author.     

Equity and information: Information regulation,environmental justice,and risks from toxic chemicals

Decreases over time in pounds of industrial chemical emissions have led to concerns that nonminority, higher‐income communities have benefited disproportionately in reductions in risk. Toxic chemical release data, modeled for toxicity and dispersion in square kilometer units across 45 states, are used to test six sets of hypotheses of potential interactions between facilities and the communities surrounding them. The results provide mixed evidence that ethnicity explains chemical emission changes. Stronger support is found that changes in emission patterns are affected by a community's ability to process complex information and its capacity for collective action, and industrial production factors. Some support is found for the efficacy of state environmental policies that both do and do not fit the traditional regulatory model in encouraging risk reductions. © 2005 by the Association for Public Policy Analysis and Management     

The empirical relationship between carbon emission and energy use of BRICS nations

In literature, there has been a large number of empirical research to examine the impact of CO2 emission on economic activity popularly known as the Environmental Kuznets curve having an inverted U shape relationship. The increasing environmental problem and environmental degradation are global phenomena due to increasing economic activities. In order to verify this relationship empirically in the context of BRICS nations, the present study intends to investigate the importance of energy use in the estimation of carbon emission while controlling GDP, industry value added and trade openness using Ordinary Least Square (OLS) and Fixed Effect (FE) Models. Our findings have confirmed that the relationship between CO2 emission and GDP confirmed inverted U‐shaped of the EKC. The direction of the relationship between squared LNIVA and LNCO2P further reinforce the inverted U‐shaped EKC. The relationship between LNEU and CO2P also satisfied the inverted U‐shape of the EKC. This may be due to the practice of energy efficiency and energy conservation measures in industrial sectors in BRICS nations. However, BRICS nations should also emphasize renewables and policies need to be aligned accordingly to keep CO2 emission at a lower level so that global warming could be kept to below 1.50°C, which is the target given by Paris Agreements.     

Performance targets,path dependence,and policy adoption: evidence from the adoption of pollutant emission control policies in Chinese provinces

Abstract

Although performance targets imposed by high levels of governments are an important vertical result-oriented influence on local governments’ policy adoption, no studies have examined the impacts of performance targets on policy processes. Using the adoption of atmospheric pollutant emission standards by Chinese provinces in the 2000 to 2015 period, this study runs spatial autoregression models to investigate the effects of mandatory performance targets on environmental policy adoption processes in China. The results show that top-down performance targets can drive the adoption of atmospheric pollutant emission standards in Chinese provinces. Furthermore, the influence of vertical environmental performance targets on the adoption of local atmospheric pollutant emission standards is stronger in Chinese provinces that have adopted more similar standards in the previous period. The results show that top-down performance management shapes the policy adoption processes and policy adoption of Chinese provinces under vertical result-oriented performance target pressure is path-dependent.     

Choosing among fuels and technologies for cleaning up the air

One of the central elements in the 1990 Clean Air Act Amendments is the regulation of emissions from motor vehicles. This legislation will have a dramatic impact on the type of cars people drive over the coming decades. Given the high cost of achieving further reductions from automobiles, there has been increasing interest in exploring new technologies and alternative fuels that improve environmental quality. The purpose of this study is to provide an integrated framework for assessing the cost effectiveness of control options that involve a combination of vehicle changes and fuel changes. This study demonstrates the importance of doing an integrated analysis in selecting an appropriate combination of technologies and fuels; it also highlights the need to consider decentralized regulatory approaches, such as effluent taxes and marketable permits, when the data are characterized by large uncertainties. The analysis suggests that a modest improvement in vehicle control technology is probably a cost effective strategy for reducing ozone; however, using a severely reformulated gasoline or an advanced technology, such as the electric vehicle, is unlikely to be cost effective compared with other available options for improving air quality. The cost savings from introducing a market-based approach in place of a vehicle mandate in California and the Northeast are estimated to range from $7 to $29 billion.     

How Policy-Making Affects Implementation: The Decentralization of the Danish Disablement Pension Administration*

‘Presidents are more likely to be punished for not making promises of administrative reform than for not implementing them.’ (March & Olsen 1983, 291) Policy-making and implementation have usually been treated as two distinct disciplines. In this article it is argued that implementation is affected by the prior policy-making process. Hypotheses regarding such impacts are derived from the policy-making theories resting on a) the rational decision-making model. b) the conflict-bargaining model, and c) the garbage-can model: Implementation failures are more likely 1) if goals are absent or vague and if alternatives and their consequences have not been considered; 2) if the policy-making process involves participants with conflicting interests and compromising; 3) if there are many and changing participants with limited attention and if symbols are important in the poky-making process. These hypotheses are tested and discussed in relation to a reorganization case, the decentralization of the disablement pension administration in Denmark in 1976.     

Biographische Erfahrungen und politische Einstellungen zwischen Jugend und Lebensmitte

The research aims at explaining the development of political attitudes between youth and midlife by biographical experiences. The sample is a cohort of 1596 former German high school students. The social origin and the political socialization of this cohort has been surveyed at age 16, and the life history as well as political attitudes at age 30 and 43; because of its educational privilege the cohort could extend its youth until age 30. As for political attitudes which may typically change between youth and midlife, value claims and their counter-part, the acknowledgement of societal constraints, are examined. The aim of the research is attained through three steps. First, it is examined if biographical experiences up to age 30 determine value claims, over and above the starting conditions of the “formative years”. As expected, occupational experiences lower value-claims, even if social origin and political socialization are controlled for. Second, it is examined if value-claims shrink between age 30 and 43 and the acknowledgement of societal constraints grows — which is confirmed. Third, it is examined, if at age 43 value claims are determined by occupational experiences between age 30 and 43 even when value-claims at age 30 are controlled for — which again is confirmed. The conclusion is that political attitudes after the “formative experiences”, in spite of their high stability, are still determined by occupational experiences.     

Which Side Are You On? Bias,Credibility, and Mediation

Mediators are often thought to be more effective if they are unbiased or have no preferences over the issue in dispute. This article presents a game theoretic model of mediation drawing on the theory of "cheap talk" which highlights a contrary logic. Conflict arises in bargaining games because of uncertainty about the resolve of the parties. A mediator can reduce the likelihood of conflict by providing information on this score. For a mediator to be effective, however, the parties must believe that the mediator is telling the truth, especially if the mediator counsels one side to make a concession because their opponent has high resolve and will fight. An unbiased mediator who is simply interested in minimizing the probability of conflict will have a strong incentive to make such statements even if they are not true, hence the parties will not find the mediator credible. Only mediators who are effectively "on your side" will be believed if they counsel restraint.     

Can markets be expected to prevent themselves from self‐destruction?

Even if competitive markets have shown themselves to be the most efficient organizational form for creating economic efficiency, the question of how they can avoid destructive influence from agents with opportunistic motives remains unresolved. Different institutional approaches have argued that to be efficient, markets need to be embedded in a set of formal and informal institutions. Because such institutions will in the long run make all market agents better off, they are labeled efficient institutions. Contrary to what is argued in neoclassical economics, it is unlikely that such institutions will be created endogenously by market agents because the institutions are to be understood as genuine public goods. Moreover, if such institutions have been established, we should expect market agents to face a collective action problem when sustaining them, leading to the destruction of the institutions. The conclusion is that if left to themselves, markets should be understood as inherently self‐destructive.     

If Extremists Vote How do They Express Themselves? An Empirical Test of an Expressive Theory of Voting

The expressive theory of voting needs more specification of the motives for expression if it is not merely to be a theory of non-instrumental voting. Brennan and Hamlin provide such a specification. Unfortunately, using individual U.S. data from the General Social Surveys we find their predictions are contradicted. Nor if other evidence in the literature purported to be evidence of expressive voting actually implied by it. We believe that this is because the reason people express themselves in voting is to signal others.     

Pre-electoral coalitions in comparative perspective: A test of existing hypotheses

Despite the vast coalition literature, pre-electoral coalitions have never been at the center of any systematic, cross-national research. Given their prevalence and potential impact on government composition and policies, this represents a serious omission in our knowledge of coalitions. I begin to remedy this situation by testing two hypotheses found in the literature on party coalitions. The first is that pre-electoral coalitions are more likely to form in disproportional systems if there are a sufficiently large number of parties. The second is that pre-electoral coalitions are more likely to form if voters face high uncertainty about the identity of future governments. These hypotheses are tested using a new dataset comprising legislative elections in 22 advanced industrialized countries between 1946 and 1998. The results of the statistical analysis support the first hypothesis, but not the second.     

The impacts of an auto weight limitation on energy,resources, and the economy

The impacts of a hypothetical auto weight limitation on energy conservation, resources usage, pollutant emission and the economy are quantitatively estimated by a linear input-output model and a linear estimation method. These estimations are the first step toward a multiple criteria formulation for understanding and solving complex energy problems.Currently at the School of Business, University of Kansas at Lawrence.