Complementary Policy Instruments Research Articles

Assessment of the European Emissions Trading System’s Impact on Sustainable Development

This study explores the interaction between the emission trading system and the Sustainable Development Goals. Using an empirical analysis of a sample of European installations covered by the Emission Trading System from 2016 to 2021, we assessed how the system internalized the costs of carbon emissions across economic sectors and analyzed its impact on achieving the Sustainable Development Goals. The results revealed that while the increased efficiency of the emissions trading system had positive effects on environmental taxation and the reduction in economic losses due to climate change, challenges persist in natural resource use and energy dependence. This study offers new insight into the carbon ability pricing policies to properly allocate environmental costs. This study highlights the importance of integrating complementary policy instruments to strengthen effectiveness, given the link between the selected sustainable development and circular economy variables. The results provide stakeholders and policymakers with essential information for optimizing environmental policies and developing integrated approaches. If well implemented, such policies can effectively contribute to the fight against climate change and promote sustainable development by reducing social and environmental costs.

Impacts of Policy Mix Comprehensiveness on BIM Implementation: Moderating Effects of Environmental State and Response Uncertainty

Due to the great potential but limited use of building information modeling (BIM) as a milestone technology to reshape traditional design and construction practices, governments in many regions of the world have formulated specific sets of complementary policy instruments, namely, policy mixes, to facilitate the development of BIM in the construction industry. Drawing on institutional theory and the organizational sensemaking literature, this study aims to examine how regional institutional policies impact organizational BIM implementation practices and how these impacts are moderated by different sources of uncertainty related to policy making and enforcement from a policy mix comprehensiveness perspective. The effects were empirically tested with a panel data set of 992 high-tech construction firms from 31 provincial jurisdictions in China during 2011–2021. The results provide clear evidence that while regional policy mix comprehensiveness positively impacts the level of BIM implementation at the organizational level, this relationship becomes stronger when firms are experiencing higher levels of environmental state uncertainty derived from regional politician turnover but weaker when firms are experiencing higher levels of response uncertainty derived from organizational top management team (TMT) turnover. As an exploratory effort to empirically assess the impacts of policy environments in the conservative construction industry through integrating the complexity of both regional policy instruments and organizational decision-making processes, this study contributes to a deepened understanding of how construction firms interact with external environments to implement innovative technologies under institutional pressures. The findings reinforce the need to devise policies for innovation diffusion in the construction industry from a more systemic and contingent perspective.

Salience and Policy Instruments: Evidence from the Auto Market

We take advantage of a unique institutional setting that allows consumers to separately value fuel and vehicle (or road) taxes. We estimate a structural model of vehicle choice using consumer-level revealed preference and find that consumers undervalue both policy instruments, but undervaluation of the latter is substantially more severe. We examine potential explanations and document that behavioral explanations, in particular salience of the policy instruments, lie at the root of our findings; for a number of the salient versions of vehicle tax and fuel costs we then construct, we cannot reject the null hypothesis of their correct valuation. This also holds when using different measures of news and online search activity as proxies for salience. The results call for complementary policy instruments to restore market efficiency and for measures to make policy instruments more salient to consumers.

Promise and performance of agricultural nutrient management policy: Lessons from the Baltic Sea

Following decades of international collaboration to restore the Baltic Sea, we provide an assessment of the domestic implementation of measures agreed to limit diffuse agricultural pollution and the patterns of policy instruments applied. Despite the Helsinki Convention being unusually specific in detailing what measures countries should introduce, we find many shortcomings. These are most pronounced in the larger countries (Poland, Germany and Russia), while smaller countries perform better, notably Sweden and Estonia. The patterns of policy instruments applied differ, influenced by domestic politics. The limited use of complementary policy instruments suggests that other priorities overrule full and effective implementation, with engagement mirroring the advantages that a restored Baltic Sea can bring to countries. Using the European Agricultural Fund for Rural Development to support farmers in managing nutrients, particularly advisory services and investments in modern manure management technologies, represents a significant opportunity for reducing agricultural pollution in most countries.

Efficiency and the taxation of bank profits

We explore the effect of profit taxation and regulation of banks and other financial intermediaries in a setting in which intermediation is inefficient. The inefficiencies arise from imperfect screening of lenders, which tends to limit lending, and government provision of deposit insurance, which encourages excessive lending. An R+F cash-flow tax with and without full refundability of tax losses is applied to financial sector profits. As well, the government regulates the amount of lending financial intermediaries can do relative to their equity. With full refundability, the cash-flow tax is neutral and has no effect on existing distortions. The tax transfers rents to the government. If tax losses are not refunded in the event of bank insolvency, the tax discourages loans and the optimal tax rate is reduced. The optimal regulation of the loan–equity ratio of banks as a complementary policy instrument is characterized.

The new fertilizer regulation: A starting point for cadmium control in European arable soils?

Bioaccumulation of cadmium (Cd) in the agricultural soil constitutes a dangerous risk for the health of both the environment and humans. Especially in the European Union, a large amount of Cd in agricultural topsoil originates from mineral fertilizer application. In this context, the EU has recently adopted the Regulation (EU) 2019/1009 with the aim to establish stricter limits for Cd presence in fertilizer products and to promote a higher use of fertilizers from organic sources. This paper discusses the future implications of the new regulation to limit the presence of cadmium (Cd) in agricultural soils and food products. The Regulation (EU) 2019/1009 represents an important step of the EU circular economy action plan with its aim to encourage the production of low cadmium content fertilizers. This paper focuses on the limits of the Regulation (EU) 2019/1009 and on the need for complementary policy instruments to protect and conserve agricultural soil health. We highlight the recently proposed, and subsequently withdrawn, EU Soil Framework Directive (SFD) as a meaningful complementary policy tool in the context of a renewed effort to pursue protection and conservation of soil health.

The Turkish state’s responses to existential COVID-19 crisis

ABSTRACT This article focuses on how the Turkish state has been responding to limit the public health effects of COVID-19 pandemic to date. It aims to explain and understand the introduction, implementation and effect of health policy instrument mixes. It argues that although ‘presidentialisation’ of executive, and ‘presidential bureaucracy’ under presidential system of government are critical to introduce policies and implement their instrument mixes without delay or being vetoed or watered down which would otherwise occur in the parliamentary system of government, these features of impositional and exclusive policy style pose risks of policy design and implementation failures when the policy problems are poorly diagnosed, their policy solutions are wrong and/or complementary policy instrument mixes implemented ineffectively. However, a temporal, albeit temporary divergence from a dominant administrative tradition and policy style is most likely when a policy issue is esoteric (i.e. technical, scientific and expert-led) and framed as an existential crisis under high uncertainty that require scientific, expert-led, inclusive, early, quick and decisive responses to pressing policy problems.

Parallel Tracks Towards a Global Treaty on Carbon Pricing

We argue that a global carbon price is the only way to effectively tackle free riding in international climate policy, required to substantially reduce greenhouse gas emissions. We briefly review the main reasons behind the essential role of carbon pricing, address common misunderstandings and scepticism, and identify key complementary policy instruments. Negotiating global carbon pricing is argued to be much easier than negotiating binding country-level targets, especially if it includes equitable revenue recycling. Moreover, a global carbon price can be more readily adapted to new data and insights of climate science. We propose a political strategy towards a global carbon price that consists of two tracks. The first entails assembly of a carbon-pricing club, a specific case of a climate club, to gradually move towards a full participatory agreement on carbon pricing. The second track involves putting time and energy into re-focusing UNFCCC negotiations on a carbon-pricing agreement. The two tracks reinforce one another, increasing the likelihood of a successful outcome.

“Smart regulation” and community cooperation in Australia’s modern biosecurity context

ABSTRACTNeoliberal governments increasingly encourage greater industry and community self-reliance. This article investigates the potential use of “smart regulation”, that is, complementary policy instruments, in a context where reliance on voluntary approaches to achieve local cooperation is problematic. It explores the case of industry-driven “area-wide management” (AWM) of fruit fly, a potentially devastating mobile pest. AWM involves synchronised pest management across a geographical area. As host plants in nearby town backyards and peri-urban areas create fruit fly breeding places, pest management is also needed here. In Australia, most local horticulture industries are expected to drive these initiatives to minimise damage to their crops and market opportunities. AWM offers an example of where the beneficiaries are concentrated, but the risk contributors are diffused. Mixed-methods research was applied involving three Australian case studies. Considerations for four policy instruments that could be included in a “smart regulation” approach are explored. The article shows that applying “smart regulation” promises a prudent way forward when governments expect industry self-reliance, but where industry has limited influence over diffused risk contributors.

Renewable energy innovations and sustainability transition: How relevant are spatial spillovers?

AbstractIn the societal challenge to switch to renewable energy, innovation has become an ever‐increasing critical determinant. However, while sustainability transition is a global challenge, diffusion and adoption of innovation tends to be uneven in space and unequal access may cause substantial heterogeneity in energy transition. This research analyzes how domestic and foreign innovation activities in the renewable energy sector influence energy transition over time. Empirical testing shows that a country's domestic innovation activity impacts renewable electricity generation capacity sooner than foreign technological innovations. I document that there are substantial barriers to substitute foreign technologies for domestic innovation efforts in the short run but also observe that foreign technologies have a stronger impact after some years. These findings have implications for cross‐border coordination of governmental innovation support and complementary policy instruments that aim at increasing adoption speed across borders.

Does the Cohesion Policy Decrease Economic Inequalities in the European Union?

Abstract This paper examines the impact of the EU Cohesion Policy on the relative development of EU countries as well as on the development of NUTS-2 regions within member states. The main hypothesis is that the Cohesion Fund payments are reducing inequalities between member states, while failing to decrease the regional inequalities within member states in the European Union. The basic conclusion is that Cohesion funds should not be viewed as the only solution for the problem of regional inequalities in the EU, but rather as a complementary policy instrument to national regional policies. However, the problem of creating institutional capacity for the withdrawal of the Cohesion resources remains emphasized, especially in new member states with lower real GDP growth, in order to compete for projects of highest multiplicative effects on the economy.

The behavioral impacts of firm-level energy-conservation goals in China's 11th five-year plan.

Energy efficiency is one of the most effective means of curbing energy consumption and associated pollutant emissions. However, energy-saving opportunities at negative net costs, or an energy-efficiency gap, widely exist and they defy an entirely rational explanation. This paper examines the significant overperformance of energy-intensive firms against their assigned energy-conservation goals in a national program in China's 11th Five-Year plan (2006-2010). Higher energy prices can be only partially responsible for more active energy saving. Behavioral constraints are explained to cause the bounded rationality of firms on energy-efficiency investment. As our theoretical and empirical studies show, energy-conservation goals could overcome such behavioral constraints to accelerate the commercialization of energy-efficiency technologies, reduce uncertainty and hesitancy of relevant investment, facilitate the enrichment of information, and concentrate the attention of firms on energy conservation. We conclude that goal-setting could provide an effective complementary policy instrument in dealing with energy conservation in China and possibly in other parts of the world.

Effect of Price and Non-price Incentives on Production and Marketable Surplus of Food Crops Supply in Ghana

Aim: This study examined food crop farmers’ supply responsiveness to selected price and non-price variables. Study Design: Cross-sectional design Place and Duration of Study : The study was carried out in Ejura Sekyeredumasi District in the Ashanti Region of Ghana and data was collected in November 2013. Methodology: A simple random sampling technique was used to sample 250 farmers for the study. Structured questionnaire was used to solicit information from the sampled farmers on production and marketing of maize and cassava. The study used a modified Nerlovian supply model to analyse the data in order to assess farmers’ supply responsiveness to selected price and non-price variables. Results: The results of the study revealed that food crop farmers respond favourably and promptly to incentive package (price or non-price factors) and this reflected in farmers’ output and farm management practices. Conclusion: The study provides evidence to support price incentives and non-price factors on food crop supply response. It suggests that a strong complementary policy instrument involving price and non-price factors will provide a fillip to agricultural productivity.

WATER QUALITY TRADING IN THE PRESENCE OF ABATEMENT‐COST SHARING

This paper examines how water quality trading interacts with nonpoint‐source abatement‐cost sharing (e.g., as currently practiced by the National Resource Conservation Service through its Environmental Quality Incentives Program [EQIP]) to promote the participation of nonpoint sources in a water quality market, participation that has thus far been noticeably lacking nationwide. As such, an idealized version of water quality trading is envisioned, where water quality trading and nonpoint cost sharing are treated as complementary policy instruments rather than substitutes. Toward this end, the subgame‐perfect equilibrium concept is used to model a “multilateral contracting” relationship between the regulatory authority and nonpoint sources when the regulator has incomplete information about the nonpoint sources' production costs. We characterize ex ante (or second‐best) nonpoint abatement levels when the regulator chooses cost‐share rates in concert with a water quality market. Numerical analysis indicates that current EQIP cost‐share rates would likely be lower and more flexibly determined in the presence of water quality trading. (JEL Q53)

Financial market imperfections and monetary policy strategy

In a model with imperfect money, credit and reserve markets, we examine if an inflation-targeting central bank applying the funds rate operating procedure to indirectly control market interest rates also needs a monetary aggregate as policy instrument. We show that if private agents use information extracted from money and financial markets to form inflation expectations and if interest rate pass-through is incomplete, the central bank can use a narrow monetary aggregate and the discount interest rate as independent and complementary policy instruments to reinforce the credibility of its announcements and the role of inflation target as a nominal anchor for inflation expectations. This study shows how a monetary policy strategy combining inflation targeting and monetary targeting can be conceived to guarantee macroeconomic stability and the credibility of monetary policy. Friedman's k-percent money growth rule, which can generate dynamic instability, and two alternative stabilizing feedback monetary targeting rules are examined.

Assessment of current Dutch energy transition policy instruments for the existing housing stock

This research assesses to what extent current Dutch energy transition policy instruments for the existing housing stock can fulfil local executive actors’ needs and instigate adoption of energy efficiency measures by them. This is done by studying energy policy instruments for the existing housing stock in the Netherlands and in other European countries, and by an empirical research, which analyses barriers and needs of local executive actors. We found that, despite current Dutch energy transition policy instruments for the existing housing stock seem to fulfil local executive actors’ needs to a large extent, complementary policy instruments are needed to stimulate and pressure the incumbent renovation regime. A long-term oriented financial rewarding system is needed to build up a structural market for the deployment of renewables, to increase the number of specialist jobs in the building sector, and to stimulate the development of integrated, standardized, building components. Furthermore, a long-term oriented financial rewarding system for energy efficiency investments in housing renovation projects, and a low VAT rate applied to energy efficient renovation measures, are needed. Finally, enforcement possibilities and sanctions (fines) should become an integrative part of Dutch energy certification regulation to make the certificate become part of a value chain.

Reframing expert support for development management

AbstractThree critiques of participatory development (PD) and their respective challenges for expert support are discussed—(i) the masking of ideological imperatives behind PD, (ii) the depoliticising practice of policy language and (iii) the restrictive space for enabling responsible support from different fields of expertise including science. Drawing on the experience of two interventions—one Guyana based and one European based—three conceptual tools are suggested for dealing with these issues, respectively. First, systems thinking is described from a critical systems perspective, interrogating the legitimacy of boundaries that we use to frame reality. Second, social learning is considered as a complementary policy instrument in which language and communication are regarded as integral to development. Third, critical space for systems thinking and social learning is examined with reference to the limitations of space provided by conventional project management. Copyright © 2008 John Wiley & Sons, Ltd.

Incentives to improve farm management: EMS, supply-chains and civil society

This paper focuses on impediments to environmentally sound management practices and how these might be overcome, with an emphasis on the role of environmental management systems, supply chains and civil society. It argues that: • Farmers are under increased pressure to cut costs and improve production but with little opportunity to increase prices. Commonly short-term economic interest has damaging environmental implications. • Current government policy, in Australia and in many other jurisdictions, relies heavily on voluntary arrangements, education and information, as the main policy instruments through which to persuade farmers to adopt better environmental farm management—e.g. the recent push to encourage the use of voluntary environmental management systems. • However, there is good evidence to suggest that these can only make a valuable contribution when combined with a range of other policy instruments, including positive and negative incentives, intervention by third parties and in some cases, an underpinning of regulation. • Arguably, what is needed is a strategy that builds on the strengths of voluntary environmental management arrangements while compensating for their weaknesses by combining them with other, complementary policy instruments. If so, we must engage with a range of questions that have not so far figured substantially in the policy debate. • Although the principal focus has been on the role of government in bringing about on-farm change in management practices, supply chain pressure (at least in respect of agricultural chemicals and practices which threaten food safety) and civil society action are also potentially powerful mechanisms for bringing about change. Government can and should play a role in harnessing such forces in the interests of improved environmental on-farm practices.

Evaluation of dutch public investment plans

This article describes a pragmatic method recently used in The Netherlands to evaluate public investments plans. Using this method, very different kinds of investment plans were evaluated for economic, social, and ecological impacts, and direct links were made with a policy-making process. The research institutes involved were asked to develop a general appraisal method on the basis of which they would rank the investment proposals. All the plans were labeled as (a) “a solid plan,” (b) “possibly a solid plan but requiring improvements” (upgradable), or (c) “a weak plan.” The research institutes also were asked to estimate the effects of combining investment plans with complementary policy instruments like regulations and/or pricing instruments. Along with the method, options for its improvement will be discussed.

Optimal environmental tax, waste disposal charge, and illegal waste disposal

In an attempt to reduce household waste, many countries are adopting user-pays systems such as weight-based curbside collection charges. As shown in Fullerton and Kinnaman [AER, 86, 1996], however, waste disposal charges open up the possibility of illegal disposal, calling for costly monitoring of illegal disposal or other complementary policy instruments. This necessitates a comprehensive model of waste management which can simultaneously address various policy instruments directed at waste generation during production and consumption as well as waste disposal. The model studied has environmental taxes, waste collection charges, and the monitoring of illegal waste disposal as policy instruments. At the same time, the model differentiates two types of household goods for which different waste management policies have to be adopted. For the first type of household goods, the amount of waste to be disposed of (e.g., packaging and containers) is more or less independent of the household's waste reduction effort. For this type of waste, the waste collection charge higher than the private cost of illegal disposal can lead to illegal disposal without the benefit of increased waste reduction effort. This may incur further costs of monitoring illegal disposal. As the household's waste disposal decision is the most relevant issue in this case, an optimal policy requires that the waste collection charge be low enough to prevent illegal disposal and that the household be indirectly charged for waste disposal through an environmental tax. In the case of a perfectly elastic supply curve where the tax is fully shifted to the consumer price, an optimal waste collection charge is zero and the legal waste disposal should be financed entirely through the environmental tax. Therefore, a user-pays system is not optimal for this type of waste. For the second type of household goods, the household's waste reduction effort (e.g., reusing and composting) can be significant. A low waste collection charge fails to provide enough incentive for such effort. An increase in the waste collection charge, however, increases the marginal benefit of illegal disposal as well as the marginal cost of consumption. The former can be remedied through monitoring and fining illegal disposal and the latter through an environmental tax. The resulting optimal policy generally has a strictly positive waste collection charge, an environmental tax that is less than that for the first type of waste, and a positive probability of monitoring illegal disposal. Thus, a user-pays system of waste disposal is relevant. Comparative statics of optimal policy for the second type of waste highlights the interdependence of policy instruments. An increase in the waste disposal cost has to be accompanied by a simultaneous increase in the waste collection charge, the environmental tax, and the monitoring effort. An increase in the monitoring cost has to be accompanied by a higher environmental tax but a lower waste collection charge and lower monitoring effort. An increase in the fines for illegal waste disposal has to be accompanied by a lower environmental tax, a higher waste collection charge, and a lower monitoring effort. This interdependence of policy instruments has not been satisfactorily addressed in most existing studies.