Design Of Policy Instruments Research Articles

Land-use and species tipping points in a coupled ecological-economic model

Complex systems can have tipping points where the system behavior changes abruptly from one regime to another. We develop an ecological-economic model that simulates the spatio-temporal dynamics of the land-use induced by a tradable permit market and its consequences on the viability of a model species. The model analysis reveals that the land-use dynamics are subject to a tipping point with regard to changes in policy scheme design. One the level of species viability, this tipping point is amplified and a second tipping point emerges. The two tipping points interact and their location and sharpness depend on the characteristics of the species. We conclude that in the consideration of coupled ecological-economic systems tipping points can play an important role. The existence of tipping points considerably complicates the design of policy instruments for the sustainable management of ecological-economic systems because a small change in the policy design can have dramatic consequences on the system dynamics.

The flexible prosumer: Measuring the willingness to co-create distributed flexibility

Rising shares of fluctuating renewables increase the need for flexibility in the power market. At the same time, the emergence of the prosumer has created new opportunities for co-creation of distributed flexibility. As of yet, there is surprisingly little empirical analysis in terms of whether individuals are actually ready to co-create flexibility, and if so, under which conditions these resources can be mobilized by grid operators or electricity supply companies. We address this gap in the energy economics literature with three studies analyzing in total 7′216 individual decisions in a series of choice experiments with 902 study participants in three main domains of residential energy prosumption: (1) solar PV plus storage, (2) electric mobility, (3) heat pumps. We develop a novel measure of the prosumers’ willingness to co-create flexibility, and solicit their preferences for power supply contracts with varying levels of flexibility to derive implied discomfort costs. Our results indicate that current and potential electric car and solar PV users exhibit a higher willingness to co-create flexibility than heat pump users. Reaping the potential in those two domains requires taking the prosumer perspective into account when designing policy instruments and creating adequate business models.

Natural Disasters, Social Protection, and Risk Perceptions

Natural disasters give rise to loss and damage and may affect subjective expectations about the prevalence and severity of future disasters. These expectations might then in turn shape individuals’ investment behaviors, potentially affecting their incomes in subsequent years. As part of an emerging literature on endogenous preferences, economists have begun studying the consequences that exposure to natural disasters have on risk attitudes, perceptions, and behavior. We add to this field by studying the impact of being struck by the December 2012 Cyclone Evan on Fijian households’ risk attitudes and subjective expectations about the likelihood and severity of natural disasters over the next 20 years. The randomness of the cyclone’s path allows us to estimate the causal effects of exposure on both risk attitudes and risk perceptions. Our results show that being struck by an extreme event substantially changes individuals’ risk perceptions as well as their beliefs about the frequency and magnitude of future shocks. However, we find sharply distinct results for the two ethnicities in our sample, indigenous Fijians and Indo-Fijians, the former of whom are noted for their “collectivist” social organization and the latter of whom are largely self-reliant: the impact of the natural disaster aligns with previous results in the literature on risk attitudes and risk perceptions for Indo-Fijians, whereas they have little to no impact on those same measures for indigenous Fijians. Anchored in the institutional context of Fiji, this result is sensible and has implications for how social protection can mitigate some of the negative impacts of natural shocks on households’ expectations. To provide welfare implications for our results, we compare households’ risk perceptions to climate and hydrological models of future disaster risk, and find that both ethnic groups over-infer the risk of future disasters relative to the model predictions. If such distorted beliefs encourage over-investment in preventative measures at the cost of other productive investments, these biases could have negative welfare impacts. Understanding belief biases and how they vary across social contexts may thus help decision makers design policy instruments to reduce such inefficiencies, particularly in the face of climate change.

Does crop rotation with legumes provide an efficient means to reduce nutrient loads and GHG emissions?

We investigate crop rotation with legumes from economic and environmental perspectives by asking how effective they are at providing profits and reducing nutrient runoff and greenhouse gas emissions compared with monoculture cultivation. We study this effectiveness in three alternative policy regimes: the free market optimum, the Finnish agri-environmental scheme, and socially optimal cultivation, and also design policy instruments to achieve the socially optimal outcomes in land use and fertilization. We first develop an analytical model to describe crop rotation and the role of legumes, and examine its implications for water and climate policies. Drawing on Finnish agricultural data, we then use numerical simulations and show that shifting from monoculture cultivation to crop rotation with legumes provides economically and environmentally better outcomes. Crop rotation with legumes also reduces the variability in profits caused by stochastic weather. The optimal instruments implementing the social optimum depend on nutrient and climate damage (nitrogen tax), as well as carbon sequestration and nutrient reduction benefits (buffer strip subsidy).

The vestiges and vanguards of policy design in a digital context

AbstractThis article explores the opportunities, challenges and expectations that the digital context of design and new digital era policy instruments, such as open data, big data, robotics and crowdsourcing, present to policy designers operating in today's governments. Adopting an instruments perspective, the article identifies four characteristics of digital era policy design before detailing three issues that must be addressed to ascertain the promise and pitfalls of digital era policy design. First, we argue that scholars and practitioners alike must investigate how traditional constraints on the ideal of rational, evidence‐driven policy design—long acknowledged in the “analogue design” literature—will fade or be exacerbated in the digital age. The article next confronts the reality that new digital designs and instruments will rarely emerge in a policy vacuum, but rather will be layered onto existing policy designs and complex policy mixes with sticky legacies that will be more or less amenable to digital design approaches. Finally, the article argues that while scholars and practitioners have been quick to presume that the digital age will foster a more collaborative model of state‐to‐non‐state cooperation, digital era policy design may ultimately marginalize or eliminate citizens altogether from the design process, raising important questions about the as of yet little understood democratic implications of digital era policy design.

Cities and “budget‐based” management of the energy‐water‐climate nexus: Case studies in transportation policy, infrastructure systems, and urban utility risk management

This article reviews city case studies to inform a framework for developing urban infrastructure design standards and policy instruments that together aim to pursue energy efficiency and greenhouse gas mitigation through city carbon budgets and water use efficiency and climate risk adaptation through city water budgets. This article also proposes combining carbon and water budgeting at the city‐scale for achieving successful coupled city carbon and water budget (CCCWB) programs. Under a CCCWB program, key actors including local governments, infrastructure designers/operators, and households would be assigned a GHG emissions and water “budget” and be required by state or federal levels to keep within this budget through the use of flexibility mechanisms, incentive programs, and sanctions. Multiple incentives and cross‐scale governance arrangements would be tied to energy‐water systems integration, resource‐efficient transportation and infrastructure development, and effective monitoring and management of energy use, emissions, climate risks to, and security of energy‐water‐transport‐food and other critical systems. As a first step to promote strategies for CCCWB development, we systematically review approaches of and shortcomings to existing budget‐based programs in the UK and US, and suggest improvements in three areas: measurement, modeling effectiveness of interventions for staying within a budget, and governance. To date, the majority of climate action or sustainability plans by cities, while mentioning climate impacts as a premise for the plan, do not address these impacts in the plan. They focus primarily on GHG mitigation while ignoring resource depletion challenges and energy‐climate‐water linkages, whereby water supplies can begin to limit energy production and energy shifts to mitigate climate change can limit water availability. Coupled carbon‐water budget plans, programs, and policies—described in this study‐ may address these concerns as well as the emerging trends that will exacerbate these problems—e.g., including population growth, climatic changes, and emerging policy choices that are not coordinated. Cities and “Budget‐Based” Management of the Energy‐Water‐Climate Nexus: Case Studies to Inform Strategy for Integrated Performance‐ and Incentive‐Based Design and Policy Instruments. © 2017 American Institute of Chemical Engineers Environ Prog, 37: 91–107, 2018

The effect of clean energy regulations and incentives on green jobs: panel analysis of the United States, 1998–2007

‘Green jobs’ are often presented as a simultaneous solution for the economic downturn and the environmental crisis, particularly as they relate to sustainable development in energy and climate change. Federal, state, and municipal authorities have employed a variety of policy tools to boost job creation within their jurisdictions. This study focuses on the role that state policies play in creating green jobs. It examines two generic policy tools – regulations and incentives – each of which can be aimed at advancing energy efficiency or renewable energy production, and assesses the relative impact they have had on generating green jobs. In order to measure this impact, we utilize panel data compiled by the Pew Charitable Trusts, which contain a state‐level count of green jobs from 1998 to 2007. The results of the analysis suggest that regulations, particularly those that mandate action on renewable energy, are likely to increase the number of private sector green jobs in states. Regulations with clear guidelines and targets tend to reduce uncertainty in business, and can lead to increased private sector investment and job availability. This study provides practical lessons regarding the type and design of policy instruments and regulations on renewable energy, which effectively encourage green job growth.

Forest-derived methane in the Swedish transport sector: A closing window?

Forest-derived methane could complement biogas from anaerobic digestion as a transport fuel. The conditions for a systemic transition have been analyzed in this article. The analysis contains three blocks: the vehicle gas development, the policy framework, and commercial projects to produce methane from forest biomass. The results reveal that several conditions for a systemic transition are in place. There is established infrastructure for feedstock supply and biofuels distribution. Infrastructure development is an important albeit not determining factor. Private and public actors have advanced plans for commercial scale plants, technological know-how, and experience from a demonstration plant. However, a major barrier for a systemic transition is the low predictability of Swedish policy instruments. The Swedish government is not free to design policy instruments but must consider compatibility with the EU framework and has changed the energy tax on biofuels several times to avoid overcompensation according to the EU regulation. This has contributed to the low predictability. The interviewees have suggested several concrete policy instruments. However, they have also emphasized that the exact design of the policy instruments is less important than the predictability of the support.

Design and Evaluation of Policy Instruments for Energy Efficiency Market

The concept of energy efficiency market as basis for energy efficiency policy making enables better understanding of the overall environment where policy needs to be implemented. Based on the market assessment, policy makers are faced with the challenge of designing policy instrument that will release identified brakes to energy efficiency. Following the market assessment, the framework for design of policy instruments and measures needs to be established. It uses a theory-based approach to provide the insight in the supposed operation of an instrument or measure and integrates the evaluation of impacts already in the design phase. In this paper, the authors categorized policy instruments in several categories and additionally described which side of the market they address and in which typical development stages of the market development their application is the most needed. For every step in the process, indicators are defined and success or failure “values” of these indicators determined. This approach can give clear picture to the policy makers what needs to be monitored and evaluated ex post . This ex post evaluation will enhance the knowledge of instrument's operation. In this paper, the authors established a detailed theory (theory-based approach) on how the instrument is supposed to work. Although this theory-based approach is known and utilized in project management, it is not mainstreamed in energy efficiency policy.

The Design of Policy Instruments towards Sustainable Livestock Production in China: An Application of the Choice Experiment Method

In face of gradual ecological deterioration, the Chinese government has been in search of more efficient and effective mitigation policies, aiming to promote the sustainability of livestock production. However, researchers and policy makers seem to neglect a key issue: pinpoint policies are the most important, which means niche targeting is the premise before any policy design, such that better knowing of the livestock farmers preference is prerequisite. This paper then analyzes this question using a method of choice experiment to elicit the farmers’ preference and valuation of livestock pollution control policy instruments at household-scale, medium-scale and large-scale farms. Five attributes (technology regulation, pollution charge, biogas subsidy, manure price, and information provisioning) were set as livestock pollution control policy instruments. In total, 754 pigs farmers from five representative provinces in China were surveyed, and the collected data were analyzed using random parameter logit models. The marginal substitution rates for attributes are estimated both with preference space approach and willingness to pay space approach. The results show significant heterogeneities in farmers’ preferences and valuations for livestock pollution control policy instruments within the three scales. All policy instruments effectively increased the manure eco-friendly treatment ratio for medium-scale farms, and household-scale farms showed little change in the manure eco-friendly treatment ratio under all policy instruments. Household-scale farms and medium-scale farms suggested the highest preference for the biogas subsidy policy, while large-scale farms suggested the highest preference for the manure price policy.

‘Test Driving’ a Financing Instrument for Climate Adaptation: Analyzing Institutional Dilemmas using Simulation Gaming

Urban physical public infrastructure is a frontline defense mechanism to manage and mitigate climate-related impacts. Market instruments are often cited as possible means to spread risk and reduce financial burdens on the public sector. The authors argue that existing research tends to focus on the technical issues of instruments and neglects considering institutional dynamics that may enable or constrain local market-based financing mechanisms. In this article, three core dilemmas (values uncertainty, planning horizon, and indirect benefits) are used to analyze the responses of practitioners to a possible financing instrument. The findings indicate that the practitioner’s responses to tax increment financing were largely shaped by the adaptation dilemmas and not the characteristics of the instrument per se. By mapping the dilemmas onto whether they would recommend it, participants imposed a financial barrier on climate adaptation investments. The authors conclude that a key imperative in the design of policy instruments is to pay attention to the congruency of informal institutions at the ‘street level’ in order to be in-step with the current sociopolitical conditions. The findings also point to four key attributes that a local market-based instrument would need to be aligned and responsive to the Dutch planning and development context.

Complexity Theory and the Constraints on Environmental Policymaking

Complexity theory has been highly influential within environmental studies circles, including among environmental legal scholars. The focus of the majority of this research has been on the implications of complex natural systems for policymaking; how best to design and implement public policy instruments in the context of complex natural systems in order to achieve desired objectives. Far less attention has been paid to the application of complexity theory to the policy process itself. This article addresses this gap by looking at what complexity theory adds to the study of environmental policymaking. To do this, the article builds a bounded model of environmental policymaking based on a meta-analysis of the existing non-complexity related theoretical and empirical policy literature. The model is used to illustrate how complexity theory changes and how environmental policy processes are perceived and studied.

Demand and supply of ecosystem services in a Mediterranean forest: Computing payment boundaries

This study assesses the feasibility of a mechanism of payment for ecosystem services to improve the provision of ecosystem services by private forest owners. The range of the potential payment is defined by the opportunity costs of a change in forest management as the lower boundary, and by the willingness to pay of society for the improved supply of ecosystem services as the upper boundary. We assess these two boundaries in four hypothetical management scenarios for Aleppo pine forests in Catalonia (north-eastern Spain): (i) passive; (ii) active timber-oriented; (iii) biodiversity improvement; and (iv) wildfire prevention. The upscaling of the outcomes to the regional level shows that the value of the social demand covers the opportunity costs of the landowner. We argue that these figures prove the feasibility and likely acceptance of introducing a payment for ecosystem services based on an earmarked tax. This study represents an initial step for policy instrument design.

Understanding Non-compliance With Protected Species Regulations in the Northeast USA Gillnet Fishery

Marine mammals and sea turtles in the United States are protected from commercial fishery interactions under the Marine Mammal Protection Act and the Endangered Species Act. To reduce harbor porpoise bycatch in the northeast sink gillnet fishery, fishermen are mandated to attach pingers to their nets in regulated areas. Although, pinger regulations have been in place for over a decade, in practice, enforcement is weak and the penalty for a violation is almost non-existent. In this scenario, the presence of normative factors may motivate a fisherman to comply with the pinger regulation. This study considers both economic and normative factors within a probit framework to explain a fisherman’s compliance decision. Model results indicate fishermen who previously violated pinger regulations, who are not completely dependent on gillnet gear and face a lower chance of being detected by an observer, are more likely to violate. Understanding the influence of normative factors on compliance decisions is a key component for higher compliance. That is, incorporation of these factors in the design of policy instruments may achieve higher compliance rates and thus more success in protecting these species. Our model findings were ground-truthed by conducting focus group research with fishermen using pingers; some preliminary findings are shared in the discussion in support of our model results. Finally, these results also suggest observer data can be used to support compliance and enforcement mechanisms in this fishery and possibly other fisheries as well.

Concern or apathy: the attitude of the public toward urban air pollution

It is important to understand public attitudes when designing policy instruments to motivate actions. Attitude is partially socially constructed and thus must be studied locally rather than inferred from other settings. This study explored public attitudes toward air pollution among Beijing residents through interviews and thematic analysis. In contrast to previous studies mostly focusing on a certain dimension of attitudes, we attempted to show an initial picture of attitudes in three dimensions, knowledge and belief, perception and concern, and covert and overt behaviors, and identify underlying factors accounting for such attitudes. The results showed that the interviewees largely knew the sources and impacts of air pollution but also demonstrated misunderstandings; half of them perceived air pollution as ‘severe’ and three-fourths of them showed little concern about air pollution; their protective and mitigation responsive behaviors were inadequate. Factors affecting such attitudes, both existing and missing in current literature, were identified. Perceived air pollution is determined by sensory cues and imagination, and mediated by lived experiences and place identity. Lack of concern about air pollution can largely be explained by a feeling of uncontrollability and the crowding effect in competing for attention. This lack is further influenced by the perceived benefits of living in large cities, perceived fairness of the impact across the population, and perceived delay of the health impacts posed by air pollution. Protective behaviors, specifically wearing facemasks, are influenced by perceived severity, vulnerability, efficacy, and barriers. Mitigation behavior, which refers to reducing car use in this case, is discouraged by a lack of feeling responsible and by perceived inconvenience and ineffectiveness. At an academic level, the results of this exploratory study are expected to provide a base for further investigations of factors affecting public attitudes. From a policy perspective, the results should provide information for designing policy instruments to raise awareness and motivate actions to cope with air pollution.

Challenges in the design of indicators for assessing the impact of the Scotland Rural Development Programme 2007–2013 on climate change mitigation

This paper addresses the use of impact indicators with respect to climate change in the 2007–2013 Rural Development Programme (RDP) of the European Union, with particular reference to the Scotland Rural Development Programme (SRDP). It concludes that the policy context has highlighted the need for the rural land use sector to respond to climate change but that the associated Common Monitoring and Evaluation Framework (CMEF) did not develop suitable indicators to assess the impact of SDRP measures on GHG emission mitigation. It suggests improved impact indicators based on the relationship between rural land use and greenhouse gas (GHG) emissions: first, an indicator based on net GHG emissions per holding; and a second based on net GHG emissions per unit volume of output. The paper points out the challenges in measuring land-based emissions accurately. It further proposes screening of RDP measures to ensure that climate change mitigation impacts are properly appraised. It is recognised that climate change policy in relation to rural land use is still at an early stage of development but greater sophistication of policy instrument design and evaluation will be required if the RDP is to contribute significantly to climate change policy objectives.

Externalities and Simultaneity in Surface Water‐Groundwater Systems: Challenges for Water Rights Institutions

AbstractWhen surface water and groundwater resources are hydraulically connected, groundwater pumping may reduce surface water flows. In recognition of hydraulic connectivity between surface and groundwater resources, many states in the western United States have begun to develop systems of conjunctive administration in which property rights for surface water and groundwater are jointly managed. Implementing conjunctive administration requires an understanding of when and where surface and groundwater resources are connected. This article analyzes how decisions about water use and changes in irrigation technology influence connectivity across space and time, generating a challenge for policy instrument design. I develop and estimate an econometric model that reflects the simultaneity in surface and groundwater levels that arises due to the two‐way flow of water in a hydraulically connected system. The model also traces the effect of changes in irrigation technology on consumptive water use and return flows, and the consequences for changes in water availability. Estimation results using a panel dataset for the Eastern Snake River Plain of Idaho from 1960 to 2011 indicate that connectivity between surface and groundwater resources has decreased over time due to declining groundwater levels. Declining groundwater levels are attributable not only to groundwater pumping, but also to a widespread shift from flood to sprinkler irrigation. This transition in irrigation technology has conserved surface water but depleted groundwater by reducing aquifer recharge. As connectivity declines, reducing groundwater pumping to augment surface water flows, a common approach to conjunctive administration, yields diminishing marginal benefits.

Evaluating the sustainability of diets–combining environmental and nutritional aspects

Abstract This study examined two methods for jointly considering the environmental impact and nutritional quality of diets, which is necessary when designing policy instruments promoting sustainable food systems. Both methods included energy content and 18 macro- and micronutrients in the diet, the climate impact, land use and biodiversity damage potential. In Method 1, the content of different nutrients in the diet was normalised based on recommended intake or upper levels for average daily intake and presented together with the environmental impacts, which were normalised according to estimated sustainable levels. In Method 2, the nutritional quality of different diets was considered by calculating their nutrient density score, and the environmental impact was then expressed per nutrient density score. Three diets were assessed; a diet corresponding to Nordic recommendations, the current average Swedish diet and a lifestyle Low Carbohydrate-High Fat (LCHF) diet. Method 1 clearly showed that the climate impact was far beyond the sustainable level for all diets, while land use was within the sustainability limit for the recommended diet, but not the other two. Comparisons based on nutrient density scores depended on the score used, but the current and LCHF diets had more impact than the recommended diet (less livestock products) for all but one score. Over- and under-consumption of nutrients were clearly shown by Method 1 but not possible to distinguish with Method 2, as normalisation was not possible, making it difficult to evaluate the absolute scale of the impacts when nutrient density scores were used. For quantitative information on the environmental and nutritional impacts of diets as support in decision-making processes, it is important that data presentation is transparent. There is limited value in reducing results to a low number of indicators that are easy to read, but difficult to interpret, e.g. nutrient density score. Method 1 allows combined assessment of diets regarding environmental impact and nutritional intake and could be useful in dietary planning and in development of dietary recommendations and other policy instruments to achieve more sustainable food systems.

Education, training and skills in innovation policy

The main question that guides this paper is how governments are focusing (and must focus) on competence building (education, training and skills) when designing and implementing innovation policies. After a brief literature review, this paper suggests a typology of internal/external and individual/organizational sources of competences that are related to innovation activities. This serves to examine briefly the most common initiatives that governments are taking in this regard. The paper identifies three overall deficiencies and imbalances in innovation systems in terms of education, training and skills: the insufficient levels of competences in a system, the time lag between firms’ short-term needs for specific competences and the long time required to develop them, and the imbalances between internal and external sources of competences in firms. From these, the paper elaborates a set of overall criteria for the (re)design of policy instruments addressing those tensions and imbalances.

Impact of energy policy instruments on the estimated level of underlying energy efficiency in the EU residential sector

The promotion of energy efficiency is seen as one of the top priorities of EU energy policy (EC, 2010). In order to design and implement effective energy policy instruments, it is necessary to have information on energy demand price and income elasticities in addition to sound indicators of energy efficiency. This research combines the approaches taken in energy demand modelling and frontier analysis in order to econometrically estimate the level of energy efficiency for the residential sector in the EU-27 member states for the period 1996 to 2009. The estimates for the energy efficiency confirm that the EU residential sector indeed holds a relatively high potential for energy savings from reduced inefficiency. Therefore, despite the common objective to decrease ‘wasteful’ energy consumption, considerable variation in energy efficiency between the EU member states is established. Furthermore, an attempt is made to evaluate the impact of energy-efficiency measures undertaken in the EU residential sector by introducing an additional set of variables into the model and the results suggest that financial incentives and energy performance standards play an important role in promoting energy efficiency improvements, whereas informative measures do not have a significant impact.