Environmental Public Goods Research Articles

Explaining Demand for Green Electricity Using Data from All U.S. Utilities

Green electricity programs enable households to voluntarily contribute to the development of renewable electricity by purchasing green electricity through their local utility. Using a dataset of all utilities in the United States, this paper explores the utility, consumer, and program characteristics that influence participation levels in green electricity, as well as whether a utility chooses to offer a program. Among other results, we find that the key determinants of program participation are the education of the consumer base and the affordability of the green electricity program. Our results enhance understanding of private provision of environmental public goods and could aid in ex ante evaluations of whether a green electricity program is likely to cover its administrative costs or be a cost-effective way of improving environmental quality.

Theoretical and Empirical Analysis of Citizens’ Willingness to Pay: Ethical and Policy Implications for the Environment in the United Arab Emirates

Exploring people’s Willingness to Pay (WTP) to protect the environment has ethical dimensions in addition to public policy relevance. This study analyzes WTP in light of four main environmental theories, namely, economic, attitude-behavior, public goods, and altruism. To this end, 1,805 surveys were administered to a national random sample in the United Arab Emirates. Descriptive and logistic regression analyses demonstrated that, albeit environmental attitudes were generally positive, WTP was conditional, fluctuating, and inconsistent. Citizens perceived environmental problems as social rather than personal; thus they shifted responsibility to the government (the other). The study found evidence that while citizens trusted the government as a moral agent that does good, they were overdependent on it to protect the environment. The ethical and public policy implications of the findings are discussed and recommendations are outlined.

Concern and Helplessness: Citizens' Assessments of Individual and Collective Action on the Provision of Environmental Public Goods in a Coastal City at Risk of Inundation.

Survey data from a representative sample of 1005 households in the UK coastal city of Portsmouth are examined to discern commonalities and contrasts in their assessment of actions to address the related environmental threats of climate change and flooding. The city of Portsmouth is at risk of inundation from rising sea levels and the city has recent experience of flooding. A simple local and global public good framework is used to organize the understanding of reported attitudes and their determinants. The findings show that it is not always the same individuals who express concern about both climate change and flooding. Investigation into perceptions of helplessness in tackling climate change indicates that individuals more often perceived themselves to be helpless in tackling climate but perceived local collective action to be more effective. Individuals considered local collective action to be more effective in tackling climate change. Perceptions of individual helplessness are in turn related to reported concern. Several socioeconomic characteristics of individuals are shown to be useful in explaining the determinants of concern and perceptions of helplessness among respondents. As other cities face climate change-related challenges, the empirical findings, based upon attitudes from an alert urban population, are informative to policy design.

Giving is a Question of Time: Response Times and Contributions to an Environmental Public Good

Does it matter whether contribution decisions regarding environmental public goods are arrived at through intuition or reflection? Experimental research in behavioral economics has recently adopted dual-system theories of the mind from psychology in order to address this question. This research uses response time data in public good games to distinguish between the two distinct cognitive processes. We extend this literature towards environmental public goods by analyzing response time data from an online experiment in which over 3400 subjects from the general population faced a dichotomous choice between receiving a monetary payment or contributing to climate change mitigation efforts. Our evidence confirms a strong positive link between response times and contributions: The average response time of contributors is 40 % higher than that of non-contributors. This suggests that reflection, not intuition, is at the root of pro-environmental contributions. This result is robust to a comprehensive set of robustness checks, including a within-subjects analysis that controls for potentially unobserved confounds and recovers the relationship at the individual level.

Income Inequality and Willingness to Pay for Public Environmental Goods

We study how the distribution of income among members of society, and income inequality in particular, affects social willingness to pay (WTP) for environmental public goods. We find that social WTP for environmental goods increases with mean income, and decreases (increases) with income inequality if and only if environmental goods and manufactured goods are substitutes (complements). Furthermore, social WTP for environmental normally changes more elastically with mean income than with income inequality. We derive adjustment factors for benefit transfer to control for differences in income distributions between a study site and a policy site. For illustration, we quantify how social WTP for environmental public goods depends on the respective income distribution for empirical case studies in Sweden, China and the World. We find that the effects of adjusting for income inequality can be substantial.

Option Fund Market Dynamics for Threshold Public Goods

Economic agents have the possibility to fund the protection of environmental public goods, such as natural ecosystems and biodiversity, facing unknown risks of collapse, which could help to back them up. On the base of the prediction markets, which meet with a degree of success since their introduction, we propose an evolutionary model of an option fund market for the threshold environmental public goods. We consider population dynamics of agents distributed into proportional fair-share contributors and free riders. The model outcomes show that the public goods could be provided when the agents exchanging option contracts are equally divided into buyers and sellers. This result only holds for a specific social belief over the probability of the public good safeguard, the strict equality between bids and asks, and the equality of all payoffs. Otherwise, providing public goods through option markets turns out to be inoperative.

The Measurement of Subjective Value and Its Relation to Contingent Valuation and Environmental Public Goods.

Environmental public goods—including national parks, clean air/water, and ecosystem services—provide substantial benefits on a global scale. These goods have unique characteristics in that they are typically “nonmarket” goods, with values from both use and passive use that accrue to a large number of individuals both in current and future generations. In this study, we test the hypothesis that neural signals in areas correlated with subjective valuations for essentially all other previously studied categories of goods (ventromedial prefrontal cortex and ventral striatum) also correlate with environmental valuations. We use contingent valuation (CV) as our behavioral tool for measuring valuations of environmental public goods. CV is a standard stated preference approach that presents survey respondents with information on an issue and asks questions that help policymakers determine how much citizens are willing to pay for a public good or policy. We scanned human subjects while they viewed environmental proposals, along with three other classes of goods. The presentation of all four classes of goods yielded robust and similar patterns of temporally synchronized brain activation within attentional networks. The activations associated with the traditional classes of goods replicate previous correlations between neural activity in valuation areas and behavioral preferences. In contrast, CV-elicited values for environmental proposals did not correlate with brain activity at either the individual or population level. For a sub-population of participants, CV-elicited values were correlated with activity within the dorsomedial prefrontal cortex, a region associated with cognitive control and shifting decision strategies. The results show that neural activity associated with the subjective valuation of environmental proposals differs profoundly from the neural activity associated with previously examined goods and preference measures.

Greening as compensation to production of environmental public goods: how do common rules have an influence at local level? The case of durum wheat in Italy

Abstract The promotion of sustainability is envisaged by the new Common Agricultural Policy (CAP) as a major issue for future policies in the agro-food sector, in line with the Europe 2020 Strategy. In this context, “greening” ecological payments have been conceived as a tool to encourage European farms towards the adoption of environmentally friendly practices. Since the new CAP became law, at least 30% of the national budget of direct payments is tied to the respect of three main ecological commitments by farmers managing 10 or more hectares of arable land, i.e. crop diversification, maintaining permanent grassland and maintaining the so called “ecological focus areas”. The present research focuses on the possible effects of the greening instrument, by evaluating the impact of this tool in different Italian areas, specialized in the durum wheat cultivation. The objectives of the analysis are to evaluate the extent and features of the impact of greening in three case study areas and to discuss the likely implications in a policy-effectiveness perspective. Thus, an empirical analysis has been carried out in order to evaluate the impact of greening in three case study areas with a strong specialization in wheat production, located in the North, Centre and South of Italy.The results have been compared across the case studies and with other quantitative and qualitative studies carried out in different contexts. The results show that the impact of greening may be different even in areas with the same productive specialization. Namely, greening deeply impacts on the durum wheat cultivation area located in the South of Italy, while it seems to have a very marginal effect on the other two areas. Thus, greening has a strongly differentiated impact both at the farm and at the territorial level, at least for the Italian durum wheat production. Basing on these first results, the setting of specific solutions to rebalance the effects of greening on the durum wheat sector is envisaged, as allowed by the present regulatory framework, in order to avoid an over-diversification in the impacts of the greening measure among different Italian regions.

Reputation and household recycling practices: Field experiments in Costa Rica

Pro-environmental behavior is the willingness to cooperate and contribute to environmental public goods. A good understanding of why individuals undertake pro-environmental actions is important in order to construct policies that are aligned with preferences and actual behavioral patterns, such as concern for social esteem and reputation. In this paper, we present the results of a framed field experiment that explores reputation formation as a driver in support of household recycling practices. We use a “shame” and a “pride” treatment to test which is more effective, if at all, in increasing recycling effort. We find that reputational concerns indeed play a role in shaping individual pro-environmental behavior. Surprisingly, subjects cooperate more if the situation is framed as avoiding shame (bad reputation) rather than as acquiring pride and gratitude (good reputation). The actual experiment is based on a real recycling program, with participants who are heads of urban households in Costa Rica.

Our uncommon heritage: biodiversity change, ecosystem services, and human well-being

Foreword Preface 1. Biodiversity change Part I. Diagnosing the Biodiversity Change Problem: 2. Biodiversity in the modern world 3. Biodiversity and ecosystem services 4. Biodiversity loss, sustainability and stability 5. Biodiversity externalities and public goods 6. Poverty alleviation and biodiversity change 7. Globalization: trade, aid, and the dispersal of species Part II. The Search for Solutions: 8. Getting the prognosis right 9. Understanding what is lost 10. Managing risk, uncertainty, and irreversibility in biodiversity change 11. Conservation incentives and payments for ecosystems services 12. Paying for International environmental public goods 13. Strengthening the biodiversity-related multilateral agreements 14. Genetic resources and the poor 15. Redirecting biodiversity change Index.

Defining and evaluating the ecological restoration economy

For decades, industry groups and many media outlets have propagated the notion that environmental protection is bad for business. However, missing from this public debate has been a detailed accounting of the U.S. economic output and employment that are created through conservation, restoration, and mitigation actions, which we call the “Restoration Economy.” In this paper, we review related literature, including 14 local and state‐level case studies of privately funded environmental restoration projects. We also review federal and state government programs that fund restoration throughout the United States, revealing the complex nature of this sector. We find growing evidence that the restoration industry not only protects public environmental goods but also contributes to national economic growth and employment, supporting as many as 33 jobs per $1 million invested, with an employment multiplier of between 1.48 and 3.8 (the number of jobs supported by every restoration job) and an output multiplier of between 1.6 and 2.59 (multiplier for total economic output from investments). The existing literature also shows that restoration investments lead to significant positive economic and employment impacts and appear to have particularly localized benefits, which can be attributed to the tendency for projects to employ local labor and materials. While these initial figures are promising, the extent of environmental restoration activities and benefits at a national level is not yet well understood. Our findings reveal the need for a methodological framework for more accurately and broadly estimating the size of the U.S. restoration sector and its impact on the U.S. economy.

The design of agri-environmental schemes: Farmers’ preferences in southern Spain

Agri-environmental schemes (AES) play a key role in promoting the production of environmental public goods by European Union agriculture. Although extensive literature has analyzed AES, some important issues remain understudied. This paper performs an ex-ante assessment of AES in permanent cropping, analyzing several issues that have received little attention from researchers, such as ecological focus areas (EFA) and collective participation. For this purpose, a choice experiment was used to assess farmers’ preferences toward AES in a case study of olive groves in southern Spain. Results show high heterogeneity among farmers, with different classes being identified, from potential participants to non-participants. As regards EFA, almost half of the farmers would be willing to accept it up to 2% for low monetary incentives (€8–9/ha per additional 1% of the farmland devoted to EFA) while the rest would do it for moderate-to-high monetary incentives (€41–151/ha per additional 1% of EFA). However, for a high share of EFA (e.g., 5–7%) higher incentives would presumably be required due to the intrinsic spatial restrictions of olive groves. With regard to collective participation, we find that it is unlikely that farmers would participate collectively with the incentive of the up to 30% EU-wide bonus. These results are relevant for policy-making now when new AES are being designed for the next programming period 2014–2020.

Old and new style of greening payments: economic and environmental implications for italian agriculture

The recent CAP reform proposed a green component of the first pillar that remunerates farmers for the prevision of environmental public goods by allocating the 30% of the direct payment to the greening payment. In order to obtain this payment, the farmers shall ensure a specified set of mandatory farm practices. The purpose of this paper is to provide a first assessment of the greening measures on different farms types. The study, through FADN data (2009-2010), aims at quantifying the impact of these measures of three sample companies of the Marche region according to the original proposal (2011) and the current proposal CAP approved in June 2013. The results shows different impact of the green payment according to the characteristic, the location and the economical state of the farms.

Private Provision of Environmental Public Goods: A Pilot Program for Agricultural Heritage Conservation

Abstract: While the true value of environmental goods may be captured in a one-off payment, it may be easier to add a smaller amount to a private good by means of donation and collect the total environmental value over time. For that, however we need to ensure the smaller amount of a heritage conservation donation added to a private good is adequate so that we can find retailers to participate in such fund-raising activities. We test the contingent valuation method's criterion validity by comparing their stated purchasing behavior with their actual behavior. The price increase from the addition of the donation did not affect total sales of the commodity. Adding a donation to specialized private goods may be an effective way to collect landscape and agricultural heritage conservation donations. Furthermore, our findings suggest that funds can be collected without affecting commodity sales. This approach is effective in other environmental protection activities.

Fiscal Decentralization, Environmental Accountability and the Provision of Environmental Public Goods in China: Evidence from 30 Provinces

This paper uses panel regression model to analyze the relationship between fiscal decentralization and local environmental management based on data from 30 Chinese provinces for the period 2002 to 2010. We hypothesize that for China, enterprises account for the majority of local government tax revenue and, due to their mobility, exert leverage over local government decisions concerning environmental public goods. To correct this situation, China’s central government implemented an environmental accountability system that features two indexes, COD for water pollution and SO2 for air pollution, which are considered in evaluating local government officials’ job performance. We find that the degree of fiscal decentralization strongly correlates with local government accepting higher levels of pollution. This paper empirically verifies that local government officials are reacting to the accountability system as demonstrated by the modest increase of pollutants included in the accountability system in comparison to the drastic increase of excluded pollutants.

Winning Coalition Size, State Capacity, and Time Horizons: An Application of Modified Selectorate Theory to Environmental Public Goods Provision

Selectorate theory proposes that authoritarian regimes supply fewer public goods than democracies. Smaller winning coalitions make it less costly for autocracies to maintain support among critical groups by providing private goods. Democracies, with large winning coalitions, find it cheaper to provide public goods. In contrast, we argue for a conditional effect of winning coalition size on public good provisions: Many public goods require considerable state capacity to plan, legislate, and implement. Moreover, leaders with short-term horizons are unlikely to invest in public goods that take considerable time to provide. Therefore, our modified selectorate theory suggests that governments will provide public goods if the size of the winning coalition is large enough, state capacity is great enough, and a priori regime durability is long enough. We test our theory on air pollution. While selectorate theory receives little empirical support, our findings cohere with modified selectorate theory. In particular, core democracies—defined as those with large winning coalitions, considerable state capacity, and high regime stability—perform better than autocracies in controlling air pollution.

The Effects of Experience on Preferences: Theory and Empirics for Environmental Public Goods

AbstractThis article develops a choice model for environmental public goods, which allows for consumers to learn about their preferences through consumption experiences. We develop a theoretical model of Bayesian updating, perform comparative statics over the model, and show how the theoretical model can be consistently incorporated into a reduced form econometric model. Our main findings are that in a random utility model (RUM) discrete choice model, a subject's scale should increase and the variability of scale should decrease with experience if subjects are Bayesians. We then estimate the model using field data regarding preferences for one particular public good, water quality. We find strong evidence that additional experience increases scale, thereby making consumer preferences more predictable from the econometrician's perspective. We find supportive but less convincing evidence that experience decreases the variability of scale across subjects.

Credit-Based Payments for Ecosystem Services: Evidence from a Choice Experiment in Ecuador

The original conceptualization of payments for ecosystem services (PES) promoted direct payments to motivate the provision of environmental public goods, but market imperfections and behavioral considerations can mean that PES that reduce market constraints are preferred. The main issue with the latter is how to include conditionality. We propose credit-based PES (CB-PES) as an incentive that links an environmental condition with the reduction of a key market constraint. Through a choice experiment in Ecuador, CB-PES was found to be a promising form of PES, with multiple desirable qualities of an incentive as cited in the behavioral economics and PES literatures.

Environment and development economics 20 years on

AbstractThis paper reviews the evolution of the field of environment and development over the last two decades. I argue that a central concern of the field has been the relation between natural resource use, income and growth, under the institutional and market conditions that prevail in developing countries. Particular attention is paid to the demographic and other drivers of change in the asset base, the linkages between poverty, property rights and the allocation of natural resources, the valuation of environmental assets and investment of resource rents, and the development of policies for managing environmental externalities and environmental public goods. I consider how the balance between topics and the treatment of individual topics has changed over time, and indicate how the field might be expected to move in the future.

Is there a need to audit CVM applications to the environment?

It is well known to economists that the contingent valuation method (CVM) fills an important gap in valuation technology with respect to managing public environmental goods and services. Currently acceptable CVM practice requires many challenging steps to be followed. One of these important steps is that of assessing the theoretical validity of the household willingness to pay (WTP) finding, but it is far from being a sufficient basis for reaching conclusions as to the credibility predicted community willingness to pay for environmental services. This paper reviews the step of testing for theoretical validity and challenges its importance relative to other more fundamental assessments of the credibility of the predicted household and societal WTP. This paper then deduces that an external ‘audit’ assessment may be necessary, in addition to an internal one, for these values to attain credibility in the determination of public choices.