Agricultural & Resource Economics
Permanent URI for this communityhttp://hdl.handle.net/1903/2208
Browse
2 results
Search Results
Item ESSAYS ON CLIMATE ADAPTATION AND ENVIRONMENTAL VALUATION(2022) Wang, Haoluan; Lichtenberg, Erik; Newburn, David A.; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Risk is an important component of the decision-making process. Often time, risk assessment is associated with either space or time. How agents perceive risk and how they respond to risk can have significant policy implications, especially when government programs are designed to either incentivize the provision of environmental amenities or reduce the production of environmental disamenities. This dissertation features three chapters that examine the role of risk, time, and space in evaluating environmental disamenities and amenities in the context of climate adaptation and ecosystem goods and services. The first chapter studies the spillover effects of levee building in response to rising flood risks in the U.S. Mississippi. Using newly digitized data on levee locations and elevations with the Great Mississippi Flood of 2011 as a natural experiment, I show that a 1% increase in the upstream levee elevation increased the downstream levee elevation by 0.7%. A back-of-the-envelope calculation suggests the external costs due to upstream levee building are at least $0.2 billion, reducing the net benefits of heightened levees by 55%. The results highlight the importance of regional coordination to manage large-scale natural disasters while mitigating inter-jurisdictional spillovers. The second chapter uses a discrete choice experiment implemented in a farmer survey to elicit landowners’ willingness to enroll in long-term payments for ecosystem services programs in Maryland. We address the issue of serial non-participation (SNP) when landowners always choose the status quo option and examine the role of time and risk preferences in landowners’ enrollment decisions. We find that ceiling on program participation is evident when SNP is accounted for, pointing to an inherent limitation in voluntary programs. Failing to account for SNP can also lead to quantitatively different welfare measures. Landowners are responsive to program payments with low discount rates consistent with market interest rates. Risk-averse landowners are less likely to enroll in programs, suggesting that they perceive participation to increase income risk. The third chapter proposes a novel extension of existing semi-parametric approaches to examine spatial patterns of willingness to pay (WTP) and status quo effects, including tests for global spatial autocorrelation, spatial interpolation techniques, and local hotspot analysis. We incorporate the statistical precision of WTP values into the spatial analyses using a two-step methodology and demonstrate this method using data from a stated preference survey that elicited values for improvements in water quality in the Chesapeake Bay and lakes in the surrounding watershed. Our proposed methodology offers a flexible way to identify potential spatial patterns of welfare impacts and facilitates more accurate benefit-cost and distributional analyses.Item Pricing Carbon: Allowance Price Determination in the EU ETS(2008) Hintermann, Beat; Lange, Andreas; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The allowance price in Phase I of the European Union Emissions Trading Scheme (EU ETS) followed a peculiar path, increasing from €7 in 2005 to over €30 in 2006, before crashing, recovering and ultimately finishing at zero by the end of 2007. I examine if the price can be explained by marginal abatement costs as predicted by economic theory, or if there were other price determinants. This has important policy implications, since the least-cost solution depends on the equality of permit price and marginal abatement costs and is the main argument in favor of permit markets. I start with a model that incorporates the most commonly cited market fundamentals and find that the latter only explain a small part of the allowance price variation, raising the question of a bubble. I carry out two different bubbles tests, the results of both of which are consistent with the presence of an allowance price bubble. I then address whether market manipulation by dominant power generators could have lead to the initial allowance price increase. I extend economic theory to include the interaction between output and permit markets. I derive a threshold of free allocation beyond which firms find it profitable to manipulate the permit price upwards, even if they are net allowance buyers. Market data indicates that this threshold was exceeded for EU power generators. Finally, I investigate the possibility that due to the speed at which the market was set up, firms may have been unable to engage in effective abatement before the end of Phase I. I develop a model under the assumption of no abatement, where firms aim to reach compliance exclusively by purchasing allowances on the market. Thus, the allowance payoff becomes that of a binary option, for which I derive a pricing formula. The model fits daily data from the years 2006-7 well. I conclude that the allowance price in Phase I was not driven by marginal abatement costs, but by a combination of price manipulation, self-fulfilling expectations and/or the penalty for noncompliance weighted by the probability of a binding cap.