42 Questions
What is the Pollution Haven Hypothesis?
Stricter environmental policies will shift pollution-intensive production toward low abatement-cost regions, creating 'pollution havens'.
Explain the Porter Hypothesis.
Environmental regulations have a net positive effect on the competitiveness of firms by encouraging cost-cutting improvements, innovation, and technological leadership.
What is the impact of environmental regulations on the production of pollution-intensive goods?
Production has shifted slightly from countries with strict regulations to those with weaker regulations.
How has the U.S.'s investment behavior been influenced by stricter environmental policies?
There has been no increase in investment by the U.S. due to environmental regulations.
What is the relationship between gross jobs lost locally and net national employment change?
Gross jobs lost locally can be significant, but the net national employment change is usually much smaller.
Why do specific employment effects vary based on regulation and market factors?
The ease of firms moving and the regulatory environment of other firms in the same industry influence employment effects.
What is the policy known for having the greatest positive difference between benefits and costs?
Kaldor-Hicks
What does Net Present Value (NPV) represent?
The discounted present value of the possible infinite stream of expected benefits and costs.
What does the Benefit-Cost Ratio represent?
The ratio between the discounted present benefits and costs.
What does the Social Discount Rate measure?
The relative valuation society places on future consumption sacrificed at present.
During the Trump administration, what was the Social Discount Rate set at?
7%
What discount rate did Biden switch to in November 2023?
2%
What is the Social Cost of Carbon?
The Social Cost of Carbon is the present discounted value of a future stream of monetized damages of incremental increases in CO2 emissions in a given year.
What is the primary challenge in combining numerous micro-damage functions into a global damage function?
The primary challenge is attempting accuracy due to the diversity of micro-damage functions.
What method is employed to run models with a range of parameter values drawn randomly to account for uncertainty?
Monte Carlo Analysis is employed to account for uncertainty.
What is the concept behind the Revealed Preference Methods for estimating benefit values?
Revealed Preference Methods use information from actual behavior to estimate benefit values.
What is the main assumption behind the Hedonic Pricing method?
The main assumption is that people observe and pay attention to the attribute of interest, such as air quality.
What is the primary problem with the Cost of Illness method in estimating willingness to pay?
The Cost of Illness method often underestimates willingness to pay as it leaves out 'pain and suffering'.
What is the Warm Glow effect in Contingent Valuation surveys?
The Warm Glow effect refers to people giving unrealistically high answers in surveys to purchase moral satisfaction.
What is the aim of using Benefit Transfers in environmental economics?
The aim is to transfer benefit values from existing studies to estimate benefits for a specific policy case.
What does VSL (Value of a Statistical Life) aim to determine?
VSL aims to determine how much individuals would sacrifice for a small reduction in the probability of death.
What is the primary concern with the Contingent Valuation method?
One primary concern is that respondents may not understand what they are being asked to value in the surveys.
What are some options to address climate change?
Reducing net emissions of CO2, geoengineering, adaption
What does the Coase Theorem state regarding negotiation of externalities?
Efficient outcome regardless of initial assignment of property rights
What is the efficient level of pollution control?
Degree of emissions reductions that maximizes net benefits
What is the main criterion for a cost-effective policy?
Achieving any target in the least-costly way
What is the Net Present Value (NPV) used for in economic analysis of climate change policy?
Discounted present value of expected benefits and costs
How is the Net Present Value (NPV) criterion applied in project analysis?
If NPV > 0, the project should be done
What does the Benefit-Cost Ratio (B/C) indicate about a project?
Project is preferred if B/C > 1
What does the Social Discount Rate (SDR) represent in economic analysis?
Valuation society places on future consumption presently sacrificed
What is the main concern with using a high discount rate in NPV analysis?
Future value may become trivial in present value terms
What is VSL and how is it calculated?
VSL stands for Value of Statistical Life. It is calculated as people's stated or revealed marginal valuation for a small change in risk, standardized for a risk change of 1.
What is the Equivalent Annual Net Benefit (EANB) used for?
Comparing projects of different lengths in time
What are some issues associated with VSL?
VSL should be adjusted for timing but not necessarily the dread/pain or involuntary vs voluntary risk. There is also mixed results on how health status affects VSL.
What is the main difference between Cost-Effectiveness and Efficiency in policy making?
Cost-effectiveness asks whether the policy accomplishes the given goal in the least costly way, while efficiency aims to set goals that are aligned with what's efficient.
Explain the concept of Cap and Trade system.
Cap and trade system is a type of tradable permits that sets the pollution level goal directly. Firms are required to relinquish one permit for every unit of pollution they emit.
What are some challenges associated with a tax approach for pollution control?
Challenges include doubts about whether the target reductions will actually be achieved, concerns about higher costs for the private sector, and fear among environmental advocates that visible costs may cause resistance.
What is the Coase Theorem and under what conditions can it lead to an efficient outcome?
The Coase Theorem states that negotiation between two parties about an externality can lead to an efficient outcome if there are no transaction costs, no significant income effects, and no third party impacts.
Differentiate between Technology Standards and Performance Standards in pollution control.
Technology standards require all polluters to install a specific piece of pollution control technology. Performance standards allow the level of pollution to vary among sources but require the same emissions per unit of production.
Explain the concept of Emission Reduction Credit (ERC) systems.
In ERC systems, there is no cap on aggregate emissions. Individuals generating credits by reducing emissions can use or sell them for compliance with other policies, reducing compliance costs.
What are some key criteria for assessing environmental policy instruments?
Criteria include achieving stated goals efficiently, cost-effectiveness, providing necessary information to the government, monitoring and enforcement capabilities, flexibility, and equitable distribution of impacts.
Explain the concept of Pareto Theory in policy evaluation.
Pareto Theory states that a policy change is deemed an improvement if at least some people benefit without making anyone worse off.
Explore the effects of environmental regulations on overseas firms, including compliance costs, productivity, innovation, and competitiveness. Learn about the challenges in measuring competitiveness effects due to limited data availability and the relatively small fraction of production costs related to compliance.
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