Air pollution is one of the most severe environmental problems that Mexico is currently facing. T... more Air pollution is one of the most severe environmental problems that Mexico is currently facing. The objective of this paper is to quantify the most relevant socioeconomic driving forces behind air polluting emissions and, more specifically, 7 local pollutants in Mexico. We do so in a multilevel version of the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model that accounts for the spatial heterogeneity at the municipal level across the country. The results show that the most relevant variables to determine the emissions of atmospheric pollutants are the population, the harvested area and the number of cars, while technological development helps to mitigate such emissions. The ecological elasticities are, in all cases, smaller than one. Our purpose is to provide quantitative information about these socioeconomic driving forces of air deterioration as a basis to establish some recommendations for environmental policy decision-making.
We study the efficiency of the uniform auction as an allocation mechanism for emission permits am... more We study the efficiency of the uniform auction as an allocation mechanism for emission permits among polluting firms. In our model, firms have private information about their abatement costs, which differ across firms and across units, and bidders' demands are linear. We show that there is a continuum of interior Bayesian Nash equilibria, and only one is efficient, minimizing abatement costs. We find that the existence of many bidders is not a sufficient condition to guarantee an efficient equilibrium in the uniform auction. Additionally, bidders' types have to be uncorrelated. Keywords Emission permits • Uniform auction • Efficiency • Incomplete information simultaneous games We thank an anonymous referee, Pedro Linares and participants at the Málaga University Economic Theory Seminar for helpful comments and suggestions. Usual disclaimer applies.
In this paper we study the relationship between market power in emission permit markets and endog... more In this paper we study the relationship between market power in emission permit markets and endogenous technology adoption. We find that the initial distribution of permits, in particular, the amount of permits initially given to the dominant firm, is crucial in determining over-or under-investment in relation to the benchmark model without market power. Specifically, if the dominant firm is initially endowed with more permits than the corresponding cost effective allocation, this results in under-investment by the dominant firm and over-investment by the competitive fringe, regardless of the specific amount of permits given to the latter firms. The results are reversed if the dominant firm is initially endowed with relatively few permits. Also, the presence of market power results in a divergence of both abatement and technology adoption levels with respect to the benchmark scenario of perfect competition, as long as technology adoption becomes more effective in reducing abatement costs.
This paper studies the optimal capacity and location of a sequence of landfills and points out th... more This paper studies the optimal capacity and location of a sequence of landfills and points out the interactions between both decisions. The decision capacity has some spatial implications, because it affects the feasible region for the rest of landfills, and some temporal implications, because the capacity determines the lifetime of the landfill and hence the instant of time where next landfills will need to be constructed. Some general properties of the solution are provided and interpreted from an economic point of view. The resulting problem turns out to be non-convex and therefore it can not be solved by conventional optimization techniques. Some global optimization methods are used to solve the problem in a particular case, in order to illustrate the behavior of the solution depending on parameter values.
In this paper, we propose an indirect method to elicit nonlinear multiattribute utility functions... more In this paper, we propose an indirect method to elicit nonlinear multiattribute utility functions which is based on duality results. The idea is to obtain a utility function which is compatible with the observed behaviour of decision makers. The paper builds on a previous work by André and Riesgo (A non-interactive method to elicit non-linear multiattribute utility functions. Theory and Application to Agricultural Economics. European Journal of Operational Research. In press) but it eliminates an important shortcoming, the necessity to estimate the efficient set, by using a DEA-like approach.
The set of efficient policies could be too large to serve as a useful guide for real action. In t... more The set of efficient policies could be too large to serve as a useful guide for real action. In this chapter we use compromise programming (CP) to reduce the number of eligible policies and get more precise policy recommendations than those derived from the efficient set ...
Abstract We study the dynamic impact of recycling through its effect on the production set of the... more Abstract We study the dynamic impact of recycling through its effect on the production set of the economy and its relationship with natural resources. The contribution of renewable and recyclable resources for sustainability is studied. Although in the short run recycling may ...
Innovar-revista De Ciencias Administrativas Y Sociales, Dec 16, 2022
This paper studies the visibility, environmental sustainability practices, and public recognition... more This paper studies the visibility, environmental sustainability practices, and public recognition of Costa Rican organizations participating in the Carbon Neutrality (CN) Program. Through a review of Costa Rican online newspapers, we conclude that the three main actions performed by CN firms are the offsetting of carbon emissions, the replacement of polluting inputs by cleaner substitutes, and employees' training. The main benefits perceived by these firms include reducing production costs, improving the organizations' image, and achieving market differentiation. In addition, by using non-parametric statistic procedures, we conclude that "highly cited organizations" tend to achieve the CN certification earlier and have a larger number of environmental certifications than "scarcely cited organizations." By analyzing newspaper coverage data in conjunction with a consumer recognition survey, we determined that "recognized organizations" tend to be the oldest, the largest, and the most cited in the press. In addition, "recognized entities" also tend to obtain the CN certification sooner than unrecognized entities, which means that there is a reward in terms of public recognition for companies that took the risk of being innovative in reducing their carbon footprint.
In this paper we propose an analytical approach to obtain so-called efficient policies in terms o... more In this paper we propose an analytical approach to obtain so-called efficient policies in terms of environmental and economic objectives. A policy is said to be efficient if any environmental or economic achievement is obtained with the minimum possible detriment to other relevant objectives. We apply this concept obtain the minimum possible environmental impact for a given growth rate or, symmetrically, the maximum economic growth for a given amount of polluting emissions. We present an application to Spanish economy with 2000 data using a Computable General Equilibrium model. We evaluate the efficiency of the observed policy and give some policy recommendations. Finally, we give an idea about how to enlarge the analysis by including additional objectives.
Prior research has shown that environmental policy can create scarcity rents. We analyse this phe... more Prior research has shown that environmental policy can create scarcity rents. We analyse this phenomenon in the framework of a duopoly that faces a carbon price, considering both Cournot and Stackelberg competition. We identify the different sources of scarcity rents, which we classify in "output" and "grandfathering" scarcity rents. The former depend on the elasticity of the rivals' output to the carbon price while the latter is exogenous. We also determine under which conditions these rents can be large enough to increase firms' profits and, as a policy implication, to what extent the existence of scarcity rents can make the firms agree on a tougher policy. This event is more likely to happen under Cournot than under Stackelberg competition, and the chances increase if the firms are allowed to pollute a large amount without paying a price.
It has been shown in prior research that cost effectiveness in the competitive emissions permit m... more It has been shown in prior research that cost effectiveness in the competitive emissions permit market could be affected by tacit collusion or price manipulation when the corresponding polluting product market is oligopolistic. We analyze these cross market links using a Stackelberg model to show that under reasonable assumptions, there are no incentives to collude for lobbying prices up. However, incentives for manipulating the price of permits up appear if there is an initial free allocation of permits, which is a policy argument against grandfathering and in favor of auctioning. This effect is increasing with the amount of permits allocated to the leader. Moreover, the changes for price manipulation increase with those changes that tend to undermine the leader's advantage in output production or to reduce the leader's abatement cost.
We compare auctioning and grandfathering as allocation mechanisms of emission permits when there ... more We compare auctioning and grandfathering as allocation mechanisms of emission permits when there is a secondary market with market power and the firms have private information. Based on real-life cases such as the EU ETS, we consider a multi-unit, multi-bid uniform auction, modelled as a Bayesian game of incomplete information. At the auction each firm anticipates his role in the secondary market, which affects the firms' valuation of the permits (that are not common across firms) as well as their bidding strategies and it precludes the auction from generating a cost-effective allocation of permits, as it would occur in simpler auction models. Auctioning tends to be more cost-effective than grandfathering when the firms' costs are asymmetric enough, especially if the follower has lower abatement costs than the leader and uncertainty about the marginal costs is large enough. If market power spills over the auction, the latter is always less cost-effective than grandfathering. One central policy implication is that the specific design of the auction turns out to be crucial for cost-effectiveness. The chances of the auction to outperform grandfathering require that the former is capable of diluting the market power that is present in the secondary market.
Lecture Notes in Economics and Mathematical Systems, 2010
This is the concluding chapter. We have introduced an approach to handle the design of public eco... more This is the concluding chapter. We have introduced an approach to handle the design of public economic and environmental polices based on multicriteria decision making in connection with a computable general equilibrium model. This approach endeavours to be both operational and consistent with economic theory. In doing so, we have also tried to build a bridge between operational research methods and economic analysis. We have introduced the notions of efficient policy, compromise policy and satisficing policy, which correspond to different MCDM approaches. Efficient policies guarantee that policy makers do not miss any costless opportunity of improvement. Compromise policies aim to provide policy results that are as close as possible to the optimum values. Satisficing policies fit frameworks in which policy makers are concerned not about optimality but about attaining some target levels for their objectives. We also offer some discussion and guidelines for future research. Coming works could relax some simplifying assumptions that we have introduced to keep our model manageable. Among others, it would be possible to build a dynamic rather than static model, relaxing the small country hypothesis, performing a more accurate analysis of the job market, or explicitly accounting for technical change and pollution abatement activities.
Air pollution is one of the most severe environmental problems that Mexico is currently facing. T... more Air pollution is one of the most severe environmental problems that Mexico is currently facing. The objective of this paper is to quantify the most relevant socioeconomic driving forces behind air polluting emissions and, more specifically, 7 local pollutants in Mexico. We do so in a multilevel version of the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model that accounts for the spatial heterogeneity at the municipal level across the country. The results show that the most relevant variables to determine the emissions of atmospheric pollutants are the population, the harvested area and the number of cars, while technological development helps to mitigate such emissions. The ecological elasticities are, in all cases, smaller than one. Our purpose is to provide quantitative information about these socioeconomic driving forces of air deterioration as a basis to establish some recommendations for environmental policy decision-making.
We study the efficiency of the uniform auction as an allocation mechanism for emission permits am... more We study the efficiency of the uniform auction as an allocation mechanism for emission permits among polluting firms. In our model, firms have private information about their abatement costs, which differ across firms and across units, and bidders' demands are linear. We show that there is a continuum of interior Bayesian Nash equilibria, and only one is efficient, minimizing abatement costs. We find that the existence of many bidders is not a sufficient condition to guarantee an efficient equilibrium in the uniform auction. Additionally, bidders' types have to be uncorrelated. Keywords Emission permits • Uniform auction • Efficiency • Incomplete information simultaneous games We thank an anonymous referee, Pedro Linares and participants at the Málaga University Economic Theory Seminar for helpful comments and suggestions. Usual disclaimer applies.
In this paper we study the relationship between market power in emission permit markets and endog... more In this paper we study the relationship between market power in emission permit markets and endogenous technology adoption. We find that the initial distribution of permits, in particular, the amount of permits initially given to the dominant firm, is crucial in determining over-or under-investment in relation to the benchmark model without market power. Specifically, if the dominant firm is initially endowed with more permits than the corresponding cost effective allocation, this results in under-investment by the dominant firm and over-investment by the competitive fringe, regardless of the specific amount of permits given to the latter firms. The results are reversed if the dominant firm is initially endowed with relatively few permits. Also, the presence of market power results in a divergence of both abatement and technology adoption levels with respect to the benchmark scenario of perfect competition, as long as technology adoption becomes more effective in reducing abatement costs.
This paper studies the optimal capacity and location of a sequence of landfills and points out th... more This paper studies the optimal capacity and location of a sequence of landfills and points out the interactions between both decisions. The decision capacity has some spatial implications, because it affects the feasible region for the rest of landfills, and some temporal implications, because the capacity determines the lifetime of the landfill and hence the instant of time where next landfills will need to be constructed. Some general properties of the solution are provided and interpreted from an economic point of view. The resulting problem turns out to be non-convex and therefore it can not be solved by conventional optimization techniques. Some global optimization methods are used to solve the problem in a particular case, in order to illustrate the behavior of the solution depending on parameter values.
In this paper, we propose an indirect method to elicit nonlinear multiattribute utility functions... more In this paper, we propose an indirect method to elicit nonlinear multiattribute utility functions which is based on duality results. The idea is to obtain a utility function which is compatible with the observed behaviour of decision makers. The paper builds on a previous work by André and Riesgo (A non-interactive method to elicit non-linear multiattribute utility functions. Theory and Application to Agricultural Economics. European Journal of Operational Research. In press) but it eliminates an important shortcoming, the necessity to estimate the efficient set, by using a DEA-like approach.
The set of efficient policies could be too large to serve as a useful guide for real action. In t... more The set of efficient policies could be too large to serve as a useful guide for real action. In this chapter we use compromise programming (CP) to reduce the number of eligible policies and get more precise policy recommendations than those derived from the efficient set ...
Abstract We study the dynamic impact of recycling through its effect on the production set of the... more Abstract We study the dynamic impact of recycling through its effect on the production set of the economy and its relationship with natural resources. The contribution of renewable and recyclable resources for sustainability is studied. Although in the short run recycling may ...
Innovar-revista De Ciencias Administrativas Y Sociales, Dec 16, 2022
This paper studies the visibility, environmental sustainability practices, and public recognition... more This paper studies the visibility, environmental sustainability practices, and public recognition of Costa Rican organizations participating in the Carbon Neutrality (CN) Program. Through a review of Costa Rican online newspapers, we conclude that the three main actions performed by CN firms are the offsetting of carbon emissions, the replacement of polluting inputs by cleaner substitutes, and employees' training. The main benefits perceived by these firms include reducing production costs, improving the organizations' image, and achieving market differentiation. In addition, by using non-parametric statistic procedures, we conclude that "highly cited organizations" tend to achieve the CN certification earlier and have a larger number of environmental certifications than "scarcely cited organizations." By analyzing newspaper coverage data in conjunction with a consumer recognition survey, we determined that "recognized organizations" tend to be the oldest, the largest, and the most cited in the press. In addition, "recognized entities" also tend to obtain the CN certification sooner than unrecognized entities, which means that there is a reward in terms of public recognition for companies that took the risk of being innovative in reducing their carbon footprint.
In this paper we propose an analytical approach to obtain so-called efficient policies in terms o... more In this paper we propose an analytical approach to obtain so-called efficient policies in terms of environmental and economic objectives. A policy is said to be efficient if any environmental or economic achievement is obtained with the minimum possible detriment to other relevant objectives. We apply this concept obtain the minimum possible environmental impact for a given growth rate or, symmetrically, the maximum economic growth for a given amount of polluting emissions. We present an application to Spanish economy with 2000 data using a Computable General Equilibrium model. We evaluate the efficiency of the observed policy and give some policy recommendations. Finally, we give an idea about how to enlarge the analysis by including additional objectives.
Prior research has shown that environmental policy can create scarcity rents. We analyse this phe... more Prior research has shown that environmental policy can create scarcity rents. We analyse this phenomenon in the framework of a duopoly that faces a carbon price, considering both Cournot and Stackelberg competition. We identify the different sources of scarcity rents, which we classify in "output" and "grandfathering" scarcity rents. The former depend on the elasticity of the rivals' output to the carbon price while the latter is exogenous. We also determine under which conditions these rents can be large enough to increase firms' profits and, as a policy implication, to what extent the existence of scarcity rents can make the firms agree on a tougher policy. This event is more likely to happen under Cournot than under Stackelberg competition, and the chances increase if the firms are allowed to pollute a large amount without paying a price.
It has been shown in prior research that cost effectiveness in the competitive emissions permit m... more It has been shown in prior research that cost effectiveness in the competitive emissions permit market could be affected by tacit collusion or price manipulation when the corresponding polluting product market is oligopolistic. We analyze these cross market links using a Stackelberg model to show that under reasonable assumptions, there are no incentives to collude for lobbying prices up. However, incentives for manipulating the price of permits up appear if there is an initial free allocation of permits, which is a policy argument against grandfathering and in favor of auctioning. This effect is increasing with the amount of permits allocated to the leader. Moreover, the changes for price manipulation increase with those changes that tend to undermine the leader's advantage in output production or to reduce the leader's abatement cost.
We compare auctioning and grandfathering as allocation mechanisms of emission permits when there ... more We compare auctioning and grandfathering as allocation mechanisms of emission permits when there is a secondary market with market power and the firms have private information. Based on real-life cases such as the EU ETS, we consider a multi-unit, multi-bid uniform auction, modelled as a Bayesian game of incomplete information. At the auction each firm anticipates his role in the secondary market, which affects the firms' valuation of the permits (that are not common across firms) as well as their bidding strategies and it precludes the auction from generating a cost-effective allocation of permits, as it would occur in simpler auction models. Auctioning tends to be more cost-effective than grandfathering when the firms' costs are asymmetric enough, especially if the follower has lower abatement costs than the leader and uncertainty about the marginal costs is large enough. If market power spills over the auction, the latter is always less cost-effective than grandfathering. One central policy implication is that the specific design of the auction turns out to be crucial for cost-effectiveness. The chances of the auction to outperform grandfathering require that the former is capable of diluting the market power that is present in the secondary market.
Lecture Notes in Economics and Mathematical Systems, 2010
This is the concluding chapter. We have introduced an approach to handle the design of public eco... more This is the concluding chapter. We have introduced an approach to handle the design of public economic and environmental polices based on multicriteria decision making in connection with a computable general equilibrium model. This approach endeavours to be both operational and consistent with economic theory. In doing so, we have also tried to build a bridge between operational research methods and economic analysis. We have introduced the notions of efficient policy, compromise policy and satisficing policy, which correspond to different MCDM approaches. Efficient policies guarantee that policy makers do not miss any costless opportunity of improvement. Compromise policies aim to provide policy results that are as close as possible to the optimum values. Satisficing policies fit frameworks in which policy makers are concerned not about optimality but about attaining some target levels for their objectives. We also offer some discussion and guidelines for future research. Coming works could relax some simplifying assumptions that we have introduced to keep our model manageable. Among others, it would be possible to build a dynamic rather than static model, relaxing the small country hypothesis, performing a more accurate analysis of the job market, or explicitly accounting for technical change and pollution abatement activities.
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Papers by Francisco J. Andre