Regulation of renewables

8/10/2019 Regulation of renewables

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Brian R. Copeland & M. Scott Taylor

American Economic Review 2009.

Sharon Loxton

ENV. 379

Duke U.

Katherine Macarena Antonio


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Research topic

Develop a theory of renewable resources management

where the degree to which countries escape the tragedyof the commons (the enforcement of property rights,and hence the efficacy of resource management), is

endogenously determined

assuming de facto property rights regime


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Some Facts Continuous declining of renewable resources stock

(deforestation, capture fisheries are in a state of decline

if not collapse).

Carbon emissions continue to grow at rapid rates

Poor environmental quality in many developingcountries

Who is responsible? Role of international trade


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Theory an existing government regulates the use of a renewable

resource by a set of agents who have a right to harvest

(fishery, forest stock)

local resource contained within one country

agents may cheat on these allocations and risk punishment

the effective protection is not perfect, even though propertyrights would be perfectly enforced if there was nomonitoring problem


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Dividing into groups resource-richeconomiesHARDIN OSTROM CLARK

SUCCESS IN

REGULATION

Limited relativeto Overcapacity.De facto openaccess .No rents earnedfrom resources

Price low openaccess, high theprotection safforded theresourceGenerate somerates. No firstbest

With Highprices obtain thefist best

With lowerprices even Clarkeconomiesexhibits openaccess.

Parameters: Resources growth rate, Mortality rate,

Time preferences rates, Technologies.


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Features of the model

The model can explain heterogeneity across countriesand resources in the effectiveness of resourcesmanagement

Predict that change in prices, population, and

technology can cause transitions to better or worsemanagement regimes.


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Model

A. AGENTS

B. TECHNOLOGIES AND ENDOWMENTS

C. RESOURCES MANAGER

DETECTION RATE FINE


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ModelD. INCENTIVE CONSTRAINT

Expected presented value to cheating

Value of non-cheat option

An agent will not cheat when the cost exceed the benefits


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Model

E. STEADY STATE

The steady state is unique. It exhibits either de factoopen access, limited harvesting restrictions, or an

outcome equivalent to that of the unconstrainedfirst best.

If:


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Three forces determine the successor failure in resources management

The regulators enforcement power,

the extent of harvesting capacity ,

and the ability of the resource to generate competitivereturns without being extinguished


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Country characteristics and

management regime1. Hardin economies will always exhibit de facto open

access in steady state. For any finite relative price p of

the harvest good, we have L=L0

(p) and no rents areearned in the resource sector.

2. If

holds and there is overcapacity in the resource sector,all economies will exhibit open access and zero rents atlow resource prices.


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Applications How the impacts of trade liberalization, technological

progress, and economic growth can differ quiteradically across countries and resources.

Trade liberalization is more favorable for resourceexporting countries, but if market integration alsobrings new technologies these tend to destabilizemanagement systems.


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Conclusions generated the limiting cases of open access and perfect

management as endogenous outcomes, and linkedthese outcomes to primitive country and resource

characteristics

model is highly stylized and focuses on three simpledeterminants of success and failure in resource

management; as such, it surely cannot explain all ofthe variation we observe in resource managementworldwide.


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ConclusionsRESEARCHA welfare maximizing regulator to show how a variety of

outcomes are possible even with a benevolentregulator, extending to allow corruption or politicalpressure.

Generate poaching or cheating in equilibrium, andhence generalizing the model to allow forheterogeneous harvesters could yield a richer set of

outcomes.Using other not a very simple, single-species renewable

resource model with the Schaefer harvestingtechnology.


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THANK YOU


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Regulation of renewables

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