This special issue focuses on the poor and their role in forest degradation. The idea that the poor are both agents of forest degradation and victims of forest loss is not new. Neither is the observation that unsustainable rates of forest use by smallholder farmers arises as a result of a complex interplay of incentives, constraints, and institutional forces. For researchers and policy makers concerned with natural resource use in low-income settings, theory is often useful, but rarely adequate to explain behavioural patterns. Unambiguous theoretical findings tend to flow only from substantial sets of simplifying assumptions, and such assumptions, measured against the observed facts of smallholder agriculture, seem largely untenable. Unfortunately much empirical research on the topic suffers from an opposite problem. In settings where, at any point in time, everything matters and nothing is held constant, econometric findings are frequently weak. The combination of heterogeneity of circumstance, homogeneity of market signals, and limitations on smallholder response generally overwhelms the statistical power of small data sets, often collected with different purposes in mind.

Given the extensive discussion of China's air pollution and urban income inequality problems, relatively little attention has been paid to any relationship which may exist between the two. This paper seeks to do so, by exploring the existence of environmental equity in China. Specifically, we first calculate traditional measures of urban income inequality (the Gini coefficient and Theil's T and L indices) for the years 1995 and 2004. Then, we estimate ‘pollution-adjusted’ incomes using China-based health functions and economic valuation studies, and recalculate the income (or now welfare) inequality measures. The results indicate that as pollution cleanup efforts gain traction over time, the regressive consequences of pollution may diminish. We thus conclude with an encouraging note for developing countries: improving welfare distribution can coexist with an improving environment.

The neoclassical economic growth model and its extensions in the fields of environmental economics and endogenous growth theory typically represent welfare as a single argument function of consumption when the models are analytically solved. This simplified welfare specification is narrower than those described in the quality-of-life literature and emphasized by proponents of sustainable development. The purpose of this paper is to analytically solve for the properties of a growth model based on a broader quality-of-life measure. The welfare measure includes two arguments, consumption and the stock of nature capital. This formulation enables an analysis of the consequences of the dynamic tension between conventionally defined economic growth and nature capital preservation. We find that a static model without technical progress yields diverse steady states, stability properties, and comparative statics, while a model with exogenous technical progress exhibits unusual comparative dynamics and balanced growth paths. These unusual outcomes have a number of policy-relevant implications for sustainable development.

This paper argues that the use of coal can be reconciled with the environment. In the empirical work, three environmental pollutants are considered, using two alternative methods with two sets of Chinese data. CO2 emissions could not be studied because of data limitations. The hypothesis that the use of coal can be reconciled with the environment through declined emission intensity is confirmed by the empirical tests. The decreases in emission intensity are driven by the application of clean coal technologies, which can be encouraged by appropriate regulations and incentives and have both environmental and economic benefits. Therefore it is critical that appropriate legal and fiscal regimes be formulated and that the development and utilization of high-efficiency and clean coal technologies be promoted. The paper also suggests that the use of coal could continue to be reconciled with concern for the environment, even while considering CO2 emissions.

This study examines the economics of using crop residues to replace coal burning for energy in China in order to mitigate carbon emissions. About 60 per cent of the available crop residues are now used by rural households in China to replace coal so that the residues are already making a major contribution to controlling China's potential carbon emissions. Using the crop residues more efficiently in village or centralized facilities, shifting to crops with more residues, or growing energy crops can all further reduce carbon emissions. However, accounting for the costs of collecting, transporting, drying and storing crop residues and the foregone crop revenue, the study estimates that the marginal cost to remove more carbon emissions with crop residues will be high.

This paper seeks to develop a basic analytical framework that can be used to trace the environmental impacts of macroeconomic policies, and especially to identify where unforeseen negative environmental effects may occur and design remedial measures. The framework is based on a formal mathematical model which shows the second-best nature of macroeconomic policies in the presence of environmental externalities. The model confirms the empirically observed and intuitively appealing conclusion that it is the combination of macroeconomic policies and subsidiary imperfections (policy, market or institutional), rather than macroeconomic policies alone, that leads to environmental degradation. Several illustrative examples are presented from case studies in selected developing countries.

The literature on volunteering has increased over the last few years. However, despite the importance of active environmental participation for solving public good and externality problems, there is still a lack of substantial empirical evidence regarding several interesting factors that influence this form of volunteering. This empirical study investigates the area by analyzing a cross-section of individuals from 38 countries using micro-data from wave III of the World Values Survey (1995–1997). The results suggest that individuals' active participation in environmental organizations is related not only to socioeconomic factors but also to political interest. We also find that a higher level of corruption is related to participation in environmental organizations. However, the situation is different for transition countries in which there was a collapse of institutional structures. The energy required to negotiate the ensuing chaos may have crowded out other forms of engagement.

On 2 April 2013 a major flood struck the City of La Plata, Argentina, killing 89 people and displacing thousands of others. That event, the worst flood the city has suffered in the past 100 years, prompted plans for a new hydraulic infrastructure. Although such an investment is necessary, little is known about its benefits. This paper intends to shed some light on this issue by estimating the willingness to pay to avoid the risk of experiencing a flooding event. For this purpose, we have taken thousands of real estate prices in the La Plata Metropolitan Area and combined them with a high-resolution flood risks map to estimate spatial hedonic price models. The results show significant price discounting for properties in flood-prone areas.

A decade has now passed since Daly made a plea for an environmental macroeconomics. Despite an expanding literature on ‘green’ national accounting and the efforts of ecological economists to measure the sustainable net benefits of a growing macroeconomy, it is only recently that Daly's plea has been adequately answered. This has been achieved with the incorporation by Heyes of an ‘environmental equilibrium’ or EE curve into the familiar IS–LM model. However, the IS–LM–EE model proposed by Heyes is incomplete. By extending Heyes' model to include the role of technological progress and the sustainable net benefits of economic activity, this paper shows that conclusions regarding the desirability of expansionary fiscal and monetary policies alter quite radically. Moreover, it sends out a clear message that environmental concerns should be incorporated into macroeconomic models. They should not be solely confined to microeconomics.

Accelerating economic growth and social development is necessary to reduce the vulnerability and enhance the adaptive capacity of sub-Saharan Africa to cope with the consequences of predicted unfavorable future climate. This requires major investments and policy reforms to induce a needed radical transformation of the way development is currently pursued to a more climate-sensitive path of low carbon growth. Key gaps in the current knowledge base that call for major investments and urgent attention include the ability to forecast more robust local future climate and to account for the uncertainties associated with climate risks for ecosystems' functions and probable nonconvexities in future impacts to project more plausible scenarios for future development in sub-Saharan Africa and provide better information on the costs and benefits of potential actions to avert the negative consequences of climate change.

We estimate the implicit prices of the crime rate and airborne pollution in Chile, using spatially compensating price differentials in the housing and labor markets. We evaluate empirically the impact of different estimation strategies for the wage and rent equations, on the economic value of these two amenities. The results show that increments in the crime rate or in air pollution have a negative impact on welfare and that the estimated welfare measures and their variances are sensitive to selection bias, endogenous amenities and clustering effects. In contrast, the welfare measures do not seem to be very sensitive to the simultaneity bias.

I review the few programs implemented in Latin America to control pollution with direct economic instruments and draw general lessons for the future implementation of these instruments in the region. The available evidence suggests that a combination of low capacities and political economy issues negatively affected the implementation of these programs. As a result, the capacity of the economic instruments to induce emission reductions cost effectively and their future political viability in these countries in the short- or medium-run may have been compromised. This present state of affairs provides more evidence in favor of the policy recommendation that Latin American countries should build local capacities before implementing direct economic instruments, than in favor of the alternative that these countries should adapt direct economic instruments to their institutional and political characteristics.

This paper examines the impact of climate shocks, measured as temperature and precipitation variability, on real monthly per capita consumption expenditure of Indian households over the 1988–2012 period, utilising data from the National Sample Survey Organisation's Consumer Expenditure Surveys. The regression results show an increase in consumption by 1.2 per cent on average, in response to a one standard deviation rise in temperature, with heterogeneous impacts across economic sectors. While agricultural and industrial households experience consumption declines of 1.7 per cent and 8.3 per cent on average, service sector households exhibit consumption increases by 2.4–9.6 per cent on average across rural and urban regions, in response to a one standard deviation rise in temperature. The analysis suggests an increase in inequality of consumption across sectors due to climatic shocks, with implications for climate policy and sustainable development in India.

Lead acid batteries generate hazardous lead waste with environmental and health implications. The deposit refund system for recycling in Delhi provides a discount to consumers on purchasing new batteries and returning used batteries to retailers for recycling. The retailers determine whether batteries are recycled in an environmentally friendly or unfriendly manner by selling them to manufacturers or to unorganized scrap dealers who then sell to unregistered smelters. This study finds that the economic instrument that brings used batteries into recycling works well. Organized recycling is limited, since retailers prefer selling used batteries to the informal sector because of higher prices, lower storage costs and taxes. In addition, we consider policy instruments like a green tax on batteries with a refund when the manufacturer ensures environment-friendly recycling and fiscal incentives to organized smelters to increase production.

This paper explains the puzzling fact that in organizing the management of surface water, village leaders have provided incentives to canal managers in some areas, but not in all. Our study indicates that the optimal contractual choice depends on the relative abilities of the leader and the manager, the design of the cultivated land, the characteristics of the canal system and the opportunity costs of the leader and the pool of managerial candidates. The unifying mechanism is the relative change in the ability of the leader and manager to perform the unmarketable activities that are needed to provide irrigation services.

A choice experiment was applied to measure the existence value of an endemic moss. We assessed value separation, embedding or warm glow and ‘ethical’ motivations. We exemplify our application by valuing an inconspicuous moss endemic to Chile's sub-Antarctic region. The choice experiment was administered to a sample of local residents of Navarino Island (southern Chile). The design isolates the existence value by requiring respondents to make simultaneous tradeoffs between moss existence value, five other biodiversity-related values and income changes. Insensitivity to scope was addressed by using degrees of extinction risks. We predominantly use a willingness-to-accept design of the payment vehicle to avoid protest responses. A meaningful marginal value for the existence of an endemic species for Navarino island residents was documented. The design, based on varying degrees of extinction risk, avoided a strong effect of warm glow. No protest responses motivated by ethical concerns were encountered.

We combined field experiment and household survey data to investigate whether working in a risky occupation such as fishing makes fishers less risk averse than people in other occupations. The unique characteristic of Vietnam's fisheries enables us to solve the endogeneity problem of occupational choice usually found in this kind of study. We used prospect theory as the main analytical framework and developed a practical procedure to simultaneously estimate the parameters of the utility function under prospect theory. The key finding is that working in a fishery makes economic agents less risk averse than others.

Livestock health is economically important for agropastoral households whose wealth is held partly as livestock. Households can invest in disease prevention and treatment, but livestock disease risk is also affected by grazing practices that result in inter-herd contact and disease transmission in regions with endemic communicable diseases. This paper examines the relationships between communal grazing and antimicrobial use in Maasai, Chagga and Arusha households in northern Tanzania. We develop a theoretical model of the economic connection between communal grazing, disease transmission risk, risk perceptions, and antimicrobial use, and derive testable hypotheses about these connections. Regression results suggest that history of disease and communal grazing are associated with higher subjective disease risk and greater antimicrobial use. We discuss the implications of these results in light of the potential for relatively high inter-herd disease transmission rates among communal grazers and potential contributions to antimicrobial resistance due to antimicrobial use.

This paper introduces a household model of private investment in storm protection under an endogenous risk framework to determine how defensive self-protection and self-insurance expenditures by coastal households to mitigate storm-inflicted damages are affected by the availability of public programs and the presence of a mangrove forest. The theoretical results show that publicly constructed physical barriers and mangroves encourage self-protection but discourage self-insurance expenditures. However, public disaster relief and rehabilitation programs lead to the crowding-out of self-protection but the crowding-in of self-insurance. Our empirical analysis of coastal households in Bangladesh impacted by Cyclone Sidr reveals partial support for the crowding-out and crowding-in effects of public investments and programs. Households located in a mangrove-protected area invest more in self-protection and less in self-insurance. Other controls, such as household socio-economic characteristics, also influence and add a degree of complexity to the relationship.