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.

Our study examines the effect of water utilization together with the effect of water quality on economic growth across countries. We constructed a panel of 177 countries covering the period of 1960–2009. We analyse two dependent variables, gross domestic product per capita and the average of five years of growth. The analysis is conducted using a fixed effects model and fixed effects with instrumental variables. We find that although water utilization affects growth, water quality also proves to be highly significant and affects growth in both the short and long run to a greater degree than water quantity.

Developing countries are known to exploit their resource frontier to achieve growth objectives and reduce poverty. This can lead to long-term positive outcomes or – if resource exploitation is unsustainable – lose–lose outcomes that leave populations and ecosystems worse off. This paper introduces a dynamic model of resource exploitation to explain how regions may succumb to, avoid or escape this negative outcome. The theoretical model characterizes a frontier community that uses soil as an input into agricultural production. The model shows that there may be a critical point in the soil stock that determines whether agricultural activities lead to sustainable development or a collapse in local income. This suggests that, in the event of a resource collapse, temporary adjustments to the system may permanently rehabilitate the resource base and change a community's development pattern. Calibration of the model to several frontier states of the Brazilian Amazon points toward an overall outcome of steady development.

The paper analyzes the economic impacts of climate change-induced fluctuations on the performance of Ethiopia's agriculture, using a countrywide computable general equilibrium (CGE) model. We model the impacts on agriculture using a Ricardian model, where current agricultural production is modelled as a function of temperature and precipitation, among other things, and where future agriculture is assumed to follow the same climate function. The effect of overall climate change is projected to be relatively benign until approximately 2030, but will become considerably worse thereafter. Our simulation results indicate that, over a 50-year period, the projected reduction in agricultural productivity may lead to reductions in average income of some 20 per cent compared with the outcome that would have prevailed in the absence of climate change. This indicates that adaptation policies – both government planned and those that ease autonomous adaptation by farmers – will be crucial for Ethiopia's future development.

The effect of preference uncertainty on estimated willingness to pay (WTP) is examined using identical payment cards and alternative uncertainty elicitation procedures in three split samples, focusing on air quality improvement in Nairobi. The effect of the stochastic payment card (SPC) and polychotomous payment card (PPC) are compared with a conventional payment card (PC). Substantial financial support is found for improved air quality in Nairobi, with approximately 85 per cent of the whole sample stating a positive WTP. The way WTP values are elicited, with and without ability to express preference uncertainty, has significant effect on WTP welfare estimate. Allowing respondents to express experienced uncertainty when stating WTP value yields more conservative but less accurate WTP values for inclusion in policy analysis. The PPC seems to hold more promise since it is easier to understand and imposes less cognitive burden on survey participants than the SPC in a developing country context.

Since 2000, the Clean Development Mechanism (CDM) under the Kyoto Protocol has included southern countries in the fight against climate change by encouraging northern countries to make environmentally friendly direct investments at the lowest cost in these developing nations. Although CDM investments have enjoyed great success, the question of the contribution of these investments to the development of the host countries remains insufficiently explored. This paper offers a computable general equilibrium model-based scenario, describing the potential economic and environmental impacts of CDM investments for Mexico. As modelled in this study, these investments should generate both additional demand for activities that produce the fixed capital goods required for their implementation and environmentally friendly technological changes in the production process for the electricity sector. The numerical simulations reveal the growth potential and important fund of development represented by the CDM for Mexico; however, they show that the environmental impact also appears broadly mixed and dependent on both the nature of the sectors it affects and the intensity of the technological change it generates.

The existing fisheries economics literature analyzes compliance problems by treating the fishing firm as one cohesive unit, but in many cases violations are committed by agents acting on behalf of a firm. To account for this, we analyze the principal–agent relationship within the fishing firm. In the case where the firm directly benefits from illegal fishing, the firm must induce its crew to violate regulations through the incentive scheme. Within this framework, we analyze how the allocation of liability between fishing firms and crew affects quota violations and the ability to design a socially efficient fisheries policy. We show that without wage frictions, it does not matter who is held liable. However, under the commonly used share systems of remuneration, crew liability generally yields a more efficient outcome than firm liability. Furthermore, asset restrictions may affect the outcome under various liability rules.

The structure of stated preference questions to value consumption from public infrastructure can vary depending on the conditions of consumption facing the household. Specifically, a good could be offered as a quasi-public or quasi-private good. This paper demonstrates how consumption from two alternative electricity allocation options can be valued using two types of stated preference questions. Since surveyed households were asked two types of questions, the authors develop a joint model of a contingent valuation question and a contingent quantity behavior response that allows for correlation in error terms across models. In their application to two villages in Rwanda, the authors find higher WTP for electricity consumed as a quasi-private good rather than a quasi-public good, with four hours of electricity per day, only in the evening. They also find correlation in the error terms across the two models, suggesting that their joint estimator is more efficient than estimating each model individually.

Climate and institutions might be crucial in lowering the vagaries of climate change impacts in terms of productivity. This study measures the relationships of productivity measures adjusted for the regulation of carbon emission and institutions together with climate change throughout the world. This paper finds that there is higher potential for reduction of CO2 emissions in developing countries at lower cost. However, the cost to reduce emissions lowers their growth potential in terms of lost productivity growth. Better institutions help to lower the negative impacts of climate change by improving the process of technological adoption in developing countries. Climate change reduces the productivity growth in developing countries by lowering the process of technological adoption, and better institutions result in higher productivity.

In low-income countries, grassroots collective action for the management of a common environmental resource is a well-known substitute for government provision of public goods. In our research we test experimentally what its effect is on social capital. To this purpose we structure a ‘sandwich’ experiment in which participants play a common pool resource game (CPRG) between two trust games in a Nairobi slum where social capital is scarce but informal rules regulating the commons are abundant. Our findings show that the change in trustworthiness between the two trust game rounds generated by the CPRG experience is crucially affected by the subjective satisfaction about the CPRG, rather than by standard objective measures related to CPRG players' behaviour. These results highlight that subjective satisfaction in a collective action has relevant predictive power on social capital creation, providing information which can be crucial to designing successful self-organized environmental resource regimes.

The authors study the impact of natural resource degradation on income diversification in Beninese fishing communities. Using survey data and econometric analysis, they show that fishermen are more likely to diversify their income when the degradation of the fish stock is more severe. However, the level of income diversification that they find is surprisingly low and far from sufficient to relieve the stress on the lakes. The latter relates to low levels of formal education among fishermen and the unregulated use of highly productive, but damaging, fishing gear. These two factors result in a high return to fishing relative to non-fishing activities, even amid degradation.

We propose an ‘allocate-and-trade’ institution to manage the eastern Nile River Basin for Ethiopia, Sudan and Egypt as the basin faces a new reality of the Grand Ethiopian Renaissance Dam (GERD). We find that a social planner could increase the region's economic welfare by assigning water rights to the riparian states. An alternative intrabasin water rights arrangement and trade could achieve more than 95 per cent of the welfare created by the social planner. GERD will change both the economic benefits and hydrological positions of the riparian countries. Economic benefits from alternative water use would be sufficient to make riparian countries better off compared with the status quo. Furthermore, riparian countries could raise more than US$680 m annually for protecting and conserving the natural resources of the region.

REDD + is one of the tools under development to mitigate climate change, but it is not yet clear how to appropriately bring in the approximately 25 per cent of developing country forests that are managed by communities. Drawing on the economics of collective action literature, the authors attempt to shed light on whether forest collective action itself sequesters carbon. Using satellite imagery combined with household and community data from Ethiopia, they examine whether community forests (CFs) with high levels of collective action attributes known to be associated with better management have more carbon than other systems. Although these results should be considered indicative due to the nature of the data, the analysis suggests that in the absence of dedicated sequestration policies the quality of local-level collective action offers at best marginal carbon benefits. Specific incentives like REDD + may therefore play important roles in delivering climate change benefits from CFs in low-income countries.

Adaptation costs to climate change vary widely across countries, especially between developed and developing countries. Adaptation costs also influence a country's decision to abate and join international environmental agreements (IEAs). In this paper, the authors study how these cost differences affect participation incentives. Their model identifies two channels through which adaptation affects free-riding incentives: carbon leakage and cost asymmetry in adaptation. In contrast with the common view, the authors find that the presence of adaptation is not necessarily an impediment to cooperation on abatement. They also present conditions under which adaptation can strengthen or weaken free-riding incentives. The results serve as a cautionary tale to policy makers and suggest that policies directed at reducing carbon leakage and/or cost differences between developed and developing countries may also affect the success and failure of IEAs.

In July 2014 a group of 14 countries (the ‘Davos Group’) launched negotiations on liberalizing trade in ‘green goods’ (also known as environmental goods – EGs), focusing on the elimination of tariffs for a list of 54 products. With an average tariff of 1.8 per cent, this group has little to offer even if the list were extended to the 411 products on the ‘WTO list’. Taking into account tariff dispersion, their tariff structure on EGs would be equivalent to a uniform tariff of 3.4 per cent, about half the uniform tariff-equivalent for non EGs products. Enlarging the number of participants to low-income countries might be possible as, on average, their imports would not increase by more than 8 per cent. Because of the strong complementarities between trade in EGs and trade in environmental services, these should also be brought into the negotiation in spite of the likely difficulties in reaching agreement on their scope.