Most resource management studies model the resource in isolation from the rest of the economy of which it is part. In many developing economies, agents participate in multiple activities, creating linkages between resource exploitation and other sectors (e.g., agriculture). In Northern Honduran fishing communities, households allocate effort to fishing according to the opportunity cost of their time, which depends on returns in other activities. We develop a model that demonstrates how market structure impacts fishery exploitation. Agricultural price increases have an ambiguous effect on labor allocated to fishing because they reduce the value of labor in fishing but increase the demand for fish via an income effect. The size and magnitude of impacts depend strongly on the tradability of inputs and outputs in the community economy. The findings point to a need to account for economic linkages and market structure when designing policies to reduce pressure on a natural resource.

The journal Environment and Development Economics began operating in 1995; in a few months, it will complete 20 years of operation. It seemed appropriate to mark this occasion with a special issue of the journal that would provide some perspective on the field, looking both backward at what has been achieved and forward to what lies ahead.

This special issue covers several important aspects of China's environmental policy, ranging from evaluation of government programs (biogas and the Sloping Land Conversion Program) that aim directly to enhance the rural environment, to the reform of natural resource sectors (collective and state forest reforms) that set foundations for the sustainable use of natural resources, and to the impacts of urban environmental policies (including urban transportation management and industrial pollution control policy). We provide an overview of the topic and a brief introduction to each of the contributed papers.

Attitudes towards and acceptance of agricultural biotechnology, which involves inserting genes that carry new traits into existing varieties, has been subject to much debate. This special issue aims to address several gaps in the literature on genetically modified (GM) technology in agriculture. Some of the papers in the issue address the economic and health aspects of genetic modification in agriculture while others examine consumers’ attitudes towards GM products, and the marketing and labeling of GM products.

In this paper, we develop a simple two-period model of natural capital investment under Knightian uncertainty and analyze the effects of changes in the degree of ambiguity on the optimal natural capital investment. We find that the degree of Knightian uncertainty affects a government's natural capital investment. Moreover, we find that the direction of the effect of the Knightian uncertainty depends on the nature of uncertainty, that is, on whether the uncertainty is about the future level of natural capital or about the return from saving.

The current paper offers a new explanation of the emergence of multiple equilibria, for which the high (low) income equilibrium is associated with high (low) environmental quality. This new explanation rests on endogenous technological choice in the presence of emission taxes – an idea whose foundations find strong support from existing empirical evidence. Thus, the interactions between environmental policy and technology choice, within a framework that accounts for the health effects of pollution, may suggest a possible mechanism behind some of the observed differences in income, life expectancy and environmental quality among countries.

While a large body of the literature on environmental policies has focused on the productivity impacts of regulations, less attention has been given to the link between environmental policies and market competition. In this paper, I develop a tractable model that incorporates variable mark-ups to study how a competitive environment is affected by environmental policies in a market with firm heterogeneity and endogenous abatement technology choice. The findings of this study are consistent with the Porter Hypothesis in the sense that environmental regulations motivate abatement technology adoption and enhance productivity and environmental quality. However, the productivity gain is mainly driven by reallocation of resources across firms rather than the induced abatement technological change. Tougher regulations harm the competitive environment by increasing average prices and market concentration. Social welfare also drops because in the absence of strong competition fewer variates are produced in equilibrium.

Capture fish stocks are facing an increasing threat of extinction, partly due to the use of illegal fishing methods. In developing coastal countries – where fishing activities are the mainstay of the population along the coast – livelihoods are being directly threatened. Although a number of studies exist on fishing regulations and those who violate them, little has been done on the relationship between intrinsic catch potentials/fishing skills and illegal fishing behavior. Using data on violations of light attraction regulation among small-scale fishers in Ghana, our results show that the risk of punishment, the amount of fishing experience, the skipper's age, and religious norms all influence the decision to violate fishing regulations. Most importantly, we found that violators and non-violators have different fishing skills. Consequently, policies targeting illegal fishing must focus on equalizing efficiency and/or fishing skills among the fishermen as well as on traditional variables that influence violation decisions.

The paper considers the transition of an economy from non-renewable to renewable energy. We set up a canonical growth model with damages in the household's welfare function and two energy sources – non-renewable and renewable energy. To produce renewable energy a capital stock must be built up. A socially optimal solution is considered that takes into account the negative externality from the non-renewable energy. We also study how the optimal solution can be mimicked in a market economy by policies using subsidies and tax rates. To solve the model numerically, we use Nonlinear Model Predictive Control. We study when a transition to renewable energy takes place and whether it occurs before the non-renewable resource is exhausted. In addition, we analyze the impact of the initial values of the non-renewable resource and of the capital stock on the time of paths of the variables.

The Nobel Prize Committee for Economics has been pretty good about drawing attention to innovative developments in economics since 1969, but in the past 20 years only one prize has been awarded for work that had a strong natural resources dimension, namely that on ad hoc cooperative solutions to the management of common property resources (Elinor Ostrom, University of Indiana). At least three Peace Prizes have been awarded for contributions to issues in conservation and the environment (Al Gore, the IPCC, and Wangari Maathai in Kenya for a tree-planting campaign). Toronto's Globe and Mail newspaper speculated in October 2012 that William Nordhaus would win the prize in economics, probably for his simulation model of economic growth and global warming (an Integrated Assessment Model). But to date only Ms Ostrom has been awarded the Economics Prize for essentially environmental economics. Thomas Schelling has circled back to environmental issues in his research over the years and was awarded the prize in economics, but it was for his contributions to game theory that he was singled out. Ronald Coase (Economics Nobel winner) focused the attention of economists on possible ‘markets’ for externalities, among other things, but few would refer to him as an environmental economist. Robert Solow set out the basic model of economic sustainability but again his prize was for other contributions. Observers in Stockholm and Oslo have thus made known their concern for environmental issues but have remained fairly agnostic about the significance of work by resource and environmental economists on such issues.

This study assesses a new generation of smallholder biogas, an applied sustainable energy technology currently being rolled out on a massive scale in rural China. In the past, the implementation of biogas programs has been largely disappointing, in China (and elsewhere). User satisfaction with the new program is high, based on purposively collected data from 2,700 households in five provinces, and the available evidence suggests tangible environmental and economic benefits. There are strong indications of fuel switching away from fuelwood and crop residues. Less time is spent on fuelwood collection and cooking, which benefits women especially. Adopters save on fertilizers by using biogas residues. Finally, problems with suspension and interrupted supply appear lower than in earlier studies. Overall, these initial findings are grounds for optimism about the potential for scaled-up smallholder biogas to deliver safe and clean rural energy, in China and beyond, provided critical conditions are met.

We use aggregate data to estimate supply, price, land-use, and greenhouse gas impacts of genetically engineered (GE) seed adoption due both to increased yield per hectare (intensive margin) and increased planted area (extensive margin). An adoption model with profitability and risk considerations distinguishes between the two margins, where the intensive margin results from direct ‘gene’ impacts and higher complimentary input use, and the extensive margin reflects the growing range of lands that become profitable with the GE technology. We identify yield increases from cross-country time series variation in GE adoption share within the main GE crops – cotton, corn and soybeans. We find that GE increased yields 34 per cent for cotton, 12 per cent for corn and 3 per cent for soybeans. We then estimate the quantity of extensive margin lands from year-to-year changes in traditional and GE planted area. If all production on the extensive margin is attributed to GE technology, the supply effect of GE increases from 5 per cent to 12 per cent for corn, 15 per cent to 20 per cent for cotton, and 2 per cent to 40 per cent for soybeans, generating significant downward pressure on prices. Finally, we compute ‘saved’ lands and greenhouse gases as the difference between observed hectarage per crop and counterfactual hectarage needed to generate the same output without the yield boost from GE. We find that altogether, GE saved 13 million hectares of land from conversion to agriculture in 2010, and averted emissions are equivalent to roughly one-eighth of the annual emissions from automobiles in the US.

In this paper we evaluate the long-run sustainability of China's Sloping Land Conversion Program (SLCP) by investigating the determinants of farmers’ self-predicted post-program land use decisions. We use data from a household survey conducted in 2005, with a particular focus on a dependent variable that reflects farmers’ ordinal responses to a question about their probability of converting the enrolled lands back to cultivation after the program ends. First, we find that targeting the program on steeper sloped and lower quality plots can significantly decrease the probability of reconversion. Second, there is a significant and robust household income structure effect on the reconversion probability. Third, participating households with the right to decide what to plant on enrolled land have a higher probability of maintaining the reforested land after the program ends. Finally, subsidy shortfall has a positive influence on the probability of reconversion.

This paper studies multilateral and unilateral policy reforms of environmental R&D subsidies and emission taxes in a two-country Cournot model with oligopolistic interdependence. The analysis indicates, inter alia, that there is a potential family of multilateral and unilateral policy reforms which can be set by pollution-intensive and pollution-moderate countries to reduce global emissions. In particular, the analysis suggests that a unilateral increase in the subsidy in the pollution-moderate country may reduce global emissions. The multilateral policy reform of the subsidy and tax in the pollution-intensive country can also reduce global emissions and increase welfare under certain conditions. The role of product differentiation in the context of policy reform is also examined.

I consider that the field of environment and development economics (EDE) began with the publication of The Control of Resources by Partha Dasgupta (1982). Although he did not confine his focus to developing countries, Dasgupta (1982: 10) suggested that managing environmental resources was much broader than conventional resource stock depletion or pollution control:

This paper translates the concepts of sustainable production to three dimensions of economic, environmental and ecological sustainability to analyze optimal production scales by solving optimizing problems. Economic optimization seeks input-output combinations to maximize profits. Environmental optimization searches for input-output combinations that minimize the polluting effects of materials balance on the surrounding environment. Ecological optimization looks for input-output combinations that minimize the cumulative destruction of the entire ecosystem. Using an aggregate space, the framework illustrates that these optimal scales are often not identical because markets fail to account for all negative externalities. Profit-maximizing firms normally operate at the scales which are larger than optimal scales from the viewpoints of environmental and ecological sustainability; hence policy interventions are favoured. The framework offers a useful tool for efficiency studies and policy implication analysis. The paper provides an empirical investigation using a data set of rice farms in South Korea.

We use farm survey data and a damage control framework to analyze impacts of Bt cotton on yields and pesticide use in Pakistan. We also derive optimal levels of pesticide use with and without Bt, taking into account health and environmental externalities. This has not been done previously in the literature. Conventional cotton growers suffer from significant insect crop damage; they underuse pesticides from a profit-maximizing perspective. Yet, the picture is reversed when externalities are also considered. The social optimum of pesticide use is much lower than the private optimum, and both optima are lower with Bt than without this technology. Bt controls pest damage more effectively. Hence, yields on Bt farms are about 20 per cent higher in spite of lower pesticide use. Large pest damage is a typical phenomenon in developing countries. In such situations, Bt can contribute to productivity growth, while reducing pesticide applications and associated negative externalities.

This paper investigates how market access and welfare are affected by piecemeal reforms of tariffs and pollution taxes in a small open economy. By constructing a general equilibrium model of international trade, which is extended to allow production-generated pollution, we characterize conditions under which a tariff reform and a pollution tax reform increase the value of the small country's imports. It is shown that uniform proportional cuts in tariffs that increase welfare do not necessarily improve market access, and the Ju–Krishna rule of tariff reforms that improves market access does not necessarily increase welfare. A reduction in all pollution distortions proportional to their degree of distortion can be shown to improve both welfare and market access.

Systematic trends in the general price level of goods and services are the subject of extensive measurement and significant interest among researchers, policy makers and the general public. Dynamic price measurement is also important in environmental accounting in that real measures of augmented output are required to draw inferences on sustainability. This paper computes price indices for emissions of five air pollutants in the United States. Using marginal damages, the paper computes Paasche, Laspeyres, Fisher and Tornquist index numbers for five air pollutants spanning the period 1999–2008 for use in computing real environmental accounts. Evidence of time series heterogeneity in the marginal damages is detected: marginal damages for nitrogen oxides increase by a factor of two and marginal damages for NH3 decrease by one-half. The analysis finds that nominal gross damages from air pollution in the United States decrease by 40 per cent between 1999 and 2008.

Vitamin A enriched rice (Golden Rice) is a cost-efficient solution that can substantially reduce health costs. Despite Golden Rice being available since early 2000, this rice has not been introduced in any country. Governments must perceive additional costs that overcompensate the benefits of the technology to explain the delay in approval. We develop a real option model including irreversibility and uncertainty about perceived costs and arrival of new information to explain a delay in approval. The model has been applied to the case of India. Results show the annual perceived costs have to be at least US$199 million per year approximately for the last decade to explain the delay in approval of the technology. This is an indicator of the economic power of the opposition towards Golden Rice resulting in about 1.4 million life years lost over the past decade in India.