Esther Blanco, AERNA Newsletter Editor
Dear AERNA colleagues and friends,
It is an honor to take over the responsibilities as an Editor of the AERNA Newsletter, from Carmen Arguedas. She did an excellent job and I will try my best to keep up. I thank all authors in this Summer newsletter, as well as those who have already committed for the Winter newsletter, for their contribution to the public good that this publication is. Your effort benefits the whole group, thanks! I welcome all of you to contact me to participate to the next edition of the newsletter (deadline 1st December 2017) via e-mail (firstname.lastname@example.org). (read more ⇓)
This newsletter incorporates two novelties:
First, the Young AERNA section, where PhD students and PhD candidates have the opportunity to share their ongoing research tasks. Young researchers are the centerpiece of any research community, and I think the same holds true for AERNA. This is the first visible outcome from a strategic effort launched by Alberto Ansuategui to get young researchers more involved in the association and provide tailored services to them. If you are a PhD student or candidate and would like to know more about this initiative and others to come, feel free to contact me.
Second, the section on Event Reviews, where AERNA members share their personal take on recent research events. Feel free to share your views on future events!
Looking forward your reaction and future contributions. Enjoy the Newsletter!
Antoni Riera, President of AERNA
After the elections held last Friday, June 30, the Association enters a new stage. With Dr. Santiago Rubio, who will replace me as president in April 2019, Dr. Maria Lourerio, who will continue to act as secretary, and doctors Esther Blanco, José Luis Oviedo and Renato Rosa as officers, has come the moment to give visibility to the improvements that, in several ways, have occurred in the field of the Economics of the Environment and of the Natural Resources in the last years: greater activity, wide presence in prestigious publications, thematic closeness to the concerns that interest to companies and institutions ... and place the Association in a speaker of the impact that global megatendences will have in our research and in the society that welcomes us. Provide, in short, expert views and references on what has been done and the path left to go to move towards a smarter, more inclusive and sustainable economy, all of them, questions very close to the research of AERNA members. (read more ⇓)
I sincerely believe that the conditions are given for this. First, because during these first two years our objective has been to set and organize the processes of administrative management of the Association in order to standardize them, improve their efficiency and get them to be as little time consuming as possible to pay attention to these new tasks. In this line, the design and management of the website, the maintenance of the partners' databases, the economic management of the association and the articulation of different channels of communication with and available to the partners has been designed. An internal work, which is not visible, but, together with the elaboration and consensus of new statutes and the partial renewal of the board of directors, should allow the Association not only to gain agility but, most importantly, to maintain in time the coordinates drawn by people and teams linked to the Association.
Second, because over the years, the Association continues to maintain a significant number of partners that are faithful to the principles and values that founded AERNA, while young researchers are closer to the Association not only to publicize their pre- and post-doctoral research but also integrate themselves into professional networks.
With this general purpose, I encourage all members to join this new stage from your current position at Spanish, Portuguese, and foreign Universities and Research Centers, stressing pioneering experiences that constitute references to good practices and therefore a sample of another way to do things valuable for everyone.
It is fair to acknowledge the generosity with which all the people who, as a partner, organizer of seminars and conferences or in their dedication to previous boards, have contributed to the growth of AERNA. Our gratefulness must be double: for the valuable content of its contributions and for the effort to share their time and knowledge.
Alejandro Caparrós, Coordinator of the Working Group on Game Theory and Environmental and Resource Economics
Game Theory analyses strategic situations where one agent’s actions affect other agents’ outcomes, and vice versa. Game Theory is particularly useful for analyzing problems dealing with externalities and public goods, which are key features of most environmental problems. As a result, Game Theory has been applied extensively in environmental and natural resource economics over the last decades. (read more ⇓)
Building on the success of the First Workshop celebrated in 2015, the Workshop will bring together researches affiliated to the AERNA Working Group on Game Theory and Environmental and Resource Economics, and invites submissions of papers that deal with environmental and resource economics problems using any of the branches of Game Theory. Theoretical and empirical contributions are welcome, including, but not limited to, coalition formation, dynamic games, bargaining, behavioral economics and experimental economics.
Although completed papers were welcome, the Workshop encouraged particularly the submission of ongoing research or papers which are not completely finished. The format of the meeting (with about one hour per presentation) will allow extensive discussions about each one of the papers accepted. Submissions by PhD students are particularly encouraged.
There is no registration fee. Lunch, soft drinks and coffee will be served during the workshop free of charge. Each participant is supposed to cover the remaining own expenses.
Venue: Institute for Public Goods and Policies, Consejo Superior de Investigaciones Científicas, Albasanz 26, Madrid. Classroom 0E18 - Menéndez Pidal.
Organizing Committee: Carmen Arguedas, Alejandro Caparrós and Michael Finus.
Carmen Arguedas, Universidad Autónoma de Madrid
Pollution standards or limits are very frequent in environmental regulation. A pollution standard defines the maximum allowed amount of a certain pollutant that polluting sources, typically firms, can release. Most textbooks consider pollution standards as command-and-control instruments. Polluters are told what they have to do and it is generally assumed that they will. With pollution standards, emissions are not priced (as opposed to carbon taxes), and no flexibility is allowed (as opposed to tradable permits markets). Hence, pollution standards are often regarded as inferior, at least to economists’ taste. (read more ⇓)
However, the majority of textbooks neglect compliance issues. In practice, though, firms may decide to exceed the standards. Following the seminal idea by Becker (1968), this may occur if firms’ expected costs of violating pollution limits are smaller than firms’ compliance costs. The latter refers to firms’ pollution abatement costs, while the expected costs of non-compliance take into account the likelihood of being discovered, as well as the possible imposed sanctions if this were the case. In practice, firms’ pollution decisions depend not only on the standard itself but also on the stringency of the monitoring and enforcement mechanisms. As a result, regulators must account for these elements when choosing the appropriate level of the standards, since they crucially affect firms’ induced pollution levels, the resulting environmental damages, and social welfare levels.
Many scholars have studied the interaction between pollution standards and compliance issues, both from theoretical and empirical viewpoints. Three main research topics have received increasing attention during the last years. The first has to do with the appropriate shape of the fines for non-compliance, and weather we should pursue full compliance per se as a desirable objective. The second is related to the interaction and different information levels of interested parties and several layers of government. The third comprises the analysis of standard setting and related enforcement issues in dynamic contexts, both in flow and stock pollution problems.
Regarding the first area of research, several reasons justify the use of non-maximum sanctions. These include the possibility of targeting enforcement in dynamic settings (Friesen 2003), self-reporting of emission levels (Livernois and Mckenna 1999), penalty evasion (Kambhu 1989), possible inverse relationships between fines and probabilities of conviction (Andreoni 1991), marginal deterrence (Shavell 1992), specific versus general enforcement (Shavell 1991), or hierarchical governments (Decker 2007). An additional factor that justifies the use of limited fines is the presence of administration costs. These depend on the degree of violation, and may account for the costs of court processes, citizens' discomfort with law transgressions, etc., such as in Polinsky and Shavell (1992) or Stranlund (2007). But administrative costs may also depend on the general discomfort in society with large fines. For example, firms may lobby the imposition of large fines, and this may result in additional implementation costs, such as in Chen and Lai (2012) or, very recently, in Arguedas, Earnhart and Rousseau (2017). In Arguedas (2008), it is shown that the appropriate structure of the penalty under non-compliance is highly progressive, while the best possible shape of the fine under compliance is linear. In the presence of these administration costs, linear penalties are socially preferred and the optimal standard induces compliance. However, when these costs are not very relevant, non-compliance can then be preferred.
With regards to hierarchical issues, the pollution standard is generally decided at the national level, while monitoring and enforcement is made by local enforcement agencies. This problem is interesting due to differences in both available information and objectives at these two administration levels, and it has been addressed by Decker (2007) or Arguedas and Rousseau (2015), among others. Generally, national regulators are less informed than local agencies about the characteristics of the polluting agents. This results in the use of uniform standards, and the delegation of the enforcement activity to the local agency. On the one hand, the local agency partially corrects for the inefficiency caused by uniform standards by setting a differentiated inspection strategy. On the other hand, the level of the standard is distorted to partially correct for the inefficiency caused by the divergence between national and local objectives. In Arguedas, Earnhart and Rousseau (2017), regulated polluting facilities and environmentally concerned citizens can expend negotiation efforts to affect the regulation. In the end, the negotiated standard depends on the political weight enjoyed and the negotiation effort costs faced by both citizens and the regulated facility, along with the stringency of the national standard and local ambient quality conditions. Other studies that use political economy models to study enforcement strategies are, for example, Makowsky and Stratmann (2009), Garoupa and Klerman (2010), Cheng and Lai (2012), or Ovaere, Proost and Rousseau (2013).
When it comes to dynamic aspects, one realizes that the vast majority of existing works about the setting of regulatory stringency and compliance assume static contexts, see, for example, Veljanovski (1984), Kambhu (1989), Jones (1989), Jones and Scotchmer (1990), Keeler (1995), or Arguedas (2008). Several works analyze optimal standards in dynamic settings, but they do so assuming perfect compliance, such as Beavis and Dobb (1986), Hartl (1992), Conrad (1992), Falk and Mendelsohn (1993) or Benford (1998). The only exceptions that allow for optimal standard setting and non-compliance (over-compliance) are two recent studies of Arguedas, Cabo and Martín-Herrán (2017a, 2017b), where the cases of flow and accumulative pollutants are respectively studied. The case of stock pollution is particularly relevant, since some important environmental problems, such as the depletion of the ozone layer or the deterioration of soil and water quality share this feature. Some preliminary findings are worth mentioning. First, both the optimal standard and the fine are harsher through time as long as the environmental problem becomes more serious. Second, a scenario where the standard and the fine are policy variables is preferred both in environmental and social welfare terms to more restrictive settings where only the fine or only the standard are policy controls, for a wide range of parameter values. Finally, when only these two restrictive scenarios are feasible, setting the fine is mostly preferred to setting the standard, even when setting the fine can induce non-compliance.
Andreoni, J. (1991), Reasonable Doubt and the Optimal Magnitude of the Fines: Should the Penalty Fit the Crime? The RAND Journal of Economics 22, 385–395.
Arguedas, C. (2008), To Comply or Not To Comply? Pollution Standard Setting under Costly Monitoring and Sanctioning. Environmental & Resource Economics 41, 155–168.
Arguedas, C., and S. Rousseau (2015), Emission Standards and Monitoring Strategies in a Hierarchical Setting, Environmental and Resource Economics 60, 395–412.
Arguedas, C., F. Cabo, and G. Martín-Herrán (2017a), Optimal Pollution Standards and Non-compliance in a Dynamic Framework. Environmental and Resource Economics, forthcoming.
Arguedas, C., F. Cabo, and G. Martín-Herrán (2017b), Enforcing Pollution Standards in Stock Pollution Problems. In progress.
Arguedas, C., D. Earnhart, and S. Rousseau (2017), Non-Uniform Implementation of Uniform Standards. Journal of Regulatory Economics 51, 159–183.
Beavis, B., y I.M. Dobb (1986), The Dynamics of Optimal Environmental Regulation. Journal of Economic Dynamics and Control 10, 415–423.
Becker, G. S. (1968), Crime and Punishment: An Economic Approach. Journal of Political Economy 76, 169–217.
Benford, F.A. (1998), On the Dynamics of the Regulation of Pollution: Incentive Compatible Regulation of a Persistant Pollutant. Journal of Environmental Economics and Management 36, 1–25.
Chen, C.C., and Y.B. Lai (2012), Does a Stricter Enforcement Policy Protect the Environment? A Political Economy Perspective. Resource and Energy Economics 34, 431–441.
Conrad, M. (1992), Stopping Rules and the Control of Stock Pollutants. Natural Resource Modelling 6, 315–327.
Decker, C.S. (2007), Flexible Enforcement and Fine Adjustement. Regulation and Governance 1, 312–328.
Falk, I., y R. Mendelsohn (1993), The Economics of Controlling Stock Pollutants: An Efficient Strategy for Greenhouse Gases. Journal of Environmental Economics and Management 25, 76–88.
Friesen, L. (2003), Targeting Enforcement to Improve Compliance with Environmental Regulations. Journal of Environmental Economics and Management 46, 72–85.
Garoupa, N., y D.M. Klerman (2010), Corruption and Private Law Enforcement: Theory and History. Review of Law and Economics 6, 75–96.
Hartl, R.F. (1992), Optimal Acquisition of Pollution Control Equipment Under Uncertainty.Management Science 38, 609–622.
Jones, C.A. (1989), Standard Setting with Incomplete Enforcement Revisited. Journal of Policy Analysis and Management 8, 72–87.
Jones, C.A., y S. Scotchmer (1990), The Social Cost of Uniform Regulatory Standards in a Hierarchical Government. Journal of Environmental Economics and Management 19, 61–72.
Kambhu, J. (1989), Regulatory Standards, Noncompliance and Enforcement. Journal of Regulatory Economics 1, 103–114.
Keeler, A. (1995), Regulatory Objectives and Enforcement Behavior. Environmental and Resource Economics 6, 73–85.
Livernois, J., and C.J. McKenna (1999), Truth or Consequences: Enforcing Pollution Standards with Self-Reporting. Journal of Public Economics 71, 415–440.
Makowsky,M. D., y T. Stratmann, T. (2009). Political Economy at any Speed: What Determines Traffic Citations? American Economic Review 99, 509–527.
Ovaere, L., S. Proost, y S. Rousseau. (2013). The Choice of Environmental Regulatory Enforcement by Lobby Groups. Journal of Environmental Economics and Policy 2, 328–347.
Polinsky, A.M., and S. Shavell (1992), Enforcement Costs and the Optimal Magnitude and Probability of Fines. Journal of Law and Economics 35, 133–148.
Shavell, S. (1991). A Note on Marginal Ddeterrence. International Review of Law and Economics 12, 345–355.
Shavell, S. (1992). Specific versus General Enforcement of Law. Journal of Political Economy 99, 1088–1108.
Stranlund, J.K. (2007), The Regulatory Choice of Non-Compliance in Emission Trading Programs. Environmental and Resource Economics 38, 99–117.
Veljanovski, C.G. (1984), The Economics of Regulatory Enforcement. In: Hawkins K, Thomas JM (eds) Enforcing Regulation. Kluwer-Nijhoff Publishing, Boston.
Elena Ojea, Universidad de Vigo; Maria L. Loureiro, Universidad de Santiago de Compostela; Maria Alló, Universidad de A Coruña; and Melina Barrio, Universidad de Alcalá de Henares
Forests are recognized worldwide for providing ecosystem services that sustain human well-being, and for their increasing role in climate change policy. While forests remove carbon from the atmosphere, deforestation and forest degradation remain one of the main causes of increasing Green House Gas (GHG) emissions, contributing 10-17% of the total emissions causing climate change (Metz et al., 2007). Reducing emissions from deforestation and forest degradation in developing countries is therefore an important component in a global climate policy framework, and has captured international attention as a potentially effective and low-cost climate change mitigation option (Stern et al., 2006). In fact, the United Nations (UN) is carrying out a collaborative initiative on Reducing Emissions from Deforestation and Forest Degradation (REDD) in developing countries. The UN-REDD program is a multi-donor trust fund that allows donors to pool resources and provide funding with the aim of significantly reducing global emissions from deforestation and forest degradation. The UN-REDD Program supports nationally led REDD processes in 50 countries across Africa, Asia-Pacific and Latin America and the Caribbean and promotes the involvement of all stakeholders, including Indigenous peoples and other forest-dependent communities, in national and international implementation. (read more ⇓)
In this context, consensus seems to be emerging that REDD cannot be seen solely as a tool for mitigating excessive carbon emissions. This is argued since the so-called win-win solutions for biodiversity and ecosystem services can be misleading, since in many cases, those interactions will involve trade-offs (Phelps et al. 2012). Benefits from carbon sequestration can be higher at the global level than at the national level, and these primarily involve offsetting developed countries’ emissions instead of assuring the adaptation of vulnerable countries to climate change effects. In this setting, valuation techniques play the role of providing a rational basis for estimating the level of adequate international transfer payments to compensate countries that are conserving forests beyond their own needs for the sake of global gain. This means that REDD should also generate additional co-benefits, including the conservation of forest ecosystems and biodiversity and provide sustainable income for some of the world’s poorest people. Understanding and quantifying the economic values of these carbon co-benefits is necessary to guide climate policy decisions, but it proves difficult given the set of market and non-market techniques applied to services valuation, and the scarce information that exists on a global basis (Jacoby, 2004).
In order to fill this gap, we conducted a worldwide meta-analysis on forest ecosystem services over the last 30 years to understand the valuations and preferences in relation to forest ecosystem benefits. We explore the data in order to address the general question of whether the threat of global warming and the capacity of forests to act as carbon sinks justify carbon storage becoming the single most important value driving tropical forest management under the new international climate policy arena. An intensive and systematic search was carried out reviewing studies from different databases such as ECONLIT, EVRI, SCIENCEDIRECT and AGECONSEARCH, among others. The large database has been analyzed with respect to the socioeconomic values derived from the services provided by these worldwide forest ecosystems. Following an output-based classification for ecosystem services, we have identified four main types of services: air quality and water regulation, food and fiber, wild species diversity, and recreation and tourism.
By means of a meta-analysis, we estimate the benefits of these ecosystem services in REDD target countries and the rest of countries in the world. We are able to differentiate the values of ecosystem services for REDD and non REDD forests ecosystem services. As a result, the estimated economic values for each forest ecosystem service in REDD countries are much higher than the level of payments perceived from REDD activities. This result reveals a large gap between the economic benefits of ecosystem services other than carbon and the magnitude of payments from REDD. Programs aimed at preventing deforestation may take these factors into account, as forest services (other than carbon) are highly valued, and the forest communities that preserve them could be under-compensated in REDD.
We also find that our estimates are close to the range of existing values for tropical forests. For example, the average benefits from air quality and water regulation in our sample ($1541/ha.yr) is within the interval values provided by the TEEB regulating bundle services estimation ($57-7135/ha.yr; TEEB, 2010). The benefits from ecosystem services are higher than the benefits from carbon storage in tropical forests and we can conclude that there is evidence that co-benefits have high values that directly compare to carbon uptake in REDD forests, and that these could create important trade-offs. These results can be useful from the perspective of establishing REDD payments, showing that there are important benefits to people from multiple forest services, and not only carbon uptake.
Jacoby, Henry D. 2004. Informing climate policy given incommensurable benefits estimates. Global Environmental Change 14(3), 287-297.
Metz, B., Davidson, O.R., Bosch, P.R., Dave, R., Meyer, L.A. 2007. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
Phelps, Jacob, Edward L. Webb, William M. Adams. 2012b. Biodiversity co-benefits of policies to reduce forest-carbon emissions. Nature Climate Change 2:497-503.
Stern, N., Peters, S., Vicki Bakhshi, Alex Bowen, Catherine Cameron, Sebastian Catovsky, Di Crane, Sophie Cruickshank, Simon Dietz, Nicola H. Edmonson, Sun-Li Garbett, Gideon Hoffman, Daniel Ingram, Ben Jones, Nicola Patmore, Helene Radcliffe, Raj Sathiyarajah, Michelle Stock, Chris Taylor, Tamsin Vernon, Hannah Wanjie, Dimitri Zenghelis. 2006. Stern Review: The Economics of Climate Change. HM Treasury. London Sunderlin.
TEEB, The Economics of Ecosystem Services and Biodiversity. 2010. The Economics of Ecosystems and Biodiversity: Ecological and Economic Foundations. Edited by Pushpam Kumar. Earthscan, London and Washington.
María Alló, Universidad de Santiago de Compostela (Maria Loureiro, Supervisor)
The European Commission (2014) has highlighted that the unsustainable use of natural resources and their overexploitation continues to be a major threat to biodiversity. The United Nations Environment Programme (UNEP, 2013) has remarked that “the world´s biodiversity continues to decline at alarming rates”. This is a worrying question and according to the World Wildlife Fund (WWF, 2014) “biodiversity underpins the health of the planet and has a direct impact on all our lives.” Chen et al. (2009) pointed out that the activities of humans are the major causes of the biodiversity loss and ecosystem degradation; indicating that despite the considerable budget invested to conserve ecosystems these are far from their conservation objectives. Therefore, it seems clear that an understanding of human behavior is crucial in order to improve environmental policies. So, what factors affect human behavior? (read more ⇓)
Traditional economic theory argues that individuals are rational and selfish; seeking to maximize their own utility. In addition, and with regards to natural and environmental resources, it is important to take into account that these are public goods. Thereupon, Hardin (1968) proposed the “tragedy of the commons” as the most common output resulting from their economic exploitation. According to traditional economic literature when humans face a public good, the more typical results found will be non-cooperation and free-rider behavior. In this sense, this literature proposes as a mean to avoid this situation, the establishment of laws and the existence of an authority which imposes rules to users in order to self-limit their extraction or use. Nonetheless, despite the existence of these laws, the success achieved in the management of natural and environmental resources has been limited so far, as it is evident. Several studies have shown that the conclusions of traditional economic models are not always true and in addition to economic incentives, factors such as social norms or social influences also matter when individuals make decisions.
Therefore, through this dissertation the analysis of social norms besides economic incentives in the individuals’ decisions was conducted analyzed in order to improve environmental policies. In spite of the importance of social factors, little is known about the role they play in the management of environmental and natural resources.
What are the social norms? Social norms are defined as behaviors, attitudes and opinions of third parties that they can be largely influential in a social setting (Sethi and Somanathan, 1996). Thereupon, greater part of people obeys them most of the time. Thus, it seems clear that social factors, such as social norms could be important to explain individuals’ behavior while taking into account the lack of success of the current management strategies of natural and environmental resources. Maybe considering these aspects can give us some insights of how to improve present management conditions.
The aim of this Dissertation has been to analyze through different case studies the role that social factors besides economic incentives have; specifically, what role can social norms play when individuals have to make decisions with regards to the environmental and natural resources without forgetting economic incentives. The goal was to shed light on how social norms and economic incentives can influence the behavior of current users of natural and environmental resources. To carry out this analysis, this thesis was composed by four chapters that deal with different environmental problems; including climate change (Alló and Loureiro, 2014), the loss of biodiversity (Alló et al. 2015), and the management of shellfish fisheries and common forests (Alló and Loureiro, 2016).
Alló, M., Loureiro, ML (2016) Evaluating the fulfillment of the principles of collective action in practice: A case study from Galicia (NW Spain). Forest Policy and Economics 73, 1-9. DOI: 10.1016/j.forpol.2016.08.002.
Alló, M., Loureiro, ML (2014) The role of social norms on preferences towards climate change policies: A meta-analysis. Energy Policy 73, 563-574. DOI: 10.1016/j.enpol.2014.04.042
Alló, M., Loureiro, ML., Iglesias, E (2015) Farmers' Preferences and Social Capital Regarding Agri-environmental Schemes to Protect Birds. Journal of Agricultural Economics, 66(3), 672-689. DOI: 10.1111/1477-9552.12104
Chen, X., Lupi, F., He, G., Liu, J., 2009. Linking social norms to efficient conservation investment in payments for ecosystem services . PNAS, 106 (28), 11812-11817.
European Commission., 2014. Overexploitation. Available online at: http://biodiversity.europa.eu/topics/overexploitation
Hardin, G., 1968. The tragedy of the commons. Science. 162, 1243-1248.
Sethi, R., Somanathan, E., 1996. The evolution of social norms in common property resource use. Am Econ Rev, 86(4), 766-788.
United Nations Environment Programme (UNEP)., 2013. Key Environmental Indicators
Tracking progress towards environmental sustainability. In: UNEP Year Book, 2013.
World Wildlife Fund (WWF)., 2014. Biodiversity & You. How does biodiversity loss affect me and everyone else? Available online at: http://wwf.panda.org/about_our_earth/biodiversity/biodiversity_and_you/
Djamel Rahmani, Universidad de Santiago de Compostela (Maria Loureiro, Supervisor)
Vehicle choice decisions are based on a complex process since they are affected by a wide set of factors. In addition to the economic, technical and environmental characteristics of the vehicles, there are many external incentives that can motivate drivers to buy a vehicle. One of the reasons could be the public incentives that most governments often use to motivate the adoption of alternative fuel vehicles. In particular, public incentives may be direct reductions in purchase price, VAT and registration tax exemption, access to priority lanes, free parking, and reductions in the annual road tax among others. However, although many incentives are offered in many European Union member countries as in Spain, little is known about the effect of the latter on drivers’ choice decisions. The present research objective is to explore the relevant factors that drive people’s vehicle choice decisions, especially those that have a key role in preferring hybrid electric vehicles over conventional vehicles. (read more ⇓)
From the extensive existing literature on car choices, few studies (Axsen et al., 2009; Chua et al., 2010; Erdem et al., 2010; Heffner et al., 2007) have specifically investigated consumers’ preferences for hybrid electric vehicles. The present research adds this line of research by introducing several contributions. We study the role of public and personal incentives that have not been dealt with in previous literature, including registration taxes exemption and free parking in the adoption of hybrid electric vehicles. Moreover, often preferences for vehicle attributes are assumed to be homogeneous among the individuals within the sample population, especially for price, while in this study the heterogeneity of attributes preferences even for price is explored. Furthermore, the present research contributes to the approaches used in the previous literature exploring preferences heterogeneities at different levels (driver, groups of drivers, and the population) by conducting more flexible models (a latent class analysis and a random parameter logit model). While random parameter logit models allow addressing the variations in tastes between individuals of the sampled population, the latent class models classify drivers into different groups in such a way that public authorities can attend better their preferences, offering each group the appropriate incentives. To increase the richness of the random parameter logit model’s behavioural capability, we specify different models accounting for correlation between attributes (and alternatives) and over time (Hensher et al., 2015).
The present research also contributes to the previous literature by testing whether large vehicle drivers have a pattern of preferences for vehicle environmental characteristics different to that of small or medium vehicle drivers. We test whether reference dependence, one of the fundamental principles of prospect theory, is satisfied in the context of discrete choice experiments (DCE). In particular, we evaluate the performance of three different definitions of the status quo, considering the reference point as the current vehicle, the minimum standards for an acceptable vehicle, and the most desirable (goal or aspirational) vehicle. Contrary to the common reference point often used in previous studies (Meyerhoff and Liebe, 2009), we consider reference points obtained for each individual of the sampled population. There is a big issue in discrete choice experiments related to the way in which the status quo option is presented or defined to respondents. The most common is to present it in the experiment design as a no-choice option without defining its attributes (Tanaka et al., 2014). In this case, the no-choice alternative is most often coded in the data matrix as a series of zeros. Sometimes the status quo option is described as respondents’ current vehicles (Glerum et al., 2011) or preferred vehicle (Hidrue et al., 2011). In some other cases, the status quo option was not included at all (Hoen and Koetse, 2012) which implies that the researcher is unrealistically forcing the respondent to choose among the presented hypothetic alternatives although he/she does not like any (Hensher et al, 2005). The present research evaluates the importance of considering a reference point when vehicle preferences analysis is carried out through discrete-choice experiments (DCE). We also seek to determine the exact reference point around which vehicle preferences are formed.
To provide some insight into these issues for the Spanish context, as well as the type of incentives that are required in order to galvanize the hybrid electric vehicle market, a DCE included in an extensive and interactive online questionnaire is conducted. In particular, tastes for vehicle type, price, fuel consumption, CO2 emissions and biofuel adaptation are assessed among 1,016 Spanish drivers.
Results of a mixed logit model analysis show that on average drivers are not, ceteris paribus, willing to pay an extra premium to change from conventional automobiles to hybrid electric vehicles. Moreover, our study finds that when controlling for individual variables, drivers who state that free parking policies and social image are important, are more likely to buy hybrid electric vehicles. However, a latent class analysis reveals that within the sampled population there are two potential subgroups of hybrid electric vehicle buyers. In particular, 43.4% of drivers (mainly women) are willing to buy hybrid electric vehicles for environmental reasons, while 15.5% (mainly high income) are enthusiastic about hybrid electric vehicles but mainly for aspirational reasons. Furthermore, we find that large vehicle drivers have a pattern of preferences for vehicle environmental attributes identical to that of small or medium vehicle drivers. Our research also finds that vehicle preferences are formed around drivers’ current vehicle (status quo) and suggests that failing to consider the status quo option properly decreases the statistical performance of the empirical models, and reduce the ability of the DCEs to explain drivers’ preferences.
Our findings suggest that public policies aimed at encouraging the use of hybrid electric vehicles should be customized to driver groups and more aggressive toward gasoline or diesel traditional vehicles. The Spanish public economic incentives to the purchase of efficient vehicles offered through the Efficient Vehicle Incentives Programme (PIVE) are not enough hence the need to accompany current policies with new incentives (VAT and registration tax exemption, free toll roads, free parking, and annual road tax exemption) to achieve the expected objectives. In our opinion, our findings can be extrapolated to all other types of alternative fuel vehicles and can serve as a guide for decision makers to achieve the famous smart cities. Finally, our study may be a reference for researchers to improve discrete choice experiment designs and analysis.
Axsen, J., Mountain, D.C., Jaccard, M., 2009. Combining stated and revealed choice research to simulate the neighbor effect: The case of hybrid-electric vehicles. Resource and Energy Economics 31(3), 221–238.
Chua, W.Y., Lee, A., Sadeque, S., 2010. Why do people buy hybrid cars?, in Proceedings of Social Marketing Forum, University of Western Australia, Perth, Western Australia, Edith Cowan University, Churchlands, W.A., 1-13.
Erdemn, C., Sentürk, I., Simsek, T., 2010. Identifying the factors affecting the willingness to pay for fuel-efﬁcient vehicles in Turkey: A case of hybrids. Energy Policy 38 (6), 3038–3043.
Glerum, A., Thémans, M., Bierlaire, M., 2011. Modeling demand for electric vehicles: the effect of car users’ attitudes and perceptions. In: Proceedings of the Second International Choice Modeling Conference, Sydney.
Heffner, R.R., Kurani, K.S., Turrentine, T.S., 2007. Symbolism in California’s early market for hybrid electric vehicles. Transportation Research Part D: Transport and Environment 12 (6), 396-413.
Hensher, D. A., Rose, J. M. and Greene, W. H. 2005. Applied Choice Analysis - A Primer. Cambridge University Press, New York.
Hensher, D.A., Rose, J.M., Greene, W.H., 2015. Applied choice analysis. Second edition, Cambridge University Press.
Hidrue, M.K., Parsons, G.R., Kempton, W., Gardner, M.P., 2011. Willingness to pay for electric vehicles and their attributes. Resource and Energy Economics 33 (3), 686–705.
Hoen A, MJ Koetse, 2012, A Choice Experiment on AFV Preferences of Private Car Owners in The Netherlands, PBL Working Paper 3, PBL Netherlands Environmental Assessment Agency, Den Haag, The Netherlands.
Meyerhoff, J., Liebe, U., 2009. Status Quo Effect in Choice Experiments: Empirical Evidence on Attitudes and Choice Task Complexity. Land Economics 85 (3), 515–528.
Tanaka, M., Takanori, I., Kayo, M., Lee, F., 2014. Consumers’ willingness to pay for alternative fuel vehicles: A comparative discrete choice analysis between the US and Japan. Transportation Research Part A 70, 194–209.
Alberto Ansuategui, UPV/EHU
Each summer since it was founded in 1922 the Western Economic Association International (WEAI) organizes its annual conference with hundreds of economists from around the world to meet and exchange ideas. This year the conference was held on the 25-29th of June in San Diego, California. Since it turned out that in June I was only three hours apart by air from San Diego I thought that the WEAI conference was a reasonable substitute for the EAERE conference in Athens. Few days before the conference the US National Weather Service warned of “excessive heat” across the south-western states and some colleagues sent me e-mails concerned about the news saying that dozens of flights had been cancelled in the US because of the predicted heat. However, there was no need to worry since San Diego is the textbook example of beautiful year-round climate. In fact, temperature in the waterfront of San Diego remained below 30ºC during the conference days and I even missed a sweater in the conference-rooms at the Marriott Marquis Hotel, although this was due to the over-use of air conditioning. (read more ⇓)
One of the characteristic features of the WEAI conferences is that they include participation of Allied Societies such as the Association of Environmental and Resource Economists (AERE), with the beneficial network externalities that this workshop-within-a-conference setting generates both for individual participants and for the Allied Societies. Since 2009 the AERE/WEAI sessions are carefully planned and organized by Professor Trudy Ann Cameron (University of Oregon). In the 2017 edition she nicely assembled 44 papers into 11 four-paper thematic sessions covering a wide range of topics. Besides, a substantial amount of the other sessions in the WEAI conference also dealt with environmental and resource economics issues.
AERE/WEAI has a good reputation for encouraging new talent and this was noticeable in most of the sessions I had the opportunity to attend. Audience had a balanced mix of experienced university professors with a big-picture approach matured over their academic lifespan and young researchers conveying excitement and enthusiasm as well as wonderful applied econometric skills to deal with all sorts of incredibly rich datasets. There was also a policy-oriented attitude in most papers, aiming at providing advice to policymakers on the most efficient ways to manage resources and facilitate the transition towards a sustainable low-carbon future.
With regard to “social activities” I would just highlight the key-note address by Nobel Laureate Peter A. Diamond (MIT) on “The Future of Social Security” and the AERE/WEAI group dinner as a wonderful opportunity to meet old and new colleagues and friends.
Next year the 93rd WEAI Annual Conference will be held on June 26-30 in another beautiful city of the North American West Coast, Vancouver. Unfortunately, it will overlap with the 6th World Congress of Environmental and Resource Economists to be held on June 25-29 in Gothenburg. Tough decision ahead!
Esther Blanco, University of Innsbruck
The last EAERE conference in Athens has been, as expected, a great event. The organization has done a great job in managing the big crowd that this event brings together. In numbers, there were almost 800 registered participants in 150 parallel sessions. Also, there were 20 policy or thematic sessions in parallel to the parallel sessions (this was rather new and somehow displaced attendance from regular parallel sessions). As it is the rule in this event, the quality of the research presented was very high, with an acceptance rate of submitted papers lower than 60%. Most importantly: we got real food for lunch; no packet lunch, no sandwiches as the only choice. (read more ⇓)
The closing ceremony ended with the audience standing, clapping to all the organizers and (many!) students that made the conference run smoothly. This does not occur so often, right?
There are many things that I like of this event, which makes it one of my favorite conferences to attend. One of the important ones is that in every time slot one can find interesting presentations to attend to. Often times, one would wish to attend more than one parallel session, but until all presentations are not broadcasted online, one needs to prioritize what to attend and what to read later back home.
This year there were four plenaries, despite one was pre-recorded (weird, right?). From this year I would pick Karine Nyborg’s presentation as my favorite. But well, I am an unconditional fan of the research of Karine Nyborg. Her presentation was entitled “No man is an island”. The take home message was that we should critically reflect on the fact that the benchmark of the perfectly competitive market is where we put most effort in research as well as in teaching, and this entails implicitly assuming that market failure is an exception and it occurs in isolation, one market failure at a time. And this is very (too?) far from reality. Read more on this in her publication in Science (science.sciencemag.org) and in her fiction webpage (www.karinenyborg.com). She also argued that we might not need to strictly differentiate between social norms and network externalities, as both create vicious and virtuous circles (by the way, the Erik Kempe Award price went to a study (www.sciencedirect.com) on network externalities in the use of electric cars – first study Kristoffer Midttømme ever sent to a journal, good job!). She also argued and that she is less concerned about crowding-out than other behavioral economists, as she thinks that the positive effects associated to conditional cooperation that can come with taxes and other interventions outperform crowding-out issues.
I also liked a lot the plenary presentation of Massimo Marinacci. It was highly abstract, and I would say addressed topics on the philosophy of research in a formalized way. It had to do with how much we do not know of the fitness of theories, models and other details when doing research and on how one should deal with the uncertainly associated to it in deriving policy implications. My take was that researchers need to be humble on truly conveying their results and very careful in deriving policy implications. But you can make up your mind reading, among others, his PNAS paper on this topic (www.pnas.org). This relates also nicely with the points Karine Nyborg made, as I think it is fair to state that the paradigm of the perfectly competitive market might not have a very good fit with reality.
The second thing that I like about this conference is the people and the atmosphere they bring to the conference. It is the norm, and not the exception, to hear respectful and constructive comments. I mean, people are nice and helpful! And this is simply great. In short, this is a chance to meet colleagues and friends and catch up. How many times you hear that a conference dinner ends up with people jumping in underwear to the restaurant’s pool? Well, rumor says this happened in Athens 2017. I cannot tell, because I skipped the dinner, but several AERNA members were there, and you can ask them next time you meet any of them.
Organization: Portuguese Association of Energy Economics (APEEN) and the Research Centre in Governance, Competitiveness and Public Policy (GOVCOPP).
The deadline for paper submission is August 16th, 2017.
For additional information, click HERE.
Organization: FAME, University of Southern Denmark.
The deadline for paper submission is August 7th, 2017.
For additional information, click HERE.
Organization: Laboratoire d'Economie Forestière (LEF) and Bureau d’Économie Théorique et Apliquée (BETA).
For additional information, click HERE.
Organization: BIOECON partners.
For additional information, click HERE.
For additional information, click HERE.
Organization: University of Graz and INNOVATE project partners in cooperation with CCCA working group on consumption based emissions and the Vienna University of Economics and Business.
The deadline for long abstract submissions is July 31st, 2017.
For additional information, click HERE.
Organization: Società Italiana per le Scienze del Clima (SISC).
For additional information, click HERE.
Organization: Florence School of Regulation Climate (FSR Climate).
The deadline for paper submissions is September 24th, 2017.
For additional information, click HERE.
Organization: Australasian Agricultural and Resource Economics Society (AARES).
The deadline for paper submissions is July 31st, 2017.
For additional information, click HERE.
Institute of Economics, University of Hohenheim, Stuttgart, Germany
Deadline: Please submit at the earliest possible date.
For additional information, consult www.eaere.org.
Fondazione Eni Enrico Mattei - FEEM, Milan, Italy
Deadline: 10 July 2017
For additional information, consult www.eaere.org.
BETA - Université de Strasbourg/ Brandenburg University of Technology
Deadline: 20 July 2017
For additional information, consult euraxess.ec.europa.eu.
Centre for Environmental and Resource Economics, Umeå University
Deadline: 11 August 2017
For additional information, consult www.umu.se.
School of Energy and Environment, City University of Hong Kong, Hong Kong
Deadline: 15 August 2017
For additional information, consult www6.cityu.edu.hk.
University of Helsinki
Deadline: 31 August 2017
For additional information, consult www.isecoeco.org.
University of Exeter, United Kingdom
Deadline: 30 Sep 2017
For additional information, consult www.eaere.org.
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