Publications by year
2022
Bateman IJ, Anderson K, Argles A, Belcher C, Betts RA, Binner A, Brazier RE, Cho FHT, Collins RM, Day BH, et al (2022). A review of planting principles to identify the right place for the right tree for ‘net zero plus’ woodlands: Applying a place-based natural capital framework for sustainable, efficient and equitable (SEE) decisions.
People and NatureAbstract:
A review of planting principles to identify the right place for the right tree for ‘net zero plus’ woodlands: Applying a place-based natural capital framework for sustainable, efficient and equitable (SEE) decisions
We outline the principles of the natural capital approach to decision making and apply these to the contemporary challenge of very significantly expanding woodlands as contribution to attaining net zero emissions of greenhouse gases. Drawing on the case of the UK, we argue that a single focus upon carbon storage alone is likely to overlook the other ‘net zero plus’ benefits which woodlands can deliver. A review of the literature considers the wide variety of potential benefits which woodlands can provide, together with costs such as foregone alternative land uses. We argue that decision making must consider all of these potential benefits and costs for the right locations to be planted with the right trees. The paper closes by reviewing the decision support systems necessary to incorporate this information into policy and decision making. Read the free Plain Language Summary for this article on the Journal blog.
Abstract.
DOI.
Groom B, Palmer C, Sileci L (2022). Carbon emissions reductions from Indonesia’s moratorium on forest concessions are cost-effective yet contribute little to Paris pledges.
Proceedings of the National Academy of Sciences,
119(5).
Abstract:
Carbon emissions reductions from Indonesia’s moratorium on forest concessions are cost-effective yet contribute little to Paris pledges
Significance
.
. More than a decade after the global adoption of REDD+ as a climate change mitigation strategy, countries have started accessing results-based payments. However, the extent to which payments are actually based on results is unknown, necessitating program evaluations to establish the contribution of REDD+ to the Paris NDCs. We undertake a microeconometric evaluation of one of the most globally significant REDD+ initiatives, Indonesia’s moratorium on forest concessions, in which a payment has been awarded. At the agreed US$5/tCO
. 2
. -eq, the value of our estimated cumulative carbon emissions far exceeds the proposed payment from the donor, Norway. Although cost-effective, the emissions reductions only contribute 3 to 4% of Indonesia’s NDC. This contribution could be increased in new initiatives with better-designed incentives and institutional arrangements.
.
Abstract.
DOI.
2021
Hansel MC, Drupp MA, Johansson DJA, Nesje F, Azar C, Freeman MC, Groom B, Sterner T (2021). Climate economics support for the UN climate targets (vol 10, pg 781, 2020).
NATURE CLIMATE CHANGE,
11(5), 456-456.
Author URL.
DOI.
Wagner G, Anthoff D, Cropper M, Dietz S, Gillingham KT, Groom B, Kelleher JP, Moore FC, Stock JH (2021). Eight priorities for calculating the social cost of carbon.
Nature,
590(7847), 548-550.
DOI.
Groom B, Weinhold DM (2021). New data on public biodiversity spending.
Nature Ecology and Evolution,
5(4), 409-410.
DOI.
Groom B, Turk Z (2021). Reflections on the Dasgupta Review on the Economics of Biodiversity.
ENVIRONMENTAL & RESOURCE ECONOMICS,
79(1), 1-23.
Author URL.
DOI.
Groom B, Fontes FP (2021). Revisiting the link between cereal diversity and production in Ethiopia.
Q Open,
1(2).
Abstract:
Revisiting the link between cereal diversity and production in Ethiopia
Abstract
. Studies show that cereal diversity positively affects mean yields, suggesting increased crop diversity as a means of increasing production (Di Falco and Chavas 2009, Baumgärtner and Quaas 2010). In practice though, agricultural development has relied on nondiverse systems. Using the Ethiopian Rural Household Survey panel, we revisit this paradox and disentangle the effects of agroecological zones and composition of crop diversity. We find a positive effect of greater cereal diversity on cereal production, but mostly in specific agroecological zones and for households who diversify away from a particular low-productivity crop: teff. These results indicate that the scope of cereal diversity to drive increases in output may be limited. Similar to recent studies of biodiversity—ecosystem function relationships (e.g. Jochum et al. 2020), the results suggest that the composition of diverse systems can be more important than the measured diversity itself. In the case of cereal crops in Ethiopia, differences in the yields of particular cereals in the crop mix explain the diversity effect, rather than diversity alone. Since some combinations of crops add to productivity but others do not, productivity-related crop choice may not guarantee in situ conservation of crop diversity on its own. Alternative conservation solutions may well be needed for that.
Abstract.
DOI.
Venmans F, Groom B (2021). Social Discounting, Inequality Aversion and the Environment.
Journal of Environmental Economics and Management DOI.
zu Ermgassen SOSE, Bull JW, Groom B (2021). UK biodiversity: close gap between reality and rhetoric.
Nature,
595(7866), 172-172.
DOI.
zu Ermgassen SOSE, Bull JW, Groom B (2021). UK biodiversity: close gap between reality and rhetoric.
NATURE,
595(7866), 172-172.
Author URL.
DOI.
2020
Haensel MC, Drupp MA, Johansson DJA, Nesje F, Azar C, Freeman MC, Groom B, Sterner T (2020). Climate economics support for the UN climate targets.
NATURE CLIMATE CHANGE,
10(8), 781-+.
Author URL.
DOI.
Cavatorta E, Groom B (2020). Does deterrence change preferences? Evidence from a natural experiment.
European Economic Review,
127, 103456-103456.
DOI.
2019
Groom B, Maddison Pr D (2019). New Estimates of the Elasticity of Marginal Utility for the UK.
Environmental and Resource Economics,
72(4), 1155-1182.
Abstract:
New Estimates of the Elasticity of Marginal Utility for the UK
This paper provides novel empirical evidence on the value of the elasticity of marginal utility, η, for the United Kingdom. η is a crucial component of the social discount rate (SDR), which determines the inter-temporal trade-offs that are acceptable to society. Using contemporaneous and historical data, new estimates are obtained using four revealed-preference techniques: the equal-sacrifice income tax approach, the Euler-equation approach, the Frisch additive-preferences approach and risk aversion in insurance markets. A meta-analysis indicates parameter homogeneity across approaches, and a central estimate of 1.5 for η. The confidence interval excludes unity, the value used in official guidance by the UK government. The term structure of the SDR is then estimated. The result is a short-run SDR of 4.5% declining to 4.2% in the very long-run. This is higher and flatter than the UK official guidance. The difference stems from incorrect calibration of social welfare and estimation of the diffusion of growth. Other things equal, the results suggest that current UK guidance might need to be updated.
Abstract.
DOI.
2018
Gorst A, Dehlavi A, Groom B (2018). Crop productivity and adaptation to climate change in Pakistan.
Environment and Development Economics,
23(6), 679-701.
Abstract:
Crop productivity and adaptation to climate change in Pakistan
The effectiveness of adaptation strategies is crucial for reducing the costs of climate change. Using plot-level data from a specifically designed survey conducted in Pakistan, we investigate the productive benefits for farmers who adapt to climate change. The impact of implementing on-farm adaptation strategies is estimated separately for two staple crops: wheat and rice. We employ propensity score matching and endogenous switching regressions to account for the possibility that farmers self-select into adaptation. Estimated productivity gains are positive and significant for rice farmers who adapted, but negligible for wheat. Counterfactual gains for non-adapters were significantly positive, which is potentially a sign of transactions costs to adaptation. Other factors associated with adaptation were formal credit and extension, underscoring the importance of addressing institutional and informational constraints that inhibit farmers from improving their farming practices. The findings provide evidence for the Pakistani Planning and Development Department's ongoing assessment of climate-related agricultural losses.
Abstract.
DOI.
Drupp MA, Freeman MC, Groom B, Nesje F (2018). Discounting Disentangled.
American Economic Journal: Economic Policy,
10(4), 109-134.
Abstract:
Discounting Disentangled
the economic values of investing in long-term public projects are highly sensitive to the social discount rate (SDR). We surveyed over 200 experts to disentangle disagreement on the risk-free SDR into its component parts, including pure time preference, the wealth effect, and return to capital. We show that the majority of experts do not follow the simple Ramsey Rule, a widely used theoretical discounting framework, when recommending SDRs. Despite disagreement on discounting procedures and point values, we obtain a surprising degree of consensus among experts, with more than three-quarters finding the median risk-free SDR of 2 percent acceptable. (JEL C83, D61, D82, H43, Q58)
Abstract.
DOI.
Atkinson G, Groom B, Hanley N, Mourato S (2018). Environmental Valuation and Benefit-Cost Analysis in U.K. Policy.
Journal of Benefit-Cost Analysis,
9(1), 97-119.
Abstract:
Environmental Valuation and Benefit-Cost Analysis in U.K. Policy
This paper presents an evaluation of the use of environmental valuation-techniques to assign monetary values to environmental impacts of policies and projects, especially nonmarket impacts-in U.K. policy. In doing so, we seek to contribute to the debate, more generally, of the use and influence of benefit-cost analysis (BCA) in national policy processes such as Impact Assessment. Specifically, our contribution in this paper is two-fold. First, we identify a number of trends that have characterized U.K. policy use of environmental valuation over the past two or so decades. While this has notably involved development of sharable values allowing more widespread uptake, it also seems that different branches of government have developed different traditions of use adding nuance to what, on the face of it, is otherwise a shared endeavor. Second, we evaluate the extent to which the use of environmental valuation can be said to have influenced policy decisions and the degree to which this is embedded by evolving policy processes. As such, we discuss two areas of environmental policy-water quality improvements and natural capital-which have entailed either substantial use of environmental valuation either in determining specific policy and investment project options or where this has helped shape the broader policy agenda. Our evaluation is not exhaustive; nor do our findings suggest that environmental valuation and BCA are necessarily the dominant driver of decisions, as we discuss. However, in recognizing this, we argue it is also important to consider a number of established or evolving cultural and legal institutional processes which broadly appear to support our assessment of such cases.
Abstract.
DOI.
2017
Emmerling J, Groom B, Wettingfeld T (2017). Discounting and the representative median agent.
Economics Letters,
161, 78-81.
Abstract:
Discounting and the representative median agent
We derive a simple formula for the social discount rate (SDR) that uses the median, rather than average agent of the economy to reflect the consequences of consumption growth on income inequality. Under reasonable assumptions, the difference between the growth of median and mean incomes is used to adjust the wealth-effect in the standard Ramsey rule. In a plausible special case the representative agent has the median income. With inequality aversion elasticity of 2 (1.5, 1), the U.K. and U.S. SDR would be 1% (0.5%, 0.25%) lower than the standard Ramsey rule. This reflects two decades of inequality-increasing growth and implies greater weight placed on future generations in public appraisal.
Abstract.
DOI.
Groom B, Hepburn C (2017). Looking back at social discounting policy: the influence of papers, presentations, political preconditions, and personalities.
Review of Environmental Economics and Policy,
11(2), 336-356.
DOI.
Andersen LE, Groom B, Killick E, Ledezma JC, Palmer C, Weinhold D (2017). Modelling Land Use, Deforestation, and Policy: a Hybrid Optimisation-Heterogeneous Agent Model with Application to the Bolivian Amazon.
Ecological Economics,
135, 76-90.
Abstract:
Modelling Land Use, Deforestation, and Policy: a Hybrid Optimisation-Heterogeneous Agent Model with Application to the Bolivian Amazon
We introduce a hybrid simulation model (‘SimPachamama’) designed to explore the complex socio-environmental trade-offs of alternative policy bundles and policy sequencing options for stemming deforestation and reducing poverty in tropical countries. Designed and calibrated to the initial conditions of a small forest village in rural Bolivia, the model consists of: (a) an optimising agricultural household module of heterogeneous agents that make individually optimal land-use decisions based on factor endowments and market conditions; (b) an encompassing general equilibrium ‘shell’ module that endogenously determines wages and links the agricultural labour market and rural-urban migration rates; and (c) a novel user-controlled policy-maker module that allows the user to make ‘real time’ choices over a variety of public and environmental policies that in turn impact land use, welfare, and migration. Over a 20-year simulation period the results highlight trade-offs between reductions in deforestation and improvements in household welfare that can only be overcome either when international REDD payments are offered or when decentralized deforestation taxes are implemented. The sequencing of policies plays a critical role in the determination of these results.
Abstract.
DOI.
2016
Freeman MC, Groom B (2016). How certain are we about the certainty-equivalent long term social discount rate?.
Journal of Environmental Economics and Management,
79, 152-168.
DOI.
Dietz S, Groom B, Pizer WA (2016). Weighing the costs and benefits of climate change to our children.
Future of Children,
26(1), 133-155.
Abstract:
Weighing the costs and benefits of climate change to our children
Our efforts to put the brakes on climate change or adapt to a warming climate present a fundamental tradeoff between costs borne today and benefits that accrue to the children and grandchildren of the current generation. In making investments today that affect future generations’ prospects, we need to think carefully about how we value their welfare compared to our own. A common economic formula recommends giving up only 5 cents today for every dollar of benefits 100 years in the future; we call this discounting the future. Underlying this approach is the assumption that future generations will be much better off than our own, just as we are much wealthier than our ancestors were. Would our descendants’ agree with this approach? Are there reasons to put more value on future benefits? William Pizer, Ben Groom, and Simon Dietz discuss three possible reasons that we might put a higher value on future benefits. First, people disagree considerably about the correct discount rate. Other plausible interpretations of society’s preferences or observed data could increase the weight we place on future benefits by as much as a factor of five. Second, we may have failed to correctly value future climate change impacts, particularly those related to the loss of environmental amenities that have no close monetary substitutes. Third, we may not be properly valuing the risk that a warming climate could cause sudden and catastrophic changes that would drastically alter the size of the population. Ultimately, the authors write, many of the choices about how we value future generations’ welfare come down to ethical questions, and many of the decisions we must make come down to societal preferences—all of which will be difficult to extract from data or theory.
Abstract.
DOI.
2015
Freeman MC, Groom B, Zeckhauser RJ (2015). Better predictions, better allocations: Scientific advances and adaptation to climate change.
Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences,
373(2055).
Abstract:
Better predictions, better allocations: Scientific advances and adaptation to climate change
Climate science initially aspired to improve understanding of what the future would bring, and thereby produce appropriate public policies and effective international climate agreements. If that hope is dashed, as now seems probable, effective policies for adapting to climate change become critical. Climate science assumes new responsibilities by helping to foster more appropriate adaptation measures, which might include shifting modes or locales of production. This theoretical article focuses on two broader tools: consumption smoothing in response to the risk of future losses, and physical adaptation measures to reduce potential damages. It shows that informative signals on the effects of climate change facilitate better decisions on the use of each tool, thereby increasing social welfare.
Abstract.
DOI.
Freeman MC, Groom B, Panopoulou E, Pantelidis T (2015). Declining discount rates and the Fisher Effect: Inflated past, discounted future?.
Journal of Environmental Economics and Management,
73, 32-49.
DOI.
Freeman MC, Groom B (2015). Using equity premium survey data to estimate future wealth.
Review of Quantitative Finance and Accounting,
45(4), 665-693.
Abstract:
Using equity premium survey data to estimate future wealth
We present the first systematic methods for combining different experts’ responses to equity premium surveys. These techniques are based on the observation that the survey data are approximately gamma distributed. This distribution has convenient analytical properties that enable us to address three important problems that investment managers must face. First, we construct probability density functions for the future values of equity index tracker funds. Second, we calculate unbiased and minimum least square error estimators of the future value of these funds. Third, we derive optimal asset allocation weights between equities and the risk-free asset for risk-averse investors. Our analysis allows for both herding and biasedness in expert responses. We show that, unless investors are highly uncertain about expert biases or forecasts are very highly correlated, many investment decisions can be based solely on the mean of the survey data minus any expected bias. We also make recommendations for the design of future equity premium surveys.
Abstract.
DOI.
Groom B, Tak M (2015). Welfare analysis of changing food prices: a nonparametric examination of rice policies in India.
Food Security,
7(1), 121-141.
Abstract:
Welfare analysis of changing food prices: a nonparametric examination of rice policies in India
The paper examines the welfare impact of the Indian government’s rice price policies in the light of the global food crisis of 2007–08 using a nonparametric approach for regression and density estimation. In particular, the impact of a ban on export of rice and increased farm gate price support for farmers, implemented to keep domestic consumer prices lower and producer prices higher than they would otherwise have been, was analysed. The net impact of the export ban was positive, as it was able to cushion the Indian population (84 % of whom are net consumers of rice) from the adverse effects of the crisis. However, the extent of welfare varied among different household types, as the poor in India are heterogeneous in nature. Thus agriculture-price policies do not have a homogenous effect on the poor in India. The majority of rice-producing farmers are relatively poor but benefitted from the increase in farm gate prices. Poor households that did not cultivate rice were the worst affected in the food crisis, as their budget share of rice is higher than that of rich households.
Abstract.
DOI.
2014
Cropper ML, Freeman MC, Groom B, Pizer WA (2014). Declining discount rates.
American Economic Review,
104(5), 538-543.
DOI.
Groom B (2014). Discounting. In (Ed) Routledge Handbook of the Economics of Climate Change Adaptation, 138-168.
Freeman MC, Groom B (2014). Positively Gamma Discounting: Combining the Opinions of Experts on the Social Discount Rate.
The Economic Journal,
125(585), 1015-1024.
DOI.
Groom B, Palmer C (2014). Relaxing constraints as a conservation policy.
Environment and Development Economics,
19(4), 505-528.
Abstract:
Relaxing constraints as a conservation policy
Eco-entrepreneurs in developing countries are often subject to market or institutional constraints such as missing markets. Conservation interventions which relax constraints may be both cost effective and poverty reducing. A simulation using data from an intervention in Madagascar to relax the technological constraints of forest honey production investigates this possibility. Cost-effectively achieving dual environment-development goals is shown to depend on the severity of constraints, relative prices, along with the nature and efficiency in use of technology. Success is more likely for technologies exhibiting close to constant returns to scale or high-input complementarity. Forest honey does not meet these requirements. Ultimately, where market or institutional constraints are present, knowledge of the recipient technology is required for more informed, efficient and perhaps more politically acceptable conservation policy. © Cambridge University Press 2014.
Abstract.
DOI.
Arrow KJ, Cropper ML, Gollier C, Groom B, Heal GM, Newell RG, Nordhaus WD, Pindyck RS, Pizer WA, Portney PR, et al (2014). Should governments use a declining discount rate in project analysis?.
Review of Environmental Economics and Policy,
8(2), 145-163.
Abstract:
Should governments use a declining discount rate in project analysis?
At a workshop held at Resources for the Future in September 2011, twelve of the authors were asked by the US Environmental Protection Agency (EPA) to provide advice on the principles to be used in discounting the benefits and costs of projects that affect future generations. Maureen L. Cropper chaired the workshop. Much of the discussion in this article is based on the authors' recommendations and advice presented at the workshop. © the Author 2014.
Abstract.
DOI.
2013
Freeman MC, Groom B (2013). Biodiversity valuation and the discount rate problem.
Accounting, Auditing and Accountability Journal,
26(5), 715-745.
Abstract:
Biodiversity valuation and the discount rate problem
Purpose: the aim of this paper is to demonstrate that the application of standard environmental accounting practices for estimating long-term discount rates is likely to lead to the rejection of biodiversity-sensitive projects that are in the greater societal good. Design/methodology/approach: the authors combine estimates of marginal ecosystem damages from two forestry case studies, one local, one global, with ten different term structures of discount rates taken from both the academic literature and policy choices to calculate present values. Findings: Standard environmental accounting approaches for estimating the long-term discount rate result in the under-valuation of projects that are sensitive to biodiversity conservation. Research limitations/implications: This paper is set within a full cost accounting (FCA) framework, and therefore has the limitations that generally follow from taking this approach to biodiversity problems. Recommended extensions include looking at broader ranges of biodiversity costs and benefits. Social implications: Unless environmental accountants engage with environmental economists over the issue of intergenerational discount rates, then it is likely that socially responsible managers will reject projects that are in the greater societal good. Originality/value: the paper introduces both normative discount rates and declining discount rates to estimates of shadow environmental provisions within FCA and contrasts these with current environmental accounting practices. It also provides two detailed case studies that demonstrate the extent to which biodiversity-sensitive investment choices are likely to be undervalued by managers who follow current accounting recommendations concerning the appropriate choice of discount rate. © Emerald Group Publishing Limited.
Abstract.
DOI.
Arrow K, Cropper M, Gollier C, Groom B, Heal G, Newell R, Nordhaus W, Pindyck R, Pizer W, Portney P, et al (2013). Determining benefits and costs for future generations.
Science,
341(6144), 349-350.
Abstract:
Determining benefits and costs for future generations
The United States and others should consider adopting a different approach to estimating costs and benefits in light of uncertainty.
Abstract.
DOI.
2012
Groom B, Gatti JR, Goeschl T, Swanson T (2012). Bargaining over Global Public Goods. In (Ed)
Global Environmental Commons, 126-161.
DOI.
Groom B, Gatti JR, Goeschl T, Swanson T (2012). Bargaining over Global Public Goods. In (Ed)
Global Environmental Commons : Analytical and Political Challenges in Building Governance Mechanisms, 1-42.
Abstract:
Bargaining over Global Public Goods
Abstract.
DOI.
Groom B, Palmer C (2012). REDD+ and rural livelihoods.
Biological Conservation,
154, 42-52.
Abstract:
REDD+ and rural livelihoods
Focusing on incentive schemes that induce participation in land-use activities to supply environmental services, this paper examines the potential impacts of REDD+ on livelihoods, in particular with respect to incomes and poverty alleviation. Two case studies, each at a different scale, are presented. First, the N'hambita Community Carbon Project in Mozambique, a REDD+ project, promoted agro-forestry and reforestation activities along with alternative livelihoods. Second, the Sloping Lands Conversion Programme (SLCP) in China is a national-level reforestation scheme to supply watershed services. Impacts on the poor are addressed through the 'lens' of a rural household allocating its labour supply to different income sources. Four aspects of REDD+ policy are discussed: the incentives necessary for ensuring the cost-effective, long-run sustainability of both carbon sinks and incomes; the implications for forest conservation, in particular biodiversity; the need for scaling up carbon sequestration activities in order to minimise carbon leakage; and, the possibilities to maximise the participation of the poor and alleviate poverty. Finally, the paper highlights the importance of using appropriate methodologies for correct evaluation of policy impacts on incomes. © 2012 Elsevier Ltd.
Abstract.
DOI.
Swanson T, Groom B (2012). Regulating global biodiversity: What is the problem?.
Oxford Review of Economic Policy,
28(1), 114-138.
Abstract:
Regulating global biodiversity: What is the problem?
We distinguish between local problems of biodiversity loss and global ones, where international cooperation is required. Global biodiversity regulation involves choosing the optimal stopping rule regarding global land conversions, in order to ensure that some areas of unconverted natural reserves remain to support the production sector that exists on converted lands. The basic difficulty with implementing a solution to this global problem lies in the asymmetry in endowments between those states that have previously converted, and those that have not. We demonstrate that the fundamental problem of global biodiversity regulation is similar to the bargaining problem analysed by Nash, Rubinstein, and others. There are benefits from global land conversion, and there must be agreement on their distribution before the conversion process can be halted. Since the institutions addressing global biodiversity problems are either highly ineffectual (benefit-sharing agreements, prior informed-consent clauses) or very extreme (incremental cost contracts), the biodiversity bargaining problem remains unresolved. For this reason we anticipate that suboptimal conversions will continue to occur, as a way of protesting the ineffective and unfair approaches employed in addressing this problem to date. © the Authors 2012. Published by Oxford University Press.
Abstract.
DOI.
2011
Gatti R, Goeschl T, Groom B, Swanson T (2011). The Biodiversity Bargaining Problem.
Environmental and Resource Economics,
48(4), 609-628.
Abstract:
The Biodiversity Bargaining Problem
We employ cooperative bargaining theory and Nash's 'rational threats' idea to cast light on the biodiversity bargaining problem. The problem of global environmental negotiations is argued to be of the nature of a bargaining problem, in which bargainers must agree on the distribution of cooperative surplus in order to move to the bargaining frontier. We discuss the importance of both efficiency (bargaining frontier) and fairness (recognition of characteristics of bargainers) in the choice of the appropriate contract. We show that the incremental cost contract, used to resolve the biodiversity bargaining problem, is of the form of an extreme point contract that fails to recognise the contributions of the South to the production of cooperative surplus. A rational response to such a contract is the use of threats of biodiversity destruction. Contracts must evince both efficiency and fairness in order to represent lasting solutions. © 2010 Springer Science+Business Media B.V.
Abstract.
DOI.
2010
Groom B, Palmer C (2010). Cost-effective provision of environmental services: the role of relaxing market constraints.
Environment and Development Economics,
15(2), 219-240.
Abstract:
Cost-effective provision of environmental services: the role of relaxing market constraints
Ferraro and Simpson (2002) argue that when markets are competitive, payments for environmental services (PES) are more cost-effective in achieving environmental goals than more indirect approaches such as subsidies to capital. However, when eco-entrepreneurs face non-price rationing in input or output markets, as is typical for credit in developing countries for example, we show that interventions which relax constraints can be more cost-effective than PES. One corollary of this is that such indirect approaches are preferred to PES by interveners (e.g. donors) and eco-entrepreneurs alike. Both of these outcomes are more likely when constraints are severe. This has implications for schemes with dual environment and poverty alleviation objectives. © Cambridge University Press 2010.
Abstract.
DOI.
Dehlavi A, Groom B, Khan BN, Shahab A (2010). Non-use values of ecosystems dependent on the Indus River, Pakistan: a spatially explicit, multi-ecosystem choice experiment. In (Ed) Choice Experiments in Developing Countries: Implementation, Challenges and Policy Implications, 129-150.
Groom B, Grosjean P, Kontoleon A, Swanson T, Zhang S (2010). Relaxing rural constraints: a 'win-win' policy for poverty and environment in China?.
Oxford Economic Papers,
62(1), 132-156.
Abstract:
Relaxing rural constraints: a 'win-win' policy for poverty and environment in China?
The link between institutional and market failures, rural poverty and
environmental degradation suggests a 'win-win' policy intervention: relax
local 'constraints' and achieve poverty alleviation and environmental
goals. We evaluate the ability of the Sloping Lands Conversion Programme
(SLCP) in China, a reforestation payments programme, to relax constraints
on off-farm labour markets and achieve these dual objectives. Our model of
the agricultural household allows for heterogeneous exposure to
constraints and impacts. The model predicts that the impact of the SLCP on
off-farm labour supply will be larger for constrained households if
constraints are relaxed. To test the predictions we combine a switching
regression with difference in differences. Applied to panel data, this
technique allows identification of the heterogeneous impact of the SLCP on
constrained and unconstrained households. Our results identify some
support for the 'win-win' hypothesis in the case of the SLCP, and how the
targeting of the programme can be improved. Copyright 2010 Oxford University Press 2009 all rights reserved, Oxford University Press.
Abstract.
2009
Groom B (2009). International experience to inform the People's Republic of China's water pollution and water resource management policy. In (Ed)
Economic Growth and Environmental Regulation: the People's Republic of China's Path to a Brighter Future, 227-250.
DOI.
2008
Groom B, Koundouri P, Nauges C, Thomas A (2008). The story of the moment: Risk averse cypriot farmers respond to drought management.
Applied Economics,
40(3), 315-326.
Abstract:
The story of the moment: Risk averse cypriot farmers respond to drought management
This article illustrates the importance of estimating risk preferences when evaluating water policy. Using agricultural production data from the Kiti region of Cyprus we estimate farmers' risk preferences à la Antle (Journal of Business and Economic Statistics, 1, 192-201, 1983, American Journal of Agricultural Economics, 69, 509-22, 1987) and show sensitivity to higher order moments of profit, such as skewness. We show that farmers in the Kiti region are risk averse with risk premiums in the region of 20% of expected profit. We use these estimates to analyse the impact of a water quota from the perspective of three policy-makers who differ only in their understanding of farmers' risk preferences. We show in the case of Kiti that policy-makers who model risk preferences incorrectly, that is, either; (a) assume risk neutrality or; (b) ignore down-side risk, wrongly predict the magnitude and direction of input responses and therefore the magnitude of welfare changes. This highlights the importance of accommodating preferences for higher order moments of profit in the evaluation of water policy.
Abstract.
DOI.
2007
Groom B, Koundouri P, Panopoulou E, Pantelidis T (2007). Discounting the distant future: How much does model selection affect the certainty equivalent rate?.
Journal of Applied Econometrics,
22(3), 641-656.
Abstract:
Discounting the distant future: How much does model selection affect the certainty equivalent rate?
Recent work in evaluating investments with long-term consequences has turned towards establishing a schedule of Declining Discount Rates (DDRs). Using US data we show that the employment of models that account for changes in the interest rate generating mechanism has important implications for operationalising a theory of DDRs that depends upon uncertainty. The policy implications of DDRs are then analysed in the context of climate change for the USA, where the use of a state space model can increase valuations by 150% compared to conventional constant discounting. Copyright © 2007 John Wiley & Sons, Ltd.
Abstract.
DOI.
Hepburn C, Groom B (2007). Gamma discounting and expected net future value.
Journal of Environmental Economics and Management,
53(1), 99-109.
Abstract:
Gamma discounting and expected net future value
Recent research suggests that the long term future should be discounted with a declining discount rate. One such line of research, exemplified by Weitzman [Gamma discounting, Amer. Econ. Rev. 91 (2001) 261-271], shows that the certainty equivalent discount rate is declining when future capital productivity is uncertain. However, in a recent paper Gollier [Maximising the expected net future value as an alternative strategy to gamma discounting, Finan. Res. Lett. 1 (2004) 85-89] puts forward a puzzle that casts doubt on the validity of this conclusion. He asserts that using expected net future value, rather than conventional expected net present value, implies that the certainty equivalent discount rate increases over time. This paper resolves the apparent puzzle by encompassing the models of Gollier [Maximising the expected net future value as an alternative strategy to gamma discounting, Finan. Res. Lett. 1 (2004) 85-89] and Weitzman [Gamma discounting, Amer. Econ. Rev. 91 (2001) 261-271]. In fact, Gollier proves that as the evaluation date moves further into the future, the discount rate at a given point in time will increase. However, given a particular evaluation date, the schedule of discount rates is declining. © 2006.
Abstract.
DOI.
Groom B, Kontoleon A, Swanson T (2007). Valuing Complex Goods: or, can you Get Anything Out of Experts Other Than a Decision?. In (Ed)
, 301-335.
Abstract:
Valuing Complex Goods: or, can you Get Anything Out of Experts Other Than a Decision?
Abstract.
DOI.
2006
Groom B, Hepburn C, Koundouri P, Pearce D (2006). Implications of declining discount rates for uk climate change policy. In (Ed) Environmental Valuation in Developed Countries: Case studies, 77-96.
2005
Groom B, Hepburn C, Koundouri P, Pearce D (2005). Declining discount rates: the long and the short of it.
Environmental and Resource Economics,
32(4), 445-493.
Abstract:
Declining discount rates: the long and the short of it
The last few years have witnessed important advances in our understanding of time preference and social discounting. In particular, several rationales for the use of time-varying social discount rates have emerged. These rationales range from the ad hoc to the formal, with some founded solely in economic theory while others reflect principles of intergenerational equity. While these advances are to be applauded, the practitioner is left with a confusing array of rationales and the sense that almost any discount rate can be justified. This paper draws together these different strands and provides a critical review of past and present contributions to this literature. In addition to this we highlight some of the problems with employing DDRs in the decision-making process, the most pressing of which may be time inconsistency. We clarify their practical implications, and potential pitfalls, of the more credible rationales and argue that some approaches popular in environmental economics literature are ill-conceived. Finally, we illustrate the impact of different approaches by examining global warming and nuclear power investment. This includes an application and extension of Newell and Pizer ['Discounting the benefits of climate change mitigation : how much do uncertain rates increase valuations?' Journal of Environmental Economics and Management 46 (2003) 52] to UK interest rate data. © Springer 2005.
Abstract.
DOI.
