A tale of two market failures: Technology and environmental policy

Market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies. These combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology. Both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives, and can be cost-effectively harnessed through the use of economic-incentive based policy. In the presence of weak or nonexistent environmental policies, investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable. Positive knowledge and adoption spillovers and information problems can further weaken innovation incentives. While environmental technology policy is fraught with difficulties, a long-term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success. © 2005 Elsevier B.V. All rights reserved.

Environmental policy and technological change

The relationship between technological change and environmental policy has received increasing attention from scholars and policy makers alike over the past ten years. This is partly because the environmental impacts of social activity are significantly affected by technological change, and partly because environmental policy interventions themselves create new constraints and incentives that affect the process of technological developments. Our central purpose in this article is to provide environmental economists with a useful guide to research on technological change and the analytical tools that can be used to explore further the interaction between technology and the environment. In Part 1 of the article, we provide an overview of analytical frameworks for investigating the economics of technological change, highlighting key issues for the researcher. In Part 2, we turn our attention to theoretical analysis of the effects of environmental policy on technological change, and in Part 3, we focus on issues related to the empirical analysis of technology innovation and diffusion. Finally, we conclude in Part 4 with some additional suggestions for research.

Encouraging clean energy investment in developing countries: what role for aid?

A large portion of foreign assistance for climate change mitigation in developing countries is directed to clean energy facilities. To support international mitigation goals, however, donors must make investments that have effects beyond individual facilities. They must reduce barriers to private-sector investment by generating information for developers, improving relevant infrastructure, or changing policies. We examine whether donor agencies target financing for commercial-scale wind and solar facilities to countries where private investment in clean energy is limited and whether donor investments lead to more private investments. On average, we find no positive evidence for these patterns of targeting and impact. Coupled with model results that show feed-in tariffs increase private investment, we argue that donor agencies should reallocate resources to improve policies that promote private investment in developing countries, rather than finance individual clean energy facilities.

GIS-based Association Between PM10 and Allergic Diseases in Seoul: Implications for Health and Environmental Policy.

PURPOSE: The role of PM10 in the development of allergic diseases remains controversial among epidemiological studies, partly due to the inability to control for spatial variations in large-scale risk factors. This study aims to investigate spatial correspondence between the level of PM10 and allergic diseases at the sub-district level in Seoul, Korea, in order to evaluate whether the impact of PM10 is observable and spatially varies across the subdistricts. METHODS: PM10 measurements at 25 monitoring stations in the city were interpolated to 424 sub-districts where annual inpatient and outpatient count data for 3 types of allergic diseases (atopic dermatitis, asthma, and allergic rhinitis) were collected. We estimated multiple ordinary least square regression models to examine the association of the PM10 level with each of the allergic diseases, controlling for various sub-district level covariates. Geographically weighted regression (GWR) models were conducted to evaluate how the impact of PM10 varies across the sub-districts. RESULTS: PM10 was found to be a significant predictor of atopic dermatitis patient count (P<0.01), with greater association when spatially interpolated at the sub-district level. No significant effect of PM10 was observed on allergic rhinitis and asthma when socioeconomic factors were controlled for. GWR models revealed spatial variation of PM10 effects on atopic dermatitis across the sub-districts in Seoul. The relationship of PM10 levels to atopic dermatitis patient counts is found to be significant only in the Gangbuk region (P<0.01), along with other covariates including average land value, poverty rate, level of education and apartment rate (P<0.01). CONCLUSIONS: Our findings imply that PM10 effects on allergic diseases might not be consistent throughout Seoul. GIS-based spatial modeling techniques could play a role in evaluating spatial variation of air pollution impacts on allergic diseases at the sub-district level, which could provide valuable guidelines for environmental and public health policymakers.