We examine the use of carbon taxes to reduce emissions of CO2 in China. To do so, we develop a dynamic computable general equilibrium (CGE) model of the Chinese economy. In addition to accounting for the effects of population growth, capital accumulation, technological change, and changing patterns of demand, we also incorporate into our model elements of the dual nature of China's economy where both plan and market institutions exist side by side. We conduct simulations in which carbon emissions are reduced by 5, 10, and 15 per cent from our baseline. After initial declines, in all of our simulations GDP and consumption rapidly exceed baseline levels as the revenue neutral carbon tax serves to transfer income from consumers to producers and then into increased investment. Although subject to a number of caveats, we find potential for what is in some sense a 'double dividend', a decrease in emissions of CO2 and a long run increase in GDP and consumption.

This study examines the environmental impacts of trade liberalization in Costa Rica. A CGE model is constructed which includes eight environmental indicators covering deforestation, pesticides, overfishing, hazardous wastes, inorganic wastes, organic wastes, greenhouse gases, and air pollution. Three trade liberalization scenarios are examined. Two sets of analyses are conducted for each scenario, one in which technologies do not change in response to trade liberalization and the other in which total factor productivity in each sector changes in response to changes in imports of machinery and equipment. To account for uncertainty regarding values of the model's parameters, a Monte Carlo experiment is conducted for each policy option. The impacts of trade liberalization on the environmental indicators are generally negative in sign but small or moderate in magnitude, both when technology is constant and when technology is allowed to vary.

The two papers presented here were commissioned by the Economy and Environment Program for Southeast Asia (EEPSEA). Established in 1993, EEPSEA supports training and research in environmental and resource economics. It uses a networking approach to provide financial and technical support to researchers in its ten member countries. The network meets in Singapore in May and November of each year. EEPSEA's current sponsors include Canada (IDRC & CIDA), Sweden (Sida), the MacArthur Foundation, and the Foreign Affairs Ministries of Denmark, Holland, and Norway.

Located in a high Andean valley, Ecuador's capital city suffers from severe air pollution, emitted by manufacturing plants as well as motor vehicles. Improving air quality would result in diminished respiratory illness, which currently costs Quito's residents several millions of dollars annually in lost earnings and medical expenditures. Technology transfer has succeeded in reducing industrial emissions at a modest cost. But diesel-fueled trucks and buses, which are a major source of various pollutants, have been the primary focus of the local government's strategy for air quality improvement. To date, that strategy has met with some success, although future initiatives will involve higher abatement expenses and therefore will test the commitment of municipal authorities and the citizens they represent to pollution control.

Economic instruments such as taxes and tradable permits have been promoted as efficiency improving policies in the transition economies of Central and Eastern Europe and elsewhere. The little noticed potential for a symmetric equity impact from the two instruments in a world without distortions is first discussed. A specific policy option is suggested in which existing environmental taxes in Central and Eastern Europe can be increased without imposing additional financial burdens in industry if appropriate tax credits are provided. Second, conditions in Central and Eastern Europe are identified that reduce the change of efficiency losses in a general equilibrium setting when distortions exist. The trade-off between efficiency and equity in such a setting is found to depend on country-specific parameters and to be reduced if: (1) a cost-effective policy is implemented, (2) environmental assets can be distributed prior to privatization, and (3) government expenditures can decline.

The paper describes a number of developing country applications of economic instruments (EIs), focusing on how policy makers—mostly in Asia and Latin America—have addressed implementation problems. The informational and institutional demands of EIs can be as great as with regulations; in any event, the former are mostly used to complement not replace the latter. Consideration of political acceptability has conditioned both instrument design (e.g. grandfathering of tradable permits, non-compliance fees rather than simple pollution charges) and phasing of implementation (e.g. starting with local experimentation, setting low initial charge rates). With the advance of market-oriented economic reforms in the developing world, the policy and institutional environment should become more conducive to applying EIs; with greater political openness in many countries, the scope for involving the media, non-governmental organizations, and the public at large in environmental enforcement (e.g., through information disclosure programmes) should also increase.

This paper describes the Fiscal Environmental Integration Model (FEIM) and its use to examine the merits of introducing a set of air pollutant emission taxes and stringent abatement requirements based on best commonly available control technology. These environmental protection strategies are examined both independently and in combination. In addition, Hungary has very high VAT, employment, and income tax rates and therefore might receive more than the usual advantage from using environmental tax revenues to reduce other taxes. We therefore also examine the economic and environmental implications of different uses of the revenues generated by the air pollutant emission taxes.FEIM is a CGE model of the Hungarian economy that includes sectoral air pollution control costs functions and execution options that allow examination of the key policy choices involved. We developed and ran a baseline and seven scenarios with FEIM. The scenarios centered on introduction of environmental load fees (ELF) on emissions of SO2, NOx, and particulates and emission abatement requirements (EAR) for these pollutants.

This paper discusses how environmental considerations will affect tax policy in the decades ahead. It argues that, in the future, interactions between tax and environmental policy are likely to go well beyond recent discussion of double divided issues, and that internalization of environmental externalities via tax policy will be the goal, which inevitably will involve the particular rather than the general. As a result, notions of neutrality which dominate current thinking on tax design will come under challenge; and in ways which will go well beyond current discussion of special treatment for particular goods and industries on environmental grounds. special treatment of environmentally harmful methods of production, more so than of goods and industries as under present tax policies, will be the name of the game. Moreover, the informational requirements of such an approach to tax policy are likely to be large. The paper concludes by pointing out that if environmental quality is a luxury good, as many suppose, with income elasticity of demand greater than one, then high income households will gain disproportionately from internalization of the externalities at issue. This may fuel pressures for more redistribution elsewhere in the tax system than is currently the case.

Casual observation suggests that many households in Moscow boil water, settle water in pans for some periods (e.g., overnight) before consuming, filter water, and buy bottled water. To date, there has been little empirical analysis of such avoidance behavior. Based on a recently completed survey of 615 households in Moscow, this paper investigates the types and amounts of avoidance measures that are used by households in Moscow to adjust drinking water quality. Survey results show that this is clearly the case: over 88 per cent of the sample boil water regularly due to concerns about water quality; 23 per cent filter water regularly; over 30 per cent settle water regularly; and about 13 per cent buy bottled water regularly. On the other hand, residents are generally content with their cold water supply and quality of delivery. Based on a microeconomic model of household avoidance behavior, logit regression results show how avoidance decisions relate to income, opinions of water quality, and location in the city. It is expected that this analysis from Moscow can also be used as a guide for future studies in other cities in Russia to evaluate opinions of quality, avoidance measures, and citizens' willingness to support public infrastructure projects designed to improve water supply.

The paper measures the changes in environmental quality that occurred in the early years of economic transition for 12 former centrally planned economies using the information on 13 pollution effluents in the manufacturing sector and the energy intensity of the value added. For the manufacturing sector, the change in the pollution is separated into scale and composition effects. Pollution decreases substantially in most countries because of large decreases in aggregate manufacturing activity. The composition effect is more diverse depending on the effluent type and country. We examine the reduced form relationship between composition effects coupled with the energy intensity rate of change and the extent of policy reforms. The results indicate a strong relationship between environmental improvement and price liberalization, trade and foreign exchange reforms, enterprise restructuring, and privatization reforms. In addition, the amplification of the environmental regulatory regime causes a shift towards a less-polluting allocation of resources.

In many developing regions of the world conventional agriculture is failing to meet the needs of people and at the same time is becoming progressively less ecologically sustainable. It is proposed that in a number of these regions, both overall economic development and the welfare of the inhabitants would improve if the primary form of land use was based on multiple use of those regions' natural biological resources, rather than continuing the practice of replacing or displacing them with marginal forms of agriculture. Testing this proposition, and then (if appropriate) effecting it, requires answers to a number of ecological, economic and management questions, in particular to do with:identifying those regions where biodiversity use has high potentialthe appropriate spatial scales for planning and managementcompatible combinations of different types of resource useecological and economic trade-offs between different resource use enterpriseshow to arrive at the most efficient form of resource usesustainable levels of biodiversity harvestresource use decisions in relation to ecological drivers (such as climate and fire)institutional and regulatory structures that dictate current resource use.These questions, it is proposed, should form the basis of an international 'virtual' institute, composed of three Biodiversity Centres, one each in Latin America, southern Africa and Southeast Asia. Examples of multiple use, such as of wildlife in southern Africa, are used to illustrate the potential, and the management scale and other issues involved. If the development of this form of land use is to succeed, it will require technical and management advice and, in many cases, removal of 'perverse incentives' that prevent a change to the more economically and ecologically sustainable form of land use. From the beginning, the emphasis in the proposed centres would be on collaborative work involving governments, landowners and resource-based industries.