Instruments of Environmental Policy

With regard to localised pollution, Bouwe R. Dijkstra is working on a model where households incur environmental damage from polluting firms in the same location. Under certain conditions, households in one location (say A) may start to pay firms in the other location (B). This will prompt firms currently in A to move to B, thus reducing damage to households in A. These payments could start from an equilibrium, where nobody is inclined to move, or while firms and households are still moving around. In the latter case, the payments might set society on the path to a completely different equilibrium. On 16 October, Bouwe Dijkstra will give a seminar on this work in progress to the Ifo Energy, Climate and Exhaustible Resources Center.

With regard to international pollution problems, Mr Dijkstra is analysing the so-called Market Exchange Solution (MES) first proposed by Andries Nentjes for the private provision of public goods. In an international climate-change agreement, for instance, the public good would be the reduction of greenhouse gas emissions. In MES, every agent faces a personal exchange rate. An exchange rate of 3, for instance, means that for every unit of the public good that the agent supplies, the group will provide three units. There exists an equilibrium set of exchange rates such that each agent demands the same amount from the group, and this amount is the sum of what all agents together supply. This equilibrium is Pareto-optimal. Research is ongoing to compare MES to other solution mechanisms and concepts such as matching and the Nash bargaining solution.

During his visit to CESifo from 13 to 24 October, Bouwe Dijkstra is planning to do research on voluntary mechanisms to address international and localised pollution issues.

Mr Dijkstra is an environmental economist, interested in instruments of environmental policy, environmental innovation and international aspects of environmental policy such as international trade, foreign direct investment and transboundary pollution.

Bouwe Dijkstra obtained his first degree in Economics and his PhD in Law and Economics from the University of Groningen (the Netherlands). After postdocs at Groningen and the Interdisciplinary Institute for Environmental Economics in Heidelberg, he moved to the University of Nottingham in 2001, where he is now Associate Professor with the School of Economics. He is Fellow of the CESifo Research Network and of the Nottingham Centre for Research on Globalisation and Economic Policy (GEP).