Scientific organisers: David Bradford (University of Princeton) and Ronnie Schöb (University of Western Ontario)
The second workshop of this year's CESifo Venice Summer Institute aimed at stimulating the scientific debate on several environmental economics issues such as the regulation of traffic congestion, the taxation of externalities and the measurement of environmental damage.
The keynote speaker was Richard Arnott from Boston College, who presented a "microscopic research agenda" for further developing the economic theory of urban traffic congestion. In his lecture he took the view that urban transport economists have been deceived by the simplicities of their models into underestimating the costs and practical difficulties of implementing congestion fees. To overcome these difficulties, he suggested the development of variety of microscopic models of urban travel which account for more detailed description of urban traffic flows and urban travel decisions. Among other issues he proposed further research on the regulation of freight deliveries, the integration of mass transit and pedestrian traffic, hypercongestion, non-commuting trips and parking.
Some of the topics Richard Arnott listed on his research agenda where taken up in subsequent sessions. Edward Calthrop considered congestion with both commuting trips and non-commuting trips and argued in favour of a uniform congestion toll combined with a subsidy to commuters. David Newbery focussed on practical issues of road pricing and promoted cordon tolls for which he presented calculations for optimal cordon tolls in eight towns in the UK. Olaf Hoelzer discussed the interaction of congestion and local pollution and showed that even clean busses might be taxed because they indirectly contribute to be pollution by aggravating congestion.
While the first set of papers focussed on local issues, the second set of papers considered more general environmental problems and policies. Ian Parry presented an analytical framework for assessing the optimal level of gasoline taxation taking into account pollution, congestion, accidental externalities and tax interactions. In comparing the gasoline tax in the USA and the UK he argued that although the optimal gasoline tax in Britain should be higher than in the USA, the optimal tax for Britain should be lower than the current one while the opposite is true for the United States.
Two-part tariffs to internalise car emissions were analysed in the next two presentations. Don Fullerton reported that in the absence of a (first-best) Pigouvian tax, a second-best combination of taxes on gasoline, car size and vintage could achieve about 70 percent of the welfare gain, a Pigouvian tax could achieve. Taking into account the tax interaction effect. Bruno de Borger analysed two-part tariffs for various restrictions on the use of tax instruments.
The second day of the workshop continued with two papers on environmental taxation. Christoph Böhringer presented a multi-sector intertemporal CGE analysis for Germany, analysing the efficiency and employment implications from differentiating taxes between the production sector and the household sector and reported that, contradictory to recent theoretical studies, a strong tax discrimination in favour of the production sector would result in increasing inefficiencies of environmental tax reforms. Klaus Conrad analysed the intertemporal aspects of environmental taxes and incorporated flow and stock externalities in an intertemporal model of taxing exhaustible resources.
International co-ordination was the topic of two subsequent presentations. Karl-Gustaf Löfgren used a dynamic cost-benefit analysis of environmental tax reforms in a global economy in which he took account of transboundary pollution problems. Stepping in for Lawrence Goulder, who was forced to cancel his presentation at the last minute, David Bradford led a discussion of alternatives to the Kyoto formulation of international control of global warming, based on an informal description of a plan that he circulated to the group.
The final session addressed the question about the appropriate measurement of environmental damages in the presence of uncertainty. As Nathalie Simon pointed out, reducing mortality risk may be considered one of the most important benefits of environmental protection policies. The willingness to pay for such mortality risk reduction, however, crucially depends on age and health conditions as the results of a contingent valuation survey of Ontario residents demonstrate. Environmental risks may also be already present before scientific research has been able to elaborate the problem. Does this allow the government to forego any policy measures? Christian Gollier reassessed the precautionary principle for such a situation and argued in favour of the adaptation of the precautionary principle to manage risk when firms, politicians and experts behave in an inefficient way.
DB/RS (25 July 2001)
For more information on the workshop, see the following pages:
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