This paper investigates the impact of environmental regulations on inward foreign direct investment (FDI) using a novel index that distinguishes between the implementation and enforcement of environmental policy across 111 countries from 2001 to 2018. Leveraging bilateral FDI data and a structural gravity model, we find robust evidence of a Pollution Haven Effect: weaker environmental regulations in host countries are associated with higher levels of inward FDI. The effect is more pronounced in emerging markets and in environments with higher corruption. Importantly, we show that FDI responds more strongly to policy implementation, capturing formal regulatory commitment, than to enforcement, measured as deviations between predicted and actual emissions. In addition, bilateral FDI patterns are shaped by the environmental stringency gap between source and host countries, consistent with regulatory arbitrage behavior.

Policy making in areas of scientific uncertainty may be shaped by the public’s stated preferences (SP). SP surveys provide respondents with information about the scenario, typically from expert sources. Here, we tested whether respondents’ pre-existing confidence in the ability of experts in general to provide reliable information was associated with (a) status quo bias, (b) response certainty and (c) willingness to pay (WTP) estimates. Using 670 responses to a 2020 choice experiment on microplastic restrictions in the UK, we show that being ex ante more confident was significantly related to less frequent status quo choices and higher response certainty. However, we only observed differences in mean WTP for our ‘microplastics released’ attribute. Our findings suggest that confidence in expert-provided information shapes how respondents engage with SP surveys, particularly in contexts of scientific uncertainty. Future work to further understand determinants and consequences of perceived expert trustworthiness would be insightful.

In this paper, we adopt an evolutionary model to describe the coevolution of technological transition and pollution in a country, where the choice of technology does not only give firms access to cleaner (but more expensive) or dirtier (cheaper and illegal) forms of production, but also access to social groups and information. Firms’ activity may be harmful to the environment and, due to the existence of ambient pollution charges, economic activity is affected by the level of pollution in the country. Our analysis describes how the evolution of the transition to clean technology and pollution generates a rich set of possible equilibria, which include stable pure strategies (where all firms choose the same technology) and inner equilibria (where both technologies could be adopted in the long run). We also observe more complex behavior and coexistence of different attractors as well as highlight the importance of initial conditions and uncover how the regulator may face possible pollution traps.

Government procurement is a highly important area to explore in seeking to advance the capacity of enterprises to achieve green technological innovation and promote green development more broadly. Research for this article focused on A-share listed manufacturing enterprises in Shanghai and Shenzhen as samples, and used the government procurement contract data published by the China Government Procurement Network to explore the effect on technological innovation in the manufacturing industry. The results show that government procurement has a significant and positive effect on green technology innovation. Moreover, the larger the scale of government procurement, the more obvious is the promotion effect on green innovation. A mechanism test found that government procurement can promote corporate green technology innovation by raising awareness of climate change (especially in the eastern regions of China), while a heterogeneity analysis found that government procurement promotes green invention patents more significantly than green utility model patents. Government procurement was also found to have a greater effect on enterprises without ISO14001 certification. Further analysis revealed that overall demand-side innovation procurement and supply-side innovation subsidies have a mutually reinforcing synergistic effect on firm innovation. While government synergies vary significantly depending on the policy implementation sequence, this article provides an important reference in identifying further ways to improve government procurement policies.

We study monitoring and enforcement for environmental compliance in the context of a transitional economy. We estimate the factors correlated with inspections carried out by the Chilean Superintendence of Environment, the imposition of fines to detected violators and the compliance behaviour of regulated facilities. The analysis considers 6,670 facilities from different economic sectors between 2013 and 2019. We find evidence of targeted monitoring and enforcement actions based on past facilities’ behaviour and individual specific characteristics. The size of the implemented fines on detected violators correlates positively with the severity and recurrence of the violation and larger fines are imposed on facilities in the energy and mining sector. We also find that the imposition of fines is transmitted as a spillover effect on the compliance behaviour of facilities sharing the same firm owner. We discuss the policy implications for improving monitoring and enforcement strategies under budget constraints.

Historical ambiguity on how cover crop use influences future crop insurance eligibility has been proposed as one explanation for low cover crop adoption rates. However, explicit guidance on cover crop use for crop insurance participants was added in the 2018 Farm Bill. This study uses farm level data from the Agricultural Resource Management Survey to ascertain whether crop insurance participation influenced adoption of cover crops and to what degree that influence persisted after the 2018 Farm Bill. Estimation of a double hurdle model, combined with a control function approach to address endogeneity, suggests statistically and economically significant effects between crop insurance expenditures and cover crop use at the “extensive margin,” but no statistically significant effect at the “intensive margin.” Estimation on subsets of the data defined by before and after the 2018 Farm Bill suggest that the effect is primarily attributable to participation trends prior to the 2018 Farm Bill. Following the 2018 Farm Bill, no statistically significant effects are observed between cover crop use and crop insurance expenditures.

Microplastic pollution from plastic fragments accumulating in agricultural fields threatens the world’s most productive soils and environmental sustainability. This is the first paper to address the challenge of developing a dynamic economic model to analyze the adoption of soil-biodegradable plastic mulches (BDMs) as a sustainable alternative to conventional polyethylene mulches. The model considers the trade-off between BDM degradation rates and agricultural production, seeking to balance the cost of BDMs and the cost of waste disposal. We consider both private and social perspectives under deterministic and stochastic environments. Our findings suggest that BDMs can significantly decrease long-term plastic pollution from single-use plastics in agriculture. For example, increasing landfill tipping fees incentivizes Washington State tomato growers to optimally adopt BDMs with a 61% degradation rate and to till used BDMs into the soil, reducing plastic waste accumulation in landfills. The study highlights the role of economic incentives, such as landfill fees, corrective taxes and the role of risk aversion, in promoting BDM adoption and curbing plastic pollution. The framework presented here offers valuable insights for policymakers and stakeholders seeking to foster sustainable agricultural practices and mitigate global plastic pollution.

Conventional benefit–cost analysis plays an important role in informing policy decisions, encouraging systematic investigation of the positive and negative impacts of alternative policies. It is based on strong normative assumptions, however. To measure individual wellbeing, the conventional approach relies on individuals’ willingness to exchange their income for the outcomes they experience. To measure societal welfare, it relies on simple aggregation of these values across individuals. In this “Ethics and Benefit–Cost Analysis” special issue, we explore alternative conceptions of individual and societal welfare, their application, and the implications, from both practical and ethical perspectives.

In the State of Ohio, the electric regulatory landscape permits local governments to become energy suppliers to residents and small businesses through community choice aggregation (CCA). Some CCAs provide enrollees 100% renewable electricity. Concurrently, the federal government offers an income tax credit (ITC) for the purchase of a solar array. With policy incentives, it is important to ensure they encourage behavior beyond the baseline scenario without the ITC. This is known as “additionality.” Renewable aggregation programs may crowd out the benefits of the ITC, violating additionality. This paper assesses additionality of the ITC in the context of Ohio’s CCA programs. The actual additionality can depend on whether renewable energy is already being supplied to the site of a solar array. Hence, we study the relationship between CCA and solar adoption probability to determine whether tax incentives are additional. Using panel data methods and post-estimation simulations, we discern if additionality is violated where these programs overlap. We find aggregation programs increase the probability of solar adoption and that $0.79 of every dollar spent on the income tax credit in Ohio is non-additional. This will help policymakers determine the efficacy of funds allocated to their programs.

We study the provision problem of an asymmetrically valued public project using a novel mechanism proposed by Van Essen and Walker (2017). Under this mechanism, each player simultaneously submits a price (either a contribution or a requested compensation) and a desired project quantity. In our context, two non-hosts interact with the project’s host, who gets harmed by provision. The minimum submitted quantity is provided if the contributions are sufficient to cover the building costs and the host’s requested compensation. We test the efficiency-enhancing effects of communication and find that, although it led to larger provided quantities, the probability of provision is unaffected, and the non-hosts kept most of the efficiency surplus. Moreover, the effect of communication disappears in settings where the host demands a larger compensation in equilibrium. The coding of chat logs reveals that veto threats are rare (1%), although the mechanism allows to do so. Reaching non-binding agreements and the host’s engagement with communication are positively correlated with the probability of provision.

This paper examines an endogenous growth model that allows us to consider the dynamics and sustainability of debt, pollution, and growth. Debt evolves according to the financing adaptation and mitigation efforts and to the damages caused by pollution. Three types of features are important for our analysis: the technology through the negative effect of pollution on TFP; the fiscal policy; the initial level of pollution and debt with respect to capital. Indeed, if the initial level of pollution is too high, the economy is relegated to an endogenous tipping zone where pollution perpetually increases relatively to capital. If the effect of pollution on TFP is too strong, the economy cannot converge to a stable and sustainable long-run balanced growth path. If the income tax rates are high enough, we can converge to a stable balanced growth path with low pollution and high debt relative to capital. This sustainable equilibrium can even be characterized by higher growth and welfare. This last result underlines the role that tax policy can play in reconciling debt and environmental sustainability.

We propose a simple indicator for the climate-related transition risks of bank lending based on transaction-level loan data. The underlying idea is that the higher the greenhouse gas intensity of an economic activity, and thus that of the debtor involved, the higher its transition risk. The relationship is mapped through two min-max-normalised functions, each of which represents a scenario for the future characteristics of the green transition. The concept is versatile and applicable to different dimensions at different levels of aggregation (banking system or individual banks, whole economy or specific sectors). As a practical example, we discuss the proposed indicator using Hungarian data for the period 2012–2020.

The EU's non-financial reporting (NFR) regulations have significant impacts on Global South stakeholders, firms that must report, actors lower in the value chain, and organisations seeking investment from NFR-compliant firms or institutions. This paper sets forth six proposals to improve the global equity and sustainability implications of the EU's NFR from a Global South perspective. The proposals involve (1) developing regulation cooperatively with the Global South; (2) streamlining reporting to enable the regulations to have real effects and limit incorrect accounting; (3) digitalising reporting through accessible technologies for greater accountability and lower administrative burdens; (4) mandating scope 3 emissions accounting and incentivising related investment; (5) anchoring financial institutions' role in ethical investment and bridging Northern and Southern actors; and (6) strengthening citizen data and sustainability literacy to close the circle of incentives, implementation, and impact.

In this study, we examine how local government debt responds to environmental policies in China. We show that when an environmental policy impacts the economy, local governments are likely to increase debt issuance, with this effect becoming stronger when local officials have greater career incentives within the Chinese bureaucratic system. Over-accumulation of local government debt, which leads to social welfare losses, is closely tied to the urgency local officials feel to secure promotions. Our analysis offers valuable insights for better coordination between fiscal and environmental policies.

This paper analyzes inequities in the distribution of air pollution in Mexico at the detailed scale of localities. We find that air pollution increases in areas that experience a decline in socioeconomic status. We utilize 15 years of remote sensing data on fine particulate matter (smaller than 2.5 microns) for more than 116,500 localities across Mexico. Our panel data models show that localities that face a decline in socioeconomic status experience a 0.24–0.83 per cent increase in annual mean pollution concentrations. Our results hold up to controlling for changes within each municipality and instrumenting with broader municipality level socioeconomic status to test for ecological fallacy. We find that local air pollution inequities are reduced by political participation channels, but not as much by increased share of manufacturing activities due to polluters locating in poorer neighborhoods. Highly dense, urban municipalities witness higher inequities most likely due to traffic, construction, and agricultural fires.

Compromised kidney function is associated with an array of environmental contaminants and pathogens that may be considered for regulation. However, there are few valuation estimates for kidney effects for use in benefit–cost analyses, particularly willingness-to-pay estimates. This paper is one of several surveys valuing morbidity developed by the OECD Surveys to elicit Willingness-to-pay to Avoid Chemicals-related negative Health Effects project, which aims to improve the basis for benefit–cost analyses. We report the results of a stated preference survey valuing reduced the risk of symptomatic chronic kidney disease, filling an important gap in the valuation literature and addressing a need for applied benefits analysis of chemical regulation. The survey was administered to representative samples in each of 10 countries: Canada, Chile, China, Denmark, Germany, Italy, Norway, Türkiye, the United Kingdom, and the United States. The mean (median) WTP for an average reduction of 3.5 in 1,000 of the risk of serious kidney disease over 5 years is $2,609 ($764), corresponding to a mean (median) value per statistical case (VSC) of chronic kidney disease of $805,000 ($224,000). The mean VSC varies between $700,000 for Canada and $1,200,000 for Türkiye.

We explore the changes in central government administration due to European Union (EU) membership and its consequences for policy outcomes and economic efficiency in Finland and Sweden. Both countries became members of the EU in 1995. Upon joining the union, member states are expected to adopt common legislation and are encouraged to develop similar rule-making procedures. The actual implementation of EU directives varies considerably between member states, however. This is also the case for Finland and Sweden. Despite the two Nordic countries for historical reasons having had similar government systems, upon becoming members of the EU, they started to diverge. Using a model of delegation and comparing the more centralized Finnish system with the decentralized institutional setup in Sweden, we show that the Swedish approach leads to a stricter than optimal environmental policy, which in turn makes EU policy non-optimal from a global point of view, ceteris paribus. We also provide empirical support for our findings in the form of some example cases. We focus on environmental policy since this is an area that has been high on the EU agenda.

Cost-share contracts, offered through working lands programs, are instrumental in addressing environmental externalities from agriculture and generating ecosystem services. However, the persistent trend of noncompliance with cost-share contractual terms has become a problem for funding agencies and policymakers. This paper aims to study noncompliance issues within the US working lands programs using historical county-level panel data (1997–2019) from Louisiana. The results show that noncompliance is attributed more to cancellations than terminations due to flexible provisions within the cancellation option. The significant incentive effect of payment obligations reveals that revisiting payment rates could reduce contract noncompliance and mitigate moral hazard.

Community Rating System (CRS) incentivizes investments in risk reduction above NFIP standards using discounts on insurance premiums. These discounts are cross-subsidized by increasing premiums in non-CRS communities. We examine the distribution of these subsidies and find that redistribution does occur, but the gains and losses are not economically large with 95% of households gaining or losing no more than 0.3% of household income. We also examine their relationship with other community characteristics and find that the strongest predictor of premium reductions is the underlying flood risk level within the community. Thus, CRS appears to reduce the cost of living in the riskier communities.

The COVID-19 pandemic and government responses led to a halt in economic activity. While this reduced pollution in urban areas, its effect on deforestation in areas outside of cities is unclear. Deforestation may have decreased due to the restrictions on economic activity, but, it may have increased due to the drying up of alternative income sources. We analyzed bi-weekly data on tropical forests worldwide in relation to the dates when different countries implemented lockdown restrictions. Our analysis found that while lockdowns did reduce mobility in forest municipalities, the average effect on deforestation was not significant. However, we did observe variations in the impact of lockdowns on deforestation based on the share of lockdown-vulnerable GDP and the level of government effectiveness. These results stand across tropical countries and within Colombia. These findings highlight the importance of alternative income sources and strong state capacity for effective policies aimed at reducing deforestation.