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Academic Research

In this paper we develop the simplest integrated assessment model in order to illustrate to undergraduate students the economic issues associated with climate change. The growth model developed in this paper is an extension of the Solow model and includes a simple climate model. Even though the model is very simple it is very powerful in its predictions. Students explore various scenarios illustrating how economic activity today will inflict damages on future generation. But students also observe that future generations will be richer than today’s generation due to productivity growth and population growth declining. Hence, the richer future generations will not be as rich as they would be without climate change. Since the cost of action is absorbed by the current generation and the benefits of action accrue to future generations students can conduct a cost-benefit analysis and explore the importance of the discount rate. 

This paper investigates the effects of financial relief programs, commonly referred to as ‘bailouts’, on pollution. A partial equilibrium soft budget constraint model of the firm is developed to identify the effect of bailouts on the emission decisions of firms. The results from the model indicate that the expectation of bailouts increases ex ante emissions. A more stringent emissions tax is required to achieve the same level of emissions if bailouts are available than if bailouts are not available; however, a tradable permit system will maintain the same emissions level if bailouts are available as when bailouts are not available.

Co-fluctuation patterns of per capita carbon dioxide emissions: The role of energy markets

This paper applies principal component analysis to investigate the linkages, or dominant cofluctuation patterns, of per capita carbon dioxide emissions across countries for the time period 1950-2000. Energy resource world markets are investigated as an offsetting mechanism possibly coordinating emission fluctuations between countries. The results of the analysis provide evidence that world energy resource markets are acting as a coordinating mechanism for emission fluctuations in most cases. The results also suggest that until recently the dominant emission co-fluctuation pattern for developed countries differs from the dominant emission co-fluctuation pattern for developing countries. The common fluctuation pattern found in the 1984-2000 time period suggests that an offsetting mechanism does exist and will help contain global per capita emissions into the future. The strong degree that emissions are linked between countries and energy markets acting as an offsetting mechanism suggest that to be successful a global agreement to address climate change must require emission reductions by all major emitters, not just the developed countries.

An examination of the relationship between air quality and income in Canada 

The Environmental Kuznets Curve hypothesis suggests that at high income levels, economic growth is accompanied by decreasing concentrations of air pollutants. We examine the relationship between four common air pollutants and income across Canadian provinces and metropolitan areas. Our study improves upon past studies of the relationship in Canada in two ways. First, our use of panel methods and pollution concentration data from individual monitoring stations allows for a much larger sample size than previous Canadian studies. Furthermore, our econometric modelling approach separates and identifies the relative magnitudes of the scale, composition, and technique effects. Our results are as expected for annual average concentrations of sulphur dioxide, nitrogen dioxide, and carbon monoxide: a positive effect of increases in the scale of the economy was completely offset by improvements in technology and changes in the composition of output. Similar results are found for ground-level ozone when choosing the measure used to assess the Canada-Wide Standard; however, the results when using annual average concentrations of ozone are much different. We attribute this difference to the focus of government policy to reduce short-term, rather than long-term, exposure to ozone.

Recently announced plans for new revenue tools to raise dedicated money to fund public transit infrastructure in the Greater Toronto-Hamilton Area (GTHA) largely avoid addressing the externalities that result from automobile use. Policy instruments, such as congestion pricing, carbon taxes, and pay as you drive insurance would provide preferred solutions to these externalities but are viewed as politically infeasible, and were therefore ignored. One of the proposed new revenue tools, a regional gasoline tax, may provide a second best solution to these externalities while raising revenue to fund public transit or cut taxes on labor income.This paper provides estimates of the various externality parameters for the GTHA gathered from various Canadian data sources. These data are applied to a general equilibrium model to provide an estimate of the second-best optimal gasoline tax for the GTHA.

This note studies British Columbia (BC) log export restrictions using a partial equilibrium trade model that takes into account both current log exports from BC and the response to additional BC log exports in foreign markets. The results contradict the conclusions of a recent study and suggest that the current policy of restricting log exports is potentially more beneficial to BC than a policy allowing unlimited log exports. It is empirically demonstrated that the preferred policy depends specifically on the size of the elasticity of excess demand for BC logs in the foreign markets.