Climate change is considered to be one of the most significant and complex challenges facing the world in the twenty-first century. As such, it is essential to increase the knowledge base regarding climate change and how best to address its impacts through efficient policies. This special issue, which is divided into two parts – published in the previous and current issues of Environment and Development Economics – is a selection of papers related to ‘The Economics of Climate Change and Sustainability’, the topic of an international workshop organized by the Economics Department of the University of Bologna in April 2018. The papers in this special issue cover a wide range of climate-change-related topics, including endogenous growth and overlapping generation models; climate-related financing and green bonds; demography; location decisions and technology diffusion; quantitative relationships and experimental approaches. They aim at providing new insights into the economics of climate change and help to identify new directions for future research.

The debate on the land–poverty nexus is inconclusive, with past research unable to identify the causal dynamics. We use a unique global panel dataset that links survey and census derived poverty data with measures of land ecosystems at the subnational level. Rainfall is used to overcome the endogeneity in the land–poverty relationship in an instrumental variable approach. This is the first global study using quasi-experimental methods to uncover the degree to which land improvements matter for poverty reduction. We draw three main conclusions. First, land improvements are important for poverty reduction in rural areas and particularly so for Sub-Saharan Africa. Second, land improvements are pro-poor: poorer areas see larger poverty alleviation effects due to improvements in land. Finally, irrigation plays a major role in breaking the link between bad weather and negative impacts on the poor through reduced vegetation growth and soil fertility.

This paper sets up a dynamic model to study the distributive effects of privatizing an open access resource. We show that with or without discounting, privatization is not always Pareto improving. We further derive conditions under which the poor are made worse off when private use rights are equally distributed compared to a situation with open access resource. These conditions imply that privatization is Pareto improving if the natural resource is sufficiently productive, inequality in alternative private project opportunities is low, and if there is no discounting. In addition, we show that once reduction in income from resource harvesting during the transition to a new steady state is accounted for, privatization is desirable for the poor only for very productive natural resources and low discount rates.

The extensive use of plastic bags in Nepal has led to growing concern in recent years. We investigate the impact of a municipal plastic bags ban on bags use behavior, based on a field survey carried out among consumers and retailers across selected municipalities. Our results indicate that the effectiveness of the ban critically depends on its enforcement and sanctioning system. In particular, our results suggest that the perceived sanction is a critical determinant of plastic bags use, as a doubling of the perceived sanction could reduce plastic bags use by two-thirds for retailers and by one-half for consumers. While the nominal amount of the fine does not seem to play a role, the probability of being detected appears to play a key role in the perceived sanction. This implies that effective monitoring of the ban by the municipal authorities is critical for the success of the policy.

This special issue contains a selection of six articles in the field of environmental and resource economics, which were presented in INFER workshops and supported events over the last two years. The topics include the effects of income inequality and freedom of the press on environmental stringency; the trade-environment nexus in China; the behavior of cross-country growth rates with respect to resource abundance and dependence; a stochastic frontier analysis to show that technological change is biased more towards energy rather than labor; how recycling and environmental taxes can affect the imbalances between the availability of and the demand for rare earth elements; and the interaction between demographic features and environmental constraints in Caribbean small island developing states. The papers include three empirical contributions and three methodological approaches, which help to improve our understanding of these topics.

This paper aims to consider the meaning of the dismal theorem, as presented by Martin Weitzman [(2009) On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics91, 1–19]. The theorem states that a standard cost–benefit analysis breaks down if there is a possibility of catastrophes occurring. This result has a significant influence on debates regarding the economics of climate change. In this study, we present an intuitive similarity between the dismal theorem and the St. Petersburg paradox using a simple discrete probability distribution.

This paper uses a continuous-time overlapping-generations model with endogenous growth and pollution accumulation over time to study the link between longevity and global warming. It is seen that increasing longevity accelerates climate change in a business-as-usual scenario without climate policy. If a binding emission target is set exogenously and implemented via a cap-and-trade system, the price of emission permits is increasing in longevity. Longevity has no effect on the optimal solution of the climate problem if perfect intergenerational transfers are feasible. If these transfers are absent, the impact of longevity is ambiguous.

This paper contributes to the literature on the determinants of environmental standards by studying the role of income inequality and freedom of the press. Given that evidence of the environmental Kuznets curve has only been found for some countries, it is thus crucial to investigate whether other factors besides income per capita levels may be affecting countries' decisions to pass environmentally-friendly legislation. We investigate the effects that inequality and freedom of the press have on environmental stringency for a sample of OECD and BRIICS countries and a global sample of 82 countries using data over the period 1994–2015. We hypothesize that the more unequal a society is, and the greater the oppression of the press is, the less stringent environmental policies are. The results partially confirm our hypothesis. In particular, lack of press freedom is negatively correlated with environmental stringency, whereas inequality shows a non-linear effect only for non-high-income countries.

This study investigates intended visitation behavior of tourists toward Rekawa wetland under anticipated climate change (CC) scenarios. An interview-based contingent visitation survey was conducted with 365 foreign and domestic tourists to estimate the effects of CC on future visitation. Based on two IPCC scenarios using two direct and three indirect climatic factors, we composed a CC environmental index. The results show a decline in number of trips equal to 43 per cent and 53 per cent under scenarios 1 and 2 respectively, but the difference is not significant. Foreign and domestic tourists differ significantly with regard to socio-demographic characteristics and beliefs about CC effects at Rekawa. Controlling for such differences, we demonstrate that foreign tourists are less likely than domestic tourists to reduce future visitation to Rekawa due to CC impacts. Still, the future of ecotourism at Rekawa wetland is at risk if adaptation measures are not taken to meet CC impacts.

The emerging large-scale production units (LSPUs) have become increasingly important in Chinese agricultural production and rural transformation due to rapid industrialization and urbanization. Based on household and plot-level data from Jiangsu and Jiangxi Provinces in China, this study provides insights into the farming systems of these LSPUs and examines how contract type, as a proxy for land tenure security, impacts on the production unit's soil-improving investments. Results from the two-stage control function approach show that the written nature of contracts positively affects the application of organic fertilizer and green manure on rented-in plots. Descriptive analysis also confirms the collateralization effect of contract type by showing that plots that are used as collateral for credit are characterized by written contracts. Policies facilitating LSPUs' access to farmland with more formal contracts may therefore play an important role in improving soil quality and land productivity.

This paper examines ethnic differences in fuelwood consumption in rural households, using an original survey dataset from two western Chinese provinces with large ethnic minority populations. We use a Heckman two-stage selection model to explain the quantity of fuelwood consumed conditional on a decision to use fuelwood. We find that ethnic minority families are more likely than majority Han Chinese families to use fuelwood. We also find that a household's off-farm income has a stronger negative effect on the quantity of fuelwood consumed for the ethnic minority families than for the Han Chinese families. In addition, families owning a larger area of forestland are more likely to use fuelwood. Yet the quantity of fuelwood consumed, especially in ethnic minority families, does not increase with owned forestland. Finally, we find that coal, rather than electricity, is a substitute for fuelwood for residential cooking and heating.

Traditional cost-benefit analyses (CBAs) of flood risk reduction measures usually ignore distributions of damages over populations, which disadvantages the poor. Instead, a CBA based on social welfare includes individual social vulnerability through relative impacts on consumption. If vulnerabilities are high, floods are catastrophic and cause poverty, migration or indirect deaths, and risk reductions have high social welfare values. For non-catastrophic risks, social welfare values of risks are relatively higher for vulnerable low-income households. We present a framework to integrate social vulnerability into CBAs, and show how financial protection reduces social flood vulnerability and provides welfare benefits. A case study illustrates that traditional CBAs underestimate the social welfare value of flood risk reduction measures, up to a factor of 30. Data on financial protection is however scarce, which hampers estimation of the social welfare value in practice. A solution is to increase financial protection of individuals, in addition to offering physical flood protection.

We examine how migration is influenced by temperature and precipitation variability, and the extent to which the receipt of a cash transfer affects the use of migration as an adaptation strategy. Climate data is merged with georeferenced panel data (2010–2014) on individual migration collected from the Zambian Child Grant Program (CGP) sites. We use the person-year dataset to identify the direct and heterogeneous causal effects of the CGP on mobility. Having access to cash transfers doubles the rate of male, short-distance moves during cool periods, irrespective of wealth. Receipt of cash transfers (among wealthier households) during extreme heat causes an additional retention of males. Cash transfers positively spur long-distance migration under normal climate conditions in the long term. They also facilitate short-distance responses to climate, but not long-distance responses that might be demanded by future climate change.

The deployment of cleaner production technologies is supposed to be crucial to mitigate the effect of climate change. The diffusion of technology from developed to developing countries can be done through different channels. It can be a business decision such as firms' relocation, opening of a subsidiary or the adoption of technology by southern firms, or it may be decided at the government level. This paper investigates, in a two-country model (North and South), the relationship between the diffusion of mitigation technologies, firms' relocation and the environment. We assume that both countries implement a carbon tax and there are two kinds of production technology used: a relatively clean technology and a dirty one. This paper theoretically shows that the technology diffusion by technology adoption, public transfer or subsidiary creation induces a decrease in relocation, while technology diffusion via purchasing dirty southern firms may increase the number of relocated firms. The paper also demonstrates that technology diffusion may have perverse effects in the long run. Indeed, total emissions may increase with technology diffusion since southern firms become more competitive.

Drought events have critical impacts on agricultural production yet there is little consensus on how these should be measured and defined, with implications for drought research and policy. We develop a flexible rainfall-temperature drought index that captures all dry events and we classify these as Type 1 (above-average cooling degree days) and Type 2 droughts (below-average cooling degree days). Applied to a panel dataset of Indian districts over 1966–2009, Type 2 droughts are found to have negative marginal impacts comparable to those of Type 1 droughts. Irrigation more effectively reduces Type 2 drought-induced yield losses than Type 1 yield losses. Over time, Type 1 drought losses have declined while Type 2 losses have risen. Estimates of average yield losses due to Type 1 droughts are reduced by up to 27 per cent when Type 2 droughts are omitted. The associated ex-post economic costs in terms of rice production are underestimated by up to 124 per cent.

In this paper, a travel cost model was applied to the case of firewood collection to assess how the inclusion of household fixed effects and how assumptions regarding conditions in the local labor market impacted resulting welfare estimates. To assess these impacts, a unique household panel data set from Kagera, Tanzania was used. It was estimated that, under the assumption of constrained labor markets, households in the Kagera region of Tanzania are willing-to-pay, on average, $120 per year (2016 USD) for access to local forests. These estimated figures were nearly 50 per cent higher when household fixed effects were excluded and nearly 10 per cent higher under the assumption of perfect labor markets. In addition, these results support previous research showing that, in many developing countries, households' demand for firewood is inelastic and that households would be willing to spend a significant amount of their resources on forest access.

This paper studies the impact of trade openness and the proportion of exporters on environmental quality through the scale, composition and technique effects from 1998 to 2007 using firm- and city-level data for 287 Chinese cities. Our results reveal that, on average, trade openness has a detrimental impact on the environment in Chinese cities, but this impact remains heterogeneous across regions. A higher proportion of exporters improves the environment in central and eastern cities while generating nevertheless more pollution in western cities. As regards the sector-specific impact, we find that the higher proportion of exporters in the mining and less-polluting manufacturing sectors in eastern cities diminishes the emissions of particulate matter 2.5 (PM2.5). Our finding also suggests that a pollution haven effect emerges in China at the city level. Finally, our results confirm the presence of an environmental Kuznets curve effect for the PM2.5 pollutant across Chinese cities.

Share contracts are the dominant remuneration system in artisanal fisheries. Introducing regulations based on collective use rights may affect the way profits are distributed. The literature on the effect of regulatory reform on factor income distribution, however, is scarce. In this paper, we look at differences in the implementation of the Extractive Artisanal Regime in Chilean hake artisanal fisheries to test its effect on share contracts. We estimated a switching regression model using census data to calculate the average treatment effect. Our results show that crewmembers in communities regulated by some form of collective use rights receive, on average, 6 per cent more of total net incomes compared to those regulated by a limited access with global quota regime. Differences in the relation between crew size and labor rewards, as well as in the negotiating power of crewmembers under different regimes, may explain the results.

We examine the impact of economic development and the role of political alignment on the fatalities and damages due to floods using state-level panel data for 19 Indian states over the period 1980–2011. The empirical results confirm that economic development leads to a decline in flood fatalities and damages due to floods across Indian states. This study also examines the role of politics in the prevention of flood fatalities. We find that both state election years and political alignment influence the extent of flood fatalities. The results suggest that not only economic development but also healthy political coordination between the central government and the states is essential to mitigate the impact of floods.

As a wide-reaching institutional reform, China's fiscal decentralization was launched in the early 1980s to encourage provincial economic growth by granting more financial autonomy to provincial governments. In this paper, the impact of fiscal decentralization on China's environmental quality is investigated both theoretically and empirically. A neoclassical model is developed based on the primary characteristics of China's fiscal decentralization. Using provincial panel data for the period 1995-2015, a two-equation regression model is employed to empirically verify the three propositions of the theoretical model: (1) there exists an inverted-U shaped relationship between fiscal decentralization and GDP per capita; (2) fiscal decentralization is positively related to GDP per capita at the steady state; (3) there is an inverted-U shaped Environmental Kuznets Curve relationship between pollution emissions and economic growth.