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Abstract:
This paper applies an economic model of climate change that is based on endogenous substitution of energy resources to determine the effect of advances in renewable technology on aggregate and sectoral fossil fuel use and energy prices. It uses a Nordhaus type partial equilibrium model of the energy sector with four demand sectors - electricity, transportation, residential and industrial energy and three of the commercially most important exhaustible resources - oil, coal and natural gas. The findings suggest that among the major commercial fuels, oil and natural gas use are not very sensitive to changes in the cost of solar energy, while coal use is expected to reduce drastically as solar becomes more economical. These results suggest that research and development in renewable energy may play only a limited role in the short run, while creating the basis for a transition to a sustainable energy economy over the longer time horizon.

Abstract:
This paper develops a spatial model for a water basin that allows for surface water allocation and re-use of the water that is lost. The analytical solution suggests specialisation of production over space - upstream farmers use canal water and downstream farmers pump groundwater that is lost upstream. Groundwater emerges as an endogenous backstop. The empirical results suggest that when traditional conservation technologies are used, optimisation over the entire basin leads to significant increases in aggregate output, project area and water use. Somewhat counter-intuitively, rents from water decrease if farmers switch from traditional to modern irrigation technology.

Water Allocation, Spatial Models, Conjunctive Use, Irrigation Technology

Abstract:
This paper develops a spatial model for a water basin that allows for surface water allocation and re-use of the water that is lost. The analytical solution suggests specialisation of production over space - upstream farmers use canal water and downstream farmers pump groundwater that is lost upstream. Groundwater emerges as an endogenous "backstop". The empirical results suggest that when traditional conservation technologies are used, optimisation over the entire basin leads to significant increases in aggregate output, project area and water use. Somewhat counter-intuitively, rents from water decrease if farmers switch from traditional to modern irrigation technology.

Water Allocation, Spatial Models, Conjunctive Use, Irrigation Technology

Abstract:
The Kyoto Protocol is now a legally binding treaty signed by 141 nations, although not by major polluting nations such as the United States, China and India. Can nuclear power, which is carbon free, save Kyoto and solve the global warming problem? Nuclear energy is a tough sell in the developed countries, but developing countries continue to rely heavily on it. Many new nuclear power plants are under construction. We develop an empirical Hotelling model that accounts for the limited stock of uranium, future efficiency improvements in nuclear technology and recycling of nuclear waste. The model shows that currently known stocks of uranium may be exhausted in a few decades. But advanced nuclear reactors can provide clean energy for a long time. However, the role of nuclear power may be much diminished even with modest technological change in fossil fuels and solar energy.

Clean Energy, Dynamic Models, Energy Resources, Hotelling Theory, Resource Substitution

Abstract:
Can nuclear power, which is carbon free, solve the global warming problem? It is a tough sell in the advanced countries, but many new nuclear power plants are under construction in the developing world. We develop an empirical Hotelling model that accounts for the limited stock of uranium, future efficiency improvements in nuclear technology and recycling of nuclear waste. We show that currently known stocks of uranium may be exhausted in a few decades. But advanced nuclear technology can provide clean energy for a longer time. The scarcity of uranium makes nuclear power costly in the future with modest technological change in fossil fuels and solar energy. Because of price-induced substitution, the current price of carbon under a Kyoto-type climate agreement may be much lower than what is generally expected.

Clean Energy, Dynamic Models, Energy Resources, Hotelling Theory, Resource Substitution

Abstract:
Much of the world's gene pool is located in tropical rainforests, which are being destroyed at an alarming rate. Proper management of protected forests is crucial to avoid further loss of forest resources and biodiversity. Resource extraction by local communities has been cited as a major impediment to the efficient management of protected forests. This paper develops a two sector dynamic model for agriculture and forest resource extraction which suggests that agricultural development in the periphery of protected forests may be an effective strategy for forest protection. Comparative dynamic results show that higher prices for agricultural output, lower input prices, better knowledge of agricultural production techniques and a lower rate of individual time preferences result in higher equilibrium stock of forest resources. Tobit analysis with data collected from the Sinharaja forest in Sri Lanka provides supportive empirical evidence.

Comparative Dynamics, Forest Protection, Sri Lanka, Tobit Analysis, Tropical Rainforests

Abstract:
Billions of dollars will be spent globally to upgrade water infrastructure in the coming years. The standard economic prescription is privatization and the introduction of water markets. A major lesson from the recent privatization debacle in electricity is that prescriptions for reform must include recognition of the technology for generation, distribution, and end-use. We apply this approach for water by comparing alternative institutions that have market power in each of these micro-markets with benchmark cases - social planning and a business-as-usual regime. An illustration shows that the business-as-usual regime with market failure may be preferred to a water distribution monopoly, while both may be dominated by monopoly power in the input or output markets. However, if the policy goal is to maximize the size of the grid, the distribution monopoly does best.

Infrastructure, Market Power, Privatization, Public Goods, Spatial Models

Abstract:
Environmental agreements such as the Kyoto Protocol aim to stabilize the amount of carbon in the atmosphere, which is mainly caused by the burning of nonrenewable resources such as coal. We characterize the solution to the textbook Hotelling model when there is a ceiling on the stock of emissions. We consider both increasing and decreasing demand for energy. We show that when the ceiling is binding, both the low-cost nonrenewable resource and the high-cost renewable resource may be used jointly. A key implication is that if energy demand were to decline in the long run, we may supplement energy supply through "clean" renewables to meet the environmental standard, but then revert back to using only "dirty" fossil fuels in the future when the ceiling has become non-binding. That is, the much heralded societal "transition" to clean energy resources may be somewhat short-lived.

Environmental Agreements, Externalities, Fossil Fuels, Nonrenewable Resources, Nonstationary Demand

Abstract:
The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects.

Comparative advantage, Dynamic models, Energy resources, Heterogenous demand, Hotelling theory

Abstract:
The US Clean Air Act allows individual states to implement their own clean fuel programs to address local or regional air quality concerns. These regulations have led to a proliferation of fuel blends known as "boutique fuels." For each of the three grades of gasoline, more than 15 types of boutique fuels are currently in use, leading to about 45 different fuel blends in use nationally. These fuels are costly to produce, but they also segment the market and increase the market power of refiners. Using measures that differentiate gasoline regulation in a given state from those in neighboring states, we find that both cost and market segmentation significantly affect wholesale gasoline prices. In particular, the greater the regulatory "distance" between a state and its neighboring states, the higher the wholesale price in that state. Simulations suggest that for some states regulating a single boutique fuel nationally may lead to a counter-intuitive outcome: gasoline prices may decline, even though a larger share of their market will be under regulation.

Clean Air Act, Environmental Regulation, Gasoline Prices, Market Structure, Product Differentiation

Abstract:
Books reviewed:

Walter Isard, History of Regional Science and the Regional Science Association International: The Beginnings and Early History

Robert E. Lang, Edgeless Cities: Exploring the Elusive Metropolis

Lori G. Kletzer, Imports, Exports, and Jobs: What Does Trade Mean for Employment and Job Loss?

Wei-Bin Zhang, Theory of Interregional Dynamics: Models of Capital, Knowledge and Economic Structures

Matthew P. Drenna, The Information Economy and American Cities

Zoltan J. Acs, Innovation and the Growth of Cities

Zoltan Acs, Henri L. F. de Groot, and Peter Nijkamp, (eds) The Emergence of the Knowledge Economy: A Regional Perspective

Robert Mendelsohn, (ed) Global Warming and the American Economy: A Regional Assessment of Climate Change Impacts

Lykke E. Andersen, Clive W.J. Granger, Eustaquio J. Reis, Diana Weinhold, and Sven Wunder, The Dynamics of Deforestation and Economic Growth in the Brazilian Amazon

Tim O'Riordan and Susanne Stoll-Kleemann, (eds) Biodiversity, Sustainability and Human Communities: Protecting beyond the Protected

Blair A. Ruble, Jodi Koehn, and Nancy E. Popson, (eds) Fragmented Space in the Russian Federation

Borje Johansson, Charlie Karlsson, and Roger R. Stough, Regional Policies and Comparative Advantage

Karl Haglund, Inventing the Charles River

Jos van Ommeren, Commuting and Relocation of Jobs and Residences

Gregory D. Squires, (ed) Urban Sprawl: Causes, Consequences and Policy Responses

Abstract:
This paper examines the sequence of optimal extraction of nonrenewable resources in the presence of multiple demands. We provide conditions under which extraction of a nonrenewable resource may be discontinuous over the course of its depletion.

Backstop technology, dynamic optimization, energy resources, herfindahl principle, multiple demands

Abstract:
Regional differences in total factor productivity, efficiency, and technological change in the Philippine rice sector are examined for the post-Green Revolution era. Malmquist productivity indices were constructed for 1971-90 and were decomposed into efficiency and technological change. The average annual Malmquist productivity growth was only slightly positive. Productivity growth was negative during the early 1970s, and was followed by a period of positive growth. Growth was negative again in the late 1980s. The period of positive growth coincided with the introduction of new rice varieties while the declines are likely to have been caused by intensification of rice production in lowland farming systems. Certain regions such as Central Luzon, Western Visayas, and Southern and Northern Mindanao had higher rates of technological change than others. This may be due to higher investments in infrastructure and education, increased adoption of tractors, and a better agroclimatic environment.

Abstract:
Most of the water used for agricultural and municipal purposes comes from river basins. Traditionally, the analysis of trade-offs has been confined to evaluating the marginal value of water in urban and municipal uses. However, return flows from these uses often end up in coastal waters that support downstream shrimp and other fish habitats. The authors have examined this problem by developing a conceptual model of a river basin with multiple uses. They have developed equilibrium conditions for water allocation to these alternative uses. A unique feature of this model is that the demand for water may vary due to exogenous conditions, such as drought. So the authors have applied this framework to the secondary data obtained from the Ogeechee river basin in coastal Georgia to show that given that the marginal values of water in upstream agriculture use and downstream fisheries may be somewhat similar, there may be a case for diverting a small amount of water away from irrigation and for the preservation of shrimp habitats, especially in drought years. However, further research is necessary to collect primary data on the economic value of water flows in upstream and downstream uses, and make more accurate estimates of the water transfers that may be necessary to preserve Georgia's coastal environments.

Abstract:
The theory of resource extraction has focused primarily on extraction when there is a single, homogeneous demand for the resource. In reality, however, we observe the simultaneous extraction of different resources such as oil, coal, and natural gas and multiple demands such as transportation, residential and commercial heating, and electricity generation. This paper develops a model with multiple resources and grades and multiple demands. The model is simulated with extraction cost, estimated reserves, and energy demand data for the world economy. It is shown that if historical rates of cost reduction in the production of solar energy are maintained, more than 90 percent of the world's coal will never be used. The world will move from oil and natural gas use to solar energy. Global temperatures will rise by only about 1.5 2 degrees centigrade by the middle of the next century and then decline steadily to preindustrial levels, even without carbon taxes. These results are significantly lower than those predicted by the Intergovernmental Panel on Climate Change and suggest that the case for global warming may be seriously overstated.