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Environmental Economics

Paper Session

Sunday, Jan. 7, 2018 1:00 PM - 3:00 PM

Marriott Philadelphia Downtown, Meeting Room 309
Hosted By: American Economic Association
  • Chair: Kathleen Segerson, University of Connecticut

Pass-Through as a Test for Market Power: An Application to Solar Subsidies

Jacquelyn Pless
University of Oxford
Arthur van Benthem
University of Pennsylvania


We formalize pass-through over-shifting as a simple yet under-utilized test for market power. We apply this test in the market for solar energy. Specifically, we estimate the pass-through of solar subsidies to solar system prices using rich micro-level transaction and subsidy data from California. Buyers of solar systems capture nearly the full subsidy, while there is more-than- complete pass-through to lessees. We conclude that solar markets are imperfectly competitive by ruling out alternative explanations for over-shifting, and reinforce this conclusion with a test of solar demand curvature. This procedure can serve to detect market power beyond the solar market.

What Drives Social Contagion in the Adoption of Solar Photovoltaic Technology?

Stefano Carattini
Yale University
Andrea Baranzini
HEG Geneva
Martin Péclat
University of Neuchâtel


Increasing the use of renewable energy is central to address climate change.
Recent research has suggested the existence of social contagion in the adoption
of solar panels, which may contribute to accelerate the transition to a low-carbon
economy. While the existing literature has focused on residential adoption only,
we extend the analysis to private firms, and farms, and include solar panels with
different characteristics. We exploit a unique large dataset providing detailed
information on about 60’000 solar installations in Switzerland, including their
specific location at the street level and details on the timing of the technological
adoption, and couple it with rich socioeconomic data at the municipality level.
We find that decisions of households to adopt the solar technology are dependent
on pre-existing adoption, and in particular on spatially close, and recent, installations.
Firms and farms PV adoptions react to neighboring PV panels, although
in a lesser extent than households. Furthermore, they are more influenced by
panels installed by their same type of owner. We also observe that adoptions
are more heavily stimulated by building-integrated than building-attached PV
systems and by larger PV systems.

Spatial Effects of Nitrogen Pollution on Drinking Water Production

Roberto Mosheim
U.S. Department of Agriculture
Robin C. Sickles
Rice University
Anthony Glass
Loughborough University
Karligash Kenjegalieva
Loughborough University


Nitrogen pollution is a key public policy concern. Nitrogen has long been recognized as an important and challenging water pollutant. Large amounts enter the environment through human actions, primarily as fertilizer for agriculture. A multitude of spatial effects arise from agricultural nitrogen pollution and drinking water production patterns. Municipal water utilities that deliver and treat drinking water in rural areas face the externality created by excess nitrogen released to the environment by crops and livestock. Compounding the issue, drinking water production in rural areas is highly fragmented with a multitude of enterprise sizes, organization forms and network densities. One problem posed by nitrogen pollution is regulatory costs imposed on municipal drinking water systems. Utilities in areas with high nitrogen concentrations must install expensive treatment systems to meet the nitrate regulations, an externality from mostly unregulated nonpoint sources.
This study uses water utility costs, system characteristics and nitrogen abatement data from the American Water Works Association and the US Geological Survey to estimate the implicit cost of removing nitrogen, the importance of scale economies, and the effect of key cost determinants like network density and customer structure. These effects result in a series of spatial patterns that lead to firm-specific heterogeneity and a “conjoint effect of a multitude of determinants” that can create a significant bias in the inefficiency estimates [Fusco and Vidoli (2013, 2015)].
In this presentation, we explore the results of a spatial stochastic frontier model following recent contributions by Glass, Kenjegalievay and Sickles (2014), and Elisa Fusco & Francesco Vidoli (2013, 2015). We compare results with a recent paper by Mosheim and Ribaudo (Land Economics 2017) that examines the interaction of scale economies and economies of density, and productive efficiency, water quality and customer characteristics.

Endogenous Population Growth in a Macro Environmental Model

Faraz Farhidi
Georgia State University


I present a dynamic growth model that explicitly allows for the interaction between an economy and an environment. I allow for endogenous population growth, where population is affected by living standards and level of industrialization as well as natural resources, indirectly through production. I also incorporate a trade-off between non-renewable energy reserves and renewable resources. Running out of fossil fuel-based energy and endogenizing the population growth the growth rate of GDP per capita is lower under endogenous population scenario relative to exogenous population growth. In a decentralized model, firms conserve non-renewable energy for a shorter period, while do not fully internalize the negative externalities arise from utilizing of non-renewable energy, compared to the social planner approach. Imposing carbon-tax element on the energy producers would speed up the adaptation of the clean energy and sustain fossil fuel resources for a more extended period and would increase the individuals’ total consumption in the long-run.
JEL Classifications
  • Q5 - Environmental Economics