Centre for Advanced Study

at the Norwegian Academy of Science and Letters

Environmental Economics: Policy Instruments, Technology Development, and International Cooperation


Former 2005/2006 Social Sciences - Law


The advantages and disadvantages of various types of environmental policy instruments are well understood under simplifying assumptions about how the rest of the economy works. However, the real world is much more complex than simple economic models often assume. Once one introduces more realistic assumptions about how an economy works, our knowledge about the properties of various types of environmental policy instruments is much less than it is under the simplifying assumptions. The purpose of the proposed project is to increase our understanding of the properties of several types of environmental policy instruments. The analyses we plan to do in the proposed project will explicitly include several important features of the economy that are often ignored in previous analyses. In particular, we shall consider:

• Pre-existing distortionary taxes

• Endogenous technology development

• Dynamics, irreversibility and time consistency

• Non-competitive firms • International trade

• Transboundary/global environmental problems

• Limited rationality, altruism, and social interdependency of preferences

End Report

During the past three decades, a vast body of literature has been produced on environmental economics. A very broad and crude classification of this literature would divide it into two categories: environmental regulation and valuation of environmental goods. The present research project focused on the first category. In particular, the project concentrated on the following comprehensive and to some extent overlapping themes (although not all the work fits into any of these categories):

  • International environmental/climate agreements
  • Endogenous technology development
  • Dynamics and time consistency
  • Limited rationality, altruism, and social interdependency of preferences

Additional research covered issues such as biodiversity, conservation, interjurisdictional competition for mobile foreign direct investment based on environmental standards, and economic-geography issues such as the geographical concentration of pollution due to the agglomeration of economic activities.

The scientific output from this project has been presented in a number of publications. Some of these publications were largely completed already before the CAS period started. For about 20 papers, a significant part of the work was done during the CAS period. Most of these publications are either in the review process or will be sent to international journals in the near future, although some have already been published in or accepted by international journals. Most of the work constitutes contributions to a large specialized body of literature on the topics studied. Accordingly, several of the results cannot be explained easily without an extensive summary of the relevant literature.

We plan to arrange a follow-up workshop in August 2007. In addition, to updating each other on ongoing work, project members will take advantage of this workshop to discuss possible additional cooperation between the CAS researchers (and other participants). There are already several joint research projects among the CAS researchers that started towards the end of the CAS period. To mention a few: Johan Eyckmans and Snorre Kverndokk are working together on two projects, ‘Can climate and development be reconciled?’ and ‘Moral motivation and climate agreements’; Reyer Gerlagh and Matti Liski are working together on ‘Imperfect observability of stocks, oil dependency, and technology adoption’; Michael Hoel and Aart de Zeeuw are working together on ‘Climate policy and R&D: Conventional versus breakthrough technologies’; and Michael Hoel and Matti Liski are working together on ‘Electricity markets with hydropower and imperfect competition’.

As mentioned above, almost all the research will be submitted to academic journals. We are considering the possibility of publishing some of the articles in a book after they have been published as articles. We have been in contact with the two publishers, Edward Elgar and Cambridge University Press. Nothing is decided yet, as we must first see when and in which journals the works will be published first. If we produce a book, it is likely to be published in 2008 based on work published in journals by the end of 2007.

My impression is that all the project members found the CAS project very productive and enjoyable. We were all fascinated by being in a small group with very homogeneous research interests and working closely together. Small informal seminars were invaluable for our work. We also all enjoyed the isolation from everyday chores and the focus on intellectual exchanges.


  • Barrett, Scott
    Professor Johns Hopkins University 2005/2006
  • Brekke, Kjell Arne
    Dr. The Ragnar Frisch Centre for Economic Research 2005/2006
  • Eyckmans, Johan
    Professor European University College Brussels 2005/2006
  • Fischer, Carolyn
    Research Fellow Resources for the Future (RFF) 2005/2006
  • Gerlagh, Reyer
    Associate Professor University of Manchester 2005/2006
  • Golombek, Rolf
    Senior Researcher The Ragnar Frisch Centre for Economic Research 2005/2006
  • Hagem, Cathrine
    Research Fellow Statistics Norway 2005/2006
  • Heggedal, Tom-Reiel
    Ph. D. Candidate Statistics Norway 2005/2006
  • Howarth, Richard B.
    Professor Dartmouth College 2005/2006
  • Kverndokk, Snorre
    Senior Researcher The Ragnar Frisch Centre for Economic Research 2005/2006
  • Liski, Matti Jukka
    Professor Helsinki School of Economics 2005/2006
  • Nyborg, Karine
    Senior Researcher The Ragnar Frisch Centre for Economic Research 2005/2006
  • Rauscher, Michael
    Professor University of Rostock 2005/2006
  • Sterner, Thomas Nils Samuel
    Professor University of Gothenburg 2005/2006
  • Ulph, David Tregear
    Professor Her Majesty's Revenue and Customs 2005/2006
  • Withagen, Cees
    Professor Tilburg University 2005/2006
  • de Zeeuw, Aart Johannes
    Professor Tilburg University 2005/2006


Group leader

  • Michael Hoel

    Title Professor Institution University of Oslo (UiO) Year at CAS 2005/2006