Sustainability science for public policy : lake sedimentation, forest emissions and the generalized resource curse

Abstract

This dissertation helps develop principles that that integrate aspects of policy analysis into sustainability science. The three principal chapters are 2, 3, and 4. Through an application to multiple sources of drinking water in the presence of other ecological services, Chapter 2 illustrates the problems and prospects of extending resource economics to more fully account for interlinkages in the resource system. In search of an alternative source of drinking water, lake water may provide an economically viable supplement to groundwater. The model solves for optimal extraction profiles and the corresponding shadow prices of drinking water taking into account the quantity and quality of lake water and storage capacity of the lake. The analytical result shows that efficient extraction follows the condition of price equal to marginal opportunity cost. The latter includes marginal user costs, which incorporate the scarcity value of "clean" water. The result provides important policy implications for the Philippines. Chapter 3 uses resource and environmental economics to devise a win-win plan whereby developed countries can incentivize improved forestry management in developing countries for better economic as well as environmental outcomes. It presents an alternative approach to Reducing Emissions from Deforestation and Degradation plus sequestration (REDD+), called Efficient Reforms for REDD+ (ERR). The model solves for the optimal harvest such that a social planner maximizes consumer and producer surplus given an initial forest stock and world prices. The numerical results show that, unlike positive efficient emissions for industry, baseline emission permits for highly degraded forests should be negative. For the case of Indonesia, potential gains from ERR is nearly twice as that from conventional REDD+. Inasmuch as practical reforms must be politically feasible, chapter 4 examines the political economy of the relationship between resource booms and the departures of public policy from what is optimal. This chapter explores the role of the generalized resource curse (GRC) as one possible reason for economic inefficiencies in countries such as the Philippines. GRC refers to the negative effects promulgated not only by traditional extractive natural resources but also by military bases, foreign aid, remittances, and some activities that induce exchange rate appreciation.