Essays on Environment, Natural Resource, Growth and Development

1. Abstract for the theis paper "Climate Change Impacts of Renewable Energy Policies: the Roles of Capacity Constraints and Market Power". A recent literature of Green Paradox shows that green policy intended to alleviate the problem of climate change may turn to speed it up (Sinn, 2008). The goal of this paper is to examine the climate change impacts of renewable energy policies by focusing on capacity constraints of some renewable energies and market power in the fossil fuel sector, both of which turn out to play important roles in determining policy impacts on the time profile of fossil fuel supply as well as the time pattern of greenhouse gas (GHG) emissions. By recognizing the capacity constraints of renewable energies, in this paper, we distinguish renewable energies between capacity constrained renewable energies and abundant renewable energies, and study their price policies and quantity policies in competitive market and non-competitive market. We show that the Green Paradox can only be confirmed in the benchmark case. Moreover, after considering the two factors mentioned, Green Paradox may not exist: the capacity constraints help renewable energy to delay the fossil fuel use to the distant future and the existence of market power changes the optimization rule of fossil fuel owners as well as their response to renewable energy policies.3. Abstract fo the thesis paper "Health and Precautionary Savings in the Pollution-Growth". We study the pollution-economic growth nexus from the perspective of health and precautionary savings. We first establish empirical support from Chinese data that higher pollution levels are associated with high savings rates. We then construct an overlapping-generations model in which agents save more in response to the higher pollution-induced health risk and the increased saving in turn leads to more investment, and thus more pollution. Such a path may appear to be sustainable in terms of economic growth, but the increased pollution makes the welfare level unsustainable. We study three kinds of policy interventions: private insurance achieves full risk sharing but does not reduce pollution; Pay-as-you-go health insurance reduces pollution but can only achieve partial risk sharing; pollution tax reduces pollution, but introduces an additional distortion in the rate of return to capital. A tax on pollution is most effective when the tax revenue is distributed to the old and sick. Even when double dividends do not exist in a static setting, they may still arise in a dynamic setting via its effects on savings behavior.3. Abstract for the thesis paper "Optimal Education Policies under Endogenous Borrowing Constraints". When young students face exogenous borrowing constraints (incomplete markets) on education loans, the simultaneous establishment of a education subsidy and an old-age pension has been shown to restore the complete market allocation (Boldrin and Montes, 2005). If the borrowing constraint is endogenous, owing to limited commitment of repayment and inalienability of future human capital (as in Kehoe and Levine, 1993), Andolfatto and Gervais (2006) by means of an example, argue that the education-subsidy-cum-pension scheme distorts the credit market, and hence, fails to restore the complete market allocation. In this paper, I show that the complete market allocation can be achieved even with endogenous borrowing constraints. The result broadens the rationale for a two-armed (education and pension) welfare state to a much wider class of economies.