International Financial Instruments for Biodiversity Conservation in Developing Countries

Problem 1 (10 points, 1-2 paragraphs):

Why do you think Duflo and Pande's (2007) estimate the distributional impacts of dams in India differs so much from Bao's (2012) estimate of dams in China? Offer and defend a feasible hypothesis (or hypotheses) using the language of public economics and social choice.

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According to Duflo and Pande (2007) disparity in terms of economic growth, agricultural outcomes and levels poverty exist between upstream districts, districts in which dams are located and districts downstream. Districts downstream are irrigated and insured against rainfall shocks hence improved agricultural production and reduced poverty levels. Upstream areas and districts in which dams are located suffer rainfall shocks and restricted use of water hence reduced agricultural production and heightened poverty; leading to the economic disparity.

Dams in China also pose similar economic disparities. However, impacts are different following its structures towards the creation of a balance in economic performances. China as established a redistributive intergovernmental transfer that balances economic performances in areas that dams are located and downstream (Bao, 2012). The redistributive intergovernmental transfer help upstream areas and regions in which dams are located benefit from the outcomes of the dams. The disparity in distributional impacts arises from differences in redistributive structures.

Problem 2 (10 points, 1-2 paragraphs):

Referring to both Weitzman (2016) and Barett (1999, in "UNDP - Global Public Goods") outline the major differences between the outcomes of the Montreal and Kyoto Protocols, and explain why they are or are not surprising given what you know about cost-benefit analysis and the basic science of ozone depletion and climate change.

Both the Montreal and the Kyoto Protocols were meant to address concerns of depletion of the ozone and climate change; a measure considered as the world's largest environmental challenge. The Montreal Protocol has worked towards eliminating the use and production of chemicals that deplete the ozone. On the other hand, Kyoto Protocol only encouraged assertive steps towards stabilization of greengages emission (Weitzman, 2016). A major difference in the outcomes of the protocols is the level of acceptance. Countries had the opportunity to pen their signatories in accordance to an option that would be economical and the Montreal Protocol saw almost all countries signed the Montreal Protocol. The outcomes are however not surprising since the consideration of economic benefits and the costs of adopting either of the options are vital. It is important to settle for the most economical option.

Problem 3: The global coral reef ecosystem

A coral reef ecosystem is a natural resource that is formed as result the action of polyps in oceans and seas. The ecosystem as an economic good is both rivalrous and non- rivalrous. When ecosystem offers a breeding grounds for fish and other aquatic animals it is viewed as rival good. In addition, the ecosystem offers food to human beings. Therefore, the economic importance to this is that fishing as an economic activity can be carried out in such areas thus making it a rivalrous activity. However, when the coral reef offers tourism attraction site and a barrier that protects the adjacent land from actions of the tsunami and other water wave energy adversaries, it is a non- rivalrous good. Based on the aforementioned economic importance of the good, it is non-excludable (Jackson, 1984).

The economic structure of the coral reef structure is a perfect competition structure. It is a natural resource and thus enjoys the principles and features associated to public good. The derivation of economic importance from the coral reef ecosystem is controlled by natural forces of demand and supply. The animals living in such area are controlled by such. However, the oligopoly economic structure can also be seen. The derivation of economic importance such as food and medicine from the coral reef ecosystem is supplemented by other natural resources such as water and other sources of food and medicine (Amin et al., 2016).

Coral reef ecosystems as a good are underprovided. Globally, it is estimated that 0.1% of the ocean water is under the coral reef. Considering that 25% of sea animals find their habitat in a coral reef, hence it is underprovided. In order to provide this good at the correct level, there is a need for environmental conservation policy and an enactment of a law to prevent mining companies from extracting raw materials from the coral reef ecosystem (Amin et al., 2016). However, the potential barriers to these policies are industrialization and globalization. Currently, excess nitrogen and phosphorus are being injected into the seawater hampering the growth of coral reefs. In addition, environmental conservation policies have been set across the world, however, each developing economy normally sacrifices the environment for economic growth. (Buger (2015) and colleague however denote that the future of coral reefs relies on environmental conservation; an aspect that proves to be a challenge. Therefore, in future, the coral reefs ecosystem will decrease with the increase of oceanic acidification, overfishing, sunscreen and other harmful water resource usages such as channelling sewers into oceans and other large water bodies.

Problem 4: What is the production-maximizing number of cows per herdsman when there is only one herdsman?

The cost of the one cow =5000Ksh

The production equation =50000-200X

But X=i xi

Taking only one herdsman then X= xi

Then 5000xi= 50000-200xi

From the relation to ensuring profit and expenditure meets the farm expectation then;

5000xi 50000-200xi

5200xi 50000

xi9.6

Xi=10

The number of cows is 10

The production then becomes; 50000-2000

48000ksh.

What is the production-maximizing number of cows per herdsman when there are N herdsmen and they cooperate fully? Assume herdsmen act identically.

The production- maximizing the number of cows is 48000ksh

If each herdsman acts independently of his peers how many cows will he decide to field? Assume all herdsmen act identically.

Assuming they act identically then from above calculation; 10 N cows

Express the difference between an individual herdsman's total profit in (b) and in (c). As the number of herdsmen grows large, what happens to this value?

48000-48000/N

When the number of herdsmen (N) grows then the difference increases.

Consider a scenario where herdsmen in scenario (c) are considering two policies, one limiting the total number of cows that are allowed to graze on their patch of savanna and one limiting the total number of herdsmen. Which do you think would work better, and why?

The policy of limiting the number of cows grazing in the Savana patch would be a better option. This is due to the fact that the production under influence of available grass in the field, while indirectly depending on the number of herdsman and number of cows. Moreover, the number of cows affect the grass which definitely determines the milk production. Therefore reducing the number of cows would be the ideal policy to consider.

References

Weitzman, M. L. (2016). How a minimum carbon price commitment might help to internalize the global warming externality (No. w22197). National Bureau of Economic Research.

Bao, X. (2012). Dams and intergovernmental transfer: Are dam projects Pareto improving in China? Job Market Paper.

Duflo, E., & Pande, R. (2007). Dams. The Quarterly Journal of Economics, 122(2), 601-646.

Jackson, P. M. (1984). Public sector economics. In Information Sources (Second Edition) (pp. 310-316).

Amin, A. K. M. R., Feng, G., Al-saari, N., Meirelles, P. M., Yamazaki, Y., Mino, S., ... & Sawabe, T. (2016). The first temporal and spatial assessment of Vibrio diversity of the surrounding seawater of coral reefs in Ishigaki, Japan. Frontiers in microbiology, 7, 1185.

Buger, M., Meijer, K., & Wittmer, H. (2015). International financial instruments for biodiversity conservation in developing countries-financial mechanisms and enabling policies for forest biodiversity. Background paper for the European Report on Development.

Barrett, S. (2016). The Paris Agreement: We can do (and have done) better. The Paris Agreement and Beyond: International Climate Change Policy Post-2020, 75.