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Environmental Institutions

Econ 373Feb 22, 2012

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Various environmental organizations

•Intergovernmental organizations•Government organization•Nongovernment organization

▫International▫Country specific

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Intergovernmental organizations

•United Nations Environment Programme (UNEP)

•IPCC (Intergovernmental Panel on Climate Change) [1988]

•World Bank- Environment and natural resources management

•International Energy Agency (IEA)•Earth System Governance Project [2009]•Global Environment Facility  [1991]

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Intergovernmental organizations•International Maritime Organization

▫A special program under UN founded in 1948▫Bring the regulation of the safety of shipping

into an international framework

•Regional fishery management organizations (RFMOs)▫ International organization dedicated to the sustainable

management of fishery resources in a particular region

of international waters, or of highly migratory species.

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International Treaties• United Nations Framework Convention on

Climate Change (UNFCCC): 1992. To stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system

• Legally no-binding• Updates are the protocols

▫ Annex I countries: industrialized countries and economies in transition

▫ Annex II countries: developed countries which pay for costs of developing countries

▫ Non Annex I countries: Developing countries.

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Kyoto Protocol (1997)

Brown = Countries that have signed and ratified the treaty              (Annex I & II countries in dark brown)Blue = No intention to ratify at this stage.Dark blue = Canada, which withdrew from the Protocol in December 2011.Grey = no position taken or position unknown

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International Treaties

•Stockholm Conference in 1972: UN's first major conference on international environmental issues

•Montreal Protocol 1987: Designed to protect the ozone layer by phasing out ozone depleting

chemicals.

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Montreal Protocol 1987•The main provisions

▫Requirement for individual countries to phase out the production and consumption of designated substances

▫A multilateral fund into which industrialized countries could contribute funds that would be used to help developing countries achieve the control measures specified in the agreement

▫A provision for trade restrictions in designated ozone-depleting chemicals. Also bans trade in products containing these substances.

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Excess profits associating with production ceiling

$

Quantity

Marginal productioncosts

Demand for CFCs

Q1Q2

P1

P2a

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Designing International Environmental Agreements• Transboundary pollutant: CFCs, CO2• Issues:

▫Has to be self-enforcing▫Sufficiently appealing for the initial agreement

• Similar to cartel▫Self-enforcing▫Voluntary participation▫Effective restriction on output

• Basic characteristics▫Cheating and nonparticipation deterred▫Individually rational▫Environmentally improving

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The Size of International Environmental Agreements•N identical countries•Each country i emits •Each country chooses either to pollute or

to abate •Payoff to the country

▫ is the average damage of 1 unit of emissions,

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The Size of International Environmental Agreements•The cooperative solution

▫If all pollute ▫All abate => choose abate

•The noncooperative solution

▫=> choose pollute

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The size of International Environmental Agreements•IEA: M countries get together to form an

agreement. ▫Stage 1 countries sort into agree to form

members and fringes▫Stage 2 act cooperatively and make a

decision of abate of not Fringe will always pollute If members choose to pollute: If members choose to abate: Abate if >

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The Size of International Environmental Agreements•The bigger the problems, the more

difficult it is to hold a group together!

Payoff

1−𝛾 𝑁

1𝛾

M*

Fringe

Member payoff1

M+M+-1 M (IEA size)

Defection to Fringe pays off

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Government organization• U.S.

▫ Environmental Protection Agency [1970]▫ Department of Energy [1977]▫ Fish and Wildlife Service (Department of Interior)

[1871]▫ Forest Service (Department of Agriculture) [1876]

• E.U.▫European Environment Agency

• China▫Ministry of Environmental Protection

• Arizona▫Arizona Department of Environmental Quality

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Nongovernmental Organization• The Nature Conservancy [1951]

▫ preserve diversity of life on Earth by protecting the lands and waters they need. It’s the largest environmental

nonprofit by assets and by revenue.• World Wide Fund for Nature (WWF) [1961]

▫ Working on issues regarding the conservation, research and restoration of the environment

▫ World's largest independent conservation organization with over 5 million supporters worldwide, working in more than 100 countries.

• Greenpeace [1971]▫ Known for its direct actions and has been described as

the most visible environmental organization in the world.

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US nonprofit organizations•Center for Climate and Energy

Solutions (C2ES), formerly Pew Center on Global Climate Change ▫ providing credible information, straight answers, and

innovative solutions in the effort to address global climate change, top environmental think tank

•Resources For the Future (RFF) [1952]▫conducts independent research into

environmental, energy, and natural resource issues, primarily via economics and other social sciences. Widely recognized as a pioneer in the field of environmental economics.

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US nonprofit organizations• Unions of Concerned Scientists (UCS) [1969]

▫ initiate a critical and continuing examination of governmental policy in areas where science and technology are of actual or potential significance

• Environmental Defense Fund (EDF) [1967]▫ issues including global warming, ecosystem

restoration, oceans, and human health. It is nonpartisan, and its work often advocates market-based solutions to environmental problems.

• Sierra Club [1892]▫ To explore, enjoy, and protect the wild places of the earth; To

practice and promote the responsible use of the earth's ecosystems and resources; To educate and enlist humanity to protect and restore the quality of the natural and human environment; and to use all lawful means to carry out these objectives.

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Group ProjectGroup 1 (Feb 29) on General MotorJohn CaseyAlex GoettingBlake DaveySheng Hao

Group 2 (Feb 29) on DanonePedro ValeciaChloe MackeyStephen JakubowskiFrank Willis

Group 3 (Feb 29) on Coca ColaJoseph WilsonXiXi MoPaul RockwellTimothy Dreschler

Group 4 (Feb 29) on WalmartMega SchmittScott RussellYongqi LuAaron UribeAntonio Roca

Group 5 (Feb 29) on IntelRay SiuXiayu ZhangJorge FloresAlex Ruane

Group 6 (Feb 29) on RaytheonIsaac MarcorTrevor BradyZimiao LiaoHua Yan

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Group ProjectGroup 7 (March 5) on HondaDarryl Davis-rosaCliff BradshawMarco GonzalesHuabin Liang

Group 8 (March 5) on McDonaldsCameron HaddadBrandon DevenyYingjie LiuLi Huo

Group 9 (March 5) on PepsiSoonchun KwonKuna BhasinEmaan AmeriAlvin Cheung

Group 10 (March 5) on Bank of AmericaDaniella TrimbleOmar KaifMatthew PerezTze Hsin ChuangDavid RodriquezGroup 11 (March 5) on ExxonMobil

Ken CummingsQihao ZhangSteven Cox

Group 12 (March 5) on AT&TMaro ChoiTim DaltonSean RochaZachary Nigro

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Group Project

•Case Study on CSR▫10-15 mins PowerPoint presentation (80%)▫Written executive summary

•Content▫Overview of the company and the industry▫Type of CSR activities▫CSR investment in dollars▫Identify why it is relevant for the firm to

adopt CSR▫Recommendations