Technology and the Environment

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Technology and the Environment

• David Zilberman

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On Interdisciplinary Research

• The notion of multidisciplinarity has various
  interpretations.
• People in several disciplines work together as a
  team. They each have their own approach on how
  to address the same problem. National Research
  Council committees use this method.
• Individuals or groups integrate knowledge of
  several disciplines in their research. Management
  and policy decisions require the second approach.
• Economics,engineering, and operation research can
  integrate disciplines that rely on natural
  sciences.

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Technology and Food

• Increase in food production was much greater than
  land expansion, mostly due to technology.
• The global population grew from 1 billion in 1800
  to 2.5 billion to 6 billion in 2000.
• Grain per capita today is 1.12 the 1950 level and
  at least 1.25 the 1800 level.
• Today we produce at least 7 time more food than
  in 1800 and 2.8 times the level of 1950.
• The growth in food production led to expansion of
  the agricultural land base in the 19th century.
• Since 1950, farms have not increased much.

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Increased Production from Increased Water Use

• Irrigated land has increased from 50 mha (million
  hectares) in 1900 to 267 mha today.
• Between 1962 and 1996, the irrigated area in
  developing countries increased at 2 annually.
• Irrigation increases crop yields. The 17 of
  land that is irrigated produces 40 of the
  global food.
• The value of production of irrigated cropland is
  about 625/ha/year (95/ha/year for rain-fed
  cropland and 17.50/ha/year for rangelands).
• Irrigation allows improved timing and spatial
  distribution of water. It allows double cropping,
  
• It enables supply stabilization and production of
  vegetables and fruits.

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Increased Production in Relation to Other Changes

• New inputs (fertilizers and pesticides) have
  been introduced.
• Energy use has increased.
• Labor in farming has declined in the developed
  world 5 or less of the population are in
  agriculture.
• The agribusiness sector is growing.
• The overall food sector is less than 25 of the
  economy.
• Agricultural productivity per capita and
  industrialization occur in India, China, Brazil,
  and Argentina.
• Increased agricultural productivity benefited the
  urban poor and allowed industrialization.
• About 20 of humanity are in agrarian societies
  and have not been exposed to modern technologies
  and the changes they have caused.

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The Change in Production Technologies

• Input/output ratios have altered the growth in
  population was accompanied by much less than
  proportional expansion of cultivated land and
  probably greater relative increase in energy use.
• There has, however, been increase in input use
  efficiencymore output use per unit of critical
  inputsresulting from new technologies
• Obvious examples are increased crop yield because
  of improved varieties. Traditional methods of
  breeding led to crop engineering which attained
  higher ratios of fruits to straw.
• The high productivity of agriculture slowed
  expansion of deforestation.
• However, it led to new environmental issues.

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Corn yield per acre has not changed for close to
100 years, and then grew by 2 annually-example
of gain of biological innovation
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Long-Term vs. Short-Term Production Technologies

• In the short run production and pollution
  technologies are not flexible. Technologies are
  embodied in machines (e.g., cars) with rather
  fixed input-output ratios.
• In the longer run, production coefficients change
  by investment in new technologies. For
  example, during the energy crisis, people
  slightly modified their cars, but the main
  response to higher price of energy was less
  driving. Later on, fuel-efficient cars were
  introduced.

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Resource-Saving Innovations Are Not Limited to
Agriculture

• The current level of global round wood harvest is
  the same as in 1976. It went up during the 1980s,
  declined, and has been stable for five years,
  less waste materials and use of recycled paper.
• Computing power-energy use and per unit
  computing cost has declined drastically (Moore
  law ).
• Miniaturization led to the same quality output
  with much less material and energy in
  communication, computing, radio, and clothing.

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Conservation Technologies

• Technologies that increase input use efficiency.
• Output f(E). Eeffective input
• Effective input actual input input use
  efficiency..
• Actual input X, EXg(q,I), g(q,I) input use
  efficiency
• Input-use efficiency depends on technology (I)
  and q environmental quality. For example,
  irrigation has lower efficiency on sandy
  soils.I0 for traditional technology and I1 for
  modern technology
• The pollution Z may be the residue of unused
  input.
• pollution actual input (1 - input use
  efficiency)
• ZX(1-g(q,I).

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Example Irrigation(Hypothetical/California)

• Increased yield, reduced water, and reduced
  drainage costs more.
• Low-cost version (bucket drip, bamboo drip)
  exists.
• Impact greater/adoption higher on lower quality
  landssandy soils and steep hills.
• More adoption with high-value crop, high prices
  of water drainage, and output.

Technology Irrigation efficiency Water/ drainage Yield (cotton) Fixed cost/yr
Traditional .6 4.0/1.6 1200 500
Sprinkler .8 3.2/.64 1325 580
Drip .9 2.7/.27 1400 650
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Other Examples
Technology Alternative Input-use efficiency Impacts Extra cost
High precision chemical applicators Aerial sprayer .90 vs .25 Input--pollution-- High
Improved cooking stove Traditional Wood stove .60 vs .20 Wood -- Health Modest
Insulation Un-insulated homes .7 vs ,2 Energy-- Modest
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Incentives and adoption

• P-output price,Winput price,v pollution price
• K1 per season cost of modern technology
• K00 per season cost of Traditional technology
• Choice of input use with a given technology
• PROfitI Max Pf(qX)-WX-V(1-g(q,I))X-KI
• Optimal rule Choose X so that
• VMP of applied waterprice of applied watervalue
  of marginal residue

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Before the externality is regulated more input is
used with the dirtier technology. The modern
technology is saving input and increasing yield
gain may not justify extra cost.

VMP modern
VMP Traditional

W
A
B
X
Xold Before tax
Xnew Before tax
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Externality tax reduce input sue and out put
of Polluting technology.It sued more input
before May use less after tax

VMP modern
Wmarginal externality traditional
VMP Traditional
Wmarginal externality tmodernl
D

C
W
A
B
X
Xold After tax
Xold Before tax
Xnew After tax
Xnew Before tax
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The Adoption choice

• Choose the modern technology if Profits1 is
  greater from Profits0.
• Higher input taxed and output taxes and lower
  capital costs will increase adoption
• Adoption is more likely on lower land quality
• Adoption is more likely when
• output price is higher
• Input price is higher
• Pollution tax is higher

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Another Example slightly different production
function

• Y10E-E2 q.5 MPE10-2E,MPXMPEq
• g(.5,0).5 g(.5,1)1
• Input use efficiency of traditional technology is
  50 of modern is 1
• P2.W4.V4 K00,K120
• Optimal X0 2(10-X).544(1-.5) hence X04
• Optimal X1 2(10-2X)4 hence X14
• Y016 Y124 Z02, Z10
• Profit032-16-88
• Profit148-16-2012 adopt
• The difference in operational profits (32-12)
  covers the extra fixed cost (20)
• Adopt if K1lt24
• Another case no pollution tax P2.W4. V0
  K00,K120
• X06,X14 Y021 YI24 modern technology increases
  yield and saves water
• Profit042-2418 Profit148-1632
• The operational profits gain from adoption is 14
• Adoption is not worth while 20gt14

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Adoption environmental quality
Profits increase with quality Below a threshold
level there is no operation

Profit traditional technology
0
Q-quality
1
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Adoption environmental quality
Adoption occurs at Low qualities between qm and qc
PR0 Profit traditional technology PR1 Profit
modern technology

PR0
PR1
0
qm
qc
Q-quality
1
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Adoption and quality

• PR1Max Pf(g(q,1) X1)-W X1 -V(1-g(q,I)) X1 -K1
• PR0 Max Pf(g(q,0) X0)-W X0 -V(1-g(q,0)) X0 -K0
• We know that
• g(q,1) gt g(q,0)- it increases input use
  efficiency
• At q1 both technologies input use efficiency is
  equal to 1 and both technologies have the same
  output and input use
• K1gt K0 New technology costs more
• The yield increasing input saving and pollution
  reducing effects of the modern technology are
  higher at a range of lower technologies
• Adoption occurs at lower qualities

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Impact of pollution regulation

• Without pollution ax traditional technology is
  generating less output with more input
• After tax the modern technology may be using more
  input and output.The gap of output increases

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Technologies and Substitution

• At modern era technologies replace
• Human effort
• Natural resources with
• Human capital
• Physical capital
• Energy

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Technology and the Poor

• Viability and adoption of technologies vary by
  location, economics, and cultural and climatic
  situations. Technologies need to be adapted to
  locations and populations. Technological
  solutions vary by locations.
• There is minimal effort to develop technologies
  that address the need of poor regions. That is a
  challenge of public research organizations.
• Technological solutions should be accompanied by
  educational efforts and resource transfer to
  enable adoption.
• Efforts to introduce a technology should
  recognize constraints introduced by markets.

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Induced Innovations

• Innovations do not emerge in a vacuum.
• They are a result of processes of innovation and
  adoption.
• They reflect economic and social conditions.
• Innovations respond to scarcity and needs.
• People put effort into solving problems and
  gaining fame and fortune.
• Societies introduce institutions to award
  innovations
• Prizes
• Patents and exclusive licenses
• Trade secrets

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More Induced Innovations

• Innovations respond to needs and economic
  conditions. Inventors, investors, and researchers
  put effort into solving burning problems, and
  that leads to innovations.
• Labor shortages led to mechanized equipment.
• Drought conditions led to improved irrigation.
• Energy crises led to higher efficiency cars.
• Farmers cooperatives were established during
  periods of excessive low farm prices.
• Environmental regulations trigger cleaner
  technologies.
• A tax on carbon will lead to improved stoves and
  power plants.

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The Innovation Process

• An innovation starts as a concept that is refined
  and developed before application.
• Innovations may be inspired by reality. The
  innovation process, which leads to useful
  technology, requires
• Research
• Development (up-scaling, testing)
• Production
• Marketing
• Use
• Experience with a product results in feedback and
  leads to improved innovations.

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Adoption and Diffusion

• The use of new technologies spreads gradually.
• There is a significant time lag between the time
  a new innovation is introduced and when it
  becomes widely used by producers or consumers.
• Diffusion is the aggregate process of product
  penetration.
• It is measured by the percentage of potential
  users who actually adopt a technology.
• Diffusion curves measure aggregate adoption as a
  function of time. They tend to be S-shaped.
• Adoption is a decision by a specific individual
  to use a technology. Diffusion is aggregate
  adoption.

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The S-Shaped Diffusion Curve
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Stages of Diffusion

• We distinguish among
• Early adopters More educated, innovative
  individuals who gain from technology.
• Followers The majority of adopters who see its
  success and want to join in.
• Laggards Less-advanced individuals who either
  do not adopt or adopt very late and may lose
  because of the technology.

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Adoption as Imitation

• Some explain the S-shaped behavior as the outcome
  of imitation.
• Contact among individuals is the driving force of
  diffusion.
• Profitability of the new technology, ease of use,
  and quality of technical support are factors that
  can enhance diffusion.
• VCRs, wireless communication, Bt cotton, and
  Viagra were technologies with a fast rate of
  diffusion, while personal computers and IPM had
  slower adoption rates.

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Threshold Model

• The factors behind diffusion
• Heterogeneity of potential adopters.
• The individual decision process aimed at
  improving well-being.
• Dynamic forces that make technology more
  attractive.
• Source of heterogeneity (size, location, land
  quality, and human capital).
• Decision criteria (profitability, well-being,
  risk minimization).
• Dynamic processes that drive adoption (learning
  by doing, learning by using, network benefits).

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Application Threshold Approach

• Mechanical innovations Tractors and cars are
  adopted by larger farms and richer families.
• In the case of a tractor,
• L size of farm
• a saving per acre
• P cost of tractor
• Adopt if P lt aL
• L P/a critical size.
• Critical size declines because P declines. As a
  result of learning by doing, a increases as a
  result of learning by using.

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Adoption -threshold model
Adopters firms that are larger than the threshold
Nu Of firms
Threshold second period
Threshold first period
Threshold third period
size
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Other Examples

• Water-conserving technologies (sprinklers)
  increase water-use efficiency if
• With traditional technology, 50 of applied water
  is actually consumed.
• 75 is consumed with sprinklers.
• It results in higher yield and water saving.
• Technology adoption occurs
• In sandy soils and hills where the traditional
  technology is especially inefficient.
• Locations where the price of water is high.
• With high-value crops.
• Green Revolution technologies are high-yield
  varieties that require complementary inputs
  (fertilizers and sometimes water). They are
  adopted when
• They have high yield and cost effects.
• Farmers have access to credit.

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Adoption and Risk

• Impacts of technologies are unknown. Risk
  considerations slow adoption.
• One approach in assessing a technology
• Maximize Expected benefits-a risk
• where a is a coefficient of risk aversion.
• Risk may be measured by a variance of profit.
• Policies that reduce risk include
• insurance (crop insurance enhances adoption)
• Diversification.
• An alternative approach Select the technology
  with the highest benefit given that it yields
  minimum required benefits at the worst case
  scenario. This approach aims to assure
  sufficient resource during drought.
• Good inventories, banking systems, and asset
  accumulation possibilities reduce the need for
  protection against risks.

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Adoption, Credit, Location, Education

• Lack of credit and high cost of credit are major
  impediments for adoption.
• Poorer consumers and farmers may be more
  constrained by risk and credit constraints.
• Adoption may be slower at far away locations
  because of less access to information and sources
  of technology, higher cost of inputs. In some
  cases, however, early adopters are at distance
  locations(if technology reduces transportation
  costs).
• Adoption requires a high learning cost -more
  educated individuals tend to be early adopters.
  When the technology is simple,sometimes less
  sophisticated individuals adopt first.

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Adoption and Policy

• The government may enhance adoption through
  positive incentives such as
• Price support of products produced with
  technologies.
• Extension and education.
• Credit subsidies.
• Insurance schemes.
• Cost-sharing arrangements.
• Negative incentives
• Regulation against existing technologies
  (pesticide regulation enhances biotechnology).
• Higher cost of inputs used intensively with
  existing technologies (water price hikes).
• Key elements of environmental policy are
  incentives to
• Induce innovation of greener products.
• Induce adoption of cleaner products.

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Timing of Adoption

• Sometimes it is worthwhile to wait and see and
  not adopt immediately when benefits of technology
  exceed costs.
• Cost of technology may decline over time. You
  should wait if the reduction in technology costgt
  than the cost of waiting.
• When a technology has uncertain irreversible
  outcomes- waiting to learn more is prudent.
• Waiting prevent the opportunity of learning and
  improving a technology- the gains from waiting
  should be compared to the costs.

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Government adoption

• Governments and Ngos are promoting and
  encouraging adoption of technologies
• Government is using incentives, initiate
  advertisement and promotional campaigns.
• Extension is an institution used for education
  and support of diffusion processes.
• Extension should complement private sector
  marketing of new technology -not replace it.
• In some cases extensions clientele are mostly
  technology providers-not users
• Extension role is to provide balanced
  assessments of new technologies not advocate
  them.
• Extension role is adaptation of technology
• Extension may initiate and implement
  institutional innovations

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Marketing and Developing Nations

• Marketing provides information and thus generate
  value
• Like anything else it can be abused-regulation
  and education should reduce abuse.
• But it may be abused- rules for truth in
  advertisement and consumers advocates are needed
  to contain dishonest advertisement
• Key for honestly-stable private sector-
• Fly by night ers have incentives to lie take
  the money and run.
• Stable firms are worried from loss of reputation
• Buyers should be educated to be aware- they are
  the ultimate decision makers

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Adoption and Marketing
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Alternative Explanation of Adoption

• One approach views adoption as a process of
  imitation.
• Alternatively, adoption is an economic choice
  that depends on information about technologies
  but cost and benefits determine the final
  outcome.
• -Adoption is influenced by provision of better
  information, improved pricing, and financial
  terms of investment.
• -Adoption of some technologies have network
  externality benefits.

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Factors that Determine Adoption

• Risk. The less uncertain buyers are about the
  new technology, they are more likely to buy it.
  Therefore, demonstrations and guarantees are
  important.
• Location. A new technology tends to spread near
  commercial centers, and transportation cost
  reduces gain from technologies.
• Education.
• Some of the technologies require extra knowledge
  and adoption cost is less for more educated
  people.
• Size and income.
• Some technologies have an increasing return to
  scale.
• Higher income individuals may be less risk
  averse.

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The S-Shaped Diffusion Curve
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Policy and Technology

• Investment in public research and appropriate
  incentives and regulation can lead to a greener
  world.
• Adoption can be enhanced by effective extension,
  subsidization of new technologies, taxing of
  input used with traditional technology, and
  credit policies.
• Size of population is only one item that
  determines environmental quality. Carbon taxing,
  public budgets of research and extension, IPR
  policies and their enforcement, and credit
  markets all determine the extent in which
  environmental issues are addressed.
• Having an effective private sector accelerates
  diffusion.

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