Three essays on environmental and natural resource economics

The doctoral dissertation is composed of three chapters on the governance of water and electricity infrastructure in China. All three chapters focus on the nexus of economy, environment, and energy.;The first chapter studies the relationship of decentralization policies and the provision of public goods in the context of urban water services in China. Different degree of externalities of the public goods may affect the efficacy of decentralization policies. Using a comprehensive 2004 dataset for all the 661 cities, I measure how the clean water supply coverage rate and the wastewater treatment rate respond to these policies respectively. Results show that cities respond positively in their piped water supply coverage but not as well in their wastewater treatment, whereas they both respond positively to the mandatory information disclosure policy. The efficacy of decentralization policy is indeed compromised when externalities exist beyond the jurisdiction as suggested by the case of wastewater. Information disclosure policy, a motivational tool tied to the promotion of local officials, is shown to provide strong incentives for water services irrespective of their externalities. Private sector participation lowers the amount of government grant in the water sector but increases the tariff charged to customers.;The second chapter of the dissertation examines whether competition reduces cost in the restructuring of the Chinese power sector. Although competition may reduce cost through technological innovation and advancement and diversification of ownership, higher transaction cost and price control may hinder its effectiveness. In this chapter, I describe the various restructuring programs over the years that affect the power plants. Then, I evaluate their impacts on the cost efficiency, measured by the factor demand of the power plants - labor, energy and materials. Using an industrial dataset from 1997 to 2004 of energy consuming coal power plants from the National Statistics Bureau, I first estimate the factor demand equations following the model developed in Fabrizio et al. (2007) to compare with the results from similar studies in the United States. Further, I model the cost structure of Chinese power plants using a more flexible translog specification. The results from these two models confirm the validity of the assumptions made based on the industry characteristics. The power plants located in the South reduced their labor demand after the Southern Grid separated from the National Grid in 2002.;The third chapter examines how the unreliability of inputs affects productivity. Specifically, it studies how Chinese industrial enterprises respond to the unreliability of electric power. Since 2002, electricity blackouts have been hampering the industrial customers in China. Using a survey dataset of the National Statistics Bureau on eleven industries across the nation from 1999 to 2004 and an electricity dataset compiled from Electricity Yearbooks, my co-authors and I estimate the cost of power unreliability by quantifying the factor-neutral and the factor-biased productivity effects. Incorporating unreliability proxies into a flexible translog cost function and the value share equations, we estimate the whole system using seemingly unrelated regressions (SUREG) with cross equation constraints. We also calculate the marginal effect of factor unreliability on cost and on carbon emissions based on these estimates.