Academic literature on the topic 'Environmental Public Goods'

Many environmental nonprofit groups are assumed to provide public goods. While an extensive literature examines why donors join and give to nonprofits, none directly tests whether donations actually provide public goods. We seek such a test by using a common form of environmental organization: watershed groups. We find their increased presence resulted in lower dissolved oxygen deficiency and higher proportions of swimmable and fishable water bodies. Increased donations to and expenditures by the groups also improved water quality. Thus, private groups likely played a role in mitigating environmental problems. Overall, our results indicate private provision of a public good by nonprofit organizations.

Thesis (Ph. D.)--West Virginia University, 1999.
Title from document title page. Document formatted into pages; contains vi, 112 p. Vita. Includes abstract. Includes bibliographical references (p. 80-106).

Thesis (Ph. D.)--Ohio State University, 2004.
Title from first page of PDF file. Document formatted into pages; contains xii, 173 p.; also includes graphics (some col.). Includes bibliographical references (p. 148-154).

The chapters of this dissertation explore complementary areas of applied microeconomics, within the fields of experimental and environmental economics. In each case, preferences and institutions interact in ways that enhance or subvert efficiency. The first chapter, "The Girl Scout Cookie Phenomenon," uses a laboratory experiment to study favor trading in a public goods setting. The ability to practice targeted reciprocity increases contributions by 14%, which corresponds directly to increased efficiency. Subjects discriminate by rewarding group members who have been generous and withholding rewards from ungenerous group members. At least some reciprocal behavior is rooted in other-regarding preferences. When someone is outside the "circle of reciprocity," he gives less to the public good than in other settings. We find no evidence of indirect reciprocity. We find two behavioral types in each treatment, differing in baseline giving but not in tendency to reciprocate. The second chapter, "The Effects of Conservation Reserve Program Participation on Later Land Use," studies another public goods issue: conservation. The Conservation Reserve Program (CRP) pays farmers to retire farmland. We use a treatment effect framework to find that ex-CRP land is 21-28% more likely to be farmed than comparable non-CRP land. This implies that the CRP improves low-quality land, making it more attractive to farm. This could demonstrate inefficiency, since farmers gain private benefit from a program meant to provide a public good. On the other hand, farmed ex-CRP land is more likely to adopt conservation practices, although this may not be caused by CRP participation. The third chapter, "Learning from Mistakes," examines financial decisions by adult Rwandans in institutions inside and outside the lab. Over 50% of subjects make irrational choices over risk—choices that likely do not reflect their preferences, and are therefore likely inefficient—and these subjects share tendencies in their take-up of financial instruments. Risk-averse individuals are more likely to belong to a savings group and less likely to take out an informal loan. For those who make mistakes, however, as they become more risk averse, they are less likely to belong to a savings group and more likely to take up informal credit.

In California, voters frequently face ballot propositions dealing directly or indirectly with environmental protection. Records of these votes provide powerful evidence of the character of voters’ demand and willingness-to-pay for environmental public goods (e.g., air quality, watershed ecosystem services, parks and recreation), and have been used in past environmental econometrics research to produce aggregated income and price effect estimates. Using neighborhood-level voting records on seven environmental-related ballot propositions in California between 2002 and 2010, this econometric study investigates the nature of voters’ demand for environmental public goods, focusing on the effect of household income on pro-environment voting. Unlike previous studies, this study uses geographically weighted regression (GWR) to determine how estimates vary across the historically, culturally, and politically diverse state of California. Preliminary statewide results from an ordinary least-squares regression model suggest that demand decreases with voter income, and that this negative income effect is strongest among lower-income households. However, GWR results suggest that the magnitude, and even the sign, of income effects varies regionally. The San Francisco Bay Area, in particular, stands out as anomalous from the statewide model estimates: in this region, wealthier households are more likely than lower-income households to support environmental propositions, ceteris paribus. This finding is consistent across all propositions studied, which include water bonds, State Parks funding, and the California High-Speed Rail program, among others. GWR results suggest that political geography and regional culture determines the way in which income (as well as education and other factors) affects voters’ support of environmental propositions.

The management of natural resources located on private lands often involves a perceived conflict between the mix of private and public benefit outputs they produce. Governments have tended to respond through legislation to restrict and redirect private decisions about resource management. However, the legislative response faces a lack of information about the costs and benefits of alternative management and policy instruments. A pertinent example of this debate is the management of wetlands on private lands. The goal in this thesis is to advance the design of policy relating to the production of environmental outputs on private lands. This goal is achieved by first estimating the welfare impacts of alternative private land management strategies on the wider community. These estimates are used as inputs into the development of alternative policy instruments that are then evaluated in terms of their potential cost-effectiveness in influencing private management. Two case studies of wetland management on private land in Australia are presented ??? the Upper South East Region of South Australia, and, the Murrumbidgee River Floodplain in New South Wales. The conceptual approach described in the first part of the thesis includes a description of the resource management problem and the strengths and weaknesses of the alternative decision frameworks widely employed in Australia. Identification of the cause and nature of transaction costs in the management process is the focus in this discussion. The welfare impacts of alternative wetland management strategies are investigated through the construction of a bio-economic model for each of the case study areas. The approach integrates biophysical analysis of changing wetland management with the value society places on wetlands. Outputs from this process are used in the development of a range of policy instruments directed towards influencing wetland management. The impact of poorly quantified and uncertain transaction costs on the potential cost-effectiveness of these options is evaluated using threshold policy analysis. The empirical results show that the perception of a conflict between the private and public values generated by resource management is accurate. For example, scenarios changing wetland management in the Upper South East of South Australia on the Murrumbidgee River floodplain in New South Wales were shown to generate net benefits of $5.2m and $5.1m respectively. Hence, changing wetland management could generate increased community welfare. The potential for these findings to be translated into wetland policy is less conclusive. Policies directed towards wetland management (in part or in whole) incur a range of transaction costs and deliver differential wetland protection benefits. Ten ???best bet??? policies are identified, but more information is required to determine conclusively whether a net benefit results to the wider community when transaction costs are included.

The thesis aims at analysing the role of collective action as a viable alternative to the traditional forms of intervention in agriculture in order to encourage the provision of agri-environmental public goods. Which are the main benefits of collective action, in terms of effectiveness and efficiency, compared to traditional market or public intervention policies? What are the drivers that encourage farmers to participate into collective action? To what extent it is possible to incorporate collective aspects into policies aimed at providing agri-environmental public goods? With the objective of addressing these research questions, the thesis is articulated in two levels: a theoretical analysis on the role of collective action in the provision of public goods and a specific investigation of two local initiative,s were an approach collective management of agro-environmental resources was successfully implemented. The first case study concerns a project named “Custodians of the Territory”, developed by the local agency in Tuscany “Comunità Montana Media Valle del Serchio”, which settled for an agreement with local farmers for a collective provision of environmental services related to the hydro-geological management of the district. The second case study is related to the territorial agri-environmental agreement experimented in Valdaso (Marche), where local farmers have adopted integrated pest management practices collectively with the aim of reducing the environmental impact of their farming practices. The analysis of these initiatives, carried out through participatory methods (Rapid Rural Appraisal), allowed developing a theoretical discussion on the role of innovative tools (such as co-production and co-management) in the provision of agri-environmental public goods. The case studies also provided some recommendations on the government intervention and policies needed to promote successful collective action for the provision of agri-environmental public goods.
La tesi si pone l’obiettivo di valutare il ruolo delle azioni collettive come una valida alternativa alle classiche forme di intervento in agricoltura, in particolare quelle volte ad incentivare la fornitura di beni pubblici ambientali. Quali sono i vantaggi delle azioni collettive, in termini di efficacia ed efficienza, rispetto alle classiche misure pubbliche o agli incentivi di mercato? Quali sono i drivers che spingono gli agricoltori a partecipare a progetti collettivi legati ai beni pubblici agro-ambientali? Attraverso quali strumenti di policy e quali assetti istituzionali è possibile favorire lo sviluppo di azioni collettive? Con l’obiettivo di rispondere a queste domande di ricerca, la tesi si articola su due livelli: un’analisi teorica sul ruolo delle azioni collettive nella fornitura dei beni pubblici e un’indagine specifica di due iniziative locali, dove si è sperimentato un approccio collettivo alla gestione delle risorse agro-ambientali. Il primo caso di studio riguarda il progetto denominato “Custodia del territorio”, sviluppato dall’ente gestore del comprensorio di Bonifica Media Valle del Serchio (Toscana), che prevede un accordo tra questo ente pubblico e gli agricoltori locali per la gestione idro-geologica del territorio in cui operano. Il secondo caso riguarda l’accordo agroambientale della Valdaso (Marche), dove gli agricoltori locali hanno adottato collettivamente pratiche di lotta integrata avanzata con l’obiettivo di ridurre l’impatto delle loro pratiche agricole sull’ambiente. L’analisi di queste iniziative, svolta attraverso metodologie partecipative (Rapid Rural Appraisal), ha permesso di sviluppate una riflessione teorica sul ruolo di strumenti innovativi (come co-produzione e co-gestione) alla gestione delle risorse agro-ambientali e di fornire raccomandazioni sul design e l’implementazione di politiche che possano favorire azioni collettive associate ai beni pubblici agro-ambientali.

Nous abordons dans un premier chapitre la question de l'équivalence entre le CAP et le CAR. La disparité entre les deux indices a de profondes conséquences sur les prises de décision environnementales. Si la disparité était au départ associée aux carences de la méthode de mise en œuvre des enquêtes, les racines du problème s'avèrent être sensiblement plus profondes. Eu égard à l'évaluation des biens publics, nous pensons que la disparité est due à la substituabilité imparfaite entre les biens privés et publiques, ainsi qu'en raison de perceptions différenciées des agents économiques entre gains et pertes. C'est à cette problématique que le premier chapitre se consacre. Ainsi, le Chapitre 1 traite de la disparité entre les indices CAP et CAR dans l'évaluation hors-marché. Dans la littérature, l'effet de substitution et l'effet de dotation sont tenus responsables de l'existence des disparités. Nous montrons que la substituabilité imparfaite dans la fonction d'utilité indirecte peut provoquer la disparité soit entre le CAP et le CAR - en raison du coût d'opportunité -, soit entre les gains et les pertes, où il s'agit d'évaluer une perte sèche. La mesure en termes relatifs accentue la substituabilité imparfaite, mais l'effet de substitution est borné dans le modèle d'aversion aux pertes. Ce premier chapitre prépare le terrain pour le Chapitre 2, où nous évaluons un vrai bien public dans un contexte d'enchères expérimentales. Les offres d'achat et de vente reflètent le CAP et le CAR, d'où leur importance. L'effet de dotation et le choix du meilleur mécanisme d'enchères y sont examinés. Les études en enchères expérimentales jusqu'ici menées ont porté sur des biens privés non marchands ; elles sont supposées divulguer ce qui se passerait en présence de biens publics, car il est a priori difficile d'envisager une expérience où le bien public est échangé. Nous y parvenons. Nous n'employons pas de valeurs induites mais laissons libre cours aux valeurs autoproduites par les sujets d'étude recrutés pour l'occasion. L'étude nous permet de vérifier si, sur des marchés simulés, bien privé non marchand et bien public sont évalués de manière identique. Ainsi, nous évaluons l'impact de trois mécanismes d'enchère - le mécanisme Becker-DeGroot-Marschak (BDM), l'enchère au deuxième prix, et l'enchère aléatoire au nième prix - dans l'évaluation des CAP et CAR privés d'un bien public pur. Nos résultats montrent que l'effet de dotation peut être éliminé en répétant le mécanisme BDM. Néanmoins, à l'échelle logarithmique, l'enchère aléatoire au nième prix donne la vitesse de convergence vers l'égalité des indices de bien-être la plus élevée. Plus généralement, nous observons que les sujets d'étude évaluent les biens publics en se référant à l'avantage privé et subjectif qui résulte du financement du bien public. Par la suite, le Chapitre 3 discute de la sincérité des préférences en enchères expérimentales répétées et traite des propriétés incitatives des mécanismes BDM et l'enchère aléatoire au nième prix. Une propriété des mécanismes d'enchères est la compatibilité avec les incitations, dans laquelle un offreur a une stratégie faiblement dominante de soumettre une offre égale à sa valeur. Il a été prouvé que les deux mécanismes sont compatibles avec les incitations. En évaluation, on répète des sessions d'enchères pour donner aux offreurs l'opportunité d'apprendre le mécanisme de marché : leur donner du temps pour révéler leurs préférences. Or, ce procédé les contre-incite à adapter leurs préférences en fonction des prix publiquement signalés, si bien qu'il crée un risque de licitation stratégique (par opposition aux offres sincères). Si les offreurs s'engagent dans des stratégies déviantes pour faire face à l'incertitude sur la valeur du bien public, les mécanismes d'enchères perdent leur propriété de compatibilité avec les incitations et révèlent de fausses préférences. Lorsque les prix dépendent des offres soumises, c'est-à-dire en présence de mécanismes de marché répétés avec prix de compensation endogènes, l'hypothèse de l'indépendance des valeurs privées - sous-jacente à la compatibilité avec les incitations - est remise en question ; même si ce type de mécanismes fournit une participation active et un apprentissage du marché. Dans sa vision orthodoxe, le comportement marchand d'adaptation met en péril la compatibilité avec les incitations. Nous introduisons un modèle qui montre que les enchérisseurs licitent suivant l'heuristique d'ancrage et d'ajustement, dépendante d'une fonction de pondération séquentielle, laquelle prend en compte les contraintes de compatibilité avec les incitations sans rejeter les prix signalés issus des autres offres. En déviant de leur ancrage dans le sens du signal public, les enchérisseurs opèrent dans un équilibre corrélé. Comme le prouve l'expérience du Chapitre 2, les contributions privées aux biens publics sont issues d'une démarche d'évaluation. Elles sont conduites aussi bien par des incitations asociales que sociales. Si l'offre privée du bien public est stimulée à la fois par une rationalité qui dicte de ne pas contribuer au bien public et de profiter de l'effort fourni par la collectivité, et par l'appétit pour la reconnaissance sociale qui incite à se faire publiquement connaître en tant que généreux donateur, laquelle des deux motivations domine ? Le Chapitre 4 fait ainsi la comparaison entre déculpabilisation et compétition pour le statut social dans la provision privée des biens publics. Lorsque les agents sont intrinsèquement impulsés, c'est-à-dire qu'ils contribuent essentiellement aux biens publics dans le but de soulager leur culpabilité d'avoir indirectement participé à leur dégradation, ils tendent à se comporter en passagers clandestins. En revanche, lorsque les agents sont extrinsèquement impulsés et se mettent en compétition pour atteindre du statut social qu'ils visent par le financement des biens publics à titre privé, leurs contributions deviennent des compléments stratégiques. Dans ce cas, le niveau agrégé des biens publics croît avec la réduction des écarts de revenus entre les agents. Injecter de la compétition pour le statut social dans des fonctions d'utilité augmente les contributions aux biens publics, et donc leur niveau global, faisant de la concurrence une incitation féconde pour résoudre le problème du passager clandestin.

The development of traffic that is conditioned by the high mobility of people, goods and services must be in line with the principles of sustainable development, but it is only possible if the consumption of renewable resources is less than natural renewal opportunities. The future is in implementation of innovative technologies such as telematics systems that offer not only technical solutions but also a new way of life, a new business approach and a new cultural aspect of living for all traffic participants. Advanced telematics solutions such as inflow management and speed limit management greatly help to solve traffic problems, like incidents, environmental pollution, traffic congestion, fuel consumption, etc. Impact of telematics can increase safety but can also introduce new risks for drivers that pose special challenges to traffic psychology and public health. In order to reduce traffic congestion, longer waiting times, environmental pollution, reduce fuel consumption in incident situation various advanced grammatical solutions have been implemented in order to reduce these problems. Telematics, using techniques such as informatics, optoelectronics, automatics and telecommunications, helps to reduce costs of transportation potential management, improves the security and reliability of the transportation service.

This work aims to measure the reduction of Carbon Dioxide (CO2) emissions in atmosphere by replacing the modal urban bus by Light Rail Vehicle (VLT). In order to accomplish this objective, a case study in Brasilia, Federal District, in the stretch of VLT which passes on Via W-3 South was conducted. The Theory of Externalities that discusses the right to ownership of private and public goods and responsibilities about the positive and negative externalities caused by the agents and individuals of society was used to support the analyses. It was used the Top-Down method, which allowed the calculation the direct emissions of CO2. The values obtained on the reduction of CO2 emissions were converted into values of carbon credits as a way to economically measure such reductions. The results showed a significant reduction in CO2 emissions per year and consequent environmental benefit.DOI: http://dx.doi.org/10.4995/CIT2016.2016.3480

The paper focuses on the presentation of the construction of the research path for eliciting willingness to pay for agroecosystem services through choice experiments in Lithuania. This paper reports on use of a survey-based choice modelling method where repetitive choice situations about alternatives of agri-environmental schemes are created, for revealing how inhabitants of Lithuania value public goods, created in agroecosystems (wildlife populations, quality of drinking water and the formation and improvement of agricultural landscape); the attitudes of the residents of Lithuania concerning the maintenance of these environmental services in the countryside; to elicit Lithuanian households' WTP and the demand for abovementioned services. Two pilot surveys were implemented between 2015 June – July in order to test and improve the choice experiment questionnaire. The result of these surveys showed that the questionnaire is accepted and well understood by the respondents. The results of the modelling shows that all the attribute coefficients are significant and the signs are as expected, positive for the environmental attributes and negative for the price attribute; moreover the model fits well and could be used for the massive survey.

Whether a given waste-to-energy (WTE) facility is publicly or privately owned and/or operated, and notwithstanding the pluses or minuses of any given Service Agreement or Operations Contract, the public sector can derive great benefit if it establishes a solid understanding of and maintains active oversight role in the technical, financial, and environmental issues associated with WTE project operations. Experience has shown that public sector clients who remain in close touch with the day-to-day operations of these capital intensive operations from the outset also retain a greater measure of influence over the inner workings, as well as the exterior/aesthetic appearances of these capital-intensive waste-processing and disposal facilities. While all parties strive for environmentally sound and safe operations, private sector operators must be concerned with profitability and/or maintaining shareholder value while the public sector entity is more typically focused on ensuring the facility provides reliable disposal services for a heterogeneous wastestream that changes over time, remains a “good corporate neighbor,” and does this at the lowest possible cost to the taxpayers and other facility users.

In the last twenty years, the exploitation of non-renewable resources and the effects of their applications on environment and human health were considered central topics in political and scientific debate on European and worldwide scale. This kind of resources have been used in different sectors, as energy systems, technological research, but also in private/public buildings and production of consumer goods, involving significantly domestic and ordinary life of every human being. Studies about the effect of this exploitation carried out discouraging results, in terms of climate changes and energy sustenance; this determined a progressive approach process to a new concept of development, able to couple the qualitative standard of modern life with the respect of planet and its inhabitants. Starting from this reflection, scientific community moved towards research on alternative resources and developed a new way to conceive planning process and technical innovations, in order to exploit renewable energies and recycled materials, promote energy savings and reduce environmental pollution. In this context the present paper aims at evaluating benefits relating to different solutions of thermal insulation in building envelope. In fact a high grade of insulation ensures better comfort conditions in inner spaces, reducing energy consumptions due to heating and cooling conditioning. The paper presents the results of a detailed Life Cycle Assessment (LCA) of the reflective foil ISOLIVING, conceived and produced by an Italian company. The Life Cycle Assessment methodology allows to consider all stages of the life cycle, from the extraction of raw materials to the product’s disposal, in an optics “from cradle to grave.” In particular, the study takes into account the production phase of the reflective foil ISOLIVING, the installation phase, the transport of all components to the production site and also the end of life scenario of the material. The possibility to collect many detailed information about the production phase adds value to the study. The analysis is carried out according to UNI EN ISO 14040 and UNI EN ISO 14044, which regulate the LCA procedure. The LCA modeling was performed using SimaPro software application. The results of the analysis allow to make an important comparison concerning the environmental performances, between the reflective foil ISOLIVING and other types of insulating materials.

Background: Quality of life is actually a broader construct that encompasses aspects of life that may not be amenable to healthcare service. The quality of life of children is a subjective perception of satisfaction or happiness on quality of life. The quality of life is influenced by various factors, namely health conditions, socio-economic status, parenting styles, and the environment. According to HL Bloom’s theory, health status is determined by 40 percent of environmental factors, 30 percent of behavioral factors, 20 percent of health services, and 10 percent of genetics or heredity. The purpose of this study was to determine the effect of social capital, parenting, and the environment on the quality of life among children. Subjects and Method: This was a retrospective cohort study. Total of 400 children aged 2-4 years old who reside in the desa layak anak villages and ordinary villages in the region of Sleman regency. The dependent variable was quality of life among children. The independent variables were social capital, parenting, and the environment. Data were obtained from in-depth interview and questionnaire. Data were analyzed using path analysis. Results: The good quality of life of children was affected directly by positive social capital (b = 0.084; SE = 0.049; p = 0.001), good parenting style (b = 0.123; SE = 0.050; p <0.001), and good environment (b = 0.128; SE = 0.048; p <0.001). Conclusion: Social capital, parenting and environment have a direct influence on the quality of life among children. Keywords: quality of life, children, social capital, parenting, environment Correspondence: Heni Puji Wahyuningsih. Doctoral Program of Development Counseling, Universitas Sebelas Maret/ School of Health Polytechnis, Yogyakarta, Indonesia. Email: heni.pujiw@-poltekkesjogja.ac.id DOI: https://doi.org/10.26911/the7thicph.01.15

Environmental policies are characterized by salient short-term costs and long-term benefits that are difficult to observe and to attribute to the government's efforts. These characteristics imply that citizens' support for environmental policies is highly dependent on their trust in the government's capability to implement solutions and commitment to investments in those policies. Using novel survey data from Mexico City, we show that trust in the government is positively correlated with citizens' willingness to support an additional tax approximately equal to a days minimum wage to improve air quality and greater preference for government retention of revenues from fees collected from polluting firms. We find similar correlations using the perceived quality of public goods as a measure of government competence. These results provide evidence that mistrust can be an obstacle to better environmental outcomes.

Despite growing interest in low-speed automated shuttles, pilot deployments have only just begun in a few places in the U.S., and there is a lack of studies that estimate the impacts of a widespread deployment of automated shuttles designed to supplement existing transit networks. This project estimated the potential impacts of automated shuttles based on a deployment scenario generated for a sample geographic area: Santa Clara County, California. The project identified sample deployment markets within Santa Clara County using a GIS screening exercise; tested the mode share changes of an automated shuttle deployment scenario using BEAM, an open-source beta software developed at the Lawrence Berkeley National Laboratory to run traffic simulations with MATSim; elaborated the model outputs within the R environment; and then estimated the related impacts. The main findings have been that the BEAM software, despite still being in its beta version, was able to model a scenario with the automated shuttle service: this report illustrates the potential of the software and the lessons learned. Regarding transportation aspects, the model estimated automated shuttle use throughout the county, with a higher rate of use in the downtown San José area. The shuttles would be preferred mainly by people who had been using gasoline-powered ride hail vehicles for A-to-B trips or going to the bus stop, as well as walking trips and a few car trips directed to public transport stops. As a result, the shuttles contributed to a small decrease in emissions of air pollutants, provided a competitive solution for short trips, and increased the overall use of the public transport system. The shuttles also presented a solution for short night trips—mainly between midnight and 2 am—when there are not many options for moving between points A and B. The conclusion is that the automated shuttle service is a good solution in certain contexts and can increase public transit ridership overall.

1.1 Macroeconomic summary Economic recovery has consistently outperformed the technical staff’s expectations following a steep decline in activity in the second quarter of 2020. At the same time, total and core inflation rates have fallen and remain at low levels, suggesting that a significant element of the reactivation of Colombia’s economy has been related to recovery in potential GDP. This would support the technical staff’s diagnosis of weak aggregate demand and ample excess capacity. The most recently available data on 2020 growth suggests a contraction in economic activity of 6.8%, lower than estimates from January’s Monetary Policy Report (-7.2%). High-frequency indicators suggest that economic performance was significantly more dynamic than expected in January, despite mobility restrictions and quarantine measures. This has also come amid declines in total and core inflation, the latter of which was below January projections if controlling for certain relative price changes. This suggests that the unexpected strength of recent growth contains elements of demand, and that excess capacity, while significant, could be lower than previously estimated. Nevertheless, uncertainty over the measurement of excess capacity continues to be unusually high and marked both by variations in the way different economic sectors and spending components have been affected by the pandemic, and by uneven price behavior. The size of excess capacity, and in particular the evolution of the pandemic in forthcoming quarters, constitute substantial risks to the macroeconomic forecast presented in this report. Despite the unexpected strength of the recovery, the technical staff continues to project ample excess capacity that is expected to remain on the forecast horizon, alongside core inflation that will likely remain below the target. Domestic demand remains below 2019 levels amid unusually significant uncertainty over the size of excess capacity in the economy. High national unemployment (14.6% for February 2021) reflects a loose labor market, while observed total and core inflation continue to be below 2%. Inflationary pressures from the exchange rate are expected to continue to be low, with relatively little pass-through on inflation. This would be compatible with a negative output gap. Excess productive capacity and the expectation of core inflation below the 3% target on the forecast horizon provide a basis for an expansive monetary policy posture. The technical staff’s assessment of certain shocks and their expected effects on the economy, as well as the presence of several sources of uncertainty and related assumptions about their potential macroeconomic impacts, remain a feature of this report. The coronavirus pandemic, in particular, continues to affect the public health environment, and the reopening of Colombia’s economy remains incomplete. The technical staff’s assessment is that the COVID-19 shock has affected both aggregate demand and supply, but that the impact on demand has been deeper and more persistent. Given this persistence, the central forecast accounts for a gradual tightening of the output gap in the absence of new waves of contagion, and as vaccination campaigns progress. The central forecast continues to include an expected increase of total and core inflation rates in the second quarter of 2021, alongside the lapse of the temporary price relief measures put in place in 2020. Additional COVID-19 outbreaks (of uncertain duration and intensity) represent a significant risk factor that could affect these projections. Additionally, the forecast continues to include an upward trend in sovereign risk premiums, reflected by higher levels of public debt that in the wake of the pandemic are likely to persist on the forecast horizon, even in the context of a fiscal adjustment. At the same time, the projection accounts for the shortterm effects on private domestic demand from a fiscal adjustment along the lines of the one currently being proposed by the national government. This would be compatible with a gradual recovery of private domestic demand in 2022. The size and characteristics of the fiscal adjustment that is ultimately implemented, as well as the corresponding market response, represent another source of forecast uncertainty. Newly available information offers evidence of the potential for significant changes to the macroeconomic scenario, though without altering the general diagnosis described above. The most recent data on inflation, growth, fiscal policy, and international financial conditions suggests a more dynamic economy than previously expected. However, a third wave of the pandemic has delayed the re-opening of Colombia’s economy and brought with it a deceleration in economic activity. Detailed descriptions of these considerations and subsequent changes to the macroeconomic forecast are presented below. The expected annual decline in GDP (-0.3%) in the first quarter of 2021 appears to have been less pronounced than projected in January (-4.8%). Partial closures in January to address a second wave of COVID-19 appear to have had a less significant negative impact on the economy than previously estimated. This is reflected in figures related to mobility, energy demand, industry and retail sales, foreign trade, commercial transactions from selected banks, and the national statistics agency’s (DANE) economic tracking indicator (ISE). Output is now expected to have declined annually in the first quarter by 0.3%. Private consumption likely continued to recover, registering levels somewhat above those from the previous year, while public consumption likely increased significantly. While a recovery in investment in both housing and in other buildings and structures is expected, overall investment levels in this case likely continued to be low, and gross fixed capital formation is expected to continue to show significant annual declines. Imports likely recovered to again outpace exports, though both are expected to register significant annual declines. Economic activity that outpaced projections, an increase in oil prices and other export products, and an expected increase in public spending this year account for the upward revision to the 2021 growth forecast (from 4.6% with a range between 2% and 6% in January, to 6.0% with a range between 3% and 7% in April). As a result, the output gap is expected to be smaller and to tighten more rapidly than projected in the previous report, though it is still expected to remain in negative territory on the forecast horizon. Wide forecast intervals reflect the fact that the future evolution of the COVID-19 pandemic remains a significant source of uncertainty on these projections. The delay in the recovery of economic activity as a result of the resurgence of COVID-19 in the first quarter appears to have been less significant than projected in the January report. The central forecast scenario expects this improved performance to continue in 2021 alongside increased consumer and business confidence. Low real interest rates and an active credit supply would also support this dynamic, and the overall conditions would be expected to spur a recovery in consumption and investment. Increased growth in public spending and public works based on the national government’s spending plan (Plan Financiero del Gobierno) are other factors to consider. Additionally, an expected recovery in global demand and higher projected prices for oil and coffee would further contribute to improved external revenues and would favor investment, in particular in the oil sector. Given the above, the technical staff’s 2021 growth forecast has been revised upward from 4.6% in January (range from 2% to 6%) to 6.0% in April (range from 3% to 7%). These projections account for the potential for the third wave of COVID-19 to have a larger and more persistent effect on the economy than the previous wave, while also supposing that there will not be any additional significant waves of the pandemic and that mobility restrictions will be relaxed as a result. Economic growth in 2022 is expected to be 3%, with a range between 1% and 5%. This figure would be lower than projected in the January report (3.6% with a range between 2% and 6%), due to a higher base of comparison given the upward revision to expected GDP in 2021. This forecast also takes into account the likely effects on private demand of a fiscal adjustment of the size currently being proposed by the national government, and which would come into effect in 2022. Excess in productive capacity is now expected to be lower than estimated in January but continues to be significant and affected by high levels of uncertainty, as reflected in the wide forecast intervals. The possibility of new waves of the virus (of uncertain intensity and duration) represents a significant downward risk to projected GDP growth, and is signaled by the lower limits of the ranges provided in this report. Inflation (1.51%) and inflation excluding food and regulated items (0.94%) declined in March compared to December, continuing below the 3% target. The decline in inflation in this period was below projections, explained in large part by unanticipated increases in the costs of certain foods (3.92%) and regulated items (1.52%). An increase in international food and shipping prices, increased foreign demand for beef, and specific upward pressures on perishable food supplies appear to explain a lower-than-expected deceleration in the consumer price index (CPI) for foods. An unexpected increase in regulated items prices came amid unanticipated increases in international fuel prices, on some utilities rates, and for regulated education prices. The decline in annual inflation excluding food and regulated items between December and March was in line with projections from January, though this included downward pressure from a significant reduction in telecommunications rates due to the imminent entry of a new operator. When controlling for the effects of this relative price change, inflation excluding food and regulated items exceeds levels forecast in the previous report. Within this indicator of core inflation, the CPI for goods (1.05%) accelerated due to a reversion of the effects of the VAT-free day in November, which was largely accounted for in February, and possibly by the transmission of a recent depreciation of the peso on domestic prices for certain items (electric and household appliances). For their part, services prices decelerated and showed the lowest rate of annual growth (0.89%) among the large consumer baskets in the CPI. Within the services basket, the annual change in rental prices continued to decline, while those services that continue to experience the most significant restrictions on returning to normal operations (tourism, cinemas, nightlife, etc.) continued to register significant price declines. As previously mentioned, telephone rates also fell significantly due to increased competition in the market. Total inflation is expected to continue to be affected by ample excesses in productive capacity for the remainder of 2021 and 2022, though less so than projected in January. As a result, convergence to the inflation target is now expected to be somewhat faster than estimated in the previous report, assuming the absence of significant additional outbreaks of COVID-19. The technical staff’s year-end inflation projections for 2021 and 2022 have increased, suggesting figures around 3% due largely to variation in food and regulated items prices. The projection for inflation excluding food and regulated items also increased, but remains below 3%. Price relief measures on indirect taxes implemented in 2020 are expected to lapse in the second quarter of 2021, generating a one-off effect on prices and temporarily affecting inflation excluding food and regulated items. However, indexation to low levels of past inflation, weak demand, and ample excess productive capacity are expected to keep core inflation below the target, near 2.3% at the end of 2021 (previously 2.1%). The reversion in 2021 of the effects of some price relief measures on utility rates from 2020 should lead to an increase in the CPI for regulated items in the second half of this year. Annual price changes are now expected to be higher than estimated in the January report due to an increased expected path for fuel prices and unanticipated increases in regulated education prices. The projection for the CPI for foods has increased compared to the previous report, taking into account certain factors that were not anticipated in January (a less favorable agricultural cycle, increased pressure from international prices, and transport costs). Given the above, year-end annual inflation for 2021 and 2022 is now expected to be 3% and 2.8%, respectively, which would be above projections from January (2.3% and 2,7%). For its part, expected inflation based on analyst surveys suggests year-end inflation in 2021 and 2022 of 2.8% and 3.1%, respectively. There remains significant uncertainty surrounding the inflation forecasts included in this report due to several factors: 1) the evolution of the pandemic; 2) the difficulty in evaluating the size and persistence of excess productive capacity; 3) the timing and manner in which price relief measures will lapse; and 4) the future behavior of food prices. Projected 2021 growth in foreign demand (4.4% to 5.2%) and the supposed average oil price (USD 53 to USD 61 per Brent benchmark barrel) were both revised upward. An increase in long-term international interest rates has been reflected in a depreciation of the peso and could result in relatively tighter external financial conditions for emerging market economies, including Colombia. Average growth among Colombia’s trade partners was greater than expected in the fourth quarter of 2020. This, together with a sizable fiscal stimulus approved in the United States and the onset of a massive global vaccination campaign, largely explains the projected increase in foreign demand growth in 2021. The resilience of the goods market in the face of global crisis and an expected normalization in international trade are additional factors. These considerations and the expected continuation of a gradual reduction of mobility restrictions abroad suggest that Colombia’s trade partners could grow on average by 5.2% in 2021 and around 3.4% in 2022. The improved prospects for global economic growth have led to an increase in current and expected oil prices. Production interruptions due to a heavy winter, reduced inventories, and increased supply restrictions instituted by producing countries have also contributed to the increase. Meanwhile, market forecasts and recent Federal Reserve pronouncements suggest that the benchmark interest rate in the U.S. will remain stable for the next two years. Nevertheless, a significant increase in public spending in the country has fostered expectations for greater growth and inflation, as well as increased uncertainty over the moment in which a normalization of monetary policy might begin. This has been reflected in an increase in long-term interest rates. In this context, emerging market economies in the region, including Colombia, have registered increases in sovereign risk premiums and long-term domestic interest rates, and a depreciation of local currencies against the dollar. Recent outbreaks of COVID-19 in several of these economies; limits on vaccine supply and the slow pace of immunization campaigns in some countries; a significant increase in public debt; and tensions between the United States and China, among other factors, all add to a high level of uncertainty surrounding interest rate spreads, external financing conditions, and the future performance of risk premiums. The impact that this environment could have on the exchange rate and on domestic financing conditions represent risks to the macroeconomic and monetary policy forecasts. Domestic financial conditions continue to favor recovery in economic activity. The transmission of reductions to the policy interest rate on credit rates has been significant. The banking portfolio continues to recover amid circumstances that have affected both the supply and demand for loans, and in which some credit risks have materialized. Preferential and ordinary commercial interest rates have fallen to a similar degree as the benchmark interest rate. As is generally the case, this transmission has come at a slower pace for consumer credit rates, and has been further delayed in the case of mortgage rates. Commercial credit levels stabilized above pre-pandemic levels in March, following an increase resulting from significant liquidity requirements for businesses in the second quarter of 2020. The consumer credit portfolio continued to recover and has now surpassed February 2020 levels, though overall growth in the portfolio remains low. At the same time, portfolio projections and default indicators have increased, and credit establishment earnings have come down. Despite this, credit disbursements continue to recover and solvency indicators remain well above regulatory minimums. 1.2 Monetary policy decision In its meetings in March and April the BDBR left the benchmark interest rate unchanged at 1.75%.