|
on Environmental Economics |
| By: | Rafaela Dios Palomares (Universidad de Córdoba); Tomás de Haro Giménez (Universidad de Córdoba); José M. Martínez Paz (Universidad de Murcia) |
| Abstract: | En este trabajo analizamos la eficiencia considerando variables de entorno en el ámbito del sector oleícola de Andalucía. Se implementa un nuevo método con dos variables, como una ampliación del planteado en una publicación anterior por Dios-Palomares et al. Posteriormente se investiga sobre los posibles factores que influyen en la eficiencia con el fin de establecer perfiles y plantear estrategias de mejora. La eficiencia media encontrada es del 57%, siendo la pura del 70% y la de escala del 84%. En cuanto a la determinación de perfiles asociados con el nivel de eficiencia, podemos concluir que no se ha encontrado relación entre los niveles de eficiencia y las variables socioeconómicas como edad, antigüedad, y tecnologías de Internet. Sin embargo, son más eficientes las almazaras que se asocian para comercializar, así como las que realizan doble extracción y las que están situadas fuera del casco urbano. |
| Keywords: | Eficiencia, Variables ambientales, almazaras |
| JEL: | D24 C61 M11 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:cea:doctra:e2006_01&r=env |
| By: | Paolo, COLLA; Marc, GERMAIN (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Vincent, VAN STEENBERGHE |
| Abstract: | Tradable emission permits share many characteristics with financial assets. As on financial markets, speculators are likely to be active on large markets for emission permits such as those developing under the Kyoto Protocol. We show how the presence of speculators on a market for emission permits affects the price of these permits when firms face risk aversion. The agency in charge of the optimal environmental policy should account for the presence of speculators when determining the total amount of permits to issue. |
| Date: | 2005–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2005049&r=env |
| By: | Marc, GERMAIN (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Vincent, VAN STEENBERGHE |
| Abstract: | The literature on the impact of economic instruments (typically taxes and tradable permits) on the level of innovation is usually based on the assumption that innovation reduces the slope of the marginal abatement cost curve. This assumption, which usually leads to the conclusion that taxes induce higher levels of innovation than tradable permits, is however never motivated. In this short article, we analyse the assumption by introducing innovation in the production function as a polluting firm and by showing how it affects the corresponding marginal abatement cost curve. We show that the slope of the marginal abatement cost curvedoes not necessarily decrease with the level of innovation. As a consequence, previous analyses lead to misleading policy recommendations |
| Date: | 2005–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2005052&r=env |
| By: | Nicholas Z. Muller (School of Forestry and Environmental Studies, Yale University); Peter C. B. Phillips (Cowles Foundation, Yale University; University of Auckland & University of York) |
| Abstract: | This paper demonstrates how parsimonious models of sinusoidal functions can be used to fit spatially variant time series in which there is considerable variation of a periodic type. A typical shortcoming of such tools relates to the difficulty in capturing idiosyncratic variation in periodic models. The strategy developed here addresses this deficiency. While previous work has sought to overcome the shortcoming by augmenting sinusoids with other techniques, the present approach employs station-specific sinusoids to supplement a common regional component, which succeeds in capturing local idiosyncratic behavior in a parsimonious manner. The experiments conducted herein reveal that a semi-parametric approach enables such models to fit spatially varying time series with periodic behavior in a remarkably tight fashion. The methods are applied to a panel data set consisting of hourly air pollution measurements. The augmented sinusoidal models produce an excellent fit to these data at three different levels of spatial detail. |
| Keywords: | Air Pollution, Idiosyncratic component, Regional variation, Semiparametric model, Sinusoidal function, Spatial-temporal data, Tropospheric Ozone |
| JEL: | C22 C23 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1548&r=env |
| By: | Marie-Antoinette Maupertuis (IDIM and Università di Corsica); Sauveur Giannoni (IDIM and Università di Corsica) |
| Abstract: | As tourism is becoming one of the most important sectors of the world economy, the number of small islands trying to develop a competitive tourist activity is increasing and this strategy appears as growth enhancing. In most cases, it is built on the environmental quality of the destination but also on lodging infrastructures and related services that tourists deserve in order to enjoy a good experience. This paper explores the inter-temporal trade-off between tourist investments and environmental quality preservation needed to ensure population revenues in the long run. It highlights possible cyclical evolution of environmental quality, tourist infrastructures, investments and tourist frequentation. |
| Keywords: | Tourism, Environment, Lifecycle, Islands |
| JEL: | O1 L83 Q26 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.145&r=env |
| By: | Valentina Bosetti (Fondazione Eni Enrico Mattei); Laurent Drouet (LOGILAB-HEC, Université de Genève) |
| Abstract: | The key role of technological change in the decline of energy and carbon intensities of aggregate economic activities is widely recognized. This has focused attention on the issue of developing endogenous models for the evolution of technological change. With a few exceptions this is done using a deterministic framework, even though technological change is a dynamic process which is uncertain by nature. Indeed, the two main vectors through which technological change may be conceptualized, learning through R&D investments and learning-by-doing, both evolve and cumulate in a stochastic manner. How misleading are climate strategies designed without accounting for such uncertainty? The main idea underlying the present piece of research is to assess and discuss the effect of endogenizing this uncertainty on optimal R&D investment trajectories and carbon emission abatement strategies. In order to do so, we use an implicit stochastic programming version of the FEEM-RICE model, first described in Bosetti, Carraro and Galeotti, (2005). The comparative advantage of taking a stochastic programming approach is estimated using as benchmarks the expected-value approach and the worst-case scenario approach. It appears that, accounting for uncertainty and irreversibility would affect both the optimal level of investment in R&D –which should be higher– and emission reductions –which should be contained in the early periods. Indeed, waiting and investing in R&D appears to be the most cost-effective hedging strategy. |
| Keywords: | Stochastic Programming, Uncertainty and Learning, Endogenous Technical Change |
| JEL: | D62 D63 H23 Q29 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.147&r=env |
| By: | Michael Greenstone (MIT); Justin Gallagher (UC Berkeley) |
| Abstract: | Approximately $30 billion (2000$) has been spent on Superfund clean-ups of hazardous waste sites, and remediation efforts are incomplete at roughly half of the 1,500 Superfund sites. This study estimates the effect of Superfund clean-ups on local housing price appreciation. We compare housing price growth in the areas surrounding the first 400 hazardous waste sites to be cleaned up through the Superfund program to the areas surrounding the 290 sites that narrowly missed qualifying for these clean-ups. We cannot reject that the clean-ups had no effect on local housing price growth, nearly two decades after these sites became eligible for them. This finding is robust to a series of specification checks, including the application of a quasi-experimental regression discontinuity design based on knowledge of the selection rule. Overall, the preferred estimates suggest that the benefits of Superfund clean-ups as measured through the housing market are substantially lower than the $43 million mean cost of Superfund clean-ups. |
| Keywords: | Valuation of environmental goods, Hazardous waste sites, Environmental regulation, Regression discontinuity, Superfound, Externalities |
| JEL: | H4 Q51 Q53 R5 R2 I18 |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.149&r=env |
| By: | Jean-Charles Hourcade (CIRED - Centre International de Recherche sur l'Environnement et le Développement - http://www.centre-cired.fr - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales;Ecole Nationale du Génie Rural des Eaux et des Forêts;Ecole Nationale des Ponts et Chaussées) |
| Abstract: | En parcourant les étapes principales de la « négociation climat », on fait apparaître le jeu de miroirs qui se déroule entre Europe et États-Unis, dans un contexte historique caractérisé par les débats sur la mondialisation, la volonté de leadership de l'Union européenne sur ce thème, la montée aux États-Unis d'inquiétudes sur le maintien de leur suprématie.On montre aussi pourquoi ce jeu, après avoir masqué des possibilités réelles de compromis, a débouché en 2000 sur l'échec de La Haye – qui facilitera le rejet du Protocole de Kyoto par le président Bush – puis sur l'adoption à Marrakech, en novembre 2001, d'un schéma d'application de ce Protocole par les autres nations, qui constitue une défaite diplomatique pour les États-Unis et une demi-défaite pour l'environnement. |
| Keywords: | changement climatique; negociation internationale |
| Date: | 2006–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00007691_v1&r=env |
| By: | Patrick Criqui (LEPII - Laboratoire d'économie de la prospective et de l'intégration internationale - http://www.upmf-grenoble.fr/lepii - CNRS : FR2664 - Université Pierre Mendès-France - Grenoble II) |
| Abstract: | L'article présente tour à tour les scénarios élaborés dans le cadre du GIEC/IPCC (Groupe d'Experts Intergouvernemental sur l'Evolution du Climat) pour décrire le champ des possibles des scénarios " sans politique ", puis les grandes lignes de " scénarios-objectif " permettant de sauvegarder le climat global, enfin les politiques susceptibles d'enclencher la combinaison des changements de comportements et des innovations technologiques qui seront indispensables pour atteindre un développement énergétique durable. |
| Keywords: | changement climatique;gaz à effet de serre;scenario;IPCC; facteur 4 |
| Date: | 2006–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00007694_v1&r=env |
| By: | Jean-Paul Vanderlinden (CIRED - Centre International de Recherche sur l'Environnement et le Développement - http://www.centre-cired.fr - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales;Ecole Nationale du Génie Rural des Eaux et des Forêts;Ecole Nationale des Ponts et Chaussées) |
| Abstract: | This dissertation contributes to the debate on Common Pool Natural Resources (CPNRs) through the analysis of a specific case study: rangeland in southwest agro-pastoral Niger. The management of CPNRs is the subject of a lively debate pertaining to the property rights regime that may accompany CPNR management. This dissertation shows that this debate may very well be the consequence of disciplinary preconceptions that are linked with disciplinary paradigms. By approaching the case study with an interdisciplinary approach, this dissertation shows how interdisciplinary research may contribute to the avoidance of “universalism” (i.e., one property rights regime fits all CPNRs) with regard to CPNR management. <br />The case study is approached by using three different conceptual frameworks in order to explore five research questions. A first framework, econometric modelling, is used to explore the following two questions: “what are the determinants of rangeland use in southwest agro-pastoral Niger?” and “what are the determinants of livestock mobility?” A second framework, event chronology analysis, is used to explore the following two questions: “what is the impact of rainfall shocks on rangeland property rights?” and “is the marginalization of the pastoral space avoidable and reversible?” A third framework, network analysis, allows for the exploration of: “do traditional local institutions have the capacity to play a role in the management of rangeland?” The analysis and discussion of these research questions point to the fact that community-level rangeland management in southwest agro-pastoral Niger is a definite possibility. Nevertheless, it will be possible only if livestock raising practices are strong in the two traditional producer groups: agriculturalists and pastoralists. Community-level management will, therefore, have to be rooted in the community that is constituted by the users of the rangeland.<br />Finally this dissertation concludes by stressing the results in terms of rangeland-management policy for Niger, in terms of the interdisciplinary analysis of CPNR, and in terms of conducting interdisciplinary research in general. |
| Keywords: | Common pool natural ressources; rangeland; Risk; agropastoralism; sahel; Niger |
| Date: | 2006–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00007738_v1&r=env |
| By: | Jean-Charles Hourcade (CIRED - Centre International de Recherche sur l'Environnement et le Développement - http://www.centre-cired.fr - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales;Ecole Nationale du Génie Rural des Eaux et des Forêts;Ecole Nationale des Ponts et Chaussées) |
| Abstract: | Traiter aujourd'hui de l'économie des régimes climatiques peut être vu comme un exercice d'économie virtuelle tant la gestion de ce dossier sera affectée par l'évolution du contexte géopolitique et par ses conséquences en termes de sécurité énergétique (J.R. Schlesinger, 1989) ou de place du multilatéralisme et du système Onusien dans la gestion des affaires du monde. Faut-il viser, dans la lignée de Kyoto, un régime intégré sous l'égide de la Convention Climat (Rio de Janeiro 1992) ? Peut-on faire vivre, sous cette même Convention, des ‘régimes fragmentés (H.D. Jacoby et al., 1998)? Faut-il revenir à des initiatives unilatérales de pays leaders se coordonnant progressivement puis élargissant le cercle d'une coalition pro-active (C. Carraro and D. Siniscalco, 1992). Tout ceci peut paraître, après la crise Irakienne affaire de politique plus que d'économie. |
| Keywords: | negociation internationale;regime climatique;equite |
| Date: | 2006–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00007775_v1&r=env |
| By: | Patrick Criqui (LEPII - Laboratoire d'économie de la prospective et de l'intégration internationale - http://www.upmf-grenoble.fr/lepii - CNRS : FR2664 - Université Pierre Mendès-France - Grenoble II) |
| Abstract: | L'entrée en vigueur du protocole de Kyoto marque le point de départ de la mise en œuvre d'un véritable régime climatique international, visant à limiter les émissions de gaz à effet de serre. L'article rappelle les objectifs, les moyens et l'architecture du Protocole et s'interroge sur sa viabilité et ses implications économiques. |
| Keywords: | régime climatique;protocole de Kyoto;changement climatique |
| Date: | 2006–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00007782_v1&r=env |
| By: | Katherine Kiel (Department of Economics, College of the Holy Cross) |
| Abstract: | A house is a bundle of many goods: The number of bedrooms, bathrooms, the quality of local public services, the tidiness of a neighbor’s yard, and the quality of the local environment. If transactions in the housing market reflect the interaction of informed buyers and sellers, then the price that the house sells for is the sum of the prices the buyer is willing to pay for each individual characteristic of the house. It is this notion that motivates environmental economists to study property values. If individuals consider the local environment as a component of the house they purchase, then information on the house and its sales price allows researchers to ‘tease out’ the price that individuals would be willing to pay for environmental goods. This approach relies on the use of the hedonic price model. |
| Keywords: | hedonic models, environmental prices, housing |
| JEL: | Q51 Q53 R2 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:0601&r=env |
| By: | Alexander F. Wagner (Swiss Banking Institute, University of Zurich and University of Linz); Friedrich Schneider (University of Linz and IZA Bonn) |
| Abstract: | We construct a panel of satisfaction with democracy (SWD) and economic, institutional, and environmental variables for 1990-2001 for fifteen European countries. In this sample, controlling for a number of factors, we find that average SWD is higher where (1) there exists an energy / CO2 tax, where (2) government expenditures on the environment are higher, where (3) certain environmental regulations like packaging rules are in place, and (4) where the government puts in place environmental offices or other official bodies charged with addressing environmental concerns. We also find that, on the environmental quality side, (5) more cars on the roads, (6) less unleaded fuel, and (7) higher pesticide use intensity all decrease SWD. |
| Keywords: | satisfaction with democracy, environment |
| JEL: | K32 P16 Q21 Q28 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1929&r=env |
| By: | John A., List; Daniel, Sturm |
| Abstract: | This paper explores to what extent secondary policy issues are infuenced by electoral incentives. We develop a two dimensional political agency model in which a politician decides on both a frontline policy issue and a secondary policy issue. The model predicts when the incumbent should manipulate the secondary policy to attract voters. We test our model by using panel data on environmental policy choices in the U.S. states. In contrast to the popular view that secondary policies are largely determined by lobbying, we find strong effects of electoral incentives. |
| JEL: | Q58 H72 D72 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:768&r=env |
| By: | GAUDET, Gérard; MOREAUX, Michel; WITHAGEN, Cees |
| Abstract: | The purpose of this paper is to characterize the optimal time paths of production and water usage by an agricultural and an oil sector that have to share a limited water resource. We show that for any given water stock, if the oil stock is sufficiently large, it will become optimal to have a phase during which the agricultural sector is inactive. This may mean having an initial phase during which the two sectors are active, then a phase during which the water is reserved for the oil sector and the agricultural sector is inactive, followed by a phase during which both sectors are active again. The agricultural sector will always be active in the end as the oil stock is depleted and the demand for water from the oil sector decreases. In the case where agriculture is not constrained by the given natural inflow of water once there is no more oil, we show that oil extraction will always end with a phase during which oil production follows a pure Hotelling path, with the implicit price of oil net of extraction cost growing at the rate of interest. If the natural inflow of water does constitute a constraint for agriculture, then oil production never follows a pure Hotelling path, because its full marginal cost must always reflect not only the imputed rent on the finite oil stock, but also the positive opportunity cost of water. |
| Keywords: | nonrenewable natural resources, renewable natural resources, order of use, water resource, oil |
| JEL: | Q1 Q2 Q3 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montde:2005-18&r=env |
| By: | Lawrence H. Goulder; William A. Pizer |
| Abstract: | Global climate change poses a threat to the well-being of humans and other living things through impacts on ecosystem functioning, biodiversity, capital productivity, and human health. This paper briefly surveys recent research on the economics of climate change, including theoretical insights and empirical findings that offer guidance to policy makers. Section 1 frames the climate change problem and indicates the ways that economic research can address it. Section 2 describes approaches to measuring the benefits and costs associated with reducing greenhouse gas emissions. In Section 3 we discuss the implications of uncertainty for the timing and stringency of policies to address possible climate change. We then present issues related to policy design, including instrument choice (Section 4), flexibility (Section 5), and international coordination (Section 6). The final section offers general conclusions. |
| JEL: | D62 H23 N50 Q20 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11923&r=env |
| By: | W. Kip Viscusi |
| Abstract: | This paper provides a systematic review of the economic analysis of health, safety, and environmental regulations. Although the market failures that give rise to a rationale for intervention are well known, not all market failures imply that market risk levels are too great. Hazard warnings policies often can address informational failures. Some market failures may be exacerbated by government policies, particularly those embodying conservative risk assessment practices. Labor market estimates of the value of statistical life provide a useful reference point for the efficient risk tradeoffs for government regulation. Guided by restrictive legislative mandates, regulatory policies often strike a quite different balance with an inordinately high cost per life saved. The risk-risk analysis methodology enables analysts to assess the net safety implications of policy efforts. Inadequate regulatory enforcement and behavioral responses to regulation may limit their effectiveness, while rising societal wealth will continue to generate greater levels of health and safety. |
| JEL: | K32 Q2 J28 J17 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11934&r=env |
| By: | Cristina Tébar Less; Steven McMillan |
| Abstract: | This report examines factors that have proven helpful in achieving the successful transfer of environmentally sound technologies (EST) to developing countries. It provides an overview of the main issues lying behind trade-related aspects of EST transfers. It then briefly examines the main channels for the transfer of such technologies and the factors which are relevant to technology transfer in general, and to EST transfer in particular. It concludes with a summary of conditions for successful EST transfers which seem to be particularly relevant in the context of trade. These include government regulation and marketbased instruments, trade-related policies and practices, intellectual property rights, capacity, and financing. The report is based on the extensive literature dealing with technology transfer in general, and EST transfer specifically, and on empirical work summarised in a range of case studies. |
| Keywords: | trade, developing countries, environmentally sound technologies, technology transfer |
| JEL: | F18 O33 Q56 |
| Date: | 2005–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaaa:2005/2-en&r=env |
| By: | Maxime Kennett; Ronald Steenblik |
| Abstract: | This study presents a synthesis of 17 country studies on environmental goods and services (EG&S) commissioned by the OECD, UNCTAD and the UNDP. The countries examined are Brazil, Chile, China, Cuba, the Czech Republic, the Dominican Republic, Guatemala, Honduras, Israel, Kenya, Korea, Mexico, Nicaragua, Pakistan, Panama, Thailand and Vietnam. Its aim is to identify determinants of demand for EG&S; to show common themes and experiences in the EG&S markets of different countries; and to draw attention to key trade, environment and development policy linkages. It also seeks to contribute to the exchange of expertise and experience in the area of trade and environment so that liberalisation of trade in EG&S can benefit all countries, developing and developed alike. |
| Keywords: | trade, developing countries, environmental goods, environmental services |
| JEL: | F14 F18 Q56 |
| Date: | 2005–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaaa:2005/3-en&r=env |
| By: | Monika Tothova |
| Abstract: | It addresses the issue of environmentally preferable products (EPPs) in the context of the Doha Development Round and the Johannesburg Plan of Implementation. It reviews available definitions; describes existing compilations of products and identifies broad categories of EPPs; and offers case studies on three groups of products addressing benefits (and costs) of liberalisation for selected countries and products. Three groups of products, including their parts and complements, were identified for case studies owing to their potential trade, environmental and developmental benefits: sisal and other fibres of the genus Agave, bicycles and solid-fuel cooking stoves. |
| Keywords: | trade, developing countries, environmental goods, environmental services |
| JEL: | F14 F18 Q56 |
| Date: | 2005–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaaa:2005/6-en&r=env |
| By: | Ronald Steenblik |
| Abstract: | Numerous studies and events over the past several years have stressed the importance of eliminating barriers to trade in renewable forms of energy and the technologies used to exploit them, as part of a broader strategy to reduce dependence on more-polluting and less secure energy sources. This paper examines the implications of liberalising trade in renewable energy, focussing on several representative fuels and technologies (charcoal, solar photovoltaic systems and their complements, and wind turbines and wind pumps). Eliminating tariffs on renewable energy and associated goods — which are 15% or higher on an ad valorem basis in many developing countries — would reduce a burden on consumers of energy, particularly people living in rural areas of developing countries, as it is in such areas that many renewableenergy technologies are making, and are likely to make, their greatest contribution. Manufacturers located in OECD countries would benefit from increased trade in renewable-energy technologies and components, but so would a growing number of companies based in developing countries. The elimination of tariffs would also help to level the playing field between aid-financed goods, which often benefit from tariff waivers, and goods imported through normal market transactions, which often do not. For the maximum benefits of trade liberalisation in renewable-energy technologies to be realised, however, additional reforms may be required in importing countries’ domestic policies, especially those affecting the electricity sector in general, rural electrification in particular, and the environment. |
| Keywords: | trade, developing countries, environmental goods, environmental technologies, renewable energy |
| Date: | 2005–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:oec:traaaa:2005/7-en&r=env |
| By: | Yusuke Sakata (Departmen of Economics, Kinki University); Junyi Shen (Osaka School of Interna ional Public Policy, Osaka University); Yoshizo Hashimoto (Osaka School of Interna ional Public Policy, Osaka University) |
| Abstract: | Transport modal choice is considered to be influenced by natural environmental change and transport network improvement. This paper reveals how these impacts affect individualsf decisions on selecting transport mode under an extension plan of Osaka Monorail Loop-line. To estimate these impacts, a Stated Choice (SC) experiment is carried out for collecting the neighborhood data around the monorailfs extended area. Our model is estimated by the Heteroscedastic Extreme Value (HEV) specification in order to avoid Independence from Irrelevant Alternatives (IIA) assumption in the Multinomial Logit (MNL) model. Both the results of full-sample and sub-sample data imply that residents prefer public transport modes (monorail or bus) to private car when either natural environment becomes worse or transport network is improved. |
| Keywords: | Environmental Deterioration; Network improvement; Network externality; Choice Model (CM); Heteroscedastic Extreme Value (HEV) Model |
| JEL: | C35 D12 Q51 R41 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0604&r=env |
| By: | Ian Parry (Resources for the Future); Hilary Sigman (Rutgers University and NBER); Margaret Walls (Resources for the Future); Roberton Williams (University of Texas at Austin and NBER) |
| Abstract: | This paper explores the distribution of costs and benefits of pollution control policies across income groups. It begins by providing a conceptual framework for understanding and measuring the burden on different income groups from the costs of alternative emissions control instruments. It then summarizes various empirical studies on how the costs of emissions taxes, emissions permits, and command and control policies are distributed across households. Turning to benefits, it discusses literature on the distribution of existing pollution costs and the implications of these results for the distribution of benefits from environmental policies. Finally, it considers three ways in which distributional considerations might be integrated into traditional cost/benefit analyses of environmental policies. |
| Keywords: | Environment; Distributional effects; |
| JEL: | Q5 |
| Date: | 2005–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:200504&r=env |
| By: | Pedroso-Galinato, Suzette; Markandya, Anil |
| Abstract: | One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources such as land and energy resources. A nested constant elasticity of substitution (CES) production function is used to allow flexibility in the estimated elasticities of substitution. Also, with this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater, implying a fairly high degree of substitutability. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship with income generation. No statistically significant relationship between income and any of the institutional indicators was found. |
| Keywords: | Economic Theory & Research,Inequality,Economic Growth,Banks & Banking Reform,Climate Change |
| Date: | 2006–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3803&r=env |
| By: | Van Houtven, George; Yang, Jui-Chen; van den Berg, Caroline; Pattanayak, Subhrendu K. |
| Abstract: | The authors show how willingness to pay surveys can be used to gauge household demand for improved network water and sanitation services. They do this by presenting a case-study from Sri Lanka, where they surveyed approximately 1,800 households in 2003. Using multivariate regression, they show that a complex combination of factors drives demand for service improvements. While poverty and costs are found to be key determinants of demand, the authors also find that location, self-provision, and perceptions matter as well, and that subsets of these factors matter differently for subsamples of the population. To evaluate the policy implications of the demand analysis, they use the model to estimate uptake rates of improved service under various scenarios-demand in subgroups, the institutional decision to rely on private sector provision, and various financial incentives targeted to the poor. The simulations show that in this particular environment in Sri Lanka, demand for piped water services is low, and that it is unlikely that under the present circumstances the goal of nearly universal piped water coverage is going to be achieved. Policy instruments, such as subsidization of connection fees, could be used to increase demand for piped water, but it is unclear whether the benefits of the use of such policies would outweigh the costs. |
| Keywords: | Town Water Supply and Sanitation,Environmental Economics & Policies,Water Use,Small Area Estimation Poverty Mapping,Urban Water Supply and Sanitation |
| Date: | 2006–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3818&r=env |
| By: | Saleem Shaik (Mississippi State University); Glenn A Helmers (University of Nebraska); Michael Langemeier (Kansas State University) |
| Abstract: | The implication of treating environmental pollution as an undesirable output (weak disposability) as well as a normal input (strong disposability) on the direct and indirect shadow price and cost estimates of nitrogen pollution abatement is analyzed using Nebraska agriculture sector data. The shadow price of nitrogen pollution abatement treated as an undesirable output represents the reduced revenue from reducing nitrogen pollution. In contrast, the shadow price of nitrogen pollution abatement treated as an input reflects the increased cost of reducing nitrogen pollution. For the 1936-97 period, the estimated shadow price and cost of nitrogen pollution abatement for Nebraska ranges from $0.91 to $2.21 per pound and from $300 to $729 million, respectively. |
| Keywords: | Direct and indirect approaches, disposability, nitrogen pollution, nonparametric programming, shadow price |
| JEL: | O P |
| Date: | 2005–12–25 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0512023&r=env |
| By: | Ukwueze Ezebuilo (Department of Economics University of Nigeria); Ogujiuba Kanayo (African Institute for Apllied Economics Enugu- Nigeria); Adenuga Adeniyi (Central Bank of Nigeria) |
| Keywords: | Contingent Valuation Methods (CVM) Willingness To Pay (WTP) Tobit (censored) model Quasi-deregulation |
| JEL: | C1 C2 C3 C4 C5 C8 |
| Date: | 2005–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0512012&r=env |
| By: | Robert Hamwey (Cen2eco: Centre for Economic & Ecological Studies) |
| Abstract: | This study seeks to review some of the key issues surrounding ongoing WTO negotiations on trade liberalisation of environmental goods and to provide trade data and analyses to assess developing countries’ current and potential performance in environmental goods trade. Data indicate that developing countries have significant export strength and potential, not only in environmentally preferable products, but in many manufactured and chemical goods used in the provision of environmental services as well. For many developing countries, this latter class of goods includes some of their most dynamic exports, which can be significantly expanded by trade liberalisation, particularly through increased South-South trade. For other developing countries, trade liberalisation of environmentally preferable products may provide immediate gains needed to support rural economies and facilitate the integration of their small and medium sized enterprises into global supply chains. The study finds that to provide gains for all countries – each with a unique production and export profile – the scope and spectrum of environmental goods targeted for liberalisation must be wide and selective, allowing developing countries to select a limited ‘best- fit’ subset of goods for their tariff reduction commitments within an eventual WTO agreement. |
| Keywords: | trade liberalisation, environmental goods, developing countries, WTO, negotiations |
| JEL: | F1 F2 |
| Date: | 2005–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0512015&r=env |
| By: | Müller-Fürstenberger, Georg (Department of Economics, University of Bern); Wagner, Martin (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria) |
| Abstract: | Focussing on the prime example of CO2 emissions, we discuss several important theoretical and econometric problems that arise when studying environmental Kuznets curves (EKCs). The dominant theoretical approach is given by integrated assessment modelling, which consists of economic models that are combined with environmental impact models. We critically evaluate the aggregation, model dynamics and calibration aspects and their implications for the validity of the results. We then turn to a discussion of several important econometric problems that go almost unnoticed in the literature. The most fundamental problems relate to nonlinear transformations of nonstationary regressors and, in a nonstationary panel context, to neglected cross–sectional dependence. We discuss the implications of these two major and some minor problems that arise in the econometric analysis of Kuznets curves. Our discussion shows that EKC modelling as performed to date is subject to major drawbacks at both the theoretical and the econometric level. |
| Keywords: | Carbon Kuznets curve, Integrated assessment models, Regressions with integrated variables, Nonstationary panels |
| JEL: | Q20 C12 C13 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:183&r=env |
| By: | Blackman, Allen (Resources For the Future) |
| Abstract: | In developing countries, urban clusters of informal firms such as brick kilns and leather tanneries can create severe pollution problems. However, these firms are quite difficult to regulate for a variety of technical and political reasons. Drawing on the literature, this paper first develops a list of feasible environmental management policies. It then examines how these policies have fared in four independent efforts to control emissions from informal brick kilns in northern Mexico. The case studies suggest that- (i) conventional command and control process standards are generally only enforceable when buttressed by peer monitoring, (ii) surprisingly, clean technologies can be successfully diffused even when they raise variable costs, in part because early adopters have an economic incentive to promote further adoption, (iii) boycotts of "dirty" goods sold in informal markets are unenforceable, (iv) well-organized informal firms can block implementation of costly abatement strategies such as relocation, and (v) private-sector-led initiatives may be best suited for informal sector pollution control. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-02-rev&r=env |
| By: | Davies, J. Clarence (Resources For the Future); Lowe, Adam |
| Abstract: | This report analyzes the environmental effects associated with activities undertaken and influenced by the health care service sector. It is one part of a larger study to better understand the environmental effects of service sector activities and the implications for management strategies. Considerable analysis has documented the service sector's contribution to domestic economic conditions, yet little analysis has been performed on the broad impacts service firms have on environmental quality. For this study the authors developed a framework to examine the nature of service sector industries' influence on environmental quality. Three primary types of influence were identified- direct impacts, upstream impacts, and downstream impacts. In addition, indirect impacts induced by service sector activities include their influence over settlement patterns and indirect influences over other sectors of the economy. In their initial analysis, the authors noted that many functions performed in the service sector also are commonly found in other sectors. The impacts of these activities have been analyzed separately from those unique to the health care sector, as they present different challenges. Health care is one of the largest U.S. industries, employing one in nine workers and costing one in seven dollars generated in the economy. Functions performed in the industry that are common in other sectors include- transportation; laundry; food services; facility cleaning; heating and cooling; and photographic processing. Activities unique to the health care industry include- infectious waste generation and disposal; medical waste incineration; equipment sterilization; dental fillings; ritual mercury usage; x-ray diagnosis; nuclear medicine; pharmaceutical usage and disposal; and drinking water fluoridation. The industry has considerable leverage upstream on its suppliers, which is important to managing risks from the use of goods commonly used in the industry, including- mercury-containing products, polyvinyl chloride plastics, latex gloves, and syringe needles. The authors identified a number of areas for potential environmental management initiatives- controlling emissions from on-site "production" type functions; mercury use; the environmental consequences of infection control measures; pollution prevention through substitution of alternative health care services; and research and data collection. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-01&r=env |
| By: | Sedjo, Roger (Resources For the Future); Swallow, Stephen |
| Abstract: | International environmental and government organizations propose eco-labeling as a market incentive to cause industry to operate in an ecologically sustainable and biodiversity-friendly manner. A microeconomic analysis questions whether eco-labeling will cause producer profits in a competitive industry to decline, even under a voluntary system, and whether eco-labeling will necessarily generate different prices for labeled and unlabeled product. Using wood product as an example, results identify conditions that may exist when firms lose profits, even under a voluntary system, and where existing production constraints may lead to a single price, regardless of labeling. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-04&r=env |
| By: | Sedjo, Roger (Resources For the Future); Simpson, R. David |
| Abstract: | This paper examines the question of the likely effects on global forests of a further reduction in wood products tariffs including both solid wood products and pulp and paper, as has been proposed to the World Trade Organization (WTO) by the Asia Pacific Economic Community (APEC). The tariff reductions would be an extension of the tariff reductions associated with the Uruguay Round (Federal Register 1999). The questions include both how international trade is likely to change in response to further tariff reduction and also the implications for timber harvests and forests generally of such trade liberalization in the various forest regions. The paper finds that the evidence suggests further reductions in tariffs on forest products are likely to generate only very modest increases in worldwide trade and production, and the increased harvest pressures on forests due to tariff reduction should be quite modest. The major countries likely to experience export and production increases are found largely in the northern hemisphere and are likely to be able to facilitate additional harvests with minimal effects on the forests due to the modest nature of the impact, new forest practices laws, new forest set-asides, and movement toward improved practices designed to achieve multifaceted sustainable forestry. Furthermore, there is little reason to expect that tariff reductions will significantly increase harvests from tropical forests. Earlier tariff reductions appear to have had minimal impacts on tropical harvests or exports. Nevertheless, tropical forests will remain under deforestation pressure due to land conversion objectives, commonly to provide additional agricultural lands. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-05&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | This paper addresses the potential impact of the introduction and development of biotechnology on planted forests. It includes a description of some recent innovations in forestry including the use of traditional breeding, and also more recent innovations involving biotechnology, including the development of clonal propagation and the use of modern molecular biology techniques. In addition to describing these innovations, the paper undertakes an assessment of their probable impact on future production of the forest industry, on the global timber supply, and on future markets for timber and wood products. The paper offers a description of recent innovations in tree breeding and biotechnology, including a discussion of innovations in agriculture that have promise for forestry. This is followed by a discussion of the current role of biotechnology in forestry and an assessment of the various types of biotechnological innovations that could be forthcoming in the next decade and beyond. Additionally, the paper examines the likely effects of biotechnology on the economics of forestry. An estimate is provided for the potential cost savings and/or value increases expected from the various innovations. Using these estimates, a quantitative assessment is made of global potential economic returns to the most immediate and major innovation, the herbicide tolerant trait. Additionally, estimates are made of the potential impact of cost savings realized from this type of biotechnology on future timber supplies in the global timber market. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-06&r=env |
| By: | Davies, J. Clarence (Resources For the Future); Konisky, David |
| Abstract: | The growing size and importance of service sector industries in the U.S. economy raises questions about the suitability of the current environmental management system to deal with perhaps a changing set of environmental concerns. This paper analyzes the environmental impacts associated with the activities undertaken and influenced by two service sector industries—foodservice (e.g., restaurants) and food retail (e.g., grocery stores). This paper is not a definitive analysis of the magnitude of the environmental effects of these industries, but is intended to be a comprehensive survey of the types of environmental implications—positive and negative—of these two service sectors. The foodservice and food retail industries are components of a larger industrial system, the food marketing system, that extends from the production of food to the marketing of food products to consumers. The U.S. foodservice industry comprises an estimated 831,000 individual establishments, employs an estimated 11 million people (about 8.6% of the U.S. workforce), and is expected to have total sales of $376 billion in 2000. The U.S. food retail industry encompasses approximately 126,000 grocery stores, employs approximately 3.5 million people (about 2.7% of the U.S. workforce), and had sales totaling $449 billion in 1998. For this analysis, we use a simple conceptual framework that segregates the environmental impacts of these industries into three categories- direct, upstream, and downstream. We conclude that, while the direct environmental impacts (e.g., energy use, solid waste generation; air and water emissions; food safety concerns; refrigerants) of these industries are important to recognize and address, opportunities also exist for these industries to address their upstream and downstream environmental impacts. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-11&r=env |
| By: | Boyd, James (Resources For the Future) |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-12&r=env |
| By: | Davies, J. Clarence (Resources For the Future); Cahill, Sarah |
| Abstract: | This report analyzes the environmental impacts of the tourism industry, which is the third largest retail industry in the United States, behind only automotive dealers and food stores. In 1998, travel and tourism contributed $91 billion to the U.S. economy, supporting 16.2 million jobs directly and indirectly. While extensive research has documented the significant economic impact of such service industries as tourism, little has been written about their effect on environmental quality. This study uses a framework developed from the industrial ecology literature to assess the impacts of the tourism industry on the environment. Three categories of impact are discussed- direct impacts, including impacts from the travel to a destination, the tourist activities in and of themselves at that destination, such as hiking or boating, and from the creation, operation, and maintenance of facilities that cater to the tourist; "upstream" impacts, resulting from travel service providers’ ability to influence suppliers; and "downstream" impacts, where service providers can influence the behavior or consumption patterns of customers. We have identified impacts from tourist-related transportation, including aircraft, automobiles, and recreational land and marine vehicles; tourist-related development, tourist activities, and direct impacts of the lodging and cruise industries. Although the direct impacts of the lodging and cruise industries and impacts of tourist-related transportation were not very significant, we found on the other hand that tourist activities can have significant impacts, depending on the type and location of activity. Tourist-related development can also have significant cumulative impacts on water quality and the aesthetics of host communities. Opportunity for upstream and downstream leverage within the tourism industry is considerable. Hotels can exert upstream influence on their suppliers to provide environmentally sound products, such as recyclable toiletries. Similarly, the cruise industry can use its leverage to convince suppliers to improve the environmental quality of shipboard products. Opportunity for downstream influence exists as well. Travel agents can influence where and how a tourist travels, and tour operators can educate tourists about ways to minimize their impact on the environment. The fragmented nature of the tourism industry is not conducive to regulation that encompasses all aspects of the industry. Therefore, educational efforts aimed at supporting existing regulations and encouraging environmentally responsible behavior where no regulations exist seem most promising as a management scheme. These educational efforts should be framed in accordance with the targeted audience (i.e., tourists and industry sectors). Tourists may be more receptive to educational initiatives that focus on the environmental benefits of altering their behavior, while industry sectors are more likely to be responsive to educational efforts that emphasize cost savings and an improved public image. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-14&r=env |
| By: | Parry, Ian (Resources For the Future); Pizer, William (Resources For the Future); Fischer, Carolyn (Resources For the Future) |
| Abstract: | Economists have speculated that the welfare gains from technological innovation that reduces the future costs of environmental protection could be a lot more important than the "Pigouvian" welfare gains over time from correcting a pollution externality. If so, then a primary concern in the design of environmental policies should be the impact on induced innovation, and a potentially strong case could be made for additional instruments such as research subsidies. This paper examines the magnitude of the welfare gains from innovation relative to the discounted Pigouvian welfare gains, using a dynamic social planning model in which research and development (R&D) augments a knowledge stock that reduces future pollution abatement costs. We find that the discounted welfare gains from innovation are typically smaller....and perhaps much smaller....than the discounted Pigouvian welfare gains. This is because the long-run gain to innovation is bounded by the maximum reduction in abatement costs and, since R&D is costly, it takes time to accumulate enough knowledge to substantially reduce abatement costs. Only in cases when innovation substantially reduces abatement costs quickly (by roughly 50% within 10 years) and the Pigouvian amount of abatement is initially modest, can the welfare gains from innovation exceed the welfare gains from pollution control. These results apply for both flow and stock pollutants, and for linear and convex environmental damage functions. Our results suggest that spurring technological innovation should not be emphasized at the expense of achieving the optimal amount of pollution control. More generally, our results appear to have implications for a broad range of policy issues. They suggest that the welfare gains from innovation that reduces the costs of supplying any public good (defense, crime prevention, infrastructure, etc.) may be fairly small relative to those from providing the optimal amount of the public good over time. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-15&r=env |
| By: | Krupnick, Alan (Resources For the Future); McConnell, Virginia (Resources For the Future); Stoessell, Terrell; Cannon, Matthew; Batz, Michael (Resources For the Future) |
| Abstract: | Reducing nitrogen oxide (NOx) emissions in the eastern United States has become the focus of efforts to meet ozone air quality goals and will be useful for reducing particulate matter (PM) concentrations in the future. This paper addresses many aspects of the debate over the appropriate approach for obtaining reductions in NOx emissions from point sources beyond those called for in the Clean Air Act Amendments of 1990. Data on NOx control technologies and their associated costs, spatial models linking NOx emissions and air quality, and benefit estimates of the health effects of changes in ozone and PM concentrations are combined to allow an analysis of alternative policies in thirteen states in the eastern United States. The first part of the study examines the cost and other consequences of a command-and-control approach embodied in the Environmental Protection Agency’s (EPA) NOx SIP call, which envisions large reductions in NOx from electric utilities and other point sources. These results are compared to the alternative policy of ton-for-ton NOx emissions trading, similar to that proposed by the EPA for utilities. We find that emission reduction targets can be met at roughly 50% cost savings under a trading program when there are no transaction costs. The paper examines a number of alternative economic incentive policies that have the potential to improve upon the utility NOx trading plan proposed by EPA, including incorporation of other point sources in the trading program, incorporation of ancillary PM benefits to ozone reductions in the trading program, and trading on the basis of ozone exposures that incorporates the spatial impact of emissions on ozone levels. For the latter analysis, we examine spatially differentiated permit systems for reducing ozone exposures under different and uncertain meteorological conditions, including an empirical analysis of the trade-off between the reliability (or degree of certainty) of meeting ozone exposure reduction targets and the cost of NOx control. Finally, several policies that combine costs and health benefits from both ozone and PM reductions are compared to command-and-control and single-pollutant trading policies. The first of these is a full multipollutant trading system that achieves a health benefit goal, with the interpollutant trading ratios governed by the ratio of unit health benefits of ozone and PM. Then, a model that maximizes aggregate benefits from both ozone and PM exposure reductions net of the costs of NOx controls is estimated. EPA’s program appears to be reasonably cost-effective compared to all of the other more complex trading programs we examined. It may even be considered an optimal policy that maximizes net aggregate benefits if the high estimate of benefits is used in which mortality risk is linked to ozone exposure. Without this controversial assumption, however, we find that EPA’s NOx reduction target is far too large. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-18&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Cannon, Matthew |
| Abstract: | This paper investigates heterogeneity in pollution abatement costs using a computable general equilibrium framework. Previous literature using aggregated data has found that "grandfathered" tradable permits are dominated by other instruments including emission taxes, performance standards, and technology mandates because of interactions with pre-existing taxes. However, when the underlying costs of abatement are heterogeneous, a disaggregate representation of costs yields qualitatively different findings. In a disaggregate model of NOX abatement in the United States, the relative performance of tradable permits improves significantly and out-performs command and control approaches over a wide range of emission reductions. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-20&r=env |
| By: | Frederick, Kenneth; Schwarz, Gregory |
| Abstract: | The socioeconomic costs of floods, droughts, and water scarcity in the years 2030 and 2095 are examined under three climate scenarios- continuation of the current climate and two climate-change scenarios based on projections from the respective results of the Canadian and Hadley general circulation models. Measures of the adequacy of water supplies to meet both withdrawal and instream uses under current and future conditions are developed for the 18 major water resources regions and 99 assessment subregions in the conterminous United States. Past and likely future changes in the infrastructure available to control and distribute water, the costs of nontraditional sources of supply, water management practices, conservation opportunities, the nature of the economy, slack in the water supply system, and institutions influencing water use are examined and provide the basis for evaluating the impacts of changes in both climate and non-climate factors on U.S. water resources. The impacts of the climate changes are calculated as the changes in the costs of maintaining the projected no-climate change, non-irrigation off-stream water uses with the climate-altered supplies. The costs and benefits are estimated under three alternative management strategies that differ in the protection provided for stream-flows and irrigation. The results support several general conclusions. First, a greenhouse warming could have major impacts on the future costs of floods, droughts, and balancing water demands and supplies. Second, the contrasting hydrologic implications of the Canadian and Hadley climate models indicate that the magnitude as well as the direction of these impacts are uncertain and likely to vary significantly among water resources regions. Third, there are many oppor-tunities to adapt to changing hydrological conditions, and the net costs are particularly sensitive to the institutions that determine how the resource is managed and allocated among users. This report was prepared as part of the Water Assessment Sector Team’s contribution to the U.S. National Assessment of the Potential Consequences of Climate Variability and Change for the Nation being conducted under the auspices of the U.S. Global Change Research Program. The climate-change scenarios used in this report were developed for use in the National Assessment. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-21&r=env |
| By: | Toman, Michael; Shogren, Jason |
| Abstract: | Having risen from relative obscurity as few as ten years ago, climate change now looms large among environmental policy issues. Its scope is global; the potential environmental and economic impacts are ubiquitous; the potential restrictions on human choices touch the most basic goals of people in all nations; and the sheer scope of the potential response—a significant shift away from using fossil fuels as the primary energy source in the modern economy—is daunting. In this paper, we explore the economics of climate change policy. We examine the risks that climate change poses for society, the benefits of protection against the effects of climate change, and the costs of alternative protection policies. We organize our discussion around three broad themes- why costs and benefits matter in assessing climate change policies, as does the uncertainty surrounding them; why well-designed, cost-effective climate policies are essential in addressing the threat of climate change; and why a coherent architecture of international agreements is key to successful policy implementation. We conclude the paper with a summary of key policy lessons and gaps in knowledge. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-22&r=env |
| By: | Sanchirico, James (Resources For the Future) |
| Abstract: | Marine protected areas (MPAs) are currently receiving considerable attention as a "new" tool to control overexploitation. Many advocates argue that MPAs will provide a plethora of benefits ranging from improved habitat to higher fish stocks with little costs. Fishermen argue, not surprisingly, that the costs resulting from closing areas could be significant and need to be considered in the debate. In this paper, a set of biological, industry, and management hypotheses drawn from the literature analyzing the effects of MPAs are discussed. In doing so, a framework is presented that can be used to assess the expected returns to society from investing in MPAs. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-23-rev&r=env |
| By: | Parry, Ian (Resources For the Future); Toman, Michael |
| Abstract: | In the wake of the December 1997 Kyoto Protocol, which, if implemented, would oblige the United States and other industrialized countries to reduce greenhouse gases (GHGs) by 2008–2012, a number of proposals have been offered to increase the incentives for reducing emissions over the nearer term. The existence of an interim period between setting and implementing environmental goals is ubiquitous in environmental policymaking. The existence of this interim period gives rise to several potential rationales for early emissions reductions. In this paper we use a series of simple models and numerical illustrations to analyze some aspects of the performance of early emissions reduction programs in the case of GHGs. We show that there is a compelling economic case for allowing early GHGs reduction credits if countries (not just individual firms) could bank early credits to offset future emissions. The annualized cost savings to the United States from spreading out abatement over time could easily amount to several billion dollars. But without the aggregate banking provision, such credits could easily generate an excessive amount of abatement and produce net economic losses. We analyze a number of other issues that affect the economic efficiency of early reduction credits, including asymmetric information, learning-by-doing (LBD), and fiscal impacts. We also compare the performance of an early reduction credits program with that of an early cap-and-trade program. This latter approach, if properly scaled, can avoid many of the problems associated with early reduction credits. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-26&r=env |
| By: | Goulder, Lawrence; Bovenberg, A. Lans |
| Abstract: | The most cost-effective policies for achieving CO2 abatement (e.g., carbon taxes) are considered politically unacceptable because of distributional consequences. This paper explores policies designed to address distributional concerns. Using an intertemporal, numerical general equilibrium model of the United States, we examine how efficiency costs change when CO2 abatement policies include elements that neutralize adverse impacts on energy industries. We find that desirable distributional outcomes can be achieved at relatively low cost in terms of efficiency. Without substantial added cost to the overall economy, the government can implement carbon abatement policies that protect profits and equity values in fossil-fuel industries. The key to this conclusion is that CO2 abatement policies have the potential to generate rents that are very large in relation to the potential loss of profit. By enabling firms to retain only a very small fraction of these potential rents, the government can protect firms’ profits and equity values. Consequently, the government needs to grandfather only a small percentage of CO2 emissions permits or, similarly, must exempt only a small fraction of emissions from the base of a carbon tax. Each of these government policies involves only a small sacrifice of potential government revenue. Such revenue has an efficiency value because it can be used to finance cuts in pre-existing distortionary taxes. Because these policies give up little of this potential revenue, they involve only a small sacrifice in terms of efficiency. We also find that there is a very large difference between preserving firms’ profits and preserving their tax payments. Allowing firms to enjoy a dollar-for-dollar offset to their payments of carbon taxesfor example, through industry-specific cuts in corporate tax ratessubstantially overcompensates firms, raising profits and equity values significantly relative to the unregulated situation. This reflects the fact that producers can shift onto consumers most of the burden from a carbon tax. The efficiency costs of such policies are far greater than the costs of policies that do not overcompensate firms. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-27&r=env |
| By: | Sterner, Thomas; Hoglund, Lena |
| Abstract: | In this paper, we discuss the effect of refunding environmental charges. Taxes often are resisted by polluters because they imply both abatement and tax costs. We show that when charges are refunded, the incentives for abatement are essentially the same as for a tax, but the output reduction that often accompanies a tax scheme is forgone. We describe and examine the refund emissions payment (REP) scheme as a policy instrument for emissions abatement and compare it with taxes and permits with regard to allocative properties, distribution of costs, property rights, and, consequently, the politics of implementation. As an empirical example, the Swedish charge on nitrogen oxides is analyzed. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-29&r=env |
| By: | Walls, Margaret (Resources For the Future); Calcott, Paul |
| Abstract: | Several studies have shown the efficiency of both a Pigovian tax on waste disposal and a deposit-refund instrument, that is a combined output tax and recycling subsidy. The efficiency of these instruments, however, critically depends on households being paid for recycling. In reality, although most households have access to curbside recycling services, they are not paid for the items they set out at the curb. All items placed in a recycling bin are thus of equal value to a household, and there is no incentive for producers to make their products any more recyclable than what is necessary to be eligible for the bin. This paper characterizes the constrained (second-best) optimum that exists with the missing recycling market and solves for a modified deposit-refund instrument that will achieve the constrained optimum. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-30&r=env |
| By: | Simpson, R. David; Ferraro, Paul |
| Abstract: | Intact ecosystems provide important global services. Many valuable ecosystems are located in low-income countries in which citizens are not in a position to provide global public goods gratis. To address this problem, international conservation and development donors have been making substantial investments in habitat conservation. Among the more common conservation schemes are interventions aimed at encouraging commercial activities that produce ecosystem services as joint products. We argue that it would be more cost-effective to pay for conservation performance directly. We use a simple yet general model to establish three conclusions. First, the overall cost of conservation is least when direct payments are employed. Second, the donor will generally find direct payments more cost-effective. Third, the preferences of donors and eco-entrepreneurs are opposed- when the donor prefers direct payments, the eco-entrepreneur prefers indirect subsidies. There are a number of reasons why direct incentive programs may be difficult to implement. We argue, however, that any approach to conservation will face similar challenges. Furthermore, we demonstrate with an empirical example that direct payment initiatives can offer spectacular cost-savings relative to less direct approaches. We therefore believe that continued experimentation with direct conservation incentives in the developing world is warranted and will prove successful. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-31&r=env |
| By: | Sanchirico, James (Resources For the Future); Wilen, James |
| Abstract: | We utilize a spatial bioeconomic model to investigate the impacts of creating reserves on limited-entry fisheries. We find that reserve creation can produce win-win situations where aggregate biomass and the common license (lease) price increase. These situations arise in biological systems where dispersal processes are prevalent and the fishery prior to reserve creation is operating at effort levels in a neighborhood of open-access levels. We also illustrate that using strictly biological criteria for siting reserves (e.g., setting aside the most biological productive areas) will likely induce the most vociferous objections from the fishing industry. In general, we find that the dispersal rate and the degree the patches are connected play a significant role on the net impacts on the fishing sector. |
| Keywords: | fisheries, limited-entry, marine reserves |
| JEL: | Q22 R10 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-34&r=env |
| By: | Sedjo, Roger (Resources For the Future); Sohngen, Brent |
| Abstract: | Forestry has been considered to have potential in reducing the atmospheric concentration of carbon dioxide by sequestrating carbon in above-ground timber and below-ground roots and soil. This potential has been noted in the Kyoto Protocol, which identified specific forestry activities for which carbon sequestration credits could be obtained. To date, a few forestry efforts have been undertaken for carbon purposes, but most of these efforts have been on a small scale. Proposals have been under discussion, however, that would result in the creation of very large areas of new forest for the purpose of offsetting some of the additional carbon that is being released into the atmosphere. Concerns are expressed, however, that large-scale sequestration operations might have impacts on the world timber market, affecting timber prices and thereby reducing the incentives of traditional suppliers to invest in forest management and new timber production. Such a "crowding out" or "leakage" effect, as it is called in the literature, could negate much or all of the sequestered carbon by the newly created sequestration forests. Accordingly, the purpose of this study is to examine and assess the interactions between carbon sequestration forestry, particularly, newly created carbon forests, and the markets for timber. The approach of this study involves utilizing an existing Dynamic Timber Supply Model (DTSM) to examine the interactions between newly created sequestration forests and the markets for timber. This model has been used to examine global timber supply and, more recently, has been modified to include carbon considerations. This study suggests that even without any specific sequestration efforts, commercial forestry offers the potential to sequester substantial volumes of carbon, approaching ten gigatons (Gt) (or petagrams (Pg)), in vegetation, soils and market products over the next century. At current rates of atmospheric carbon build up this is equal to about three years of net carbon releases into the atmosphere. This volume of carbon sequestration could be increased 50–100% by 50 million hectares (ha) of rapidly growing carbon-sequestering plantation forests, even given the anticipated leakages due to market price effects. Finally, the projections suggest that the amount of crowding out and carbon leakages are likely to be very modest. The 50 million ha of carbon plantations are projected to reduce land areas in industrial plantations, that is, crowd out, only from 0.2 to 7.8 million ha over the 100-year period. The addition of carbon sequestration forests offers the potential to increase the carbon sequestration of the forest system more than 50%, up to 5.7 Gts, above that already captured from market activity. This estimate assumes that crowding out and associated projected leakages will occur. At current rates of atmospheric carbon buildup, about 2.8% of the expected total buildup in atmospheric carbon over the next century could be offset by 50 million ha of carbon plantations. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-35&r=env |
| By: | Burtraw, Dallas (Resources For the Future) |
| Abstract: | The 1990 U.S. Clean Air Act Amendments (CAAA) instituted a national program in tradable sulfur dioxide (SO2) emission permits, referred to as "emission allowances," in the U.S. electricity sector. This paper provides a survey and assessment of the SO2 allowance trading program with a focus on the role of innovation. Over the last decade the cost of compliance has fallen dramatically compared with most expectations, and today the total cost of the program is 40– 140% lower than projections (depending on the timing of those projections and the counter-factual baseline considered). Marginal costs of reductions are less than one-half the cost considered in most analyses at the time the program was introduced. Innovation accounts for a large portion of these cost savings, but not as typically formulated in economic models of research and development (R&D) efforts to obtain patent discoveries. Innovation under the SO2 allowance trading program involves organizational innovation at the firm, market and regulatory level and process innovation by electricity generators and upstream fuel suppliers. An important portion of the cost reductions that are evident was already in the works prior to and independent of the program. Nonetheless, the allowance trading program deserves significant credit for providing the incentive and flexibility to accelerate and to fully realize exogenous technical changes that were occurring in the industry. This marks a significant departure from conventional approaches to environmental regulation, which would not be expected to capture these savings. The ongoing transition to restructuring of electricity markets and expanding competition in electricity generation complements the design of the SO2 allowance trading program by providing firms with full incentives to reduce costs of pollution control. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-38&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Heintzelman, Martin |
| Abstract: | The universal theme of deregulation of the electricity industry is the dismantling of the exclusive franchise, opening up some segments of the industry to competition. Technological changes in generation have helped eliminate the perception that generation is a natural monopoly, but this change has not occurred in transmission and distribution services. Marketing functions have also been opened up to competition in many places. This paper includes a brief overview of the different approaches to restructuring that have been adopted in selected countries around the world. It also surveys the existing literature that explores various aspects of how electricity restructuring is likely to affect the environment. The effect of restructuring on the environment consists of four constituent influences- (1) changes in electricity demand and how it substitutes for (and complements) the consumption of other products, (2) the substitution among fuels and other inputs in electricity production, (3) efficiency improvements that stem from the introduction of competition, and (4) the interaction of firm behavior and market structure with existing and new incentive-based approaches to environmental regulation. Notwithstanding the possibility that electricity consumption displaces the use of other fuels in end uses, most studies find some negative environmental effect from increased consumption, especially with respect to carbon emissions. However, the efficiency gains that can be expected in delivering electricity services create the opportunity for additional environmental controls. Regulatory reform has arrived in the electricity sector, and it is expected to offer welfare gains that can be shared between economic and environmental objectives. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-39&r=env |
| By: | Toman, Michael; Kolstad, Charles |
| Abstract: | Economics has played an increasingly important role in shaping policy, in the United States and elsewhere. This paper reviews some of the dimensions of the economic approach to analyzing, understanding, and developing solutions to the problem of climate change. We then turn to the issue of designing regulatory instruments to control the problem. The paper concludes with a discussion of the political economy of greenhouse gas control in an international context. |
| Keywords: | climate change, climate policy design, integrated assessment, environmental policy coordination |
| JEL: | Q28 Q48 D61 D62 D63 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-40&r=env |
| By: | Beierle, Thomas; Cahill, Sarah |
| Abstract: | Just as information technology is rapidly changing how we work, shop, and play, it is changing how we practice democracy. This paper focuses on one area where the Internet is broadening public participation in governance- the administration of environmental laws and regulations. It describes a survey of how each of the 50 states is using the Internet to provide citizens with environmental information, gather public input on agency decisions, and foster networks of interested citizens. As "laboratories for democracy," the states may be the source of ideas and experience that anticipate how environmental governance at all levels of government will change over the next decade. The survey results suggest that electronic democracy in state-level environmental decisionmaking is in an early and experimental phase. All state environmental agencies have Web sites and most provide substantial amounts of information on-line. However, opportunities for active on-line interaction between citizens and government, as well as among citizens themselves, are quite limited. Relatively few states, for example, allow citizens to comment on proposed rules electronically. Overall, the survey suggests that it is a good time for states to learn from each other as more innovative states push the envelope of what technology allows and more cautious states continue to adopt basic features as decision-makers become convinced of their efficacy. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-42&r=env |
| By: | Blackman, Allen (Resources For the Future); Afsah, Shakeb; Ratunanda, Damayanti |
| Abstract: | Although a growing body of evidence suggests that publicly disclosing information about plants’ environmental performance can motivate emissions reductions, this phenomenon remains poorly understood. To help fill this gap, this paper presents original data from a survey of plants participating in the Program for Pollution Control, Evaluation and Rating (PROPER), Indonesia’s widely-acclaimed public disclosure program. These data suggest that a key means by which PROPER spurs abatement is improving factory managers’ information about their own plants’ emissions and abatement opportunities. This finding contrasts with the prevailing view in the literature that public disclosure enhances pressures to abate placed on firms by external agents such as community groups and shareholders. But our data also suggest that PROPER’s "environmental audit" effect operates in concert with external pressures. Therefore, simply supplying new information to plant managers without making that information public may not be sufficient to motivate significant abatement |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-44&r=env |
| By: | Blackman, Allen (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future); Cook, Joseph; Newbold, Stephen |
| Abstract: | In developing countries, urban clusters of manufacturers which are "informal"—small-scale, unlicensed and virtually unregulated—can have severe environmental impacts. Yet pollution control efforts have traditionally focused on large industrial sources, in part because the problem is not well-understood. This paper presents a benefit-cost analysis of four practical strategies for reducing emissions from traditional brick kilns in Ciudad Juárez, Mexico. To our knowledge, it is the first such analysis of informal sources. We find very significant net benefits for three of the four control strategies. These results suggest that informal polluters should be a high priority for environmental regulators. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-46&r=env |
| By: | Stavins, Robert; Jaffe, Adam; Newell, Richard (Resources For the Future) |
| Abstract: | Environmental policy discussions increasingly focus on issues related to technological change. This is partly because the environmental consequences of social activity are frequently affected by the rate and direction of technological change, and partly because environmental policy interventions can themselves create constraints and incentives that have significant effects on the path of technological progress. This paper, prepared as a chapter draft for the forthcoming Handbook of Environmental Economics (North-Holland/Elsevier Science), summarizes for environmental economists current thinking on technological change in the broader economics literature, surveys the growing economic literature on the interaction between technology and the environment, and explores the normative implications of these analyses. We begin with a brief overview of the economics of technological change, and then examine three important areas where technology and the environment intersect- the theory and empirical evidence of induced innovation and the related literature on the effects of environmental policy on the creation of new, environmentally friendly technology; the theory and empirics of environmental issues related to technology diffusion; and analyses of the comparative technological impacts of alternative environmental policy instruments. We conclude with suggestions for further research on technological change and the environment. |
| Keywords: | technological change, induced innovation, environment, policy |
| JEL: | O30 Q00 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-47&r=env |
| By: | Blackman, Allen (Resources For the Future) |
| Abstract: | Increasingly, conventional wisdom dictates that agrarian policy in developing countries should foster a "doubly green revolution" that both protects the environment and boosts output. Like the first green revolution, such a transformation will entail convincing millions of farmers to adopt new practices and, as a result, will confront well-documented barriers to technological change in developing-country agriculture. It will also face a number of new obstacles, including a divergence between the interests of policymakers and farmers, a policy environment biased in favor of input-intensive agriculture, and the fact that many environmentally friendly technologies entail relatively high set-up costs. At least in the short run, institutional constraints will limit the contribution of agricultural biotechnology to overcoming these obstacles. Hence, the first green revolution may serve as an overly optimistic model for a shift to a more sustainable agriculture. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-48&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Bharvirkar, Ranjit; Paul, Anthony |
| Abstract: | This paper analyzes the benefits and costs of policies to reduce nitrogen oxides (NOx) emissions from electricity generation in the United States. Because emissions of NOx contribute to the high concentration of atmospheric ozone in the eastern states that is associated with health hazards, the U.S. Environmental Protection Agency (EPA) has called on eastern states to formulate state implementation plans (SIPs) for reducing NOx emissions. Our analysis considers three NOx reduction scenarios- a summer seasonal cap in the eastern states covered by EPA’s NOx SIP Call, an annual cap in the same SIP Call region, and a national annual cap. All scenarios allow for emissions trading. Although EPA’s current policy is to implement a seasonal cap in the SIP Call region, this analysis indicates that an annual cap in the SIP Call region would yield about 400 million dollars more in net benefits (benefits less costs) than would a seasonal policy, based on particulate-related health effects only. An annual cap in the SIP Call region is also the policy that is most likely to achieve benefits in excess of costs. Consideration of omissions from this accounting, including the potential benefits from reductions in ozone concentrations, strengthens the finding that an annual program offers greater net benefits than a seasonal program. |
| Keywords: | emissions trading, electricity, particulates, nitrogen oxides, NO<sub>x</sub>, health benefits |
| JEL: | Q2 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-55-rev&r=env |
| By: | Brennan, Timothy (Resources For the Future) |
| Abstract: | We examine the suggestion that if consumers in sufficient numbers are willing to pay the premium to have power generated using low-emission technologies, tax or permit policies become less necessary or stringent. While there are implementation difficulties with this proposal, our purpose is more fundamental- can economics make sense of using preferences as a regulatory instrument? If “green” preferences are exogenously given, to what extent can or should they be regarded as a substitute for other policies? Even with green preferences, production and consumption of polluting goods continues to impose social costs not borne in the market. Moreover, if green preferences are regarded as a policy instrument, the “no policy” baseline would require a problematic specification of counterfactual “non-green” preferences. Viewing green preferences as a regulatory policy instrument is conceptually sensible if the benchmark for optimal emissions is based on value judgments apart from preferences consumers happen to have. If so, optimal environmental protection would be defined by reference to ethical theory or, even less favorably, by prescriptions from policy advocates who give their own preferences great weight while giving those of the public at large (and the costs they bear) very little consideration. |
| Keywords: | Environmental regulation, preference change |
| JEL: | Q2 B4 D6 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-01&r=env |
| By: | Bell, Ruth (Resources For the Future) |
| Abstract: | Several experiences in international environmental cooperation and assistance are examined to understand how communication across differing traditions, legal systems, cultures, history, and language has impacted joint efforts to develop stronger environmental regimes. The article concludes that efforts to build more effective environmental protection regimes in support of both domestic and international environmental goals must become much smarter to overcome communication barriers and related impediments to effective joint activities. Different traditions can coexist and even work productively together where there is strong and equal motivation on both sides. But when these conditions are absent, the international partners need to find additional bridging tools and must work explicitly to identify genuinely common goals. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-05&r=env |
| By: | Austin, David; Alberini, Anna |
| Abstract: | Proponents of environmental policies based on liability assert that strict liability imposed on polluters induces firms to handle hazardous wastes properly. We run regressions relating unintended pollution releases to strict liability imposed on polluters, exploiting variation across states and over time in the liability provisions of state mini-Superfund laws. Strict liability reduces the frequency and severity of pollution releases, provided it is modeled endogenously with the latter. Its effects vary with firm size. Partially sheltered from liability, small firms may have specialized in riskier production processes, but their number has not necessarily grown in response to the states’ liability policy. |
| Keywords: | strict liability, negligence, hazardous waste, state environmental policy, endogenous policy adoption |
| JEL: | Q28 D72 K13 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-06&r=env |
| By: | Blackman, Allen (Resources For the Future); Nelson, Per-Kristian (Resources For the Future); Mathis, Mitchell |
| Abstract: | Although ignored for decades, environmental issues now attract considerable attention in the literature on economic development. This paper describes research on environmental issues in seven topic areas that historically have been at the heart of development economics- the role of the state, economic growth, trade and industrialization, relations between rich and poor countries, structural adjustment and stabilization, population change, and the objectives and strategies of development. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-08&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Krupnick, Alan (Resources For the Future); Pizer, William (Resources For the Future); Morgenstern, Richard (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future) |
| Abstract: | Accurate estimates of pollution abatement costs are crucial elements of any rational effort to set or evaluate environmental policies. One of the primary sources of this information in the United States has been the Bureau of the Census (BOC) Pollution Abatement Costs and Expenditures (PACE) survey, which collected annual establishment-level data on abatement costs for most years between 1972 and 1994. After a five-year lapse, the PACE survey was restarted in 2000, collecting 1999 data. Yet as firms have turned to more comprehensive abatement strategies involving process and design changes, pollution prevention, and recycling, the PACE survey has faced a number of problems that limit its ability to accurately measure abatement costs. At the same time, both national and international interest in understanding the true costs of environmental protection has grown, along with the complexity of the research and policy issues currently under discussion. There is now widespread interest in redesigning the PACE survey to improve its usefulness to policymakers as well as to researchers. In March 2000, Resources for the Future (RFF) convened an expert workshop to consider a wide range of issues relevant to future PACE surveys. This report describes the workshop and derives a number of conclusions based on discussions at the workshop. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-09&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Bharvirkar, Ranjit; Paul, Anthony |
| Abstract: | The U.S. electric power sector is in the midst of two major regulatory changes. One is the change from cost-of-service regulation to competition as a means of disciplining electricity prices, often referred to as “electricity restructuring.” The other is the apparently increasing scope and stringency of environmental regulation; proposed tighter restrictions on nitrogen oxide (NOx) emissions from existing generators are one recent example. We look at the effects of restructuring on three issues- (a) economic surplus and environmental quality, (b) the cost of NOx control policies and who bears the costs, and (c) the cost-effectiveness of a seasonal and an annual NOx cap in the SIP Call region. We find that without the NOx cap, nationwide restructuring leads to higher NOx and carbon emissions from the electricity sector. Adding either a seasonal or an annual NOx cap-and-trade regime in the eastern United States mitigates the increase in NOx emissions but has a much smaller effect on carbon emissions. The out-of-pocket compliance cost associated with achieving a seasonal or an annual NOx cap is moderately higher with nationwide restructuring than without, but the changes in economic surplus are significantly higher. For a seasonal policy, most of the costs are borne by electricity consumers. For an annual policy, most of the incremental costs beyond those with seasonal controls are borne by producers. However, the economic benefits of nationwide restructuring more than offset the higher costs of controlling NOx emissions in a more competitive environment. The foregone economic surplus is compared with the benefits resulting from NOx emission reductions using an integrated assessment model of atmospheric transport and valuation of human health effects. We find an annual policy dominates a seasonal policy from a cost effectiveness perspective under limited restructuring, and even more strongly under nationwide restructuring. |
| Keywords: | electricity, restructuring, deregulation, competition, emissions trading, particulates, nitrogen oxides, NO<sub>x</sub>, health benefits, cost effectiveness |
| JEL: | Q2 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-10-rev&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | The study explores challenges associated with, and the feasibility of, financial assurance requirements for liabilities arising under U.S. environmental statutes, with a particular emphasis on liabilities associated with natural resource damages (NRDs). The overlap between federal NRD liability and financial assurance arises in the context of two financial assurance rules- one for waterborne vessels that carry oil or hazardous substances, and one for offshore facilities used for oil exploration, drilling, production, or transport. The report addresses the rules’ history, their role as a complement to other forms of environmental regulation, and their impact on the regulated community and providers of coverage. Despite numerous difficulties and over objections from the regulated community, the rules have been implemented with success and without significant shortfalls in coverage availability. |
| Keywords: | financial assurance, financial responsibility, natural resource damages, liability |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-11&r=env |
| By: | Simpson, R. David |
| Abstract: | There has been considerable recent interest in the valuation of ecosystem services. We focus here on the value of such services in the production of market goods. Although the conceptual basis for conducting such exercises is straightforward, the data with which to implement them empirically is generally not available. An upper bound on the value of ecosystem services arises when the production technology exhibits constant returns to scale in ecosystem services and market inputs jointly. There are compelling reasons to suppose that the existence of fixed factors of production would imply that production technologies exhibit decreasing return to scale. Under these circumstances, no general conclusions can be drawn. We show in an illustrative example that a range of outcomes is possible, depending on the substitutability between ecosystem services and other inputs and the scarcity of ecosystem services relative to other factors of production. |
| Keywords: | ecosystem services, returns to scale, elasticity of substitution |
| JEL: | Q29 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-16&r=env |
| By: | Sedjo, Roger (Resources For the Future); Sohngen, Brent; Mendelsohn, Robert |
| Abstract: | This study develops cumulative carbon “supply curves” for global forests utilizing an dynamic timber supply model for sequestration of forest carbon. Because the period of concern is the next century, and particular time points within that century, the curves are not traditional Marshallian supply curves or steady-state supply curves. Rather, the focus is on cumulative carbon cost curves (quasi-supply curves) at various points in time over the next 100 years. The research estimates a number of long-term, cumulative, carbon quasi-supply curves under different price scenarios and for different time periods. The curves trace out the relationship between an intertemporal price path for carbon, as given by carbon shadow prices, and the cumulative carbon sequestered from the initiation of the shadow prices, set at 2000, to a selected future year (2010, 2050, 2100). The timber supply model demonstrates that cumulative carbon quasi-supply curves that can be generated through forestry significantly depend on initial carbon prices and expectations regarding the time profile of future carbon prices. Furthermore, long-run quasi-supply curves generated from a constant price will have somewhat different characteristics from quasi-supply curves generated with an expectation of rising carbon prices through time. The “least-cost” curves vary the time periods under consideration and the time profile of carbon prices. The quasi-supply curves suggest that a policy of gradually increasing carbon prices will generate the least costly supply curves in the shorter periods of a decade or so. Over longer periods of time, however, such as 50 or 100 years, these advantages appear to dissipate. |
| Keywords: | carbon supply curves, sequestration, timber, forests, model, global warming, prices, markets |
| JEL: | Q10 Q15 Q21 Q23 Q24 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-19&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | Political pressure often exists to earmark environmental tax revenues or permit rents to the industry affected by the regulation. This paper analyzes schemes that rebate revenues based on output shares- tradable performance standards, an emissions tax with market-share rebates, and tradable permits with output-based allocation. All three policies effectively combine a tax on emissions with a subsidy to output. The result is a shifting of emissions control efforts toward greater emissions rate reduction and less output contraction, with higher marginal costs of control and lower output prices compared to the social optimum, given any targeted level of abatement. These welfare costs depend on the degree of output substitutability and are likely to be much larger in the long run. While some political and market-failure justifications may exist, policy makers should carefully consider industry characteristics before engaging in output-based rebating. |
| Keywords: | emission tax, permit allocation, earmarking, tradable performance standards |
| JEL: | H21 H23 Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-22&r=env |
| By: | Toman, Michael; Kerr, Suzi; Sedjo, Roger (Resources For the Future); Birdsey, Richard; Kauppi, Pekka; Noble, Ian; Brown, Sandra; Krankina, Olga; Moura-Costa, Pedro |
| Abstract: | An RFF Workshop brought together experts from around the world to assess the feasibility of using biological sinks to sequester carbon as part of a global atmospheric mitigation effort. The chapters of this proceeding are a result of that effort. Although the intent of the workshop was not to generate a consensus, a number of studies suggest that sinks could be a relatively inexpensive and effective carbon management tool. The chapters cover a variety of aspects and topics related to the monitoring and measurement of carbon in biological systems. They tend to support the view the carbon sequestration using biological systems is technically feasible with relatively good precision and at relatively low cost. Thus carbon sinks can be operational. |
| Keywords: | carbon, sinks, global warming, sequestration, forests |
| JEL: | Q10 Q15 Q21 Q23 Q24 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-26&r=env |
| By: | Palmer, Karen (Resources For the Future); Macauley, Molly (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future); Cline, Sarah; Holsinger, Heather |
| Abstract: | Managing the growing quantity of used electronic equipment poses challenges for waste management officials. In this paper, we focus on a large component of the electronic waste stream—computer monitors—and the disposal concerns associated with the lead embodied in cathode ray tubes (CRTs) used in most monitors. We develop a policy simulation model of consumers’ disposal options based on the costs of these options and their associated environmental impacts. For the stock of monitors disposed of in the United States in 1998, our preliminary findings suggest that bans on some disposal options would increase disposal costs from about $1 per monitor to between $3 and $20 per monitor. Policies to promote a modest amount of recycling of monitor parts, including lead, can be less expensive. In both cases, the costs of the policies exceed the value of the avoided health effects of CRT disposal. |
| Keywords: | end-of-life electronics, waste stream, cost-benefit analysis |
| JEL: | Q2 Q0 H8 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-27&r=env |
| By: | Sterner, Thomas; Slunge, Daniel |
| Abstract: | This paper studies the Swedish prohibition of the hazardous solvent Trichloroethylene (TCE). Sweden is alone in completely prohibiting its use. The ban has been at best a partial success and illustrates the dilemmas of policymaking. Use has declined but not stopped, largely because the decision to ban TCE was challenged in the courts. Recently, the EU Court of Justice decided in favor of Sweden’s right to have a ban. This article analyzes abatement cost data to show that the cost of replacing TCE is low for most plants, although there appear to be a few firms for which it may be quite high. A crosscountry comparison indicates that the Swedish ban was less effective than the very strict technical requirements in Germany or the tax used in Norway. A tax (or deposit refund scheme) would be a good mechanism to achieve a swift phaseout. |
| Keywords: | hazardous chemicals, regulation, environmental tax, solvents, |
| JEL: | D62 L50 Q28 K32 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-32&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | A major problem being faced by human society is that the global temperature is believed to be rising due to human activity that releases carbon dioxide to the atmosphere, i.e., global warming. The major culprit is thought to be fossil fuel burning, which is releasing increasing amounts of carbon dioxide in the atmosphere. The problem of increasing atmospheric carbon dioxide can be addressed a number of ways. One of these is forestry and forest management. This paper examines a number of current issues related to mitigating the global warming problem through forestry. First, the overall carbon cycle is described, and the potential impact of forests on the buildup of atmospheric carbon is examined. A major focus is the means by which forests and forest management can contribute to the sequestration of carbon. The potential role of forests and forestry in sequestrating carbon to reduce the buildup of greenhouse gases in the atmosphere is now well recognized. A number of alternative approaches to utilizing forestry and forest management for carbon sequestration are examined. These include forest protection; the management of forests for carbon for joint products, i.e., the management of forests to generate both carbon and timber as products; the establishment of plantation forests dedicated to carbon sequestration; and increased production of wood products. Replacing other materials with wood will sequester carbon while reducing energy requirements, thereby reducing carbon emissions. Studies examining the costs of carbon sequestration using forestry are also discussed. The recent Kyoto Protocol (K.P.) explicitly recognizes certain forestry activities as “certifiable” for sequestration credits. But some definitions and aspects of carbon sequestration through forestry were left incomplete or inadequately defined by the Protocol. Furthermore, the KP has changed due to the recent withdrawal of the US for the Protocol (although not from the Kyoto Process). Nevertheless, further clarification is necessary to understand the full potential and set of opportunities from forestry both within the framework of the Protocol and more generally. Alternative types of vehicles for sequestration credits are discussed below,m both within and outside the context of the KP , and their advantages and disadvantages in terms of periods covered and liability are also examined. Finally, some ongoing real-world activities utilizing forestry specifically to sequester carbon are discussed. |
| Keywords: | forests, carbon, sinks, sequestration, forest management, Kyoto Protocol |
| JEL: | Q10 Q15 Q21 Q23 Q24 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-34&r=env |
| By: | Stavins, Robert; Hahn, Robert; Cavanagh, Sheila |
| Abstract: | We review major developments in national environmental policy during the Clinton Administration, defining environmental policy to include not only the statutes, regulations, and policies associated with reducing pollution, but also major issues of public lands management and species preservation. We adopt economic criteria for policy assessment — principally efficiency, cost-effectiveness, and distributional equity. While the paper is primarily descriptive, we highlight a set of five themes that emerge in the economics of national environmental policy over the past decade. First, over the course of the decade, national environmental targets were made more stringent, and environmental quality improved. Most important among the new targets were the National Ambient Air Quality Standards (NAAQS) for ambient ozone and particulate matter, issued by EPA in July 1997, which could turn out to be one of the Clinton Administration’s most enduring environmental legacies. Also, natural resource policy during the Clinton years was heavily weighted toward environmental protection. Environmental quality improved overall during the decade, continuing a trend that began in the 1970s, although improvements were much less than during the previous two decades. Second, the use of benefit-cost analysis for assessing environmental regulation was controversial in the Clinton Administration, while economic efficiency emerged as a central goal of the regulatory reform movement in the Congress during the 1990s. When attention was given to increased efficiency, the locus of that attention during the Clinton years was the Congress in the case of environmental policies and the Administration in the case of natural resource policies. Ironically, the increased attention given to benefit-cost analysis may not have had a marked effect on the economic efficiency of environmental regulations. Third, cost-effectiveness achieved a much more prominent position in public discourse regarding environmental policy during the 1990s. From the Bush Administration through the Clinton Administration, interest and activity regarding market-based instruments for environmental protection — particularly tradeable permit systems — continued to increase. Fourth, the Clinton Administration put much greater emphasis than previous administrations on expanding the role of environmental information disclosure and voluntary programs. While such programs can provide cost-effective ways of reaching environmental policy goals, little is known about their actual costs or effectiveness. Fifth and finally, the Environmental Protection Agency placed much less emphasis on economic analysis during the 1990s. EPA leadership was more hostile to economic analysis than it had been under the prior Bush Administration, and it made organizational changes to reflect this change in priorities. |
| Keywords: | air quality standards, benefit-cost analysis, voluntary programs |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-38&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | Financal assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the financial resources necessary to compensate for environmental damage that may arise in the future. Accordingly, assurance is an important complement to liability rules, restoration obligations, and other regulatory compliance requirements. The paper reviews the need for assurance, given the prevalence of abandoned environmental obligations, and assesses the implementation of assurance rules in the United States. From the standpoint of both legal effectiveness and economic efficiency, assurance rules can be improved. On the whole, however, cost recovery, deterrence, and enforcement are significantly improved by the presence of existing assurance regulations. |
| Keywords: | financial assurance, financial responsibility, bonding, environmental insurance |
| JEL: | K13 K32 Q38 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-42&r=env |
| By: | Parry, Ian (Resources For the Future) |
| Abstract: | This paper draws on a number of recent studies to shed light on several policy issues raised by the impact of environmental policies on technological innovation. First, to what extent does induced innovation raise the overall net benefits to society from environmental policies? Second, how does induced innovation affect the appropriate choice among alternative environmental policy instruments? Third, how does it affect the optimal stringency of environmental regulations? Fourth, should environmental policies be supplemented with additional policies to promote innovation, such as research contracts or prizes for new technologies? |
| Keywords: | environment, technological innovation, pollution control, instrument choice |
| JEL: | Q28 O38 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-44&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | Over the past 30 years, industrial plantation forests have become a major supplier of industrial wood. There are several reasons for this, including the improved economics of planted forests due to biotechnological innovations, the increases in natural forest wood costs due to increasing inaccessibility, and rising wood costs from natural forests due to new environmental restrictions related to logging. Forestry today is on the threshold of the widespread introduction of biotechnology into its operational practices. In many cases, the biotechnology likely to be introduced is simply an extension of that being utilized in agriculture, such as herbicide-tolerant genes. However, biotechnology in forestry also is developing applications unique to forestry, including genes for fiber modification, lignin reduction and extraction, and for the promotion of straight stems and reduced branching. |
| Keywords: | Biotechnology, breeding, forestry, tree plantations, timber, fiber, genes, GMOs, industrial wood, economics, benefits, costs |
| JEL: | Q21 Q23 Q16 O32 L73 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-51&r=env |
| By: | Stavins, Robert |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-53&r=env |
| By: | Oates, Wallace (Resources For the Future) |
| Abstract: | This paper provides a review and assessment of the debate over environmental federalism-the issue of the roles of different levels of government in environmental management. The paper begins with the presentation of three benchmark cases that provide a framework for thinking about the issue. It then offers a review, first of the theoretical literature and second of some new, provocative empirical literature on the race to the bottom. The paper contends that there remains, under certain circumstances, an important role for decentralized government in the setting of environmental standards and the design of regulatory programs. The central government, in addition to setting standards for "national" pollutants, has a fundamental contribution to make in supporting research in environmental science and pollution control technology and in providing needed information and guidance to state and local governments. |
| Keywords: | environmental federalism, environmental management, environmental policy, environmental regulation |
| JEL: | Q2 H1 H7 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-54&r=env |
| By: | Portney, Paul; Oates, Wallace (Resources For the Future) |
| Abstract: | This paper provides a review and assessment of the extensive literature on the political determination of environmental regulation. A promising theoretical literature has emerged relatively recently that provides models of the political interaction of government with various interest groups in the setting of environmental standards and the choice of regulatory instruments. A large empirical literature supports such models, finding evidence of the influence of interest groups but also evidence that net social benefits are often an important determinant of environmental policy choices. We then take up the issue of environmental federalism and the large and growing theoretical literature that addresses the competitive “race to the bottom.” The paper concludes with a brief look at the evolution of environmental policy and finds that economics has come to play a growing role both in the setting of standards for environmental quality and in the design of regulatory measures. |
| Keywords: | environmental regulation, environmental management, environmental policy |
| JEL: | Q2 H1 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-55&r=env |
| By: | Stavins, Robert |
| Abstract: | Environmental policies typically combine the identification of a goal with some means to achieve that goal. This paper, prepared as a chapter draft for the forthcoming Handbook of Environmental Economics, focuses exclusively on the second component, the means—the Ainstruments—of environmental policy, and considers, in particular, experience around the world with the relatively new breed of economic-incentive or market-based policy instruments. I define these instruments broadly, and consider them within four categories- pollution charges; tradable permits; market barrier reductions; and government subsidy reductions. By defining market-based instruments broadly, I cast a large net for this review of applications. As a consequence, the review is extensive. But this should not leave the impression that market-based instruments have replaced, or have come anywhere close to replacing, the conventional, command-and-control approach to environmental protection. Further, even when and where these approaches have been used in their purest form and with some success, such as in the case of tradeable-permit systems in the United States, they have not always performed as anticipated. In the final part of the paper, I ask what lessons can be learned from our experiences. In particular, I consider normative lessons for- design and implementation; analysis of prospective and adopted systems; and identification of new applications. |
| Keywords: | market-based policy, economic incentives, tradable permits, emission taxes |
| JEL: | Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-58&r=env |
| By: | Toman, Michael; Pezzey, John C. |
| Abstract: | Concern about sustainability helped to launch a new agenda for development and environmental economics and challenged many of the fundamental goals and assumptions of the conventional, neoclassical economics of growth and development. We review 25 years’ of refereed journal articles on the economics of sustainability, with emphasis on analyses that involve concern for intergenerational equity in the long-term decisionmaking of a society; recognition of the role of finite environmental resources in long-term decisionmaking; and recognizable, if perhaps unconventional, use of economic concepts, such as instantaneous utility, cost, or intertemporal welfare. Taken as a whole, the articles reviewed here indicate that several areas must be addressed in future investigation- improving the clarity of sustainability criteria, maintaining distinctions between economic efficiency and equity, more thoroughly investigating many common assumptions in the literature about prospects for resource substitution and resource-enhancing technical change, and encouraging the empirical investigation of sustainability issues. |
| Keywords: | economic efficiency, intergenerational equity, social optimality, sustainable development |
| JEL: | Q20 D60 D90 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-03&r=env |
| By: | Wernstedt, Kris (Resources For the Future) |
| Abstract: | Abstract Environmental managers in Russia face severe problems, both from Soviet-era and continuing environmental degradation and due to the weakness of current institutions with responsibilities for environmental protection. This paper draws on surveys, a case study of water pollution, and workshops on Russian environmental decisionmaking to explore prospects for environmental improvements. Using concepts from the regulatory reform literature on next-generation environmental policies, it focuses on the use of market incentives, the construction of a civil society, and community involvement, and emphasizes that Russian nongovernmental organizations may have a particularly important role to play in improving environmental management. Solidifying their legal base, coalition-building skills, and capability to conduct independent, pragmatic policy analyses would enhance their contribution. |
| Keywords: | Russia, environmental management, non-governmental organizations, water quality, Siberia, transitioning countries, next-generation environmental policies |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-04&r=env |
| By: | Kerr, Suzi; Sanchirico, James (Resources For the Future); Newell, Richard (Resources For the Future) |
| Abstract: | Fisheries worldwide continue to suffer from the negative consequences of open access. In 1986, New Zealand responded by establishing an individual transferable quota (ITQ) system that by 1998 included 33 species and more than 150 markets for fishing quotas. We assess these markets in terms of trends in market activity, price dispersion, and the fundamentals determining quota prices. We find that market activity is sufficiently high to support a competitive market and that price dispersion has decreased over time. Using a 15-year panel dataset, we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices, ecological variability, and market interest rates. Controlling for these factors, our results show an increase in quota prices, consistent with increased profitability. Overall, the results suggest these markets are operating reasonably well, implying that ITQs can be effective instruments for efficient fisheries management. |
| Keywords: | tradable permits, individual transferable quota, fisheries, policy. |
| JEL: | Q22 Q28 D40 L10 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-20&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | Abstract Economic models of trade in endangered species products often do not incorporate four focal arguments in the policy debate over trade bans- 1) law-abiding consumers may operate in another market, separate from illegal consumers, that trade would bring online; 2) legal trade reduces stigma, which affects demand of law-abiding consumers; 3) laundering may bring illegal goods to legal markets when trade is allowed; 4) legal sales may affect illegal supply costs. This paper analyzes systematically which aspects of these complicated markets, separately or in combination, are important for determining whether limited legalized trade in otherwise illegal goods can be helpful for achieving policy goals like reducing poaching. |
| Keywords: | endangered species, black markets, CITES, poaching, stigma |
| JEL: | K42 Q21 D11 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-21&r=env |
| By: | Goulder, Lawrence |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-22&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | Project-based mechanisms for emissions reductions credits, like the Clean Development Mechanism, pose important challenges for policy design because of several inherent characteristics. Participation is voluntary. Evaluating reductions requires assigning a baseline for a counterfactual that cannot be measured. Some investments have both economic and environmental benefits and might occur anyway. Uncertainty surrounds both emissions and investment returns. Parties to the project are likely to have more information than the certifying authority. The certifying agent is limited in its ability to design a contract that would reveal investment intentions. As a result, rules for baseline determination may be systematically biased to overallocate, and they also risk creating inefficient investment incentives. This paper evaluates, in a situation with asymmetric information, the efficacy of the main baseline rules currently under consideration- historical emissions, average industry emissions, and expected emissions. |
| Keywords: | climate policy, Clean Development Mechanism, baseline emissions, asymmetric information |
| JEL: | D8 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-23&r=env |
| By: | Sanchirico, James (Resources For the Future); Cochran, Kathryn; Emerson , Peter |
| Abstract: | This paper is a guide for citizens, scientists, resource managers, and policy makers, who are interested in understanding the economic and social value of marine protected areas (MPAs). We discuss the potential benefits and costs associated with MPAs as a means of illustrating the economic and social tradeoffs inherent in implementation decisions. In general, the effectiveness of a protected area depends on a complex set of interactions between biological, economic, and institutional factors. While MPAs might provide protection for critical habitats and cultural heritage sites and, in some cases, conserve biodiversity, as a tool to enhance fishery management their impact is less certain. The uncertainty stems from the fact that MPAs only treat the symptoms and not the fundamental causes of overfishing and waste in fisheries. |
| Keywords: | Marine Protected Areas (MPAs), marine reserves, fisheries |
| JEL: | Q0 Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-26&r=env |
| By: | Wernstedt, Kris (Resources For the Future); Hersh, Robert |
| Abstract: | We examine the use of El Niño-Southern Oscillation (ENSO) forecasts for flood planning in the Pacific Northwest. Using theories of resource mobilization as a conceptual foundation, the paper relies on- 1) case studies of three communities vulnerable to flooding that have had access to long-term forecasts of ENSO conditions; and 2) analysis of data collected from a survey of nearly 60 local emergency managers, planners, and public works staff. We find that understanding the regulatory machinery and other institutions involved in using climate forecasts is critical to more effective use of these forecasts. Forecast use could be promoted by- 1) an extension service to broker climate information; 2) the identification or creation of federal authorities to fund activities to mitigate ENSO impacts; and 3) the proactive use of ENSO signals to identify areas most likely to be influenced by climate anomalies. |
| Keywords: | flooding, ENSO, La Niña, climate variability, climate forecast, natural hazards, water policy |
| JEL: | Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-27&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Hoffmann, Sandra (Resources For the Future); Yoshino , Yutaka |
| Abstract: | We review the legal provisions of the WTO regime that have important implications for national, market-based environmental policies. We evaluate those provisions for their effects on a member country’s ability and incentives to design economically efficient environmental policies. International trade institutions do not recognize the polluter pays principle, posing some challenges for unilateral policies addressing cross-border pollutants and leakage. Nor do they recognize the economic equivalence of emission tax and permit regimes, leading to different potential constraints on policy design and leaving some environmental policies open to influence by protectionist motives. As many legality issues have yet to be disputed and resolved, opportunities exist to help the WTO and environmental institutions evolve in ways to enable and encourage good policymaking. |
| Keywords: | trade, environment, WTO, GATT, market-based policies |
| JEL: | F1 Q38 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-28&r=env |
| By: | Stavins, Robert; Wagner, Alexander; Wagner, Gernot |
| Abstract: | Economists have expended considerable effort to develop economically meaningful definitions of the somewhat elusive concept of “sustainability.” We relate such a definition of sustainability to well known concepts from neoclassical economics, in particular, potential Pareto improvements (in the Kaldor-Hicks sense) and inter-personal compensation. In the inter-temporal realm, we find that dynamic efficiency is a necessary but not sufficient condition for a notion of sustainability that has normative standing as a goal for public policy. We define sustainability as dynamic efficiency plus intergenerational equity. Further, we argue that it is not unreasonable for economists to focus on the efficiency element, leaving equity considerations to the political process. The analogy to the relationship between potential Pareto improvements and (intragenerational) transfers can facilitate discussions about sustainability, both within the economics community and as part of an interdisciplinary discourse, and makes the basic concepts easier to operationalize. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-29&r=env |
| By: | Shogren, Jason; Margolis, Michael |
| Abstract: | The Theory of the Second Best implies that any country with less-than-ideal resources can lose from international trade. Recently it has been suggested this means the South (poor countries) are better off suppressing trade with the North, especially trade in natural resource products, since the North has better developed rights to protect its natural resources. Here we show that the suppression of such trade may also impede the development of property rights in the South, but that even taking this into account, trade liberalization need not improve Southern welfare. We find that within a cone of world prices on the boundary of which lies the South’s autarky price vector, welfare losses still occur even when local governments in the South make optimal choices to enclose the hinterlands. Corollary to the losses, the South can gain from tariffs or quotas and, within a proper subset of the cone of loss, can suffer when the prices of its exports rise. |
| Keywords: | International Trade; Property Rights; Natural Resources; Environment; Second Best; Institutional Change; Development |
| JEL: | F02 F10 F18 K11 O10 O19 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-30&r=env |
| By: | Bernard, Jean-Thomas; Cote, Bruno |
| Abstract: | Energy intensity is the ratio of energy use to output. Most industries deal with several energy sources and outputs. This leads to the usual difficulties of aggregating heterogeneous inputs and outputs. We apply principal components analysis to assess the information derived from six energy intensity indicators. We use two measures of total energy use (thermal and economic) and three measures of industry output (value added, value of production, and value of shipments). The data comes from manufacturing industries in Québec, Ontario, Alberta, and British Columbia from 1976 to 1996. We find that the variation of the six energy intensity indicators that is accounted for by the first principal component is quite large. However, depending on how variables are measured, there may be significant differences in the assessment of the evolution of energy intensity for some industries. There are no particular patterns in this respect. This makes identifying benchmarks that could be used to assess future performance difficult. |
| Keywords: | Energy intensity; aggregation; principal components analysis |
| JEL: | Q40 C43 L60 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-31&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Toman, Michael; Withagen, Cees |
| Abstract: | For the mitigation of long-term pollution threats, one must consider that both the process of environmental degradation and the switchover to new and cleaner technologies are dynamic. We develop a model of a uniform good that can be produced by either a polluting technology or a clean one; the latter is more expensive and requires investment in capacity. We derive the socially optimal pollution stock accumulation and creation of nonpolluting production capacity, weighing the tradeoffs among consumption, investment, and adjustment costs, and environmental damages. We consider the effects of changes in the pollution decay rate, the capacity depreciation rate, and the initial state of the environment on both the steady state and transition period. The optimal transition path looks quite different with a clean or dirty initial environment. With the former, investment is slow and the price of pollution may overshoot the long-run optimum before converging. With the latter, capacity may overshoot. |
| Keywords: | pollution accumulation, clean technology, capacity investment |
| JEL: | Q2 Q42 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-38&r=env |
| By: | Smith, V. Kerry; Banzhaf, H. Spencer (Resources For the Future); Walsh, Randy |
| Abstract: | Environmental policy analyses increasingly require the evaluation of benefits from large changes in spatially differentiated public goods. Such changes are likely to induce general equilibrium effects through changes in household expenditures and local migration, yet current practice "transfers" constant marginal values for even the largest changes. Moreover, it ignores important distributional effects of policy. This paper demonstrates that recently developed locational equilibrium models can provide transferable general equilibrium benefit measures. Our results suggest that taking account of the potential for adjustment and household heterogeneity is important. Applying benefits estimated from this method to the effect of the Clean Air Act amendments in Los Angeles, we find that the estimated annual general equilibrium benefits in 2000 and 2010 are dramatically different by income group and location. The gains range from $33 to about $2,400 per household. These differences arise from variations in the air quality conditions, income, and the effects of general equilibrium price adjustment. |
| Keywords: | air quality, clean air act, non-market valuation, Tiebout model |
| JEL: | H41 Q25 R13 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-44&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Banzhaf, H. Spencer (Resources For the Future) |
| Abstract: | This paper provides new estimates of efficient emission fees for sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions in the U.S. electricity sector. The estimates are obtained by coupling a detailed simulation model of the U.S. electricity markets with an integrated assessment model that links changes in emissions with atmospheric transport, environmental endpoints, and valuation of impacts. Efficient fees are found by comparing incremental benefits with emission levels. National quantity caps that are equivalent to these fees also are computed, and found to approximate caps under consideration in the current multi-pollutant debate in the U.S. Congress and the recent proposals from the Bush administration for the electricity industry. We also explore whether regional differentiation of caps on different pollutants is likely to enhance efficiency. |
| Keywords: | emissions trading, emission fees, air pollution, cost-benefit analysis, electricity, particulates, nitrogen oxides, NOx, sulfur dioxide, SO2, health benefits |
| JEL: | Q2 Q4 D61 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-45&r=env |
| By: | Parry, Ian (Resources For the Future) |
| Abstract: | This paper discusses how carbon abatement policies interact with the tax system, and how these interactions affect the overall costs of carbon controls. We provide formulas for adjusting cost estimates of auctioned and grandfathered carbon emissions from partial equilibrium energy models into rough estimates of general equilibrium costs that account for fiscal interactions. In the basic model with a tax on labor income, the general equilibrium costs of (revenue-neutral) auctioned permits are around 25% higher than the partial equilibrium costs; those of grandfathered permits, which do not directly raise revenues for recycling, are typically more than 100% higher. However, when allowance is made for complicating factors, such as the effect of tax subsidies on raising the distortionary costs of the tax system, the efficiency gains from recycling revenues from auctioned permits are larger. Indeed the general equilibrium costs of (revenue-neutral) auctioned permits can be negative for modest abatement levels. |
| Keywords: | carbon permits; tax distortions; revenue recycling; general equilibrium costs |
| JEL: | Q28 H21 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-47&r=env |
| By: | Shih, Jhih-Shyang (Resources For the Future); Louis, Garrick |
| Abstract: | Most of the United States have laws mandating the recycling of municipal solid waste (MSW). In order to comply, municipalities recycle quotas of materials, without regard to fluctuating prices. An inventory system is proposed that allows municipalities to be sensitive to materials prices as they recycle in accordance with state mandates. A dynamic model is developed; it uses historical secondary material prices as exogenous inputs to minimize the net present value of MSW recycling system cost. The model provides a cost-effective method for municipalities to achieve their MSW recycling targets. The savings is approximately $1.43 per ton of MSW generated based on total MSW management costs of $13.5 per ton. The model also allows one to investigate the effectiveness of various strategies for increasing the recycling rate. These strategies include- reducing the transportation cost for recyclables, supporting the market price of selected secondary materials, and landfill bans on selected materials. This model may also be used to investigate the effect of market price changes on the portfolio of materials held in inventory for recycling. |
| Keywords: | Municipal Solid Waste, Recycling, Inventory, Optimization |
| JEL: | Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-48&r=env |
| By: | Krupnick, Alan (Resources For the Future); Morgenstern, Richard (Resources For the Future); Zhang, Xuehua |
| Abstract: | To reduce carbon emissions worldwide, it makes sense to consider the possibility of developed countries paying for carbon reductions in developing countries. Developing countries may be interested in such activities if the ancillary air pollution benefits are large. This paper reports on an RFF survey of the emissions benefits (and costs) of reducing sulfur dioxide (SO2) emissions from small, coal-burning boilers in Taiyuan, an industrial, northern Chinese city that recently banned uncontrolled coal combustion in certain small boilers in the downtown area. We find significant carbon benefits in percentage terms - on the order of 50% to 95% reduction - associated with this SO2 control policy, with large reduction potential elsewhere in Taiyuan and China. While the cost for boilers that switched out of coal was almost $3,600 per ton of SO2 reduced, these ancillary carbon reductions are truly "free" from a social cost perspective. |
| Keywords: | Carbon, air pollution, informal sector, ancillary benefits, abatement costs, survey |
| JEL: | O12 O2 Q12 Q25 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-54&r=env |
| By: | Krupnick, Alan (Resources For the Future); McGuinness, Meghan; Jakus, Paul |
| Abstract: | Mercury contamination of the Chesapeake Bay is a concern to health authorities in the region. We evaluate the economic and health effects of postulated recreational and commercial fishing advisories for striped bass on the Maryland portion of the bay. Awareness of and response to the advisory is estimated using a meta-analysis of the literature. Three values are estimated- welfare losses to recreational anglers, welfare losses in the commercial striped bass fishery, and health benefits. An estimate of percentage of consumer surplus loss is applied to the value of all fishing days in the bay to estimate recreational welfare loss. Welfare losses to the commercial fishery are estimated based on a model of supply and demand. Health benefits are estimated using estimated exposure and epidemiological relationships, and while potentially large, are highly uncertain. Results also suggest most individuals are below advisory standards ex ante, such that advisories should target high-frequency consumers. |
| Keywords: | fisheries, mercury, advisories, recreation, health benefits |
| JEL: | I18 Q22 Q25 Q26 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-55&r=env |
| By: | Parry, Ian (Resources For the Future); Pizer, William (Resources For the Future); Fischer, Carolyn (Resources For the Future) |
| Abstract: | This paper examines whether the welfare gains from technological innovation that reduces future abatement costs are larger or smaller than the “Pigouvian” welfare gains from optimal pollution control. The relative welfare gains from innovation depend on three key factors - the initially optimal level of abatement, the speed at which innovation reduces future abatement costs, and the discount rate. We calculate the welfare gains from innovation under a variety of different scenarios. Mostly they are less than the Pigouvian welfare gains. To be greater, innovation must reduce abatement costs substantially and quickly and the initially optimal abatement level must be fairly modest. |
| Keywords: | innovation, welfare, regulation, endogenous, technological, change, R&D |
| JEL: | Q16 Q28 O32 O33 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-57&r=env |
| By: | Toman, Michael |
| Abstract: | Economic analysts within government agencies as well as outside government has played a noticeable and increasing role in formulating U.S. climate policy. However, that role has remained limited; in particular, economic analysis has largely been ignored and occasionally even derided in the context of setting targets for GHG control. This paper explores this uneasy relationship between analysis and policy during several U.S. administrations. Some of these problems stem from the incompleteness of the economic analyses themselves, and economic analysts sometimes have not been the most effective advocates for their own findings. However, I think one of the biggest obstacles to more effective use of economic analysis in climate policymaking has been a basic lack of desire among many policymakers for the fruits of the analyses. This reluctance has been especially marked when the economic analysis clashes with strongly held preconceptions – from either side – about what climate policy ought to be. |
| Keywords: | climate change, Kyoto Protocol, Council of Economic Advisers |
| JEL: | Q2 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-59&r=env |
| By: | Simpson, R. David |
| Abstract: | The destruction of natural habitats has prompted concerns about the loss of biological diversity. Regrettably, however, there is no consensus among either biologists or economists on the most meaningful measures of biodiversity. Fundamentally different definitions are useful in asking fundamentally different questions. Considerable attention has been given to the value of diversity in search models. A measure of “aggregate variability” is appropriate to such models. Values derived from search models tend to be well behaved; they exhibit diminishing returns in diversity. In contrast, a definition of diversity as “relative abundance” is more appropriate to more complex objective functions. Values derived in these models are not necessarily well behaved. The differences between diversity values arising in search models and those arising from more general objectives are demonstrated. An example shows that “consistency tests” applied to measures of valuation may not be useful when diversity per se is being valued. |
| Keywords: | Biological diversity; biodiversity; diversity index, abundance; search; variability, consistency; contingent valuation; diminishing returns; increasing returns |
| JEL: | D43 D83 Q20 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-62&r=env |
| By: | Boyd, James (Resources For the Future); Wainger, Lisa |
| Abstract: | Ecosystem compensation and exchange programs require benefit analysis in order to guarantee that compensation or trades preserve the social benefits lost when ecosystems are destroyed or degraded. This study derives, applies, and critiques a set of ecosystem benefits indicators (EBIs). Organized around the concept of ecosystem services and basic valuation principles we show how GIS mappings of the physical and social landscape can improve understanding of the ecosystem benefits arising from specific ecosystems. The indicator system focuses on landscape factors that limit or enhance an ecosystem's ability to provide services and that limit or enhance the expected value of those services. The analysis yields an organized, descriptive, and numerical depiction of sites involved in specific mitigation projects. Indicator-based evaluations are applied to existing wetland mitigation projects in Florida and Maryland in order to practically illustrate the virtues and limits of the approach. |
| Keywords: | Ecosystem Valuation, Wetlands, Spatial Analysis, Landscape Analysis |
| JEL: | Q0 Q3 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-63&r=env |
| By: | Newell, Richard (Resources For the Future); Anderson, Soren |
| Abstract: | Carbon capture and storage (CCS) technologies remove carbon dioxide from flue gases for storage in geologic formations or the ocean. We find that CCS is technically feasible and economically attractive within the range of carbon policies discussed domestically and internationally. Current costs are about $200 to $250 per ton of carbon, although costs are sensitive to fuel prices and other assumptions and could be reduced significantly through technical improvements. Near-term prospects favor CCS for certain industrial sources and electric power plants, with storage in depleted oil and gas reservoirs. Deep aquifers may provide an attractive longer-term storage option, whereas ocean storage poses greater technical and environmental uncertainty. Vast quantities of economically recoverable fossil fuels, sizable political obstacles to their abandonment, and inherent delay associated with developing alternative energy sources suggest that CCS should be seriously considered in the portfolio of options for addressing climate change, alongside energy efficiency and carbon-free energy. |
| Keywords: | carbon, capture, storage, sequestration, climate change, technology |
| JEL: | Q30 Q40 O30 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-68&r=env |
| By: | Toman, Michael |
| Abstract: | The primary aim of this paper is pedagogical. We first present and discuss a “wiring diagram” framework in order to elucidate the general links between economic growth and "natural capital." After developing the general framework, we develop parallel frameworks applicable to several specific sectors of the economy (agriculture, forestry, and manufacturing). Two appendices provide a mathematical formulation of the economy-wide framework and a brief historical review of the role of natural resources and the environment in economic growth theory. |
| Keywords: | economic growth, natural resources, sustainable development |
| JEL: | Q00 O1 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-71&r=env |
| By: | Toman, Michael; Krautkraemer, Jeffrey |
| Abstract: | In this paper, we first present and discuss the basic logic underlying all neoclassical economic theories of “optimal” energy supply- maximization of the present value of some stream of economic returns. We then discuss how the economic theory of optimal resource depletion has evolved since Hotelling’s classic 1931 article. We also consider the power of the theory to support improved empirical understanding of actual behavior. Our discussion of empirical literature indicates that this work has so far provided only limited empirical understanding. |
| Keywords: | depletable resources, energy, intertemporal optimization |
| JEL: | Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-01&r=env |
| By: | Bell, Ruth (Resources For the Future); Fulop, Sandor |
| Abstract: | International environmental cooperation efforts throw environmental professionals together to work, without considering the very different life experiences, legal traditions and cultural framework that each bring to the work. As the work they do together is inherently sensitive – often, the purpose is to write new laws or develop new policies for national application -- this failure explicitly to consider the perspectives of the professionals is puzzling. Two environmental lawyers—one American, one Hungarian—who worked together over the course of 18 months in an effort designed to breathe life into provisions of the Aarhus Convention by improving public access to environmental information held by government bodies, examine the nature and content of their communication, and how that affected their end product. This case study discloses that the authors had very different ideas about what needed to be accomplished in the project, indeed of the very purpose of tools for increasing environmental public participation. It suggests ways in which communication can be facilitated in future such efforts. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-02&r=env |
| By: | Harrington, Winston (Resources For the Future) |
| Abstract: | The performance of the industrial point-source water pollution abatement program in the U.S. Clean Water Act is examined. I begin with a brief description of the statute and then turn to a description of the process used to develop the rules that govern effluent discharges. This is followed by a discussion of the outcomes resulting from efforts to apply these rules to industrial pollutant sources. Two types of outcomes are considered- administrative outcomes and outcomes in the water. Last, the issue of implementation is discussed- how the Clean Water Act may have affected the incentives governing the behavior of industrial dischargers, municipal waste treatment plant operators, and regulators. Surprisingly, there is some evidence that the Clean Water Act, at least as far as industrial point sources are concerned, may be evolving into an effluent fee policy, or at least a mixed policy. |
| Keywords: | effluent guidelines, indirect dischargers, water quality |
| JEL: | Q25 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-03&r=env |
| By: | Beierle, Thomas |
| Abstract: | Following the attacks of September 11, 2001, the Environmental Protection Agency and other government agencies removed information from their websites that they feared could invite attacks on critical public and private infrastructure. Accordingly, the benefits and costs of environmental information disclosure programs have come under increasing scrutiny. This paper provides a framework for examining these benefits and costs, and illustrates the framework through three brief case studies of information disclosure programs- risk management planning, materials accounting, and the Sector Facility Indexing Program. The paper closes by using these three cases to outline what we know and still need to find out about information disclosure programs. |
| Keywords: | disclosure, Toxics Release Inventory, risk management planning, materials accounting, Sector Facility Indexing Project, right-to-know |
| JEL: | Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-05&r=env |
| By: | Pizer, William (Resources For the Future); Kopp, Raymond (Resources For the Future) |
| Abstract: | Decisions concerning environmental protection hinge on estimates of economic burden. Over the past 30 years, economists have developed and applied various tools to measure this burden. In this paper, developed as a chapter for the Handbook of Environmental Economics, we present a taxonomy of costs along with methods for measuring those costs. At the broadest level, we distinguish between partial and general equilibrium costs. Partial equilibrium costs represent the burden directly borne by the regulated entity (firms, households, government), including both pecuniary and nonpecuniary expenses, when prices are held constant. General equilibrium costs reflect the net burden once all good and factor markets have equilibrated. In addition to partial equilibrium costs, these general equilibrium costs include welfare losses or gains in markets with preexisting distortions, welfare losses or gains from rebalancing the government's budget constraint, and welfare gains from the added flexibility of meeting pollution constraints through reductions in the use of higher-priced, pollution-intensive products. In addition to both partial and general equilibrium costs, we also consider the distribution of costs across households, countries, sectors, subnational regions, and generations. Despite improvements in our understanding of cost measurement, we find considerable opportunity for further work and, especially, better application of existing methods. |
| Keywords: | social cost, cost-benefit, cost-effectiveness, environmental regulation |
| JEL: | Q20 Q28 H41 L50 D58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-06&r=env |
| By: | Blackman, Allen (Resources For the Future); Kildegaard, Arne |
| Abstract: | In many cities in developing countries, clusters of small and medium enterprises create severe pollution problems. Because conventional regulatory approaches are typically ineffective in such situations, policy responses have increasingly focused on promoting voluntary clean technological change. Yet the data and analysis needed to guide such efforts are scarce. This paper uses original firmlevel survey data on a cluster of small- and medium-scale leather tanneries in León, Guanajuato— Mexico’s leather capital—to econometrically identify the factors that drive the adoption of three clean tanning technologies. Using a multivariate probit model to estimate a system of seemingly unrelated regressions, we find—in contrast to conventional wisdom—that neither firm size nor regulatory pressure is correlated with adoption. Rather, the drivers of adoption are the firm’s human capital and stock of technical information, the same factors that explain conventional productivity-enhancing technological change. We also find that private-sector trade associations and input suppliers are important sources of technical information about clean technologies. |
| Keywords: | clean technology, developing country, small and medium enterprises, Mexico, multivariate probit |
| JEL: | Q25 O13 O33 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-12-rev&r=env |
| By: | Macauley, Molly (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future) |
| Abstract: | We develop and estimate an index-based measure of expected consumer welfare under various carbon emissions control policies in the electricity generation sector. This approach estimates welfare effects by a somewhat less data intensive methodology than econometric approaches or more complex modeling. We include anticipated technological change in the production of renewable and nonrenewable power generation during the next two decades. We estimate welfare improvements from 2000 to 2020 as renewable energy technologies continue to be improved and gradually adopted, compared with a counterfactual scenario allowing for continual improvement of nonrenewable generation technology. We formally incorporate uncertainty. We evaluate the model under alternative carbon emissions control policies, including policies that create incentives through price mechanisms and policies that mandate the composition of the generation portfolio. We focus on three countries that differ widely in their power fuel mix- India, Germany, and the United States. |
| Keywords: | carbon emissions control, electricity generation, technological change, consumer welfare |
| JEL: | Q40 Q42 O33 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-14&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future) |
| Abstract: | For years economists have urged policymakers to use market-based approaches such as cap-and-trade programs or emission taxes to control pollution. The SO2 allowance market created by Title IV of the 1990 U.S. Clean Air Act Amendments (CAAA) presents the first real test of the wisdom of economists' advice. This paper provides an overview of the origins, design, and performance of the U.S. acid rain program, and an analysis of its specific features and its adaptability as a model for addressing other pollution problems, such as control of NOx or CO2 emissions. The program also has resulted in innovation through changes in organizational technology, in the organization of markets, and through experimentation at individual boilers, much of which arguably would not have occurred under a more prescriptive approach to regulation. There is ample evidence that allowance trading has achieved substantial cost savings, and there are lessons that can guide the design of future policies. |
| Keywords: | emission trading, cap and trade, air pollution, cost-benefit analysis, electricity, particulates, sulfur dioxide, SO2, health benefits, acid rain |
| JEL: | Q25 Q4 D62 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-15&r=env |
| By: | Beierle, Thomas |
| Abstract: | One of the most notable innovations in environmental management in the past 15 years has been the use of environmental information disclosure as a strategy for improving firms’ environmental performance. Following the Environmental Protection Agency’s success with the Toxics Release Inventory, the agency and Congress initiated a number of other disclosure initiatives. This discussion paper documents the experience of three of these- risk management planning, materials accounting, and the Sector Facility Indexing Project. The paper examines the benefits and costs of these programs, their effectiveness, and the dynamics by which disclosure works. |
| Keywords: | disclosure, Toxics Release Inventory, risk management planning, materials accounting, Sector Facility Indexing Project, right-to-know |
| JEL: | Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-16&r=env |
| By: | Blackman, Allen (Resources For the Future); Batz, Michael (Resources For the Future); Evans, David |
| Abstract: | Ciudad Juárez, Chihuahua, is home to the U.S.–Mexico border’s largest maquiladora labor force, and also its worst air pollution. We marshal two types of evidence to examine the link between maquiladoras and air pollution in Ciudad Juárez, and in its sister city, El Paso, Texas. First, we use a publicly available sector-level emissions inventory for Ciudad Juárez to determine the importance of all industrial facilities (including maquiladoras) as a source of air pollution. Second, we use original plantlevel data from two sample maquiladoras to better understand the impacts of maquiladora air pollution on human health. We use a series of computational models to estimate health damages attributable to air pollution from these plants, we compare these damages to estimates of damages from non-maquiladora industrial polluters, and we use regression analysis to determine whether the poor suffer disproportionately from maquiladora air pollution. We find that air pollution from maquiladoras has serious consequences for human health, including respiratory disease and premature mortality. However, maquiladoras are clearly not the leading cause of air pollution in Ciudad Juárez and El Paso. Moreover, most maquiladoras are probably less important sources of dangerous air pollution than at least one notoriously polluting Mexican-owned industry. Finally, we find no evidence to suggest that maquiladora air pollution affects the poor disproportionately. |
| Keywords: | maquiladora, air pollution, human health, environmental justice, U.S.-Mexico border, Ciudad Juárez, El Paso |
| JEL: | Q01 Q25 O13 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-18&r=env |
| By: | Hoberg, George |
| Abstract: | This paper reviews the battles over the Forest Service planning rule that culminated in the November 2000 revising of the regulations implementing the National Forest Management Act. In a departure froj the agency’s emphasis on multiple use, the rule established ecological sustainability as the key objective guiding planning for the national forests. The supporting material explicitly states that “it is based on the recommendation of an eminent committee of scientists.” This pape5r examines the Committee of Scientists and the NFMA rule as a case study in the relation between science and politics in the development and implementation of statutory standards for management of the National Forest System. The conclusion considerations the broader question of whether the Committee and Forest Service overstepped their appropriate roles in promoting what is essentially a new statutory mandate. |
| Keywords: | Forest Service, planning, National Forest Management Act, Committee of Scientists, multiple use, sustainability |
| JEL: | K00 Q23 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-19&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | Water pollution taxes, or effluent fees, have long been advocated by environmental economists as a regulatory approach to cost effectively achieve water quality improvements. The article reviews the arguments in favor of taxes and traces the history of the idea in U.S. policy debates. Particular attention is given to the institutional challenges presented by a tax system and its application in watershed contexts where transport phenomena are important. The article also addresses the question of why effluent taxes are so rarely seen in practice. |
| Keywords: | water quality, effluent fees, market-based incentives |
| JEL: | Q25 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-20&r=env |
| By: | Parry, Ian (Resources For the Future) |
| Abstract: | Grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders. Consequently, they can be highly regressive, even if the poor do not have large budget shares for polluting goods. Using an analytical model, this paper estimates the burden borne by different income groups when emissions permits are used to control power plant emissions of carbon, SO2, and NOx. We also compare the burden borne by poor households under permits with that under emissions taxes, performance standards, technology mandates, and input taxes. And we show how the social costs of policies differ from efficiency costs when society has aversion to inequality. |
| Keywords: | equity effects; pollution controls; emissions permits; social welfare function |
| JEL: | Q28 H22 H23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-21&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Evans, David (Resources For the Future) |
| Abstract: | Emissions of nitrogen oxides (NOx ) contribute to formation of particulate matter and ozone, and also to acidification of the environment. The electricity sector is responsible for about 20% of NOx emissions in the United States, and the sector has been the target of both prescriptive (command-and-control) and flexible (cap-and-trade) approaches to regulation. We summarize the major NOx control policies affecting this sector, and provide some perspectives as to their effectiveness. While both prescriptive and flexible approaches continue to play an important role, significant new proposals have wholly embraced a cap-and-trade approach. |
| Keywords: | emissions trading, cap and trade, air pollution, cost-benefit analysis, electricity, particulates, ozone, nitrogen oxides, acid rain |
| JEL: | Q25 Q4 D62 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-23&r=env |
| By: | Stavins, Robert; Snyder, Lori; Miller, Nolan |
| Abstract: | We use a hazard model to estimate the effect of environmental regulation on the diffusion of membrane cell production technology in the chlorine manufacturing industry. We estimate the effect of regulation on both the adoption of the membrane technology at existing plants and on the exit of existing plants using older technologies. We find that environmental regulation did affect the diffusion of the cleaner technology in the chlorine industry. However, it did so not by encouraging the adoption of membrane cells by existing facilities, but by reducing the demand for chlorine and hence encouraging the shutdown of facilities using the environmentally inferior options. |
| Keywords: | regulation, technological change, environment, hazard model |
| JEL: | Q20 Q28 L50 L65 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-25&r=env |
| By: | Stavins, Robert; Barrett, Scott; Aldy, Joseph (Resources For the Future) |
| Abstract: | We critically review the Kyoto Protocol and thirteen alternative policy architectures for addressing the threat of global climate change. We employ six criteria to evaluate the policy proposals- environmental outcome, dynamic efficiency, cost effectiveness, equity, flexibility in the presence of new information, and incentives for participation and compliance. The Kyoto Protocol does not fare well on a number of criteria, but none of the alternative proposals fare well along all six dimensions. We identify several major themes among the alternative proposals- Kyoto is “too little, too fast”; developing countries should play a more substantial role and receive incentives to participate; implementation should focus on market-based approaches, especially those with price mechanisms; and participation and compliance incentives are inadequately addressed by most proposals. Our investigation reveals tensions among several of the evaluative criteria, such as between environmental outcome and efficiency, and between cost-effectiveness and incentives for participation and compliance. |
| Keywords: | policy architecture, Kyoto Protocol, efficiency, cost effectiveness, equity,participation, compliance |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-26&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | Output-based refunding of environmental policy revenues combines a tax on emissions with a subsidy to output. With imperfect competition, subsidies can discourage output underprovision. However, when market shares are significant, endogenous refunding suffers compared to a fixed subsidy. Refunding the emissions tax according to market share reduces the incentive to abate, and marginal abatement costs will not be equalized if market shares differ. In a Cournot duopoly, endogenous refunding leads to higher output, emissions, and possibly costs compared to a fixed rebate program. These results hold whether emission rates are determined simultaneously or strategically in a two-stage model. |
| Keywords: | emissions tax, earmarking, tradable performance standards, imperfect competition, Cournot, duopoly, refunding, subsidy |
| JEL: | H21 H23 Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-27&r=env |
| By: | Krupnick, Alan (Resources For the Future); Fischer, Carolyn (Resources For the Future); Morgenstern, Richard (Resources For the Future); Logarta, Jose; Rufo, Bing |
| Abstract: | The Asian Development Bank has sponsored research on market-based instruments for managing pollution in Metro Manila, Philippines, where air quality is seriously degraded. This report offers three policy options for reducing particulate emissions and their precursors. For stationary sources, we recommend an emissions fee that creates efficient financial incentives to reduce emissions while raising revenues for monitoring and enforcement activities. For mobile sources, we propose a pilot diesel retrofit program using a low-cost technology that is effective at existing 2,000 ppm sulfur content. Second, we recommmend a charge on the sulfur content of diesel fuel to encourage meeting and surpassing the 500 ppm standard to allow for more advanced particulate trap technologies. Although better data are needed—both for designing controls and for evaluating their efficacy—much can be learned just by implementing these programs, so we make recommendations for starting points. |
| Keywords: | air pollution, emissions tax, Philippines, particulates |
| JEL: | Q25 Q01 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-30&r=env |
| By: | Pizer, William (Resources For the Future) |
| Abstract: | Most studies that compare price and quantity controls for greenhouse gas emissions under uncertainty find that price mechanisms perform substantially better. In these studies, the benefits from reducing emissions are proportional to the level of reductions, and such linear benefits strongly favor price policies (Weitzman 1974). Catastrophic damages, however, challenge that intuition as consequences become highly nonlinear. Catastrophe avoidance offers huge benefits, and incremental adjustments on either side of the associated threshold are relatively unimportant, suggesting a strong preference for quantity controls. This paper shows that with catastrophic damages, both price and quantity mechanisms offer large gains over the business-as-usual alternative, and the difference between policies is never more than 10%. Catastrophe avoidance is much more important than efficient catastrophe avoidance. Although previous studies favoring price policies in the presence of uncertainty have worried that catastrophes would reverse their results, this analysis indicates that such concerns are not borne out. |
| Keywords: | climate change, global warming, prices versus quantities, stock externalities, integrated assessment, uncertainty |
| JEL: | Q28 D81 C68 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-31&r=env |
| By: | Toman, Michael |
| Abstract: | Chapter I- Modeling Challenges in Analyzing GHG Trading Frederic Ghersi, former visiting scholar, Resources for the Future and Michael Toman, adjunct professor Johns Hopkins University and University of California-Santa Barbara and former senior fellow, Resources for the Future Chapter II- Experimental Methods for Research into Trading of GHG Emissions R. Andrew Muller, McMaster University Chapter III- Exploring the Behavioral Underpinnings of Carbon Trading Jason Shogren, University of Wyoming Chapter IV- Greenhouse Gas Trading- Design Issues Seeking Research Answers Tom Tietenberg, Colby College |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-33&r=env |
| By: | Pizer, William (Resources For the Future); Newell, Richard (Resources For the Future); Zhang, Jiangfeng |
| Abstract: | The political economy of environmental policy favors the use of quantity-based instruments over price-based instruments (e.g., tradable permits over green taxes), at least in the United States. With cost uncertainty, however, there are clear efficiency advantages to prices in many cases, especially for stock pollutants such as greenhouse gases. The question arises, therefore, of whether one can design flexible quantity policies that mimic the behavior of price policies, namely stable permit prices and abatement costs. We explore a number of “quantity-plus” policies that replicate the behavior of a price policy through rules that adjust the effective permit cap for unexpectedly low or high costs. They do so without necessitating any monetary exchanges between the government and the regulated firms, which can be a significant political barrier to the use of price instruments. |
| Keywords: | permit market, prices, quantities, banking, borrowing, uncertainty |
| JEL: | Q28 Q48 D8 L51 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-34&r=env |
| By: | Sedjo, Roger (Resources For the Future); Amano, Masahiro |
| Abstract: | This report compares the approaches of the governments of Japan, Canada, and the European Union member countries toward using carbon sinks to meet their respective Kyoto Protocol carbon reduction targets. Various policies have been proposed by which governments can sequester carbon by promoting afforestation and reforestation, slowing deforestation, and undertaking forest management activities under Articles 3.3 and 3.4. At this time, carbon emissions reduction programs are still under development, both within individual countries and within the context of the protocol. Although some of the details have been worked out, concrete definitions are often still lacking, especially as regards impermanence of forests, additionality, leakage, and socioeconomic and environmental impacts. Japan appears most likely to rely most heavily on forest and biological sinks to meet its Kyoto targets. For Canada, sinks are likely to play a rather modest role. For the EU, the role of sinks is likely to be even smaller, with sinks playing no role for some EU countries (including Sweden, our case study country). However, the final decisions have not yet been made for any of these countries, and the actual role of sinks remains to be determined. |
| Keywords: | Climate, Sinks, Kyoto Protocol, Forestry. Canada, Japan, European Union |
| JEL: | F01 Q23 Q28 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-41&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Morgenstern, Richard (Resources For the Future) |
| Abstract: | Estimates of marginal abatement costs for reducing carbon emissions derived from major economic-energy models vary widely. Controlling for policy regimes, we use meta-analysis to examine the importance of structural modeling choices in explaining differences in estimates. The analysis indicates that particular assumptions about perfectly foresighted consumers and Armington trade elasticities generate lower estimates of marginal abatement costs. Other choices are associated with higher cost estimates, including perfectly mobile capital, inclusion of a backstop technology, and greater disaggregation among regions and sectors. Some features, such as greater technological detail, seem less significant. Understanding the importance of key modeling assumptions, as well as the way the models are used to estimate abatement costs, can help guide the development of consistent modeling practices for policy evaluation. |
| Keywords: | climate models, carbon tax |
| JEL: | Q4 Q25 D58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-42-rev&r=env |
| By: | Stavins, Robert |
| Abstract: | This paper reviews lessons that can be learned from U.S. experiences with market-based environmental policies and from related research. Highlights of U.S. experience are summarized with four categories of policy instruments- pollution charges; tradable permits; market friction reductions; and government subsidy reductions. Normative lessons are considered in three areas- design and implementation; analysis of prospective and adopted systems; and identification of new applications. Positive political economy lessons are also reviewed. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-43&r=env |
| By: | Parry, Ian (Resources For the Future) |
| Abstract: | This paper provides simple formulas for adjusting the costs of carbon taxes and tradable carbon permits to account for interactions with preexisting tax distortions in the labor market. Both policies reduce labor supply as they increase product prices and reduce real household wages; the resulting efficiency losses in the labor market can be substantial relative to partial equilibrium abatement costs. However, much of this added cost can be offset—and perhaps more than offset when additional distortions from the tax system are considered—if revenues from carbon taxes or auctioned permits are used to reduce distortionary taxes. Consequently, there can be a strong case on efficiency grounds for using carbon taxes or auctioned permits over grandfathered carbon permits. |
| Keywords: | carbon taxes, carbon permits; fiscal interactions; revenue recycling |
| JEL: | Q28 H21 H23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-46&r=env |
| By: | Stavins, Robert |
| Abstract: | The organizers of an Aspen Institute conference have identified what they characterize as “the critical conundrum” — how business, government, and communications media balance the competing values of economic growth and a healthy environment. In this paper, prepared for discussion at the conference, I focus on government policy, and ask how government integrates economic concerns into its development of environmental policies. In addition, I ask whether and how government should carry out such integration of economic and environmental concerns. I consider two dimensions of environmental policy, which are closely interrelated but conceptually distinct- (1) what is the appropriate (and actual) degree of government activity; and (2) what form should (and does) government activity take. In this brief essay, I attempt to define the scope of these questions, and suggest criteria that can be used to evaluate responses. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-48&r=env |
| By: | Stavins, Robert; Wagner, Alexander; Snyder, Lori |
| Abstract: | We develop and apply a new method for estimating the economic benefits of an environmental amenity. The method fits within the household production framework (Becker 1965), and is based upon the notion of estimating the derived demand for a privately traded option to utilize a freely-available public good. In particular, the demand for state fishing licenses is used to infer the benefits of recreational fishing. Using panel data on state fishing license sales and prices for the continental United States over a fifteen-year period, combined with data on substitute prices and demographic variables, a license demand function is estimated with instrumental variable procedures to allow for the potential endogeneity of administered prices. The econometric results lead to estimates of the benefits of a fishing license, and subsequently to the expected benefits of a recreational fishing day. In contrast with previous studies, which have utilized travel cost or hypothetical market methods, our approach provides estimates that are directly comparable across geographic areas. Further, our results suggest that the benefits of recreational fishing days are generally less than previously estimated. |
| JEL: | Q26 Q21 Q22 H41 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-49&r=env |
| By: | Wernstedt, Kris (Resources For the Future); Hersh, Robert |
| Abstract: | In this paper, the first part of our three-part study on the development of brownfields policy in Wisconsin, we examine the regulatory history of the brownfields policy. We start with the 1978 Hazardous Substance Spill Law, the antecedent to the brownfields regulatory reform of the 1990s, and examine the interaction of policy entrepreneurs in both the public and the private sectors that has led to innovation. We follow this by exploring the response of the Wisconsin Department of Natural Resources to reform efforts, looking at both how it anticipated and led some of the efforts and how it addressed demands placed on it by the state legislature and executive. We then discuss the central role that the state’s Brownfields Study Group has played in moving brownfields cleanup and redevelopment objectives into legislation and the field. We base our work on interviews with nearly 70 individuals from public, private for-profit, private nonprofit, and tribal organizations. |
| Keywords: | brownfields, policy innovation, regulatory history |
| JEL: | Q24 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-52&r=env |
| By: | Krupnick, Alan (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future); Bergin, S.; Russell, Armistead |
| Abstract: | In this paper, we develop an integrated cost-benefit analysis framework for ozone and fine particulate control, accounting for variability and uncertainty. The framework includes air quality simulation, sensitivity analysis, stochastic multi-objective air quality management, and stochastic cost-benefit analysis. This paper has two major contributions. The first is the development of stochastic source-receptor (S-R) coefficient matrices for ozone and fine particulate matter using an advanced air quality simulation model (URM-1ATM) and an efficient sensitivity algorithm (DDM-3D). The second is a demonstration of this framework for alternative ozone and PM2.5 reduction policies. Alternative objectives of the stochastic air quality management model include optimization of the net social benefits and maximization of the reliability of satisfying certain air quality goals. We also examine the effect of accounting for distributional concerns. |
| Keywords: | ambient air, ozone, particulate matter, risk management, public policy, cost-benefit analysis, variability and uncertainty, stochastic simulation, stochastic multi-objective programming, decisionmaking, National Ambient Air Quality Standards |
| JEL: | C6 Q2 Q25 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-55&r=env |
| By: | Smith, V. Kerry; Banzhaf, H. Spencer (Resources For the Future) |
| Abstract: | We document the sensitivity of welfare estimates derived from discrete choice models to assumptions about the choice set. Such assumptions can affect welfare estimates through both the estimated parameters of the model and, conditional on the parameters, the substitution among alternatives. Our analysis involves estimates of the benefits of air quality improvements in Los Angeles based on discrete choices of neighborhood and housing. We further illustrate the use of meta analysis to document and summarize voluminous information derived from repeated sensitivity analyses. |
| Keywords: | Meta analysis, random utility model, choice set, air quality, housing |
| JEL: | C15 Q25 R21 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-61&r=env |
| By: | Walls, Margaret (Resources For the Future) |
| Abstract: | Solid waste management services are contracted out to private firms in many U.S. communities. Household waste collection, transport, and disposal are relatively straightforward services to define within the terms of a contract. The addition of recycling, however, significantly complicates matters. How should contracts be structured to provide incentives for recycling? Who should own key facilities, such as recyclable materials processing facilities? Should a separate contract for processing and sale of materials be used, or should these services be provided by government employees or purely private markets? These questions are addressed in this study using the principal-agent framework and the theory of incomplete contracts in economics. I explain stylized facts in the industry, including facts about asset ownership, and look in detail at contracts used in seven communities that have achieved high rates of waste diversion and recycling. |
| Keywords: | incentive contracts, asset specificity, principal-agent models, waste collection, recycling |
| JEL: | L33 L14 Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-62&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | In a second-best world of below-optimal pollution pricing, the public return to R&D may be greater than under Pigouvian pricing, due to excess benefits of increasing abatement, or it may be lower, since private actors lack the incentives to take full advantage of the new, cleaner technologies. This paper uses a simple model to demonstrate the interaction between environmental policies, R&D externalities, and the social return to innovation. The results indicate that strong public support for innovation is only justified if at least a moderate emissions policy is in place and spillover effects are significant. Furthermore, in most cases, policy constraints that limit regulatory burdens tend to further limit the scope for public support, even when cost reductions allow for more stringent abatement targets. An exception is when knowledge of the policy adjustment process further reduces private innovation incentives. |
| Keywords: | emissions price, technological innovation, spillovers, R&D policy |
| JEL: | Q28 O38 H23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-02&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Newell, Richard (Resources For the Future) |
| Abstract: | We assess different policy options for reducing greenhouse gas emissions and promoting the development and diffusion of renewable energy technologies- (1) a carbon emissions price, (2) a generation subsidy for renewable energy, (3) a tax on fossil fuel generated energy, (4) a portfolio (market share) requirement for renewable energy sources, (5) a tradable performance standard for the emissions intensity of all generation, and (6) a subsidy for R&D investment in renewable energy technology. We evaluate the relative performance of the different policies according to different potential goals- emissions reduction, renewable energy production, R&D, and welfare. We also assess how the nature of technological progress—whether it occurs by learning by doing or firm-specific innovation—affects the desirability of different policy measures. |
| Keywords: | technology, policy instruments, climate change, renewable energy |
| JEL: | Q21 Q28 Q48 O38 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-05&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Laxminarayan, Ramanan (Resources For the Future) |
| Abstract: | Although much has been written about the implications of monopoly power for the rate of extraction of natural resources, the specific case in which the resource can be sold in two markets with different elasticities of demand has escaped notice. We find that a monopolist facing two markets with differing iso-elastic demand schedules extracts more rapidly than the social planner, whether or not arbitrage prevents price discrimination between markets. This analysis is relevant in the case of many resources — such as natural gas used for power generation and household heating, or petroleum used for making plastics and as fuel. |
| Keywords: | exhaustible resources, monopoly, markets, price discrimination |
| JEL: | D42 Q3 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-08&r=env |
| By: | Boyd, James (Resources For the Future); Sanchirico, James (Resources For the Future); Shabman, Leonard (Resources For the Future) |
| Abstract: | Habitats and the services they provide are part of our nation’s portfolio of natural capital assets. As for many components of this portfolio, it is difficult to assess the value of their services, and this complicates regulators’ investment decisions, especially when the alternative use is measurable. The principal objective of this report is to suggest possible strategies for the National Marine Fisheries Service (NMFS) as it applies economic analyses and arguments in support of the agency’s trustee responsibilities. Many approaches are possible, and as we discuss, the “right” strategy will depend on the questions asked, the resources available, and the agency’s role in the consultation process. We discuss in detail bioeconomic modeling and ecosystem indicator approaches to habitat value assessment. Although the approaches are discussed independently, multiple tools could be used simultaneously across different regions or within the same region on different aspects of one consultation. |
| Keywords: | Bioeconomic, ecological indicators, ecosystem services |
| JEL: | Q20 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-09&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | Policies to promote energy efficiency in household appliances have different impacts, depending on the structure of market supply. If provision is perfectly competitive, markets will offer the variety of energy efficiency levels that consumers demand. However, if producers can price discriminate, using energy intensity to help segment consumer demand, consumers of low-end appliances are offered too little energy efficiency so that high-end consumers can be charged more for efficient appliances. Minimum energy efficiency standards can then improve welfare. We also consider average intensity standards, energy prices, and innovation and identify important differences in their effects on energy intensity, welfare, and consumers, depending on market structures. To evaluate the role for policy, one must know not only how consumers value energy efficiency in their decisionmaking, but also how producers respond to those values. |
| Keywords: | energy efficiency, appliance, standards, price discrimination |
| JEL: | Q40 Q55 Q58 O3 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-11&r=env |
| By: | Stavins, Robert |
| Abstract: | This paper introduces a volume of collected papers on the political economy of environmental regulation- economic analyses of the processes through which political decisions regarding environmental regulation are made, principally in the institutional context found in the United States. Despite this geographic focus, many of the papers contain analytical models that are methodologically of interest and/or have lessons that are relevant in other parts of the world. In the environmental realm, questions of political economy emerge along three fundamental dimensions, which are closely interrelated but conceptually distinct- (1) the degree of government activity; (2) the form of government activity; and (3) the level of government that has responsibility. The first three parts of the book deal respectively with these three fundamental dimensions of inquiry. Part I features a set of six articles that examine how the targets and goals of individual environmental policies are established. Part II brings together nine articles that employ the analytical apparatus of positive political economy to address questions related to the choice of policy instruments for environmental regulation. Part III features four articles that examine — both positively and normatively — the level of government that is delegated responsibility for environmental protection. Finally, in Part IV, three articles are featured that assess the use of economic analysis in contemporary environmental policy. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-12&r=env |
| By: | Krupnick, Alan (Resources For the Future); Alberini, Anna; Simon, Nathalie; Cooper, Maureen |
| Abstract: | Using results from two contingent valuation surveys conducted in Canada and the United States, we explore the effect of a latency period on willingness to pay (WTP) for reduced mortality risk using both structural and reduced form approaches. We find that delaying the time at which the risk reduction occurs by 10 to 30 years significantly reduces WTP for respondents aged 40 to 60 years. Additionally, we estimate implicit discount rates equal to 8% for Canada and 4.5% for the United States—both well within the range established previously in the literature. |
| Keywords: | value of a statistical life, mortality risks, cost–benefit analysis |
| JEL: | Q51 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-13&r=env |
| By: | Krupnick, Alan (Resources For the Future); Bell, Ruth (Resources For the Future); Morgenstern, Richard (Resources For the Future); Anderson, Robert; Abegunawardena, Piya; Schreifels, Jeremy; Dong, Cao; Jinan, Wang; Jitian, Wang; Larsen, Steiner |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-16&r=env |
| By: | Dowlatabadi, Hadi; Boyd, David; MacDonald, Jamie |
| Abstract: | How much a policy is expected to cost and who bears the brunt of that cost play a significant role in the debates that shape regulations. We do not have a good track record of predicting costs and their ultimate distribution, but systematic reviews of past assessments have identified some of the factors that lead to errors. A wide range of expected costs of climate policy have been hotly debated, but all are likely to be wrong. This does not mean that we should continue a debate using ill-informed analyses. On the contrary, we need early small experiments to shed light on key unknowns. Environmental stewardship is a long-term challenge and an adaptive regulatory approach promises to inform policy targets and improve controls through sequential regulatory phases that promote- innovation, flexibility and diffusion of best technologies. |
| Keywords: | cost estimation, climate policy, modeling, adaptive management |
| JEL: | D21 D82 D83 F13 O31 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-17&r=env |
| By: | Pizer, William (Resources For the Future); Kruger, Joseph |
| Abstract: | The European Union is on the verge of establishing an emissions trading program ten times the size of the Acid Rain trading program in the United States. Its design takes advantage of many lessons from existing experience with trading programs, as well as economic theory, and innovates in important ways. While we view this as an impressive development, concerns about equity, enforcement, and efficiency remain. Specifically, a lack of data and weaker environmental institutions in some EU Member States raises questions about both allowance allocations and compliance and enforcement. Although much attention has focused on whether prices will be “too low” in the first phase of the program, a greater risk is that uncertainty about program elements, technology and behavioral response, and external events could create volatile markets and costly compliance in the second phase. Regardless of outcome, the EU trading system will be influential in future international efforts to reduce greenhouse gases. |
| Keywords: | European Union, climate change, emissions trading |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-24&r=env |
| By: | Krupnick, Alan (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future); Bergin, S.; Russell, Armistead |
| Abstract: | A key question in developing effective mitigation strategies for ozone and particulate matter is identifying which source regions contribute to concentrations in receptor regions. Using a direct approach with a regional, multiscale three-dimensional model, we derive multiple source-receptor matrices (S-Rs) to show inter- and intrastate impacts of emissions on both ozone and PM2.5 over the eastern United States. Our results show that local (in-state) emissions generally account for about 23% of both local ozone concentrations and PM2.5 concentrations, while neighboring states contribute much of the rest. The relative impact of each state on others varies dramatically between episodes. In reducing fine particulate concentrations, we find that reducing SO2 emissions can be 10 times as effective as reducing NOx emissions. SO2 reductions can lead to some increase in nitrates, but this is relatively small. NOx reductions, however, lead to both ozone reductions and some reduction in nitrate and sulfate particulate matter. |
| Keywords: | source-receptor, ozone, particulate matter, sensitivity analysis, air quality simulation, National Ambient Air Quality Standards |
| JEL: | Q2 Q25 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-25&r=env |
| By: | Parry, Ian (Resources For the Future) |
| Abstract: | This paper quantifies the costs of controlling SO2, carbon, and NOx emissions from power generation, accounting for interactions between environmental policies and the broader fiscal system. We distinguish a dirty technology (coal) that satisfies baseload demand and a clean technology (gas) that is used during peak periods, and we distinguish sectors with and without regulated prices. Estimated emissions control costs are substantially lower than in previous models of fiscal interactions that assume a single, constant returns technology and competitive pricing. The results are reasonably robust to alternative scenarios, such as full price deregulation and market power in the deregulated sector. |
| Keywords: | electricity generation, pollution control, fiscal interactions, price regulation, multiple technology |
| JEL: | Q28 H21 H23 L94 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-27&r=env |
| By: | Stavins, Robert |
| Abstract: | The Kyoto Protocol (1997) to the United Nations Framework Convention on Climate Change (1992) may come into force without U.S. participation, but its effects on climate change will be trivial. At the same time, the economic and scientific consensus points to the need for a credible international approach. A reasonable starting point is the Framework Convention on Climate Change (FCCC), which was signed by 161 nations and ratified by 50, including the United States, and entered into force in 1994. In this paper, I remain agnostic on the question of the Kyoto Protocol’s viability. Some analysts see the agreement as deeply flawed, while others see it as an acceptable or even excellent first step. But virtually everyone agrees that the Protocol is not sufficient to the overall challenge, and that further, subsequent steps will be required. This is my starting point for proposing a three-part policy architecture- first, all nations would be involved through the use of economic trigger mechanisms, such as growth targets; second, long-term targets would be required — in the short-term, firm, but moderate targets, and in the long-term, flexible, but much more stringent targets; and third, market-based policy instruments would be part of the package — emissions trading, carbon taxes, or hybrids of the two. This overall approach can be made to be scientifically sound, economically rational, and politically pragmatic. |
| Keywords: | global climate change, global warming, policy architecture, Kyoto Protocol |
| JEL: | Q54 Q58 Q48 Q39 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-28&r=env |
| By: | Afsah, Shakeb; Sterner, Thomas; López, Jorge |
| Abstract: | This paper evaluates the effectiveness of the Program for Pollution Control Evaluation and Rating (PROPER) in Indonesia. PROPER, the first major public disclosure program in the developing world, was launched in June 1995; though it collapsed in 1998 with the Asian financial crisis, it is currently being revived. There have been claims of success for this pioneering scheme, yet little formal analysis has been undertaken. We analyze changes in emissions concentrations (mg/L) using panel data techniques with plant-level data for participating firms and a control group. The results show that there was indeed a positive response to PROPER, especially among firms with poor environmental compliance records. The response was immediate, and firms pursued further emissions reductions in the following months. The total estimated reductions in biochemical oxygen demand (BOD) and chemical oxygen demand (COD) were approximately 32%. |
| Keywords: | environmental policy, pollution control, public disclosure, Asia, Indonesia |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-34&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Fox, Alan |
| Abstract: | Abstract The choice of mechanism for allocating tradable emissions permits has important efficiency and distributional effects when tax and trade distortions are considered. We present different rules for allocating carbon allowances within sectors (lump-sum grandfathering, output-based allocation [OBA], and auctioning) and among sectors (historical emissions and value-added shares). Using a partial equilibrium model, we explore how OBA mitigates price increases, limits incentives for conservation in favor of lowering energy intensity, and changes relative output prices among sectors. We then use a computable general equilibrium model from the Global Trade Analysis Project, modified to incorporate a labor/leisure choice, to compare overall mechanism performance. The output subsidies implicit in OBA mitigate tax interactions, which can lead to higher welfare than grandfathering. OBA with sectoral distributions based on value added generates effective subsidies similar to a broad-based tax reduction, performing nearly like auctioning with revenue recycling, which generates the highest welfare. OBA based on historical emissions supports the output of more polluting industries, which more effectively counteracts carbon leakage but is more costly in welfare terms. Industry production and trade impacts among sectors that are less energy intensive are also quite sensitive to allocation rules. |
| Keywords: | emissions trading, output-based allocation, tax interaction, carbon leakage |
| JEL: | Q2 Q43 H2 D61 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-37&r=env |
| By: | Stavins, Robert; Jaffe, Adam; Newell, Richard (Resources For the Future) |
| Abstract: | Market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies. These combined market failures provide a strong rationale for a portfolio of public policies that foster emissions reduction as well as the development and adoption of environmentally beneficial technology. Both theory and empirical evidence suggest that the rate and direction of technological advance is influenced by market and regulatory incentives, and can be cost-effectively harnessed through the use of economicincentive based policy. In the presence of weak or nonexistent environmental policies, investments in the development and diffusion of new environmentally beneficial technologies are very likely to be less than would be socially desirable. Positive knowledge and adoption spillovers and information problems can further weaken innovation incentives. While environmental technology policy is fraught with difficulties, a long-term view suggests a strategy of experimenting with policy approaches and systematically evaluating their success. |
| Keywords: | technology, research and development, environment, externality, policy |
| JEL: | O38 Q28 H23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-38&r=env |
| By: | Kopp, Raymond (Resources For the Future) |
| Abstract: | At the present time no widely accepted temporal emissions path for greenhouse gases has been developed and adopted at either a country or a global level. What does exist is a set of nearterm, country-level emissions targets associated with the first commitment period of the Kyoto Protocol and a process for the determination of targets for subsequent commitment periods. However, the first commitment period targets specified by the protocol have been heavily criticized on the grounds that they are arbitrary and ad hoc. The purpose of this paper is to examine the conceptual foundations upon which one might base a domestic climate policy for the United States and to attempt to determine whether a near-term emissions target can indeed be derived from structured decisionmaking resting upon these conceptual foundations. |
| Keywords: | U.S. climate policy, greenhouse gas target, cost-effectiveness analysis, costbenefit analysis |
| JEL: | Q2 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-41&r=env |
| By: | Walls, Margaret (Resources For the Future); Nelson, Per-Kristian (Resources For the Future) |
| Abstract: | In 1999 Congress passed the National Air Quality and Telecommuting Act. This Act established pilot telecommuting programs in five major U.S. metropolitan areas with the express purpose of studying the feasibility of addressing air quality concerns through telecommuting. This study provides the first analysis of data from the “ecommute” program. Using two-and-one-half years of data, we look at telecommuting frequency, mode choice, and emissions reductions. We also look at reporting behavior, dropout rates, and other information to assess the program’s performance. We analyze results by city - Denver, Washington, D.C., Houston, Los Angeles, and Philadelphia are the five pilot cities. And finally, we use the program’s emissions reduction findings to calculate how much telecommuting would be needed to reach an annual volatile organic compounds emission reduction target in each city. This discussion paper is one in a series of four RFF papers on telecommuting published in December 2004. In addition to analysis of the ecommute data described in this paper, Safirova and Walls (discussion paper 04-43) similarly analyze data from a 2002 survey conducted by the Southern California Association of Governments (SCAG) of telecommuters and nontelecommuters. These same authors put these findings into context by providing a review of the empirical literature on telecommuting (discussion paper 04-44). Finally, Nelson presents an assessment of institutional and regulatory barriers to using telecommuting in a mobile source emissions trading program (04-45). The studies by RFF are part of a larger report on the ecommute program completed by the Global Environment and Technology Foundation (GETF) for the U.S. Environmental Protection Agency. More information about the overall project can be found on the ecommute/GETF website- http-//www.ecommute.net/program/. |
| Keywords: | telecommuting, mode choice, air quality, emissions |
| JEL: | R4 Q53 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-42&r=env |
| By: | Walls, Margaret (Resources For the Future); Safirova, Elena (Resources For the Future) |
| Abstract: | In this paper, we review 20 relatively recent empirical studies of telecommuting, all of which focus on the trip reduction perspective. The studies include earlier ones with smaller datasets, such as some pilot studies of individual employers, and more recent studies based on broader surveys of both telecommuters and nontelecommuters. We focus on the results of the studies with respect to participation and frequency of telecommuting, the effects on vehicle-miles-traveled (VMT) and trips, and in some cases, the impacts on emissions and air quality. Although there does not seem to be a consensus, there is a predominant view that certain factors increase both the likelihood of telecommuting and the frequency of telecommuting. These factors are having children in the household, being female, having more education, having a longer commute trip, having worked longer for one’s current employer and/or in one’s current position, and having a job that does not require face-to-face contact with coworkers or clients. Most studies of VMT and trip reductions from telecommuting show that telecommuters significantly reduce both daily trips and VMT. Not only does commute VMT fall, but noncommute VMT appears to fall in some cases as well. The studies of VMT, however, tend to focus on the reductions for individual employees who choose to telecommute. Although an individual telecommuter may experience a sharp reduction in VMT, total benefits depend on how many people are telecommuting, how often they are doing so, and the duration of telecommuting. More research is needed with larger and more broadly based datasets across employers that include both individual employee characteristics and employer and job characteristics. This would allow a better analysis of telecommuting choice and frequency as well as more reliable estimates of VMT and emissions impacts. This discussion paper is one in a series of four RFF papers on telecommuting published in December 2004. Discussion papers 04-42 and 04-43 present analyses of two recent datasets on telecommuters. In 04-42, Nelson and Walls analyze data from five pilot cities enrolled in the "ecommute" program. In 04-43, Safirova and Walls analyze data from a broad survey conducted by the Southern California Association of Governments (SCAG) of telecommuters and nontelecommuters. Finally, in 04-45 Nelson presents an assessment of institutional and regulatory barriers to using telecommuting in a mobile source emissions trading program. The studies by RFF are part of a larger report on the ecommute program completed by the Global Environment and Technology Foundation (GETF) for the U.S. Environmental Protection Agency. More information about the overall project can be found on the ecommute/GETF website- http-//www.ecommute.net/program/. |
| Keywords: | telecommuting, mode choice, air quality, emissions |
| JEL: | R4 Q53 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-44&r=env |
| By: | Nelson, Per-Kristian (Resources For the Future) |
| Abstract: | The 1999 National Telecommuting and Air Quality Act created pilot programs in five metropolitan areas in the United States to examine whether a particular type of economic incentive, tradable emissions credits created from telecommuting, represents a viable strategy for reducing vehicle miles traveled and improving air quality (H.R. 2094, 2000). Under the ecommute program, companies could generate emissions credits by reducing the vehicle miles traveled (VMT) of their workforce through telework programs. They would then be able to sell the credits to firms that needed the reductions to comply with air quality regulations. This paper provides some context for evaluating whether such a trading scheme represents a feasible approach to reducing mobile source emissions and promoting telecommuting and reviews the limited experience with mobile source emission trading programs. From a regulatory perspective, the most substantial drawback to such a program is its questionable environmental integrity, which is a result of difficulties in establishing sufficiently rigorous quantification protocols to measure accurately the emission reductions from telecommuting. Perhaps more importantly, such a program is not likely to be cost-effective; the emissions reductions from a single telecommuter are extremely small, meaning that any trading program will have relatively high transaction costs to environmental benefits. A comparison of estimated emission reductions from the five pilot cities with historical and projected emission credit and allowance prices indicates that the yearly revenue per participant is likely to be well under $100, substantially below what firms participating in the program said would be an adequate incentive to induce a substantial increase in telecommuting. This discussion paper is the final paper in a series of four on telecommuting published in by RFF in December 2004. In discussion paper 04-42, Walls and Nelson analyze data from five pilot cities enrolled in the “ecommute” program. In 04-43 Safirova and Walls examine the 2002 Telework survey conducted in California and, in 04-44, these authors review the empirical literature on telecommuting with a focus on trip reduction impacts. The studies by RFF are part of a larger report on the ecommute program completed by the Global Environment and Technology Foundation (GETF) for the U.S. Environmental Protection Agency. More information about the overall project can be found on the ecommute/GETF website- http-//www.ecommute.net/program/. |
| Keywords: | telecommuting, emissions trading |
| JEL: | R4 Q53 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-45&r=env |
| By: | Stavins, Robert |
| Abstract: | This article, prepared for the forthcoming second edition of the New Palgrave Dictionary of Economics, provides an overview of the economics of environmental policy. Included are the setting of goals and targets, notably the Kaldor-Hicks criterion, and the related method of assessment known as benefit-cost analysis. Also reviewed are the means of environmental policy, that is, the choice of specific policy instruments, featuring an examination of potential criteria for assessing alternative instruments, with focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional command-and-control mechanisms and market-based instruments. |
| Keywords: | environmental economics, efficiency, cost-effectiveness, benefit-cost analysis, market-based instruments, tradeable permits, pollution taxes |
| JEL: | K32 Q28 Q38 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-54&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future) |
| Abstract: | We analyze policies to promote renewable sources of electricity. A renewable portfolio standard raises electricity prices and primarily reduces gas-fired generation. A “knee” of the cost curve exists between 15% and 20% goals for 2020 in our central case, and higher natural gas prices lower the cost of greater reliance on renewables. A renewable energy production tax credit lowers electricity price at the expense of taxpayers and thus limits its effectiveness in reducing carbon emissions; it also is less costeffective at increasing renewables than a portfolio standard. Neither policy is as cost-effective as a capand-trade policy for achieving carbon emissions reductions. |
| Keywords: | renewable energy, electricity, renewable portfolio standard, carbon dioxide |
| JEL: | Q42 Q48 Q54 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-01&r=env |
| By: | Pizer, William (Resources For the Future) |
| Abstract: | While the rest of the world has pursued absolute emissions limits for greenhouse gases, the Bush administration has proposed an alternative policy formulation based, among other things, on reducing emissions intensity—that is, emissions per dollar of real gross domestic product. Critics of this formulation have denounced the general idea of an intensity-based emissions target, along with its voluntary nature and weak targets. This raises the question of whether intensity-based emissions limits, distinct from the other features of the Bush initiative, offer a useful alternative to absolute emissions limits. This paper makes the case that they do, based on how emissions targets are framed. The argument draws on four key observations- greenhouse gas emissions will continue to rise over the near term, absolute targets emphasize zero or declining emissions growth while intensity targets do not, developing countries’ economic development is integrally tied to emissions growth for the foreseeable future, and intensity targets need not be any more complicated to administer than absolute targets. |
| Keywords: | carbon, climate, policy, intensity, global warming |
| JEL: | Q54 Q58 Q56 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-02&r=env |
| By: | Kruger, Joseph |
| Abstract: | Much has been written about the economic and environmental performance of U.S. emissions trading programs for “acid rain” (sulfur dioxide) and nitrogen oxides. Less explored have been the unique roles and interactions of environmental regulators and the companies they regulate. I first examine how these roles change the way that regulators and companies operate within their own organizations and with each other. Next, I use examples from U.S. trading programs to illustrate the design and administrative features that allow program administrators and industry to best fulfill their respective roles. Finally, I examine briefly whether these features are present in the EU Emissions Trading System and determine the implications for its effectiveness. |
| Keywords: | emissions trading, climate change, environmental management, information technology |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-03&r=env |
| By: | Stavins, Robert; Plantinga, Andrew; Lubowski, Ruben |
| Abstract: | When and if the United States chooses to implement a greenhouse gas reduction program, it will be necessary to decide whether carbon sequestration policies — such as those that promote forestation and discourage deforestation — should be part of the domestic portfolio of compliance activities. We investigate the cost of forest-based carbon sequestration. In contrast with previous approaches, we econometrically examine micro-data on revealed landowner preferences, modeling six major private land uses in a comprehensive analysis of the contiguous United States. The econometric estimates are used to simulate landowner responses to sequestration policies. Key commodity prices are treated as endogenous and a carbon sink model is used to predict changes in carbon storage. Our estimated marginal costs of carbon sequestration are greater than those from previous engineering cost analyses and sectoral optimization models. Our estimated sequestration supply function is similar to the carbon abatement supply function from energy-based analyses, suggesting that forest-based carbon sequestration merits inclusion in a cost-effective portfolio of domestic U.S. climate change strategies. |
| Keywords: | abatement; carbon; climate change; costs; forestry; greenhouse gases; land use; landuse change; sequestration |
| JEL: | Q54 Q23 Q24 Q15 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-04&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Krupnick, Alan (Resources For the Future); Evans, David (Resources For the Future); Toth, Russell |
| Abstract: | For years economists have urged policymakers to use market-based approaches such as cap-and-trade programs or emission taxes to control pollution. The SO2 allowance market created by Title IV of the 1990 U.S. Clean Air Act Amendments represents the first real test of the wisdom of economists’ advice. Subsequent urban and regional applications of NOx emission allowance trading took shape in the 1990s in the United States, culminating in a second large experiment in emission trading in the eastern United States that began in 2003. This paper provides an overview of the economic rationale for emission trading and a description of the major U.S. programs for sulfur dioxide (SO2) and nitrogen oxides (NOx). We evaluate these programs along measures of performance including cost savings, environmental integrity, and incentives for technological innovation. We offer lessons for the design of future programs including, most importantly, those reducing carbon dioxide. |
| Keywords: | sulfur dioxide, nitrogen oxides, emission trading, power plants, air pollution |
| JEL: | H23 Q25 Q28 D78 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-05&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Sterner, Thomas; Muchapondwa, Edwin |
| Abstract: | This paper formulates a bioeconomic model to analyze community incentives for wildlife management under benefit-sharing programs like the Communal Areas Management Programme for Indigenous Resources (CAMPFIRE) in Zimbabwe. Two agents influence the wildlife stock- a parks agency determines hunting quotas, and a local community chooses to either aid or discourage outside poachers. Wildlife generates revenues from hunting licenses and tourism; it also intrudes on local agriculture. We consider two benefit-sharing regimes- shares of wildlife tourism rents and shares of hunting licenses. Resource sharing does not necessarily improve community welfare or incentives for wildlife conservation. Results depend on the exact design of the benefit shares, the size of the benefits compared with agricultural losses, and the way in which the parks agency sets hunting licenses. |
| Keywords: | bioeconomic, CAMPFIRE, community, poaching, wildlife, benefit sharing |
| JEL: | H41 Q20 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-06&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future) |
| Abstract: | In the mid-1990s, when the Federal Energy Regulatory Commission was preparing to release Order 888 requiring open access to the transmission grid, the commission, environmental groups, and the Environmental Protection Agency, among others, raised the question of how open access and greater competition in wholesale electricity markets might affect the environment. If open access worked as expected, underutilized older coal-fired generators in the Midwest and elsewhere might find new markets for their power, leading to associated increases in air pollution emissions. Restructuring also might lead to retirements of inefficient nuclear facilities, whose generation would be replaced by fossil generation, further increasing emissions. On the other hand, some suggested that in the long run, the anticipated increase in investment in new gas-fired generators might accelerate a switch from coal to gas that would decrease emissions. Lastly, if restructuring produced the desired result of lower electricity prices, many observers suggested that an increase in electricity demand would lead to more generation and higher emissions. The counterargument was that restructuring would lead to product differentiation and customer choice, including the opportunity for customers to willingly select “green electricity.” In this paper we review the prospective literature on the possible or anticipated effects of restructuring on the environment and the evidence from changes in the intervening years to utilization of coal facilities, performance of existing nuclear plants, investment in natural gas generation, and electricity prices. We assess how actual experience compares with prior expectations. We discuss other changes in upstream fuel markets, energy policy, and environmental regulations and the role that each of these factors plays in the efforts to evaluate the environmental effects of restructuring. Today the movement toward restructuring has stalled, leaving the country divided into competitive and regulated regions. We discuss the implications of this division for the future of environmental policy and the complicated relationships between policy agendas concerning mitigation of climate change and further restructuring of the electricity industry. |
| Keywords: | electricity, electric utilities, regulation, competition, environment, air pollution, natural gas, coal, nuclear, renewables, customer choice |
| JEL: | L51 L94 L98 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-07&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Pizer, William (Resources For the Future); Harrington, Winston (Resources For the Future); Sanchirico, James (Resources For the Future); Newell, Richard (Resources For the Future) |
| Abstract: | Economic analyses of climate change policies frequently focus on reductions of energy-related carbon dioxide emissions via market-based, economywide policies. The current course of environment and energy policy debate in the United States, however, suggests an alternative outcome- inefficiently designed and/or sector-based policies. This paper uses a collection of specialized, sector-based models in conjunction with a computable general equilibrium model of the economy to examine and compare these policies at an aggregate level. We examine the relative cost of different policies designed to achieve the same quantity of emissions reductions. We find that excluding a limited number of sectors from an economywide policy does not significantly raise costs. Focusing policy solely on the electricity and transportation sectors doubles costs, however, and using nonmarket policies can raise costs by a factor of 10. These results are driven in part by, and are sensitive to, our modeling of preexisting tax distortions. |
| Keywords: | carbon, carbon dioxide, climate change, climate policy, general equilibrium |
| JEL: | Q25 D58 D61 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-08&r=env |
| By: | Parry, Ian (Resources For the Future); Fischer, Carolyn (Resources For the Future); Jawahar, Puja; Aguilar , Francisco |
| Abstract: | In a developing country context, a policy to promote adoption of common environmental content for corporate codes of conduct (COCs) aspires to meaningful results on two fronts. First, adherence to COC provisions should offer economic benefits that exceed the costs of compliance; i.e., companies must receive a price premium, market expansion, efficiency gains, subsidized technical assistance, or some combination of these benefits in return for meeting the requirements. Second, compliance should produce significant improvements in environmental outcomes; i.e., the code must impose real requirements, and monitoring and enforcement must offer sufficient incentives to prevent evasion. With those goals in mind, we explore options for establishing common environmental content in voluntary COCs. Because the benefits of a COC rest on its ability to signal information, we ground our analysis in a review of experiences with a broad range of voluntary (and involuntary) information-based programs- not only existing corporate COCs, but also the International Organization for Standardization (ISO) family of standards, ecolabels, and information disclosure programs. We find some important tradeoffs between harmonization, applicability, feasibility, and efficacy. |
| Keywords: | corporate social responsibility, codes of conduct, environmental management |
| JEL: | Q2 O19 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-09&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Sedjo, Roger (Resources For the Future); Jawahar, Puja; Aguilar , Francisco |
| Abstract: | The forestry industry provides a good illustration of the active roles that industry associations, environmental nongovernmental organizations (NGOs), national governments, and international organizations can play in developing and promoting codes of conduct that are formally sanctioned and certified. It also reflects some of the challenges of disseminating codes of conduct in developing countries and ensuring market benefits from certification. We describe the emergence of forest certification standards, outline current certification schemes, and discuss the role of major corporations in creating demand for certified products. We also discuss the limited success of certification and some of the obstacles to its adoption in developing countries. The current diversity of forest certification programs and ecolabeling schemes has created a costly, less-than-transparent system that has been largely ineffective in terms of the initial goals of reducing tropical deforestation and illegal logging. Some steps have been taken toward harmonization of different certification criteria as well as endorsement and mutual recognition among existing forest certification programs. However, it is unlikely that standardization alone can overcome other, more serious barriers to certification in developing countries. |
| Keywords: | forest certification, codes of conduct, Forest Stewardship Council, PEFC, Sustainable Forestry Initiative, sustainable forest management |
| JEL: | Q23 Q56 L73 Q13 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-10&r=env |
| By: | Pizer, William (Resources For the Future); Newell, Richard (Resources For the Future) |
| Abstract: | We estimate a carbon mitigation cost curve for the U.S. commercial sector based on econometric estimation of the responsiveness of fuel demand and equipment choices to energy price changes. The model econometrically estimates fuel demand conditional on fuel choice, which is characterized by a multinomial logit model. Separate estimation of end uses (e.g., heating, cooking) using the 1995 Commercial Buildings Energy Consumption Survey allows for exceptionally detailed estimation of price responsiveness disaggregated by end use and fuel type. We then construct aggregate long-run elasticities, by fuel type, through a series of simulations; own-price elasticities range from –0.9 for district heat services to –2.9 for fuel oil. The simulations form the basis of a marginal cost curve for carbon mitigation, which suggests that a price of $20 per ton of carbon would result in an 8% reduction in commercial carbon emissions, and a price of $100 per ton would result in a 28% reduction. |
| Keywords: | commercial energy demand, carbon policy, climate change, discrete choice |
| JEL: | Q28 Q48 Q41 C35 C15 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-13&r=env |
| By: | Krautkraemer, Jeffrey |
| Abstract: | Whether economic growth can be sustained in a finite natural world is one of the earliest and most enduring questions in economic literature. Even with unprecedented growth in human population and resource consumption, humans have been quite adept at finding solutions to the problem of scarce natural resources, particularly in response to signals of increased scarcity. Because environmental resources generally are not generally traded on markets, however, scarcity signals for these resources may be inadequate, and appropriate policy responses are difficult to implement and manage. In the debate over the economic scarcity of natural resources, one significant change in recent years has been a greater focus on the ecosystem services and the resource amenities yielded by natural environments. The general conclusion of this paper is that technological progress has ameliorated the scarcity of natural resource commodities; but resource amenities have become more scarce, and it is unlikely that technology alone can remedy that. |
| Keywords: | natural resource scarcity. environmental amenities. resource substitution. |
| JEL: | Q01 Q10 Q20 Q30 Q40 Q50 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-14&r=env |
| By: | Blackman, Allen (Resources For the Future); Sisto, Nicholas |
| Abstract: | The city of León, Guanajuato, is Mexico’s leather goods capital and a notorious environmental hotspot. Over the past two decades, four high-profile voluntary agreements aimed at controlling pollution from León’s tanneries have yielded few concrete results. To understand why, this paper reconstructs the history of these initiatives, along with that of local environmental regulatory capacity. Juxtaposing these two timelines suggests that the voluntary pollution control agreements were both motivated by—and undermined by—gaps in the legal, institutional, physical, and civic infrastructures needed to make regulation effective. Our analysis offers a concrete definition of environmental regulatory capacity, provides insights into how it evolves, and demonstrates its importance. Moreover, it sheds light on the question of whether voluntary environmental agreements—an increasingly popular regulatory tool—are likely to be effective in developing countries. |
| Keywords: | environment, voluntary agreement, regulatory capacity, Latin America, Mexico |
| JEL: | Q53 Q56 Q58 O13 O54 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-16&r=env |
| By: | Narain, Urvashi (Resources For the Future); van 't Veld, Klaas; Gupta, Shreekant |
| Abstract: | Using purpose-collected survey data from 537 households in 60 different villages of the Jhabua district of India, this paper investigates the extent to which rural households depend on common-pool natural resources for their daily livelihood. Previous studies have found that resource dependence— defined as the fraction of total income derived from common-pool resources—strongly decreases with income. Our study finds a more complex relationship. First, for the subsample of households that use positive amounts of resources, we find that dependence follows a U-shaped relationship with income, declining at first but then increasing. Second, we find that the probability of being in the subsample of common-pool resource users follows an inverse U-shaped relationship with income- the poorest and richest households are less likely to collect resources than those with intermediate incomes. Resource use by the rich is therefore bimodal- either very high or—for the very richest households—zero. Third, we find that resource dependence increases at all income levels with an increase in the level of common-pool biomass availability. The combination of these results suggests that the quality of natural resources matters to a larger share of the rural population than had been previously believed; common-pool resources contribute a significant fraction of the income not just of the desperately poor, but also of the relatively rich. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-18&r=env |
| By: | Kruger, Joseph |
| Abstract: | Cap-and-trade programs have become widely accepted for the control of conventional air pollution in the United States. However, there is still no political consensus to use these programs to address greenhouse gases. Meanwhile, in the wake of the success of the U.S. SO2 and NOx trading programs, private companies, state governments, and the European Union are developing new trading programs or other initiatives that may set precedents for a future national U.S. greenhouse gas trading scheme. This paper summarizes the literature on the “lessons learned” from the SO2 trading program for greenhouse gas trading, including lessons about the potential differences in design that may be necessary because of the different sources, science, mitigation options, and economics inherent in greenhouse gases. The paper discusses how the programs and initiatives mentioned above have been shaped by lessons from past trading programs and whether they are making changes to the SO2 model to address greenhouse gases. Finally, the paper concludes with an assessment of the implications of these initiatives for a future U.S. national greenhouse gas trading program. |
| Keywords: | climate change, emissions trading, European Union, U.S. states, corporate environmentalism |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-20&r=env |
| By: | Boyd, James (Resources For the Future); Banzhaf, H. Spencer (Resources For the Future) |
| Abstract: | This paper describes the construction of an ecological services index (ESI). An ESI is meant to summarize and track over time the magnitude of beneficial services arising from the natural environment. A central task of this paper is to define rigorously ecosystem services so that services can be counted in an economically and ecologically defensible manner—a requirement if ecological contributions to welfare are to be incorporated into the national accounts. This paper advocates a particular economic structure and relates it to index theory and makes concrete recommendations for the measurement of such an index. |
| Keywords: | ecosystem services, Green GDP, index numbers, ecological economics |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-22&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future) |
| Keywords: | CAIR, Clean Air Interstate Rule, Clean Air Mercury Rule, CAMR, multipollutant regulation, particulates, multi-pollutant regulation, ozone, air quality regulation, emissions, mercury, sulfur dioxide, nitrogen oxides, SO2, NOx, electricity, air pollution |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-23&r=env |
| By: | Parry, Ian (Resources For the Future); Walls, Margaret (Resources For the Future); Sigman, Hilary; Williams III, Roberton |
| Abstract: | This paper reviews theoretical and empirical literature on the household distribution of the costs and benefits of pollution control policies, and ways of integrating distributional issues into environmental cost–benefit analysis. Most studies find that policy costs fall disproportionately on poorer groups, though this is less pronounced when lifetime income is used, and policies affect prices of inputs used pervasively across the economy. The policy instrument itself is also critical; freely allocated emission permits may hurt the poor the most, as they transfer income to shareholders via scarcity rents created by higher prices, while emissions taxes offer opportunities for progressive revenue recycling. And although low-income households appear to bear a disproportionate share of environmental risks, policies that reduce risks are not always progressive, for example, they may alter property values in ways that benefit the wealthy. The review concludes by noting a number of areas where future research is badly needed. |
| Keywords: | distributional incidence; emissions taxes; tradable permits; environmental benefits; distributional weights |
| JEL: | Q52 Q58 H22 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-24&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Kruger, Joseph; Zetterberg, Lars; Åhman, Markus |
| Abstract: | In its guidance on National Allocation Plans (NAPs), the European Commission has discouraged Member States from adopting allocation methodologies that would provide incentives to firms affecting their compliance behavior. The purpose is to promote economic efficiency and to prevent strategic behavior that deviates from individual and collective cost-minimization. For example, some methodologies would reward one type of compliance investment over another. To discourage such actions, the EU Emission Trading System guidelines prohibit ex post redistribution of emission allowances within an allocation period based on behavior in that period. Similarly, the Commission has indicated that decisions about the initial distribution of allowances in the second phase (2008-2012) must depend on measures prior to 2005 so as not to give companies an incentive to adjust their behavior to receive a larger allowance allocation. However, two other aspects of the NAPs—the treatment of closures and new entrants—may also affect firm behavior. An undercurrent in these guidelines is the question of whether Member States should allow incumbent emitters to hold infinitely lived, once-and-for-all property rights to a share of the emission allowances in the future. This paper develops an approach for balancing efficiency considerations with perceived issues of fairness. We propose a ten-year rule to guide policy regarding closure of existing sources and the status of new sources and to guide the initial distribution of emission allowances in general. A ten-year rule would address issues of fairness and capture an important part of the potential gains that could be achieved through an efficient initial distribution of allowances. |
| Keywords: | emission trading, allowance allocations, closures, new entrants, tradable permits, air pollution, cost-effectiveness, greenhouse gases, climate change, global warming, carbon dioxide |
| JEL: | Q2 Q25 Q4 L94 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-30&r=env |
| By: | Blackman, Allen (Resources For the Future) |
| Abstract: | Colombia’s discharge fee system for water effluents is often held up as a model of a well-functioning, economic-incentive pollution control program in a developing country. Yet few objective, up-to-date evaluations of the program have appeared. Based on a variety of primary and secondary evaluative data, this paper finds that that the program has been beset by a number of serious problems including limited implementation in many regions, widespread noncompliance by municipal sewage authorities, and a confused relationship between discharge fees and discharge standards. Nevertheless, in several watersheds, pollution loads dropped significantly after the program was introduced. While proponents claim the incentives that discharge fees created for polluters to cut emissions in a cost-effective manner were responsible for this success, this paper argues that the incentives they created for regulatory authorities to improve permitting, monitoring, and enforcement were at least as important. |
| Keywords: | environment, economic incentive, market based instrument, discharge fees, water pollution, Latin America, Colombia |
| JEL: | Q53 Q56 Q58 O13 O54 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-31&r=env |
| By: | Newell, Richard (Resources For the Future); Wilson, Nathan |
| Abstract: | We analyze whether technology inducement prizes could be a useful complement to standard research grants and contracts in developing climate change mitigation technologies. We find that there are important conceptual advantages to using inducement prizes in certain circumstances. These conceptual inferences are borne out by an examination of the track record of prizes inducing research into public goods, including relevant energy technologies. However, we also find that the prizes’ successes are contingent on their proper design. We analyze how several important design elements could influence the effectiveness of a climate technology prize. |
| Keywords: | inducement prize, research and development, climate change, technology, policy |
| JEL: | Q28 D81 C68 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-33&r=env |
| By: | Macauley, Molly (Resources For the Future); Vukovich, Fred |
| Abstract: | This paper traces the evolution of space-derived remote sensing data and data products from their initial dissemination to their impact on public policy related to climate change. We focus on the examples of renewable energy, public health, and ecosystem assessment. Our approach differs from previous studies that have characterized the value of data in terms of the fundamental scientific phenomena they describe. In our research we have sought to identify contributions of space-derived earth science in “making a difference” beyond scientific understanding, thereby providing at least a partial answer to questions about the utility of research posed by Congress, the Office of Management and Budget, managers at the National Aeronautics and Space Administration, and other decisionmakers. |
| Keywords: | Natural resources, climate change, space, data |
| JEL: | Q2 O38 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-35&r=env |
| By: | Blackman, Allen (Resources For the Future) |
| Abstract: | In many developing countries, a host of financial, institutional, and political factors hamstring conventional environmental regulation. Given these constraints, a promising strategy for controlling pollution is to promote the voluntary adoption of clean technologies. Although this strategy has received considerable attention in policy circles, empirical research on the adoption of clean technologies in developing countries is limited. This paper presents historical background and original survey data on the adoption of five clean tanning technologies by a sample of 137 leather tanneries in León, Guanajuato, Mexico, a city where tanneries have serious environmental impacts and conventional environmental regulation has repeatedly failed to mitigate the problem. The analysis suggest that rather than top-down public-sector pressure and technical assistance, the key factor driving the adoption of clean tanning technologies in León is the bottom-up dissemination of information about the cost and quality benefits of the technologies. |
| Keywords: | clean technology, leather tanning, developing country, Mexico |
| JEL: | Q53 Q55 Q56 Q13 Q33 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-38&r=env |
| By: | Blackman, Allen (Resources For the Future); Albers, Heidi; Crooks, Lisa; Ávalos-Sartorio, Beatriz |
| Abstract: | More than three-quarters of Mexico’s coffee is grown on small plots shaded by the existing forest. Because they preserve forest cover, shade coffee farms provide vital ecological services including harboring biodiversity and preventing soil erosion. Unfortunately, tree cover in Mexico’s shade coffee areas is increasingly being cleared to make way for subsistence agriculture, a direct result of the unprecedented decline of international coffee prices over the past decade. This paper summarizes the key findings of a three-year study of deforestation in Oaxaca, one of Mexico’s prime regions for growing shade coffee. First, we find that deforestation during the 1990s was significant. Second, the loss of tree cover can likely be slowed by promoting coffee-marketing cooperatives and “green” certification, providing coffee price supports, and specifically targeting areas populated by small, indigenous farmers for assistance. Finally, to be effective, such policies must be implemented quickly after price shocks occur. |
| Keywords: | deforestation, agroforestry, shade-grown coffee, Mexico, land cover |
| JEL: | O13 Q15 Q23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-39&r=env |
| By: | Blackman, Allen (Resources For the Future); Morgenstern, Richard (Resources For the Future); Laskowski, Stanley |
| Abstract: | This paper examines the United States’ experience with environmental decentralization, focusing on the relationship between the U.S. Environmental Protection Agency (EPA) and the states. It outlines the factors that are considered in determining the appropriate degree of decentralization, the advantages and disadvantages of decentralization, how the EPA-state relationship has evolved over the years, and the structural mechanisms used to ensure that there is a high degree of performance by EPA and the states in administering the programs. Program-specific examples of the EPA-state relationship are also provided. |
| Keywords: | environmental decentralization, environmental administration |
| JEL: | H11 H59 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-42&r=env |
| By: | Pizer, William (Resources For the Future) |
| Abstract: | The uncertainty surrounding both costs and benefits associated with global climate change mitigation creates enormous hurdles for scientists, stakeholders, and decisionmakers. A key issue is how policy choices balance uncertainty about costs and benefits. This balance arises in terms of the time path of mitigation efforts as well as whether those efforts, by design, focus on effort or outcome. This paper considers two choices—price versus quantity controls and absolute versus relative/intensity emissions limits—demonstrating that price controls and intensity emissions limits favor certainty about cost over climate benefits and future emissions reductions. The paper then argues that in the near term, this favoritism is desired. |
| Keywords: | carbon, climate, policy, intensity, global warming, uncertainty, price, quantity |
| JEL: | D81 Q54 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-44&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | Governments often use fiscal, exchange rate, monetary policy as well as export promotion tax increases, privatization, and land reform as part of comprehensive adjustments packages for addressing economic imbalances, balance of payments, and structural weaknesses. Such approaches, however, have come under heavy criticism for failing to recognize the social and environmental costs associated with them. Critics have argued that economic growth, trade liberalization, and increased primary product exports increase pressure on many sectors, including the agricultural and forestry land use sectors. This paper examines a number of these types of external shocks. This paper makes two arguments. First, from a theoretical economic perspective, although in many cases structural adjustment programs can be expected to affect the domestic forest sector, in other cases they will not. Second, even when there is an impact on the forest, it need not be detrimental to environmental and ecosystem values. A sustainable forest system needs to provide wood, local environmental products and services, and global ecological services, but individual forests can specialize in some of these. |
| Keywords: | forests, sustainability, macroeconomics, trade, exchange rates, structural adjustment |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-47&r=env |
| By: | Aldy, Joseph (Resources For the Future) |
| Abstract: | Understanding and considering the distribution of per capita carbon dioxide (CO2) emissions is important in designing international climate change proposals and incentives for participation. I evaluate historic international emissions distributions and forecast future distributions to assess whether per capita emissions have been converging or will converge. I find evidence of convergence among 23 member countries of the Organisation for Economic Co-operation and Development (OECD), whereas emissions appear to be diverging for an 88-country global sample over 1960–2000. Forecasts based on a Markov chain transition matrix provide little evidence of future emissions convergence and indicate that emissions may diverge in the near term. I also review the shortcomings of environmental Kuznets curve regressions and structural models in characterizing future emissions distributions. |
| Keywords: | emissions distributions, environmental Kuznets curve, Markov chain transition matrix |
| JEL: | O40 Q54 Q56 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-53&r=env |
| By: | Sanchirico, James (Resources For the Future); Holland, Daniel; Quigley, Kathryn; Fina, Mark |
| Abstract: | Individual fishery quotas (IFQs) are an increasingly prevalent form of fishery management around the world, with more than 170 species currently managed with IFQs. Yet, because of the difficulties in matching quota holdings with catches, many argue that IFQs are not appropriate for multispecies fisheries. Using on-the-ground-experience with multispecies IFQ fisheries in Iceland, New Zealand, Australia, and Canada, we assess the design and use of catch-quota balancing mechanisms. Our methodology includes a mix of interviews with fishery managers, industry representatives, and brokers; literature review; and data analysis. We find that a combination of incentives and limits on use rates for the mechanisms provide sufficient flexibility to the quota owner without the fishery manager incurring excessive levels of overexploitation risk. Contrary to some opinions, these programs are evidence that it is possible to implement IFQ programs for multispecies fisheries and that they can be profitable and sustainable. |
| Keywords: | natural resources, created markets, tradable permits |
| JEL: | Q22 Q28 D40 L10 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-54&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Kahn, Daniel (Resources For the Future) |
| Abstract: | The Regional Greenhouse Gas Initiative (RGGI) is an effort by nine Northeast and Mid-Atlantic states to develop a regional, mandatory, market-based cap-and-trade program to reduce greenhouse gas (GHG) emissions from the electricity sector. The initiative is expected to lead to an increase in the price of electricity in the RGGI region and beyond. The implications of these changes for the value of electricity-generating assets and the market value of the firms that own them depends on the initial allocation of carbon dioxide allowances, the composition of generating assets owned by the firm, and the locations of those assets. Changes in asset values inside the RGGI region may be positive or negative, whereas changes outside of the RGGI region are almost always positive but nonetheless vary greatly. Viewing changes at the firm level aggregates and moderates both positive and negative effects on market value compared with what would be observed by looking at changes at individual facilities. Nonetheless, a particular firm’s portfolio of assets is unlikely to reflect the overall composition of assets in the industry as a whole, and some firms are likely to do substantially better or worse than the industry average. |
| Keywords: | emissions trading, allowance allocations, electricity, air pollution, auction, grandfathering, generation-performance standard, output-based allocation, cost-effectiveness, greenhouse gases, climate change, global warming, carbon dioxide, asset value |
| JEL: | Q2 Q25 Q4 L94 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-55&r=env |
| By: | Siikamäki, Juha (Resources For the Future); Layton, David |
| Abstract: | This paper considers the role of incentive payment programs in eliciting, estimating, and predicting landowners’ conservation enrollments. Using both program participation and the amount of land enrolled, we develop two econometric approaches for predicting enrollments. The first is a multivariate censored regression model that handles zero enrollments and heterogeneity in the opportunity cost of enrollments by combining an inverse hyperbolic sine transformation of enrollments with alternative-specific correlation and random parameters. The second is a beta-binomial model, which recognizes that in practice elicited enrollments are essentially integer valued. We apply these approaches to Finland, where the protection of private nonindustrial forests is an important environmental policy problem. We compare both econometric approaches via cross-validation and find that the beta-binomial model predicts as well as the multivariate censored model yet has fewer parameters. The beta-binomial model also facilitates policy predictions and simulations, which we use to illustrate the framework. |
| Keywords: | protection, endangered, voluntary, incentive, tobit, beta-binomial, stated preferences |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-57&r=env |
| By: | Stavins, Robert |
| Abstract: | Vintage-differentiated regulation (VDR) is a common feature of many environmental and other regulatory policies in the United States. Under VDR, standards for regulated units are fixed in terms of the units’ respective dates of entry, or “vintage,” with later entrants facing more stringent regulation. In the most common application, often referred to as “grandfathering,” units produced prior to a specific date are exempted from new regulation or face less stringent requirements. The vintage-differentiated approach has long appealed to many participants in the policy community, for reasons associated with efficiency, equity, and simple politics. First, it is frequently more cost-effective—in the short-term—to introduce new pollutionabatement technologies at the time that new plants are constructed than to retrofit older facilities with such technologies. Second, it seems more fair to avoid changing the rules of the game in mid-stream, and hence to apply new standards only to new plants. Third, political pressures tend to favor easily-identified existing facilities rather than undefined potential facilities. On the other hand, VDRs can be expected—on the basis of standard investment theory—to retard turnover in the capital stock (of durable plants and equipment), and thereby to reduce the cost-effectiveness of regulation in the long-term, compared with equivalent undifferentiated regulations.1 A further irony is that, when this slower turnover results in delayed adoption of new, cleaner technology, VDR can result in higher levels of pollutant emissions than would occur in the absence of regulation. In this Article, I survey previous applications and synthesize current thinking regarding VDRs in the environmental realm, and develop lessons for public policy and for future research. In Part 2, I describe the ubiquitous nature of VDRs in U.S. regulatory policy, and examine the reasons why VDRs are so common. In Part 3, I establish a theoretical framework for analysis of the cost-effectiveness of alternative types of environmental policy instruments to provide a context for the analysis of VDRs. In Part 4, I focus on the effects of VDRs, and describe a general theory of the impacts of these instruments in terms of their effects on technology adoption, capital turnover, pollution abatement costs, and environmental performance. In Parts 5 and 6, I examine empirical analyses of the impacts of VDRs in two significant sectors- Part 5 focuses on the effects of VDRs in the U.S. auto industry, and Part 6 on the effects of new source review, which is a form of VDR, in power generation and other sectors. In Part 7, I examine implications for policy and research, and recommend avenues for improvements in both. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-59&r=env |
| By: | Burtraw, Dallas (Resources For the Future) |
| Abstract: | Title IV of the 1990 amendments to the Clean Air Act initiated a historic experiment in incentive-based environmental regulation through the use of tradable allowances for emission of sulfur dioxide by electric generating facilities. To date, relatively little allowance trading has taken place; however, the costs of compliance have been much less than anticipated. The purpose of this paper is to address the apparent paradox that the allowance trading program may not require (very much) trading to be successful. Title IV represented two great steps forward in environmental regulation- first a move toward performance standards and second formal allowance trading. The first step has been sufficient to date for improving dynamic efficiency and achieving relative cost-effectiveness. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-95-30-rev&r=env |
| By: | Kopp, Raymond (Resources For the Future); Smith, V. Kerry; Mitchell, Robert; Presser, Stanley; Ruud, Paul; Hanemann, W. Michael; Krosnick, Jon; Carson, Richard |
| Abstract: | In 1992 the National Oceanic and Atmospheric Administration (NOAA) convened a panel of prominent social scientists to assess the reliability of natural resource damage estimates derived from contingent valuation (CV). The product of the panel's deliberations was a report that laid out a set of recommended guidelines for CV survey design, administration, and data analysis. This paper focuses on one of these guidelinesthe Panel's call for the "temporal averaging" of willingness-to-pay (WTP) responses obtained from CV surveys as one method for increasing their reliability. The panel suggested- "Time dependent measurement noise should be reduced by averaging across independently drawn samples taken at different points in time. A clear and substantial time trend in the responses would cast doubt on the 'reliability' of the finding." The purpose of this paper is to examine the temporal reliability of CV estimates. Our findings, using a CV instrument designed to measure willingness-to-pay for a program to protect Prince William Sound, Alaska from future oil spills, like the Exxon Valdez spill, exhibited no significant sensitivity to the timing of the interviews. For two samples involving independent interviews taken over two years apart, the distribution of respondents' choices "for" and "against" the protection program did not differ. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-95-37&r=env |
| By: | Richer, Jerrell |
| Abstract: | Data are compiled from the tax records of 29 major environmental organizations for the period 1980-1994 to identify factors that influence voluntary contributions. I examine the effects of organizational characteristics, such as fundraising expenditures and alternative sources of revenue, along with the impact of general economic conditions and the political climate. I find that government grants to the organizations had a positive and statistically significant impact on voluntary contributions rather than a crowding out effect. Contributions were price inelastic, where the price is defined as the effective cost to the donor of achieving a one-dollar increase in the provision of program services. Resources devoted to fundraising had a strong and positive impact on donations, suggesting that the environmental organizations fell short of maximizing both total and net revenues. Contributions were also affected by factors largely outside of the organizations' control. Increases in the unemployment rate were associated with reductions in giving, while donations are shown to be greater in years when a Republican President was in office. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-95-39&r=env |
| By: | Morgenstern, Richard (Resources For the Future) |
| Abstract: | Both theory and recent trends suggest some optimism for the future of environment-related taxes. While new research emphasizes the potentially significant distortions created by environmental taxes and appears to undermine the so-called "double dividend" theory, it also suggests that virtually any environmental policy, including regulations, taxes, and tradable permits, can compound existing distortions in the tax system. Currently, direct environmental taxes, such as per-unit charges on emissions, are only in limited use; however, indirect environmental levies, including taxes on fuels, vehicles, beverage containers, and fertilizers, are growing in importance across the OECD nations. Over the period 1990-1993, environmental taxes as a share of total revenue increased while taxes on personal and corporate income declined slightly, indicating a modest tax shift. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-03&r=env |
| By: | Kopp, Raymond (Resources For the Future); Smith, V. Kerry; Mitchell, Robert; Presser, Stanley; Ruud, Paul; Hanemann, W. Michael; Krosnick, Jon; Carson, Richard |
| Abstract: | In 1992 the National Oceanic and Atmospheric Administration (NOAA) convened a panel of prominent social scientists to assess the reliability of natural resource damage estimates derived from contingent valuation (CV). The product of the Panel's deliberations was a report that laid out a set of recommended guidelines for CV survey design, administration, and data analysis. One of the Panel's recommendations was that CV surveys should employ a referendum approach. This method describes a choice mechanism that asks each respondent how they would vote if faced with a particular program and the prospect of paying for the program through some means, such as higher taxes. The Panel also recommended that CV referendum questions which commonly use only "for" or "against" answers should be expanded to explicitly offer an "I would-not-vote" response. The purpose of this paper is to consider the effects of such a "would-not-vote" option. In developing the test, we followed the important elements of the NOAA Panel guidelines for the design and administration of a CV survey and use what was acknowledged(by the Panel) as the most carefully developed CV questionnaire to that time, that is, the State of Alaska's study of the Exxon Valdez oil spill. Our findings suggest that when those selecting the "would-not-vote" response are treated as having voted "against" the offered program, offering the option does not alter- (a) the distribution of "for" and "against" responses, (b) the estimates of WTP derived from these choices, or (c) the construct validity of the results. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-05&r=env |
| By: | Sedjo, Roger (Resources For the Future); Sohngen, Brent; Mendelsohn, Robert; Lyon, Kenneth |
| Abstract: | In this paper, we show how ecological and economic models can be linked to determine the economic impact of climate change on global timber markets. We begin by discussing some of the important issues relevant to global impact analyses such as this. We then outline our general modeling framework and discuss the particular models that will be used. Finally, we discuss some of the important issues involved with linking the two types of models. The authors would like to acknowledge the help of Ron Neilson, who provided us with information, data, and output from the ecological model, MAPSS (Mapped Atmosphere-Plant-Soil System). |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-08&r=env |
| By: | Walls, Margaret (Resources For the Future); Hanson, Jean |
| Abstract: | One of the most common criticisms of pollution taxes is that they are often believed to be inequitable — i.e., low income households are thought to be disproportionately harmed. In this paper, we assess the distributional impacts of three taxes aimed at reducing emissions from motor vehicles- (i) a tax on total annual emissions, (ii) a tax on emissions rates (in grams per mile), and (iii) a tax on annual miles traveled. We use two alternative measures of economic well-being, annual household income and a constructed measure of lifetime income. We find that all three fees look regressive, both on the basis of annual and lifetime income — though much less so on a lifetime income basis. However, if one of these fees is used to substitute for existing vehicle registration fees, the differential impacts over existing fees are quite small- on a lifetime income basis, the mileage-based fee looks almost identical to the current system, while the total emissions fee is a little more regressive and the emissions rate-based fee slightly more regressive still than the current system. These results highlight the importance of tax shifting to help the environment. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-11&r=env |
| By: | Krupnick, Alan (Resources For the Future); Farrell, Deirdre |
| Abstract: | EPA appears likely to tighten the ambient ozone standard, even as many areas of the country are having great difficulties meeting the current standard. This paper offers an analysis of potential regulatory, administrative, and legislative initiatives for reducing the costs of meeting ozone standards. The detailed analysis of these initiatives is organized into six steps- (i) acknowledge mistakes and adapt to new knowledge; (ii) rehabilitate EPA's Title I Program; (iii) build on the best ideas; (iv) clarify and change the Clean Air Act; (v) educate the public; and (vi) fund research. EPA can go a long way to make its programs more efficient and effective without changes in the Clean Air Act; indeed, a number of its current initiatives show promise. But it must do more. Congress can help, too, by giving EPA the statutory guidance and freedom it needs to improve the program. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-13&r=env |
| By: | Sedjo, Roger (Resources For the Future); Simpson, R. David |
| Abstract: | There is considerable interest in biodiversity prospecting (the search for valuable new products from natural sources) as a conservation strategy. In an earlier paper, we have argued that the value of the marginal species (and, by extension, the incentives for the conservation of the habitat on which it is found) is small. In this paper, we show that investments in biodiversity prospecting are unlikely to increase incentives for conservation by much. If the value of the marginal species were appreciable, researchers ought already to have made investments to exploit it. If it is not, it is doubtful that additional investments will generate any substantial increase. It is important to be clear about our findings- we are not saying that none of the myriad uses of biodiversity is important. Quite to the contrary, we are saying that if biodiversity is important, more effective strategies for its conservation must be found. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-14&r=env |
| By: | Smith, V. Kerry; Espinosa, Andres |
| Abstract: | This paper describes the results of using a new computable general equilibrium model for the European Union that incorporates local and transboundary externalities to evaluate the effects of trade policy reform. In contrast to all past theoretical and empirical research, this model includes the morbidity effects of three criteria air pollutants as nonseparable arguments of household preferences. The model is based on the Harrison-Rutherford Wooton model that identifies 11 regions, six aggregate commodities and three factor inputs. Three modifications were made to the model- (a) Stone Geary utility functions were used to characterize preferences for each consumer; (b) nine morbidity effects due to the three air pollutants were introduced as translating effects; and (c) pollution generation and dispersion models were introduced and calibrated to the model's base solution. General equilibrium welfare effects are evaluated with a balance of trade function. Overall, the evaluations of policy suggest that incorporating environmental effects as non-separable influences on preferences can have a marked impact on the evaluation of trade policy reforms. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-18&r=env |
| By: | Kopp, Raymond (Resources For the Future); Smith, V. Kerry; Mitchell, Robert; Presser, Stanley; Ruud, Paul; Hanemann, W. Michael; Krosnick, Jon; Conaway, Michael; Martin, Kerry; Carson, Richard |
| Abstract: | The past few years have seen a highly charged debate about whether contingent valuation (CV) surveys can provide valid economic measures of people's values for environmental resources. In an effort to appraise the validity of CV measures of economic value, a distinguished panel of social scientists, chaired by two Nobel laureates, was established by NOAA, to critically evaluate the validity of CV measures of nonuse value. The Panel provided an extensive set of guidelines for CV survey construction, administration, and analysis, and distinguished a subset of items from their guidelines for special emphasis and described them as burden of proof requirements. Of particular interest was the Panel's requirement that CV surveys demonstrate "responsiveness to the scope of the environmental insult." That demonstration has come to be called a scope test. The paper reports the findings from the first CV study that adheres to the NOAA Panel's guidelines and includes a formal scope test. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-20&r=env |
| By: | Blackman, Allen (Resources For the Future); Bannister, Geoffrey |
| Abstract: | The considerable difficulties associated with cross-border environmental management are compounded when polluters are unlicensed micro-enterprises such as auto repair shops and traditional brick kilns; such "informal sector" firms are virtually impossible to regulate in the conventional manner. This paper describes an example of an innovative and promising approach to the problem- the Ciudad Juárez Brickmakers' Project, a private-sector-led, binational initiative aimed at abating highly polluting emissions from Ciudad Juárez's approximately 350 informal brick kilns. We draw three lessons from the Project's history. First, private-sector-led cross-border initiatives can work indeed they may be more effective than public sector initiatives but they require strong public sector support. Second, necessary conditions for effective environmental management in the informal sector include enlisting the cooperation of local unions and political organizations, relying upon peer monitoring among informal firms, and providing inducements to offset compliance costs. Ineffective strategies include promoting too-advanced and therefore inappropriate technologies and intervening in informal markets. And finally, the history of the Brickmakers' Project suggests that, in volatile developing economies, even well designed voluntary market-based environmental initiatives in the informal sector are bound to be fragile. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-22&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | Financial responsibility rules are an increasingly common form of environmental regulation. Currently, the operators of landfills, underground petroleum storage tanks, offshore rigs, and oil tankers must demonstrate the existence of adequate levels of capital as a precondition to the legal operation of their businesses. Environmental financial responsibility ensures that firms possess the resources to compensate society for pollution costs created in the course of business operations. In addition to providing a source of funds for victim compensation and pollution remediation, financial responsibility is thought to motivate better decision-making, particularly regarding the management of long-term risks. This article describes both the promise of financial responsibility as a complement to conventional environmental regulation and a set of weaknesses associated with its current implementation under U.S. environmental statutes. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-26&r=env |
| By: | Sedjo, Roger (Resources For the Future); Simpson, R. David |
| Abstract: | We develop a model of search in which a researcher chooses the size of sequential batches of samples to test. While earlier work has considered similar questions, the contribution of this paper is to use the search model to place a value on the marginal research opportunity. The valuation of such opportunities may be of little interest or relevance in many of the contexts in which search models are employed, but we apply our analysis to an area of considerable societal interest- the valuation of biological diversity for use in new product research. While data from which to make inferences are limited, we find that, using plausible estimates of relevant parameters, the value of biodiversity in these applications is negligible. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-27&r=env |
| By: | Simpson, R. David; Craft, Amy |
| Abstract: | Biologists and conservation advocates have expressed grave concern over perceived threats to biological diversity. "Biodiversity prospecting"—the search among naturally occurring organisms for new products of agricultural, industrial, and, particularly, pharmaceutical value—has been advanced as both a mechanism and a motive for conserving biological diversity. Economists and others have attempted to estimate the value of biodiversity for use in new pharmaceutical project research. Most of these existing approaches are incomplete, however, as they have not yet considered full social welfare, i.e., both consumer surplus and profit. This paper addresses social welfare by calibrating a model of competition between differentiated products with data from the pharmaceutical industry. We find that the magnitude of losses from even catastrophic declines in biodiversity are negligible in comparison to the value of world production. While social values of biodiversity prospecting might motivate habitat conservation in some areas, these values are likely to be small relative to land value in other uses in even some of the more biologically rich regions of the world. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-33&r=env |
| By: | Palmer, Karen (Resources For the Future); Walls, Margaret (Resources For the Future); Sigman, Hilary |
| Abstract: | This paper explores public policies for reduction of municipal solid waste. We parameterize a simple model of waste disposal using supply and demand elasticities from the economics literature and 1990 prices and quantities of recyclable and recycled materials. Using this model, we calculate the waste reduction in response to three public policies- (i) deposit/ refunds, (ii) advance disposal fees, and (iii) recycling subsidies. The results illustrate the effects of the three policies on source reduction and recycling of five recyclable materials that comprise 56 percent of municipal solid waste- aluminum, glass, paper, plastic, and steel. The calculated responses provide information about the cost of reducing municipal solid waste through various policies. This analysis suggests that a 7.5 percent reduction in disposal of the solid wastes in the model might have been optimal in 1990 from a benefit-cost perspective. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-35&r=env |
| By: | Mazurek, Janice |
| Abstract: | This paper seeks to inform the current "regulatory reform" effort in the U.S. by describing how information from risk assessments and cost-benefit analyses is used by decision makers in six other industrialized countries. In Japan, Germany, the United Kingdom, Netherlands, Canada and the European Union decision makers deal with uncertainties associated with risk assessments differently than in the U.S. They are less likely to employ "default assumptions" to bridge uncertainties and instead tailor risk evaluations to the chemical in question. Furthermore, while U.S. agencies are sometimes required to pair information from risk assessments with data from cost-benefit analyses in order to estimate how much it costs to stem or avert environmental and health effects, the decision makers in the six study regimes primarily use such information to set standards, screen chemicals, and identify potential substitutes for hazardous chemicals. Respondents in the study countries say that both quantitative risk assessment and cost-benefit analysis presently contain too many uncertainties to yield meaningful results. However, trade liberalization and shrinking government budgets are stirring greater interest abroad in how the U.S. conducts and uses risk assessments. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-96-36&r=env |
| By: | Davies, J. Clarence (Resources For the Future); Darnall, Nicole |
| Abstract: | This paper examines and ranks the District of Columbia's environmental problems. Four criteria are used to determine each problem's severity- public opinion of the problem, health effects, the number of people affected, and ecological and welfare effects. Public opinion is measured via 345 city resident and 23 stakeholder interviews. Stakeholders included environmental experts familiar with issues in the District. Health and ecological effects are captured by analyzing both the EPA's and District of Columbia's environmental data. The results show that the top four problems facing the city, in order of importance, are- drinking water, air pollution, the Anacostia River, and lead poisoning. Several recommendations for resolving the District's problems are offered and including creating a separate D.C. Environmental Agency, applying for EPA grant monies, publishing a D.C. environmental report, fostering community cooperation, and increasing education about the environment. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-04&r=env |
| By: | Powell, Mark |
| Abstract: | This paper discusses EPA's acquisition and use of science in two decisions under the Safe Drinking Water Act- the 1991 revision of the lead drinking water regulations and the 1995 decision to pursue additional research instead of revising the arsenic in drinking water standard. In the first case, a committed band of policy entrepreneurs within EPA mobilized and supplemented scientific information which had accumulated in the agency's air program to force lead in drinking water up the agency's regulatory agenda. In the minds of senior EPA decisionmakers, there was adequate science to justify making the lead in drinking water regulation more stringent; the critical question was "how far to go" in terms of regulatory compliance expenditures. To the extent that the agency's use of science increased the regulatory benefits estimate, it could rationalize more stringent and costly regulations. In the case of arsenic in drinking water, not only the scientific uncertainties in estimating the health risks but also the regulatory compliance costs, the distribution of those costs, and the presumed public health impacts of delay were important in the decision to pursue additional research on the health risks of arsenic. However, because EPA decisionmakers have failed to articulate what they consider to be compelling scientific evidence to justify departing from default risk assessment procedures in this case, it seems less likely that future research will facilitate future decision-making. Both cases illustrate impediments to the generation of scientific data needed for regulatory decision-making, the potential for scientific information to be distorted in or omitted from the regulatory decision-making process, and the key roles played by intermediaries between scientists and decisionmakers within EPA. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-05-rev&r=env |
| By: | Powell, Mark |
| Abstract: | This paper discusses EPA's acquisition and use of science in a decision under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)- the 1983-84 suspensions of ethylene dibromide (EDB); and in a decision under the Toxic Substances Control Act (TSCA)- the 1989 Asbestos Ban and Phaseout Rule. By requiring EPA to balance the risks and benefits of the commercial use of toxic substances, both statutes place considerable analytical burdens on the agency, though TSCA places a more substantial burden on EPA for acquiring science and demonstrating unreasonable risks. In the case of EDB, data produced outside EPA over which the agency had no control incited a public alarm. Because a senior EPA official had contaminated the agency's reservoir of public trust by cooking the scientific data to provide regulatory relief, EPA had no credibility to portray the health risks of EDB in an objective manner. In the case of asbestos, the reviewing court, despite its limited scientific capability and lack of political accountability, substituted its own science policy judgment for that of politically accountable decisionmakers of the more expert administrative agency. The court was arguably invited to do so, however, by the substantial evidentiary judicial review standard specified for TSCA by the legislature. Both cases illustrate the need for and difficulty of generating and considering scientific information regarding tradeoffs among risks in environmental regulatory decision-making. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-06-rev&r=env |
| By: | Powell, Mark |
| Abstract: | This paper discusses EPA's acquisition and use of science in two decisions regarding National Ambient Air Quality Standards- the 1987 Revision of the NAAQS for Particulate Matter and the 1993 Decision Not to Revise the NAAQS for Ozone. In the first case, more than ten years before EPA proposed to revise the NAAQS for particulates, narrowly-scoped results of academic experiments suggesting that the agency should focus its regulatory efforts on smaller diameter suspended particulates penetrated deep into the agency, far removed from decisionmakers in Washington. The particulates review was elaborate and protracted and was promoted and inhibited by multiple factors. Due to the lengthy review period, however, researchers involved in complex epidemiological studies were able to produce information which bore directly on regulators' questions prior to the final decision. Such is a rarity given the normal mismatch between the pace of regulatory decisonmaking and the time required to produce, analyze, and verify original scientific data. These studies observed an increase in respiratory ailments in children at particulate concentrations experienced in U.S. urban areas and suggested the lack of a discernible threshold in the relationship between particulate levels and mortality. Furthermore, as the decision was being finalized, the agency leadership was warned that forthcoming studies would probably suggest health concerns at even lower levels than the lowest end of the proposed range. In the case of ozone, political factors and a divided Clean Air Science Advisory Committee (CASAC) led to a 1992 proposal by EPA Administrator Reilly not to revise the NAAQS for ozone. Administrator Browner essentially inherited this decision during the transition period between the Bush and Clinton administrations, and although the role of science in the final decision-making was not substantive, the scientific review process was considered. The ozone case study illustrates that an elaborate and lengthy NAAQS review process is required to make science available for consideration by EPA decisionmakers and that policy disagreements within CASAC provide the Administrator with a justification to not revise the NAAQS on the basis of "scientific uncertainty." Both cases provide examples of non-agency scientists operating in multiple, overlapping roles inside and outside the regulatory decision-making process. The NAAQS case studies also underscore that the Clean Air Act is based on the false scientific premise that a threshold level exists below which health effects from ubiquitous air pollutants will not be observed. As a consequence of this mistaken legislative presumption, new scientific developments inevitably point toward ever more stringent ambient standards and preordain--in principle--the outcome of periodic reviews of the scientific basis of air quality regulation. In practice, EPA's response has been to delay the inevitable. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-07-rev&r=env |
| By: | Stavins, Robert; Whitehead, Bradley |
| Abstract: | We examine what will be required if market-based environmental policy instruments are to become a major force in U.S. environmental policy. We define market-based instruments, and specify five categories- pollution charges; tradable permits; deposit refund systems; reducing market barriers; and eliminating government subsidies. We review major U.S. applications, including- EPA's emissions trading program; the leaded gasoline phasedown; water quality permit trading; CFC trading; SO2 allowance trading; and the RECLAIM program. We assess the U.S. experience in terms of the relatively limited use of these instruments and in terms of the mixed record of performance of implemented instruments. We ask how the next generation of market-based instruments can be advanced, focusing on four sets of approaches- improving program design; applying market-based instruments on the state level; implementing new Federal programs; and addressing long-term issues. We conclude with a brief prognosis of the likely future role of market-based instruments in U.S. environmental policy. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-10&r=env |
| By: | Stavins, Robert |
| Abstract: | There continues to be great debate about the desirability of taking actions to limit carbon dioxide (CO2) and other greenhouse gas emissions, but it is important to consider policy instruments that can be employed to meet targets that may eventually be forthcoming. The theoretical advantages of market-based instruments, such as carbon taxes and systems of tradable carbon rights, are striking. In the U.S. domestic context, grandfathered tradable permits will probably be the preferred approach (if any) in the short run, although revenue-neutral carbon taxes will hold greater promise in the long run. In the international context, a system of international tradable permits could provide important advantages over alternative approaches, but it is difficult to imagine what existing international institution could administer such a system. Hence, despite the great theoretical advantages of market-based approaches to addressing global climate change, neither domestic political barriers nor international institutional impediments to implementing these and other instruments should be underestimated. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-11&r=env |
| By: | Arora, Seema; Cason, Timothy |
| Abstract: | This research uses neighborhood characteristics (at the zipcode level) to explain changes in toxic releases between 1990 and 1993. It combines the Toxics Release Inventory data with demographic data from the 1990 US Census. We first analyze the location of manufacturing facilities in a particular neighborhood using a sample selection model, and then attribute changes in the level of emissions between 1990 and 1993 to the demographic and socio-economic characteristics of the neighborhood in 1990. The results indicate that variables likely to affect the propensity for communities to engage in political action significantly influence environmental performance. Economic characteristics of neighborhoods (such as income levels and unemployment) also affect changes in releases. Release changes in the Southeastern US exhibit a pattern consistent with racial injustice. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-12&r=env |
| By: | Krupnick, Alan (Resources For the Future); Harrington, Winston (Resources For the Future); Alberini, Anna |
| Abstract: | In this paper we report on the results of a telephone survey conducted in Southern California during August and September 1996. The purpose of the survey was to inform respondents about a set of rather complex pricing policies designed to reduce motor vehicle emissions and to estimate respondent support for those policies. After receiving extensive information about these policies, respondents were polled on whether they would support, i.e., vote for, any or all of these options. The pollution fee survey elicited support for a plan that levied a fee on vehicles in the region, depending on the vehicle's emissions per mile and on the miles driven. The sample was then split in two, with half the respondents being told that a portion of the revenues would be returned to the public in the form of reductions in motor vehicle fees or sales tax reductions, and half told that these returns would be made in the form of coupons. Nearly 40 percent of respondents agreed to support the base plan (42 percent of those expressing an opinion). More than 50 percent supported the fees with rebates, including support of 54 percent when all the available revenues are returned to the public (57 percent of the sample expressing an opinion). Support for the coupon policy was intermediate between the base and rebate policies, attracting 42 percent of the sample (45 percent of those expressing an opinion). Statistical analyses were performed on the data to explain the voting patterns observed. Generally, the levels of support were significantly affected by the design features of the plans, such as the size of the fee paid and the rebate, as well as by a host of socio-demographic and perceptual variables, such as ethnicity, age, political affiliation, expected efficacy of the policy, and the degree to which air pollution affects the respondent or his or her family. Examination of these statistical results may be useful in the development of pollution fee programs to present to the public, as well as in the design of public information campaigns and the allocation of marketing resources to win support for these programs. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-13&r=env |
| By: | Hersh, Robert |
| Abstract: | This report describes the reasons why integrated pollution control (IPC) became accepted as a necessary part of the environmental regulatory systems of the Netherlands, the United Kingdom, and Sweden and examines the experience these countries have had with unified environmental statutes, alternative compliance approaches, cross-media permitting, and other aspects of IPC that are under consideration in this country. The report is organized into five chapters. In the first chapter we provide a brief overview of the intellectual pedigree of integrated pollution control and discuss arguments that have been put forward by advocates of IPC as well as the counter-arguments of those who have taken a more skeptical view of the technical and political feasibility of implementing IPC measures. Chapter two details how the United Kingdom, long considered the dirty man of Europe, is developing an integrated system of industrial pollution control based on its 1990 Environmental Protection Act. The Act introduced new controls to limit and prevent pollution from a wide range of industries and has created a unified pollution inspectorate to ensure that the best practical environmental option (BPEO) for all media is achieved. We consider both the progress the UK Environmental Agency has made in IPC as well as the barriers it has encountered. In chapter three, we examine how the Dutch Environmental Ministry (VROM) was able to forge a consensus among diverse groups for the need to embrace innovative, integrated policies and then examine in detail the Dutch experience with alternative compliance efforts, notably their covenant system. The long-standing success of Sweden’s industrial permitting system is analyzed in chapter 4 and in the fifth and final chapter we consider the development and implications of the European Union’s recently adopted Directive on Integrated Pollution Prevention and Control, a document which is likely to have a profound influence on environmental management in Europe and elsewhere. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-15&r=env |
| By: | Parry, Ian (Resources For the Future); Goulder, Lawrence; Williams III, Roberton |
| Abstract: | This paper employs analytical and numerical general equilibrium models to assess the efficiency impacts of two policies to reduce U.S. carbon emissions — a revenue-neutral carbon tax and a non-auctioned carbon quota — taking into account the interactions between these policies and pre-existing tax distortions in factor markets. We show that tax interactions significantly raise the costs of both policies relative to what they would be in a first-best setting. In addition, we show that these interactions put the carbon quota at a significant efficiency disadvantage relative to the carbon tax- for example, the costs of reducing emissions by 10 percent are more than three times as high under the carbon quota as under the carbon tax. This disadvantage reflects the inability of the quota policy to generate revenue that can be used to reduce pre-existing distortionary taxes. Indeed, second-best considerations can limit the potential of a carbon quota to generate overall efficiency gains. Under our central values for parameters, a non-auctioned carbon quota (or set of grandfathered carbon emissions permits) cannot increase efficiency unless the marginal benefits from avoided future climate change are at least $17.8 per ton of carbon abatement. Most estimates of marginal environmental benefits are below this level. Thus, our analysis suggests that any carbon abatement by way of a non-auctioned quota will reduce efficiency. In contrast, our analysis indicates that a revenue-neutral carbon tax can be efficiency-improving so long as marginal environmental benefits are positive. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-18-rev&r=env |
| By: | Bohn, Henning; Deacon, Robert |
| Abstract: | The effect of insecure ownership on ordinary investment and on the exploitation of natural resources is examined. Insecure ownership is characterized as a positive probability that a typical asset or its future return will be confiscated. For empirical analysis, the probability of confiscation is modeled as a function of observable political attributes of countries, principally the type of government regime in power (democratic versus non-democratic) and the prevalence of political violence or instability. A general index of ownership security is estimated from the political determinants of economy wide investment rates, and then introduced into models of petroleum and forest use. Ownership risk is found to have a significant, and quantitatively important effect. Empirically, increases in ownership risk are associated with reductions in forest cover and with slower rates of petroleum exploration. Contrary to conventional wisdom, greater ownership risk tends to slow rates of petroleum extraction, apparently because the extraction process is capital intensive. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-20&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Lile, Ron; Bohi, Douglas |
| Abstract: | On November 8, 1996, various U.S. Environmental Protection Agency (EPA) officials, scholars and industry representatives gathered at Resources for the Future (RFF) to examine the EPA's method for classifying private SO2 allowance transactions by the Allowance Tracking System (ATS). The one-day workshop at RFF was designed to evaluate how well the EPA's classification scheme within the ATS currently meets the needs of constituencies with a vested interest in the allowance trading system, and to determine if other classifications would be more beneficial. The EPA has limited its collection of information to that which is necessary to ensure compliance with environmental goals. In particular, the EPA has interpreted its mission to be one of minimal interference in guiding the development of the allowance market and that its primary purpose is emission compliance and not the monitoring of transactions. Therefore, the goal of the ATS is to provide a central registry of recorded allowance transfers for the purpose of emission compliance. As a result, the ATS is unusual as a mechanism for monitoring market activity because it provides information about the buyer and seller of an allowance but does not provide price information. Furthermore, the EPA has limited its role so as not to exercise approval of individual allowance trades, and has excluded from consideration options for expanding the EPA's data collection effort. However, the EPA recognizes that the interests of Congress and the public extend beyond compliance with the environmental goals to include the development of allowance trading to help achieve these goals at the lowest possible cost. In addition, there is widespread interest in the development of SO2 emission allowance trading as a prototype for other potential trading programs, and the ATS provides a potential template for the oversight role of the environmental regulator in programs such as these. Therefore, another goal of the workshop at RFF was to assess how well the ATS performs in promoting the development of allowance trading in general, and with respect to the interests and needs of each of the constituencies interested in the SO2 allowance trading program. This discussion paper incorporates observations, suggestions and concerns expressed during this workshop. Furthermore, this discussion paper concludes with recommendations regarding the EPA's current classification methodology. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-21&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Bohi, Douglas |
| Abstract: | The SO2 trading program has achieved reductions in emissions ahead of schedule, with allowance prices below the marginal costs that were anticipated for the program. This paper explores the experience with the program and proposes a taxonomy of reasons why allowance prices are low. The overarching reason is that the most costly investments to accommodate full emission reductions have been successfully delayed. Application of a discount rate to these long run marginal costs yields an estimate of allowance price close to that observed today. Several factors have contributed to the delay in bearing these costs, and helped to reduce their magnitude. One group of factors stems from market fundamentals, especially the cost of rail transport of low sulfur coal. A second group includes the influences of state and federal regulators. A third group includes distinctions from the "imagined" program compared to that which was actually been enacted. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-24&r=env |
| By: | Stavins, Robert; Keohane, Nathaniel; Revesz, Richard |
| Abstract: | In the realm of environmental policy instrument choice, there is great divergence between the recommendations of normative economic theory and positive political reality. Four gaps stand out. First, despite the advantages of market-based policy instruments, they have been used to a minor degree, compared with conventional, command-and-control instruments. Second, pollution-control standards have typically been much more stringent for new than for existing sources, despite the inefficiency of this approach. Third, in the few instances in which market-based instruments have been adopted, they have nearly always taken the form of grandfathered tradeable permits, rather than auctioned permits or pollution taxes, despite the advantages in some situations of these other instruments. Fourth, the political attention given to market-based environmental policy instruments has increased dramatically in recent years. We search for explanations for these four apparent anomalies by drawing upon intellectual traditions from economics, political science, and law. We find that all fit quite well within an equilibrium framework, based upon the metaphor of a political market. In general, explanations from economics tend to refer to the demand for environmental policy instruments, while explanations from political science refer to the supply side. Overall, we find that there are compelling theoretical explanations for the four apparent anomalies, although these theories have yet to be empirically verified. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-25&r=env |
| By: | Smith, V. Kerry; Mansfield, Carol; Schwabe, Kurt |
| Abstract: | This research considers whether the principles developed to analyze the optimal jurisdiction for producing public goods can be applied in cases where regulations of private activities provide the primary means to deliver different amounts of public and quasi-public goods. The analysis evaluates how devolution affects the development of benefit cost analyses for regulations and the role of economic versus environmental factors in defining the extent of the regulatory market. Using a study of nutrient control for the Neuse River in North Carolina, the analysis develops area specific measures of the benefits and costs of regulations and illustrates how changes in the composition of the areas allowed to "count" for policy design can affect decisions about the levels of control judged to meet the net benefit test. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-30&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Krupnick, Alan (Resources For the Future); Austin, David; Farrell, Deirdre; Mansur, Erin |
| Abstract: | Title IV of the 1990 Clean Air Act Amendments initiated a dramatic reduction in emissions of sulfur dioxide and nitrogen oxides by electric power plants. This paper presents the results of an integrated assessment of the benefits and costs of the program, using the Tracking and Analysis Framework (TAF) developed for the National Acid Precipitation Assessment Program (NAPAP). Although dramatic uncertainties characterize our estimates especially with respect to the benefits of the program, many of which we have modeled explicitly, we find that the benefits can be expected to substantially outweigh the costs of the emission reductions. The lion’s share of benefits result from reduced risk of premature mortality, especially through reduced exposure to sulfates, and these expected benefits measure several times the expected costs of the program. Significant benefits are also estimated for improvements in health morbidity, recreational visibility and residential visibility, each of which measures approximately equal to costs. In contrast, areas that were the focus of attention in the 1980s including effects to soils, forests and aquatic systems still have not been modeled comprehensively, but evidence suggests benefits in these areas to be relatively small, at least with respect to "use values" for the environmental assets that are affected. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-31-rev&r=env |
| By: | Krupnick, Alan (Resources For the Future); Austin, David; McConnell, Virginia (Resources For the Future) |
| Abstract: | This paper examines implications for cost-effective allocation of pollution controls when preferences of coalitions organized along regional lines, or according to preferences for air vs. water quality improvements, are accounted for. Results are compared to a base case in which NOx emissions reductions must satisfy only a water quality standard, and total costs are minimized over emissions sources. Relative to base-case result that marginal control costs must be equal across sources, stronger relative preferences for air imply shifting of control toward sources that produce greater ancillary benefits to air quality. Regional differences may require side payments to induce cooperation where benefits are low, but this will not affect how controls themselves should be allocated. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-34&r=env |
| By: | Parry, Ian (Resources For the Future) |
| Abstract: | This paper examines multi-factor productivity trends in the U.S. petroleum, coal, copper and logging industries since 1970. Measures of multi-factor productivity growth are negative for all four industries during the 1970s. At the time this led to fears that stocks of natural resources were being exhausted, and this might hinder future economic growth. However in retrospect the 1970s look like an exceptional period, rather than marking a change in long run productivity trends. The decline in measured multi-factor productivity in that decade appear to be explained by a number of special factors that generally have a transitory rather than a permanent effect on productivity growth. For example, the rise in natural resource prices encouraged the entry of relatively inefficient producers. New environmental and health & safety regulations were phased in during the period that also reduce measured multi-factor productivity. Over the last 15 years however, productivity measures have improved significantly in all the industries. For example, we estimate that the level of productivity in 1992 was around 75 percent higher in the petroleum industry than at the trough of the productivity slowdown, and around 60 percent higher in coal and copper. To some extent these improvements represent restructuring and consolidation in response to falling output prices. However, technological developments have also played an important role in all four industries. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-39&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | Unlike other resources such as petroleum, coal, and copper, forests are renewable. Yet, in many respects forests historically have been treated as a nonrenewable resource in that forest stocks were depleted or "mined" and loggers moved on to exploit other "deposits." The lands were often put to other uses, typically agricultural, or allowed to regenerate naturally. This paper looks at technical change in forest extraction, i.e., logging under a number of different conditions. It finds that, on average, labor productivity has been increasing in recent decades. However, total factor productivity in the US has declined in recent years. In addition, the study examines the tree-growing potential of plantation forestry. It finds that there is underway a substantial shift away from the harvesting of old-growth forests and toward intensive forest plantations. Plantations allow for high productivity in tree growing and are being used to offset decreased wood availability due to the inaccessibility and high costs of many old- and second-growth forests. The decreased accessibility reflects not only the impacts of past logging but, perhaps more importantly, the increase in forests in protected area set-asides. Additionally, natural forests face increasingly stringent regulations on logging and forest management activities. High-yield intensively managed forests, on well located, high productivity sites, offer the potential of obtaining high yields while using relatively small land areas by allowing the near full output potential of practices including species selection, fertilization and pest control. Finally, tree planting creates the opportunity to apply genetic improvements to the tree stock thereby further increasing growth productivity and allowing for control of tree characteristics. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-42&r=env |
| By: | Ando, Amy |
| Abstract: | This paper uses duration analysis to evaluate the ability of interest groups to influence the timing of decisions to add species to the endangered species list by exerting pressure on the Fish and Wildlife Service. Using data from 1990 to 1994, it finds that public opposition and support can substantially slow and hasten (respectively) the progress of candidate species through the parts of the listing process most directly under the agency’s control. Since the Service is not an atypical agency, similar patterns of public influence on delay may exist in other areas of bureaucratic decision making as well. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-43-rev&r=env |
| By: | Ando, Amy |
| Abstract: | This paper looks for positive spillovers from the legal protection of one species to the welfare of others, and for evidence of economies of scope in the costs associated with protecting species under the Endangered Species Act. The analyses use data on the intensity of interest-group comment activity in response to proposals to protect new species. The results suggest that these phenomena are significant, strengthening arguments that wildlife-protection policy should be shifted towards species groups or ecosystems. However, the findings are also consistent with diminishing public willingness-to-pay for protected species in a given area, a pattern which also has public-policy implications. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-44-rev&r=env |
| By: | Powell, Mark; Wilson, James |
| Abstract: | This paper reviews the risk assessments prepared by the U.S. Department of Agriculture (USDA) in support of regulations implementing the Conservation Reserve Program (CRP) and Environmental Quality Incentives Program (EQIP). These two natural resource conservation programs were authorized as part of the 1996 Farm Bill. The risk assessments were required under the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994. The framework used for the assessments was appropriate, but the assessments could be improved in the areas of assessments endpoint selection, definition, and estimation. Many of the assessment endpoints were too diffuse or ill-defined to provide an adequate characterization of the program benefits. Two reasons for this lack of clarity were apparent- 1) the large, unprioritized set of natural resource conservation objectives for the two programs and 2) there is little agreement about what changes in environmental attributes caused by agriculture should be considered adverse and which may be considered negligible. There is also some "double counting" of program benefits. Although the CRP and EQIP are, in part, intended to assist agricultural producers with regulatory compliance, the resultant environmental benefits would occur absent the programs. The paper concludes with a set of recommendations for continuing efforts to conduct regulatory analyses of these major conservation programs. The central recommendation is that future risk assessments go beyond efforts to identify the natural resources at greatest risk due to agricultural production activities and instead provide scientific input for analyses of the cost-effectiveness of the conservation programs. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-49&r=env |
| By: | Palmer, Karen (Resources For the Future); Walls, Margaret (Resources For the Future) |
| Abstract: | Many environmentalists and policymakers are shifting their focus from media-specific pollution problems to product-specific, life-cycle environmental problems. In this paper, we develop a model of production and consumption that incorporates life-cycle environmental externalities—specifically, an upstream manufacturing byproduct, air or water pollution from manufacturing, and downstream solid waste disposal. We then use the model to derive optimal government policies to address all three externalities. We assume throughout that a Pigovian tax on waste disposal is precluded because of the potential for illegal dumping. We then examine four cases- one in which Pigovian taxes on the upstream externalities are feasible, one in which such taxes are infeasible, and two final cases in which the upstream pollutant is subject to one of two different types of regulatory standards. In general, we find that no single instrument can solve multiple problems, contrary to what some observers have suggested. However, we find that there are alternative ways of reaching the social optimum. We also discover that a so-called "integrated" approach to policy appears to be important, no matter what policy options are adopted. And finally, we find that there is only a limited role for product "life-cycle assessments"—enumerations of all of the resources used and pollutants emitted throughout an entire product life-cycle. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-97-51-rev&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Toman, Michael |
| Abstract: | Policies that reduce emissions of greenhouse gases can simultaneously alter emissions of conventional pollutants that have deleterious effects on human health and the environment. This paper first describes how these "ancillary" benefits—benefits in addition to reduced risks of climate change—can result from greenhouse gas (GHG) mitigation efforts. It then discusses methodologies for assessing ancillary benefits and provides a critical review of estimates associated with reductions of criteria air pollutants. We find that these benefits in the U.S. may be significant, indicating a higher level of "no regrets" greenhouse gas abatement than might be expected based on simple economic calculations of abatement cost. However, the magnitude of ancillary benefits realized by any program of GHG mitigation is highly dependent on the location, pollutant, degree of exposure, and the economic behavior of individuals in response to the program. It is also highly dependent on the interaction of GHG abatement policies with the policies used for regulating conventional pollutants. We identify a rule of thumb to suggest ancillary benefits could be on the order of 30 percent of the incremental cost of GHG mitigation. For modest carbon reduction that do not result in changes in emissions of sulfur dioxide by electric utilities, ancillary benefits may be as high as $7 per ton. Greater benefits could be obtained with larger GHG reductions, although the costs of abatement would also be much greater. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-01-rev&r=env |
| By: | Pizer, William (Resources For the Future) |
| Abstract: | Uncertainty about compliance costs causes otherwise equivalent price and quantity controls to behave differently. Price controls in the form of taxes fix the marginal cost of compliance and lead to uncertain levels of compliance. Meanwhile quantity controls in the form of tradable permits or quotas fix the level of compliance but result in uncertain marginal costs. This fundamental difference in the face of cost uncertainty leads to different welfare outcomes for the two policy instruments. Seminal work by Weitzman (1974) clarified this point and derived theoretical conditions under which one policy is preferred to the other. This paper applies this principal to the issue of worldwide greenhouse gas (GHG) control, using a global integrated climate economy model to simulate the consequences of uncertainty and to compare the efficiency of taxes and permits empirically. The results indicate that an optimal tax policy generates gains which are five times higher than the optimal permit policy a $337 billion dollar gain versus $69 billion at the global level. This result follows from Weitzman’s original intuition that relatively flat marginal benefits/damages favor taxes, a feature that drops out of standard assumptions about the nature of climate damages. A hybrid policy, suggested by Roberts and Spence (1976), is also explored. Such a policy uses an initial distribution of tradeable permits to set a target emission level, but then allows additional permits to be purchased at a fixed "trigger" price. The optimal hybrid policy leads to welfare benefits only slightly higher than the optimal tax policy. Relative to the tax policy, however, the hybrid preserves the ability to flexibly distribute the rents associated with the right to emit. Perhaps more importantly for policy discussions, a sub-optimal hybrid policy, based on a stringent target and high trigger price (e.g., 1990 emissions and a $100/tC trigger), generates much better welfare outcomes than a straight permit system with the same target. Both of these features suggest that a hybrid policy is a more attractive alternative to either a straight tax or permit system. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-02&r=env |
| By: | Smith, V. Kerry |
| Abstract: | This paper considers the modeling strategies that have been used to incorporate time in revealed and stated preference methods for valuing environmental resources. After reviewing a subset of the economic models for describing time as an input to household production; time in creating habits and persistence in demand for particular services of environmental resources, and time as offering an opportunity for future consumption, the overview suggests that time has been used as a complement in production or consumption to marketed goods in each of these frameworks. The paper suggests two possible alternatives. This structure along with further restrictions to preferences or technology implies that there are other strategies for using revealed preference data to measure the economic value of changes in environmental quality. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-07&r=env |
| By: | Krupnick, Alan (Resources For the Future); Mazurek, Janice; Boyd, James (Resources For the Future) |
| Abstract: | The paper develops a framework to evaluate permits granted to firms under the Environmental Protection Agency's Project XL with emphasis on the novel air permit granted to the Intel Corporation. We describe the permit, the process that created it, and the types of costs and benefits likely to arise from this type of "facility-specific" regulatory arrangement. Among other things, the paper describes the permit's impact on environmental quality, production costs, transaction costs, and Intel's strategic market position. The paper also considers how an estimate of the costs and benefits both to Intel and society might be estimated. While facility-specific regulation typically conjures images of production cost savings as processes are re-engineered and low-cost abatement strategies pursued, the Intel case highlights perhaps a more important source of benefit- flexibility in the form of streamlined permitting. Flexibility in this form allows for accelerated product introductions, with potentially significant benefits to the firm and possibly to society. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-11&r=env |
| By: | Blackman, Allen (Resources For the Future); Bannister, Geoffrey |
| Abstract: | Low-technology unlicensed micro-enterprises known as "informal" firms are a significant source of pollution in developing countries that are virtually impossible to regulate in the conventional manner. This paper describes an example of an innovative and promising approach to the problem- the Ciudad Juárez Brickmakers' Project, a private-sector-led initiative aimed at abating highly polluting emissions from Ciudad Juárez, Mexico's approximately 300 informal brick kilns. We draw four lessons from the Project's history. First, private-sector-led initiatives can work -- indeed they may be more effective than public sector initiatives -- but they require strong public sector support. Second, necessary conditions for effective environmental management in the informal sector include enlisting the cooperation of local organizations, relying upon peer monitoring, and offsetting compliance costs. Ineffective strategies include promoting too-advanced technologies and intervening in informal markets. Third, pollution control strategies that provide the greatest environmental benefits may be less appropriate than low-cost intermediate strategies. Finally, in volatile developing economies, market-based environmental initiatives in the informal sector are bound to be fragile. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-15&r=env |
| By: | Austin, David; Alberini, Anna |
| Abstract: | This paper explores the issue of whether strict liability imposed on polluters has served to reduce uncontrolled releases of toxics into the environment. Strict liability should create additional incentives for firms to handle hazardous substances more carefully, thus reducing the future likelihood of uncontrolled releases of toxics. However, the size of these incentives may vary according to the size of a firm's assets, since asset size is the ultimate limit on a firm's liability. We are therefore interested to see whether imposing strict liability for the cost of remediation at hazardous waste sites has encouraged firms to handle toxic materials more carefully and has uniformly reduced the incidence of toxic spills, or whether the effect is dependent on firm size and other factors. To answer these questions, we exploit the variation in state hazardous waste site laws across states and over time. We use data on accidents and spills involving hazardous substances coming from a comprehensive database of events reported to the US EPA under their Emergency Response Notification System (ERNS), and fit regressions relating the frequency of spills of selected chemicals used in manufacturing to the type of liability in force in a state. We control for the extent of manufacturing activity in the state, and include in the regression other program features that might alter firms' expected outlays in the event of an accident, and thus affect firms' incentives to take care. Results vary with the chemical being analyzed. For some chemicals, such as halogenated solvents, the presence of strict liability does not provide any additional explanatory power for the number of spills beyond what is achieved by the number of establishments and the sectoral composition of manufacturing. For other families of chemicals (acids, ammonia and chlorine), we find that the impacts of manufacturing activities on the number of spills in each state do vary systematically with the liability regime. In particular, it appears that under strict liability small firms are responsible for a disproportionate number of spills. Since strict liability states tend to have more manufacturing firms, and more small manufacturing firms, these factors serve to increase the number of spills of these chemicals in strict liability states. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-16&r=env |
| By: | Krupnick, Alan (Resources For the Future); Harrington, Winston (Resources For the Future); Farrell, Deirdre |
| Abstract: | The Congestion Mitigation/Air Quality Program (CMAQ), established in 1991 by the Intermodal Surface Transportation Efficiency Act (ISTEA) to provide about $1 billion per year to fund transportation projects that improve air quality, is intended both to support traditional transportation control measures and to encourage innovation in developing new strategies and technologies for controlling emissions from transportation sources. While the program has indeed encouraged some innovative approaches to local transportation and air quality problems, critics see it as a diversion of funds that could more usefully be devoted to conventional highway improvement projects. The current debate in Congress over the reauthorization of ISTEA and, specifically, the CMAQ provisions, is hampered by the lack of detailed information about the achievements of previous CMAQ projects and a plan for evaluating future projects. Resolution of this debate could be aided by emphasizing the role of CMAQ projects as natural experiments and developing a plan to conduct them. The purpose of this paper is to outline a strategy of analysis and data collection that will facilitate evaluation of CMAQ projects. This paper argues that the lack of emphasis (in all but the largest projects) on project evaluation can be explained by the public goods nature of information. Because local implementing agencies bear the costs of evaluation, while the benefits are enjoyed primarily by other jurisdictions in planning their transportation and environment projects, too little evaluation is conducted. At present, much of the potential usefulness of CMAQ projects to planners is dissipated because there is little systematic learning. Indeed, a project could succeed as an experiment if learning took place, even if it failed to improve air quality. This paper examines the kinds of data collected now in CMAQ programs in comparison with the kinds of data that would permit more effective program evaluation, particularly ex post evaluation, i.e., analysis of what actually resulted from the implementation of the individual project. In many cases, data-gathering should concentrate on observable outcomes that can clearly be attributed to the project and yet bear some relationship to air quality or congestion, either established by previous empirical study or by model results. A method is proposed for collecting the requisite data for each of several important types of CMAQ projects. To assure that the data are collected and evaluated will also require changes in the way in which CMAQ is administered, including the dedication of some portion of CMAQ funds for evaluating completed projects. The biggest change may be the need to develop measures of "success" and identify "control cases" against which to judge the success of the experiment. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-18&r=env |
| By: | Blackman, Allen (Resources For the Future); Harrington, Winston (Resources For the Future) |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-21&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Parry, Ian (Resources For the Future); Goulder, Lawrence; Williams III, Roberton |
| Abstract: | This paper employs analytical and numerical general equilibrium models to examine the costs of achieving pollution reductions under a range of environmental policy instruments in a second-best setting with pre-existing factor taxes. We compare the costs and overall efficiency impacts of emissions taxes, emissions quotas, fuels taxes, performance standards, and mandated technologies, and explore how costs change with the magnitude of pre-existing taxes and the extent of pollution abatement. We find that the presence of distortionary taxes raises the costs of pollution abatement under each instrument relative to its costs in a first-best world. This extra cost is an increasing function of the magnitude of pre-existing tax rates. For plausible values of pre-existing tax rates and other parameters, the cost increase for all policies is substantial (35 percent or more). The impact of pre-existing taxes is particularly large for non-auctioned emissions quotas- here the cost increase can be several hundred percent. Earlier work on instrument choice has emphasized the potential reduction in compliance cost achievable by converting fixed emissions quotas into tradable emissions permits. Our results indicate that the regulator's decision whether to auction or grandfather emissions rights can have equally important cost impacts. Similarly, the choice as to how to recycle revenues from environmentally motivated taxes (whether to return the revenues in lump-sum fashion or via cuts in marginal tax rates) can be as important to cost as the decision whether the tax takes the form of an emissions tax or fuel tax, particularly when modest emissions reductions are involved. In both first- and second-best settings, the cost differences across instruments depend importantly on the extent of pollution abatement under consideration. Total abatement costs differ markedly at low levels of abatement. Strikingly, for all instruments except the fuel tax these costs converge to the same value as abatement levels approach 100 percent. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-22&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | This paper analyzes the impact on exhaustible resource markets of setup or shutdown costs, a sparsely analyzed category of nonconvex production technologies. This paper proves that, even under idealized circumstances for competition, a competitive equilibrium will fail to exist in the presence of setup costs, for any utility and cost functions such that a planner would exploit exhaustible resource pools sequentially. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-25&r=env |
| By: | Stavins, Robert |
| Abstract: | Some eighty years ago, economists first proposed the use of corrective taxes to internalize environmental and other externalities. Fifty years later, the portfolio of potential economic-incentive instruments was expanded to include quantity-based mechanisms--tradable permits. Thus, economic-incentive approaches to environmental protection are clearly not a new policy idea, and over the past two decades, they have held varying degrees of prominence in environmental policy discussions. This paper summarizes U.S. experiences with such market-based policy instruments, including- pollution charges; deposit-refund systems; tradable permits; market barrier reductions; and government subsidy reductions. No particular form of government intervention, no individual policy instrument--whether market-based or conventional--is appropriate for all environmental problems. Which instrument is best in any given situation depends upon a variety of characteristics of the environmental problem, and the social, political, and economic context in which it is being regulated. There is no policy panacea. Indeed, the real challenge for bureaucrats, elected officials, and other participants in the environmental policy process comes in analyzing and then selecting the best instrument for each situation that arises. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-26&r=env |
| By: | Burtraw, Dallas (Resources For the Future) |
| Abstract: | This paper reports on four areas of research concerning Title IV of the 1990 Clean Air Act Amendments that regulates emissions of SO2 from electricity generation. The first is the costs of the program over the long-run as estimated from the current perspective taking into account recent changes in fuel markets and technology. We compare projected costs with potential cost savings that can be attributable to formal trading of emission allowances. The second area is an evaluation of how well allowance trading has worked to date. The third area is the relationship between compliance costs and economic costs from a general equilibrium perspective. The fourth area is a comparison of benefits and costs for the program. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-28-rev&r=env |
| By: | Fullerton, Don; Stavins, Robert |
| Abstract: | On a topic like the environment, communication among scholars from different disciplines in the natural and social sciences is both important and difficult, but such communication has been far from perfect. Economists themselves may have contributed to some rather fundamental misunderstandings about how economists think about the environment, perhaps through our enthusiasm for market solutions, perhaps by neglecting to make explicit all of the necessary qualifications, and perhaps simply by the use of jargon that has specific meaning only to other economists. In this brief essay, we seek to clarify some of these misunderstandings and thus to improve future interdisciplinary communication. We hope that natural scientists and other non-economists will take economic analysis and prescriptions more seriously when they see tempered enthusiasm, explicit qualifications, and better definitions. Our method is to posit a series of prevalent "myths" regarding how economists think about the natural environment. We then explain how each myth might have originated from statements by economists that were meant to summarize a more qualified analysis. In this way, we hope to explain how economists really do think about the natural environment. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-29&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | The concept of pollution prevention, or "P2," signifies a new, proactive environmental mindset that targets the causes, rather than the consequences, of polluting activity. While anecdotal evidence suggests that P2 opportunities exist and that many have been pursued, there is also the perception that the pace of P2 is far too slow. To explore that claim—and to shed light on barriers to P2 innovation—this paper presents case studies of industrial P2 projects that were in some way unsuccessful. While based on a very limited sample, the evidence contradicts the view that firms suffer from organizational weaknesses that make them unable to appreciate the financial benefits of P2 investments. Instead, the projects foundered because of significant unresolved technical difficulties, marketing challenges, and regulatory barriers. Based on evidence from the cases, the paper concludes with a discussion of environmental policy reforms likely to promote P2 innovation.. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-30&r=env |
| By: | Toman, Michael |
| Abstract: | Academic and policy debates over climate change risks and policies have stimulated economic research in a variety of fields. In this article I briefly discuss eight overlapping areas of current research in which further effort particularly is warranted. These areas include decision criteria for policy; risk assessment and adaptation; uncertainty and learning; abatement cost and the innovation and diffusion of technology; and the credibility of policies and international agreements. Further analysis in these areas not only will advance academic understanding but also will provide insights of considerable importance to policymakers. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-32&r=env |
| By: | Brennan, Timothy (Resources For the Future); Macauley, Molly (Resources For the Future) |
| Abstract: | We review economic models of environmental protection and regulatory enforcement to highlight several attributes that are particularly likely to benefit from new enforcement technologies such as remote sensing using satellites in space. These attributes include the quantity and quality of information supplied by the new technologies; the accessibility of the information to regulators, regulatees, and third parties; the cost of the information; and whether the process of information collection can be concealed from the observer. Satellite remote sensing is likely to influence all of these attributes and in general, improve the efficacy of enforcement. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-33&r=env |
| By: | Kerr, Suzi; Cramton, Peter |
| Abstract: | An auction of carbon permits is the best way to achieve carbon caps set by international negotiation to limit global climate change. To minimize administrative costs, permits would be required at the level of oil refineries, natural gas pipe lines, liquid sellers, and coal processing plants. To maximize liquidity in secondary markets, permits would be fully tradable and bankable. The government would conduct quarterly auctions. A standard ascending-clock auction in which price is gradually raised until there is no excess demand would provide reliable price discovery. An auction is preferred to grandfathering (giving polluters permits in proportion to past pollution), because it allows reduced tax distortions, provides more flexibility in distribution of costs, provides greater incentives for innovation, and reduces the need for politically contentious arguments over the allocation of rents. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-34&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Lile, Ron |
| Abstract: | The Clean Air Act Amendments (CAAA) of 1990 instituted a historic experiment in emission allowance trading for sulfur dioxide (SO2). A necessary requirement for evaluating this experiment is an understanding of how the cost recovery rules and other guidance given to firms by state-level public utility commissions (PUCs) and elected bodies has affected compliance behavior. From the onset of the CAAA, there has been varied response by state policy-makers toward SO2 compliance. This paper presents a compilation of these actions as they took shape in states that were affected by the SO2 program. Our primary interest is on the proposals that emerged during the embryonic years of the allowance program, from 1990 to 1993, when investment plans for utilities affected by the first phase of the program beginning in 1995 were taking shape. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-35&r=env |
| By: | Pizer, William (Resources For the Future); Morgenstern, Richard (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future) |
| Abstract: | Expenditures for environmental protection in the U.S. are estimated to exceed $150 billion annually or about 2% of GDP. This estimate, based on largely self-reported information, is often cited as an assessment of the burden of current regulatory efforts and a standard against which the associated benefits are measured. Little is known, however, about how well reported expenditures relate to true costs. The potential for both incidental savings and uncounted burdens means that actual costs could be either higher or lower than reported expenditures. A significant literature supports the notion that increases in reported environmental expenditures probably understate actual economic costs. Estimates of the true cost of a dollar increase in reported environmental spending range from $1.50 to $12. This paper explores the relationship between reported expenditures and economic cost in the manufacturing sector in the context of a large plant-level data set at the four-digit SIC level. We use a cost function modeling approach which treats both environmental and non-environmental production activities as distinct, unrelated cost minimization problems for each plant. We then explore the possibility that these activities are, in fact, related by including reported regulatory expenditures in the cost function for non-environmental output. Under the null hypothesis that reported regulatory expenditures accurately measure the cost of regulation, the coefficient on this term should be zero. In ten of eleven industries studied, including all of the heavily regulated industries, this null hypothesis is accepted using our preferred fixed-effects model. Our best estimate, based on an expenditure weighted average of the four most heavily regulated industries, indicates that an incremental dollar of reported environmental expenditure reduces non-environmental production costs by eighteen cents with a standard error of forty-two cents. This is equivalent to saying that total costs rise by eighty-two cents for every dollar increase in reported environmental expenditures. Using an alternative pooled model we find uniformly higher estimates. Although consistent with previous results, we believe these higher estimates are biased by omitted variables characterizing differences among plants. Summarizing, our results enable us to reject claims that environmental spending imposes large hidden costs on manufacturing plants. In fact, our best estimate indicates a modest though statistically insignificant overstatement of regulatory costs. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-36&r=env |
| By: | Toman, Michael |
| Abstract: | Government, corporate and other decision makers are more and more often being urged to 'act sustainably' and to pursue policy paths toward 'sustainable development.' However, application of these concepts is hampered by serious interdisciplinary disagreements about the interactions of humans with their environment. Moreover, reducing disagreements about sustainability cannot be achieved solely through an improvement in scientific knowledge. These observations lead me to express skepticism about the capacity of any more or less mechanistic rule, economic, scientific or otherwise, to provide definitive and reliable answers about sustainable policies or conduct. However, there are processes and procedures that can help guide decisionmaking. I underscore the need for a methodologically pluralistic approach to addressing sustainability issues, while also underscoring the importance of addressing economic costs and benefits as one critical element of sustainability assessment. Practitioners of cost-benefit analysis are increasingly recognizing the need for embedding their findings in a broader set of information. A pluralistic approach, without mechanistic decision rules, only increases the need to have greater quantity and maturity of political discussion and education about sustainability than seems often to prevail. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-39&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Toman, Michael; Kerr, Suzi |
| Abstract: | In Kyoto in 1997, the US government agreed that between 2008 and 2012 it would limit average annual emissions of greenhouse gases (GHGs) to seven percent below 1990 levels. As participants in the climate policy debate consider various means by which limits on US GHG emissions might be undertaken in the wake of the Kyoto agreement, there is considerable interest but also some confusion about how a GHG trading program could be organized and operated in practice. In this paper we address several aspects of policy design for a US system, such as who and what is covered by regulation, the organization of the trading system, how carbon permits are allocated, and how a system could be initiated and changed over time. The paper synthesizes existing analyses and adds new insights concerning uncertainty, intertemporal consistency, market institutions, and interactions with the tax system. Our fundamental conclusion is that a domestic "cap-and-trade" system with homogeneous permits applied to control flows of fossil fuels "upstream" in the energy system (along with selective inclusion of other gases and CO2 "sinks"), with permits auctioned periodically by the government, has the most appeal of different trading systems on efficiency and distributional grounds, though it may suffer politically because of its close resemblance to a carbon tax. We identify auction mechanisms that appear to be feasible and efficient for carbon permit allocation. We further argue that while the private sector should bear the "external" risk of changes in total permit availability as a consequence of modifications in international agreements, and that an auctioned upstream program provides more protection against the "internal" risk of efficiency-reducing opportunism by government regulators than other trading mechanisms. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-40&r=env |
| By: | Toman, Michael; Lile, Ron; King, Dennis |
| Abstract: | In this paper we address two related conceptual and practical challenges in assessing "sustainability." The first is the criteria to be used, in particular the relationship between sustainability and measures of economic well-being and the use of monetary versus nonmonetary indicators. The second is the problem of determining which physical scales to use for sustainability assessments when there are multiple and overlapping "communities" or stakeholder groups. While neither set of challenges admits a definitive solution, there has been progress on the first set of issues – in particular, through the development of multi-criteria assessment strategies and stakeholder involvement processes. In contrast, the problem of how to assess sustainability in practice at multiple scales remains less well understood. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-42&r=env |
| By: | Toman, Michael; Withagen, Cees |
| Abstract: | Environmental policymakers must address the adverse effects of a number of pollutants that accumulate in the environment. Goals for the regulation of these damages often involve holding long-term emissions below a level deemed to be "dangerous,'' or outright banning of offending products or processes along with subsidization of more "green" alternatives. This paper builds upon previous studies by Keeler, Spence, and Zeckhauser (1971) and Tahvonen and Withagen (1996) in addressing the optimal long-term management of an accumulative but assimilatable pollutant through policies that restrict more damaging production processes and thereby induce more benign alternatives. Using a simple general equilibrium approach, we consider the possibility that the assimilative capacity of the environment is diminished and eventually exhausted by pollution accumulation. In this case there is a nonconvexity in the problem that gives rise to multiple potential optima, complicating the characterization of the optimal path and the determination of decentralized policies that can support an optimal outcome. In particular, environmental quality may be preserved or completely degraded in the long term. This makes the question of whether polluting processes or products should be banned more complicated and more interesting. We characterize the circumstances under which a banning policy is consistent with an intertemporally optimizing path, we investigate the sensitivity of optimal solutions to the cost of a clean backstop technology, and we discuss more generally the design of price-based and quantity-based policies for supporting an optimal solution. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-43&r=env |
| By: | Krupnick, Alan (Resources For the Future); Austin, David; Morton, Brian; McConnell, Virginia (Resources For the Future); Stoessell, Terrell; Cannon, Matthew |
| Abstract: | Nitrogen oxide emissions not only affect air quality but have recently been found to be an important source of nitrate pollution in the Chesapeake Bay. This analysis examines the costs, emissions, source-specific and location-specific allocations of NOX emissions reductions and the ancillary ozone related health benefits under a range of policy scenarios. The paper includes analysis of three separate policies. The first is a detailed analysis of the effect on nitrate loadings to the Bay of command and control policies specified in the Clean Air Act and as part of the OTAG process. The second is a comparison of alternative scenarios for reducing NOX emissions that meet nitrate loading goals, with or without concern for reducing ozone concentrations and the health effects they cause. The third is a comparison of alternative approaches to allocate NOX emissions to meet NOX reduction and ozone exposure goals while capturing the ancillary effect on nitrate loadings. This last analysis focuses on the stake the Bay jurisdictions have in the outcome of negotiations over NOX trading programs being developed by EPA for reducing ozone in the Eastern U.S. With the primary focus on the Chesapeake Bay jurisdiction, all three analyses integrate the ancillary ozone benefits of policies to reduce nitrate pollution, including examination of how these ancillary benefits change under alternative meteorological episodes, and explore lower cost alternatives to current regulatory programs in both qualitative and quantitative terms. We find that the Chesapeake Bay benefits from efforts to reduce NOX emissions to meet the ambient air quality standard for ozone. Airborne NOX emission reductions slated to occur under the Clean Air Act in the Bay airshed will reduce nitrate loadings to the Bay by about 27 percent of the baseline airborne levels. The additional controls of NOX contemplated in what we term the OTAG scenario is estimated to result in an additional 20 percent reduction from this baseline. However, the paper's analysis of possible least cost options shows that the costs of obtaining such reductions can be significantly reduced by rearranging the allocation of emissions reductions to take advantage of source-type and locational considerations. In addition, we find that adding consideration of ancillary ozone-related health benefits to the picture does not alter any qualitative conclusions. Quantitatively, unless a link between ozone and mortality risk is assumed, the benefits are too small to affect the cost-saving allocations of NOX reductions. If the case for such a link can be made, the results change dramatically, with large overall increases in NOX reductions and a relative shift in controls to non-Bay states and utility sources. These specific effects are sensitive to the source-receptor coefficients linking NOX to ozone, however. Our analyses also suggest that the Bay jurisdictions have a stake in the outcome of the NOX trading debate -- that some trading designs can lead to better outcomes for these jurisdictions than others. Nevertheless, a common feature of cost-savings policies is that they both rearrange emissions reductions and, in the aggregate, reduce emissions less than a command and control system. Thus, some trading regimes result in significantly smaller loadings reductions (up to 25 percent smaller) than the command and control approach. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-46&r=env |
| By: | Harrington, Winston (Resources For the Future); McConnell, Virginia (Resources For the Future); Cannon, Matthew |
| Abstract: | This paper examines the behavioral and stochastic aspects of modeling emission reductions from vehicle Inspection and Maintenance (I/M) programs. Forecasts of the potential emission reductions from such programs have been modeled by the use of the Environmental Protection Agency's MOBILE Model, EPA's computer model for estimating emission factors for mobile sources. We examine the structure of this Model and review the way behavior of drivers, mechanics and state regulatory authorities is incorporated in the current generation of the Model. We focus particularly on assumptions about vehicle repair under I/M, compliance with I/M requirements, and the impact of test measurement error on predicted I/M effectiveness. We also include some preliminary comparisons of the Model's outcomes to results of the I/M program in place in Arizona. Finally, we perform some sensitivity analyses to determine the most influential underlying parameters of the Model. We find that many of the assumptions of the I/M component of the Model are based on relatively small data sets on vehicle done in a laboratory setting, and that the output of the Model makes it difficult to compare the results against real world data from on-going state programs. In addition, the Model assumes that vehicles will either be repaired or receive a waiver. In the Arizona program there appears to be a third category of vehicles those which fail the test and do not receive passes. This share may be as high as a third of all failing vehicles. Vehicles which do not eventually pass the test would be treated in the Model as non-compliant. However, in current programs, states do not seem to be measuring and entering the compliance rate correctly. The paper also examines the evidence about whether emissions deteriorate over the life of vehicle in a grams per mile basis (as assumed by the Model) or a grams per gallon basis. It finds support for the argument that emissions deteriorate on a grams per gallon basis. We find through sensitivity analysis that the repair effectiveness assumed by the Model to occur in an IM240 test are much greater than for the idle test, and that identification rates and repair effectiveness vary a great deal according to the cutpoint. These results are based on small numbers of vehicle tests in a laboratory setting and could be compared to real world evidence. Examining costs and cost-effectiveness of variations in I/M programs is important for determining improvements in I/M programs. States may not have incentives to develop cost-effective programs based on current Model that forecast emission reduction "credits" that are overly optimistic. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-47&r=env |
| By: | Parry, Ian (Resources For the Future); Oates, Wallace (Resources For the Future) |
| Abstract: | This paper first describes the new literature in environmental economics on the so-called "double dividend" and then explores its implications for a broad range of economic issues. The basic finding in this literature is that in a second-best, general equilibrium setting, environmental measures raise costs and prices and thereby reduce the real wage. This rise in the cost of living reduces slightly the quantity of labor supplied in an already highly distorted labor market, giving rise to losses in social welfare that can be large relative to the basic welfare gains from improved environmental policy. These losses may be offset to some extent by using revenues (if any) from the environmental programs to reduce existing taxes on labor. This same line of analysis applies to many programs and institutions in the economy that raise the cost of living- tariffs and quotas on imports, agricultural price-support programs, monopoly pricing, programs of occupational licensure that limit entry, and many others. The paper thus suggests that traditional, partial equilibrium benefit-cost analysis has, in many instances, unwittingly omitted a potentially quite significant class of social costs from the calculations. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-48&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | Improved environmental accounting is increasingly seen by corporate managers and environmental advocates alike as a necessary complement to improved environmental decision-making within the private sector. This paper develops an economic approach to the evaluation of environmental accounting's benefits and derives the value, and determinants, of improved accounting information in several production and capital budgeting contexts. Using concepts from managerial economics, finance, and organizational theory, the analysis identifies the types of environmental accounting improvement that are most likely to yield significant financial and environmental benefits. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-98-49&r=env |
| By: | Pizer, William (Resources For the Future); Morgenstern, Richard (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future) |
| Abstract: | The possibility that workers could be adversely affected by environmental policies imposed on heavily regulated industries has led to claims of a "jobs versus the environment" trade-off by both business and labor leaders. The present research examines this claim at the industry level for four heavily polluting industries- pulp and paper mills, plastic manufacturers, petroleum refiners, and iron and steel mills. By focusing on labor effects across an entire industry, we construct a measure relevant to the concerns of key stakeholders, such as labor unions and trade groups. We decompose the link between environmental regulation and employment into three distinct components- factor shifts to more or less labor intensity, changes in total expenditures, and changes in the quantity of output demanded. We use detailed plant-level data to estimate the key parameters describing factor shifts and changes in total expenditures. We then use aggregate time-series data on industry supply shocks and output responses to estimate the demand effect. We find that increased environmental spending generally does not cause a significant change in industry-level employment. Our average across all four industries is a net gain of 1.5 jobs per $1 million in additional environmental spending, with a standard error of 2.2 jobs—an insignificant effect. In the plastics and petroleum sectors, however, there are small but significantly positive effects- 6.9 and 2.2 jobs, respectively, per $1 million in additional expenditures. These effects can be linked to favorable factor shifts—environmental spending is more labor intensive than ordinary production—and relatively inelastic estimated demand. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-01-rev&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | This paper maintains that the Forest Service (FS), as an institution, is in deep trouble. It argues that the FS today is an agency without a unique mission and without a supporting constituency. For the FS to be viable in the future it needs a distinct well-defined mission and a committed constituency. The distinct mission needs to be generally supported, or at least not opposed, by most of the American people. The constituency needs to be committed to the FS to the extent that it will provide major support in the Congress for FS budgets. The paper identifies some potential candidates for a mission for the National Forest System (NFS), e.g., as a biological reserve or as a provider of forest recreation. Another potential paradigm could be that of the Quincy Library Group, which apparently is going to receive separate Congressional funding and a unique management mandate for a set of national forests in California. This paper examines the feasibility of these missions and paradigms including budget and constituency support. Finally, there is the question of whether the FS has completed its useful life and if society would be better served by merging existing land management agencies into an integrated agency that can better provide for the coordinated management required. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-03&r=env |
| By: | Parry, Ian (Resources For the Future); Pizer, William (Resources For the Future); Fischer, Carolyn (Resources For the Future) |
| Abstract: | This paper presents an analytical and numerical comparison of the welfare impacts of alternative instruments for environmental protection in the presence of endogenous technological innovation. We analyze emissions taxes and both auctioned and free (grandfathered) emissions permits. We find that under different sets of circumstances each of the three policies may induce a significantly higher welfare gain than the other two policies. In particular, the relative ranking of policy instruments can crucially depend on the ability of adopting firms to imitate the innovation, the costs of innovation, the slope and level of the marginal environmental benefit function, and the number of firms producing emissions. Moreover, although in theory the welfare impacts of policies differ in the presence of innovation, sometimes these differences are relatively small. In fact, when firms anticipate that policies will be adjusted over time in response to innovation, certain policies can become equivalent. Our analysis is simplified in a number of respects; for example, we assume homogeneous and competitive firms. Nonetheless, our preliminary results suggest there is no clear-cut case for preferring any one policy instrument on the grounds of dynamic efficiency. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-04&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Krupnick, Alan (Resources For the Future); Austin, David; Stoessell, Terrell |
| Abstract: | This paper reports the results of policy simulations of environmental and human health externalities arising from the production of electricity. The primary purpose of this paper is to illustrate the Maryland Externalities Screening and Valuation Model, developed for the State of Maryland’s Department of Natural Resources. A secondary purpose is to estimate likely Maryland benefits from Title IV emissions reductions at electric power generation facilities. Sources and scope of benefits, and the potential of policy to achieve specific environmental and human health goals, are suggested by the results. The authors find that expected health benefits from reductions in power plant emissions dominate the estimated benefits of improved recreational visibility and residential visibility. The latter are the only environmental benefits the model is currently equipped to estimate, because of gaps in the science-to-economics literature. The model fully accounts for all significant environmental pathways, so future parameter estimates can be inserted as they are developed. The authors estimate that in 2010 Maryland health benefits will be about $0.7 billion, while recreational visibility benefits (in Shenandoah National Park) will be approximately $21 million (to residents of Virginia and Maryland), and residential visibility benefits, for inhabitants of a city of the size of Washington, DC and similarly affected by reduced urban visibility, will be about $1.2 million. This integrated-assessment model is designed to estimate and report also the tremendous uncertainties in measuring and valuing these effects. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-05&r=env |
| By: | Beierle, Thomas |
| Abstract: | This paper presents a framework for evaluating mechanisms that involve the public in environmental decision-making. These include traditional participatory mechanisms--such as public hearings, notice and comment procedures, and advisory committees--as well as those considered more innovative--such as regulatory negotiations, mediations, and citizen juries. The framework is based on a set of "social goals," defined as those goals which are valued outcomes of a participatory process, but which transcend the immediate interests of any party in that process. The goals are- educating the public, incorporating public values and knowledge into decision-making, building trust, reducing conflict, and assuring cost-effective decision-making. The paper begins with a discussion of the need for an evaluative framework which 1) identifies the strengths and weaknesses of a number of different participatory mechanisms, 2) is "objective" in the sense of not taking the perspective of any one party to a decision, and 3) measures tangible outcomes. Section One presents the social goals framework as an approach for meeting these objectives. It illustrates how the framework can be applied to one case study in environmental decision-making- the performance of the Restoration Advisory Board at the Fort Ord military base in California. In Section Two, we contrast the social goals framework with two alternative approaches to evaluation, one based on participatory processes and one based on stakeholder interests. We find that, while useful for answering some questions about public involvement, these two approaches fail to meet all three objectives and may miss important information about the success of a particular participatory effort. In Section Three we take a closer look at participatory mechanisms and discusses how each is likely to perform against the various social goals. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-06&r=env |
| By: | Toman, Michael; Powell, Mark; Lile, Ron |
| Abstract: | The "Clean Development Mechanism" (CDM) contained in the December 1997 Kyoto Protocol to the United Nations Framework Convention on Climate Change provides, for the first time, the capacity for industrialized countries to claim credits for greenhouse gas (GHG) emissions reductions or offsets undertaken in cooperation with host developing countries. However, the Protocol provides no guidance on how these cooperative activities for GHG reduction and sustainable development would be undertaken in practice, including the particularly important issue of the relationship of the private sector vis-à-vis government institutions in designing, financing, and securing approval for jointly implemented GHG abatement projects. The pilot program for "Activities Implemented Jointly" under the Framework Convention provides an opportunity to better understand the practical constraints and opportunities for successful private sector participation in the CDM. This paper highlights some of the lessons for establishing a successful CDM by examining a small number of cases from the United States Initiative on Joint Implementation (USIJI). The authors first review the objectives, proposal review and evaluation criteria of this program, and provide some overall information on project proposals by project type and stage of development. They then develop case studies of two energy-related USIJI projects from the earlier phase of the program. These cases illustrate several potential problems that can arise in establishing CDM transactions. Further investigation of more recent cases sheds some light on the extent to which these problems change over time. To be successful, the CDM must be based on a solid institutional footing, with clear incentives for all parties involved. The cases examined here illustrate how transactions can become entangled in the same kinds of problems that bedevil other transactions in developing and transitional economies. In both early cases, "transaction costs" were substantial. The latter projects indicated that while the nature of transactions costs changed over time, they still remained somewhat substantial. Project proponents regarded gaining USIJI acceptance as one of the principal impediments to JI project development. The cases also illustrate the need for clear and widely understood goals and procedures for investor country approval. In addition, the analysis underscores how attitudes of different project proponents regarding the value of GHG credits can affect their perspective on the transaction. Finally, the study underscores that financing remains the ultimate hurdle to project implementation, and that the expectation of a clear financial return on investment is a prerequisite to a successful project. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-08&r=env |
| By: | Toman, Michael; Farrow, Scott |
| Abstract: | In this paper we first describe the legal and administrative basis of mandates that variously require and eschew economic measures for environmental management. We then summarize the steps involved in benefit-cost analysis and what can and cannot be accomplished with such information. Our basic conclusion is that while the approach is not perfect, benefit-cost analysis has a solid methodological footing and provides a valuable performance measure for an important governmental function, improving the well-being of society. However, benefit-cost analysis requires analytical judgements which, if done poorly, can obfuscate an issue or worse, provide a refuge for scoundrels in the policy debate. We conclude the paper with specific suggestions for both the everyday performance of benefit-cost analysis and its use in policy decision-making. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-11&r=env |
| By: | Binkley, Clark |
| Abstract: | Throughout the globe, forestry faces predictable trends associated with the transition from reliance on natural forests to ones created through human stewardship. Laid over the ordinary economics of this transition are increases in the values of the environmental services that forests provide. The three general approaches to forest management--natural forest management, plantation forest management, and preserve management--are evaluated in this economic context. The USDA Forest Service has interesting opportunities to apply each approach, but doing so will require profound organizational changes. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-15&r=env |
| By: | Fairfax, Sally |
| Abstract: | This paper argues that state trust land management experience is potentially a source of valuable insights and examples for the U.S. Forest Service. The paper sketches historic and current trends in public resource administration to define what constitutes useful new ideas which might aid the agency in its present crisis. In spite of being this nation's oldest approach to public resource management, the state trust lands are an appropriate source of new ideas in an era in which, the paper suggests- (1) the courts are receding as a major source of executive accountability, (2) the legitimacy of federal agencies, particularly those whose authority is rooted in science, is declining, and (3) the institutional framework for public resource management is rapidly fragmenting and diversifying. The Forest Service could fruitfully explore (1) the trust standard of prudence, particularly requirements for trustee accountability and record keeping; (2) the role of the beneficiary in trust accountability and constituency building; (3) the state trust manager's adaptation of the trust notion of a portfolio and risk management; and (4) state trust land agency's different approaches to tying program funding to income without eliminating the legislature's role in appropriations. The trust mandate as embodied in western trust land management organizations also provides (5) examples of institutional flexibility that could be instructive to the agency in this new era of partnerships, and (6) a raft of experience doing the same thing the Forest Service does (e.g., leasing grazing and minerals) which ought to inform Forest Service consideration of alternative management tools. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-16&r=env |
| By: | Long, Rebecca; Beierle, Thomas |
| Abstract: | This paper discusses the Federal Advisory Committee Act (FACA) and how it affects public participation in environmental decision-making. Passed in 1972 as one of the "openness in government" laws, FACA governs how the federal government seeks outside advice. It has had a profound influence on who participates in government decision-making, when they participate, how they participate, and what influence participation has on policy. FACA has had a number of notable successes. Primary among these has been its role in limiting the unbalanced influence of special interests, acting through advisory committees, on public policy-making. The advisory committees which the law governs have also achieved a number of the "social goals" of public participation, including- (1) educating the public, (2) bringing public values into government decision-making, (3) improving the substantive quality of decisions, (4) increasing trust in government institutions, and (5) reducing conflict. Often, advisory committees have given government relatively inexpensive access to experts and stakeholders in order to achieve these goals. However, FACA has also createddirectly and indirectlya number of "chilling effects" on public participation in environmental decision-making. First are procedural requirements which make it difficult for groups outside of government to become advisory committees, and thereby gain access to decision-making. Second are ambiguities in the law and its regulations which limit the willingness of public agencies to engage the public outside of FACA. And third are Clinton Administration policies which limit the number of advisory committees that agencies are allowed to establish. Taken together, these chilling effects create a paradox wherein agencies are reluctant to engage the public in decision-making outside of FACA but significant barriers keep groups (and agencies) from forming advisory committees under the Act. The paper concludes by recommending a streamlining of FACA's procedural requirements, a clarification of regulations and policies regarding what type of participation falls under FACA, and an elimination of administrative ceilings on advisory committee formation. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-17&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | The paper discusses the design of environmental remediation laws in countries struggling with fundamental market and institutional reforms. Optimal cleanup standards, liability rules, and enforcement are discussed from the standpoint of both economic efficiency and practical implementation. Particular attention is paid to financing mechanisms and issues that arise during privatization. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-21&r=env |
| By: | Harrington, Winston (Resources For the Future); McConnell, Virginia (Resources For the Future) |
| Abstract: | This paper examines the current assignment of liability for in-use vehicle emissions and suggests some alternative policies that may reduce the cost and increase the effectiveness. The authors first discuss the cost, performance and incentives under current Inspection and Maintenance (I/M) programs, using the recently implemented Arizona "Enhanced I/M" program as an example. These programs were designed to identify and repair vehicles with malfunctioning emission control systems. Since their inception, however, I/M programs have been plagued by transaction costs that have drastically raised the cost of I/M as well as limited its effectiveness. These transaction costs fall into three categories- emission monitoring, repair avoidance, and non-transferability of emission reductions. The authors argue that most of these transaction costs can be attributed to the current assignment of liability for I/M to motorists, and they examine the potential for other liability assignments to reduce transaction costs and improve program efficiency. Among the alternative institutional arrangements discussed are greater imposition of liability on manufacturers, emission repair subsidies, repair liability auctions, and vehicle leasing. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-22&r=env |
| By: | Ando, Amy; Harrington, Winston (Resources For the Future); McConnell, Virginia (Resources For the Future) |
| Abstract: | The Arizona I/M program provides one of the first opportunities to examine the costs and effectiveness of vehicle emission repair. This paper examines various aspects of emission reductions, fuel economy improvements, and costs of repair, drawing data from over 80,000 vehicles failing the I/M test in Arizona between 1995 and the first half of 1996. We summarize the wealth of repair data from the Arizona program and highlight its limitations. Because missing or incomplete cost information has been a serious shortcoming for evaluation of I/M programs, we develop a method for estimating the costs of repair when those costs are not reported. We find surprising evidence that almost one quarter of all vehicles that take the I/M test are never observed to pass the test. Using a statistical analysis, we provide some information about the differences between the vehicles that pass and those that do not. Older, more polluting vehicles are much more likely to never pass the I/M test, and their expected costs of repair are much higher than those of new cars. The paper summarizes the evidence on cost and emission reduction in the Arizona program, comparing costs and emission reductions for both cars and trucks. Finally, we examine the potential for more cost-effective repair, first through an analysis of tightening I/M cutpoints, and then by calculating the cost savings of achieving different emission reduction goals when the most cost effective repairs are made first. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-23-rev&r=env |
| By: | Parry, Ian (Resources For the Future); Bento, Antonio |
| Abstract: | A number of recent studies have shown that the general equilibrium welfare effects of externality-correcting policies depend importantly on pre-existing taxes in the economy, particularly those that distort the labor market. This paper extends the prior literature by allowing for consumption goods that are deductible from labor taxes. These "goods" represent medical insurance, other less tangible fringe benefits, mortgage interest, and so on. The initial tax system effectively subsidizes tax-favored consumption relative to other consumption, in addition to distorting the labor market. The authors find that incorporating tax-favored consumption may overturn key results from earlier studies. In particular, a revenue-neutral pollution tax (or auctioned pollution permits) can produce a substantial "double dividend" by reducing both pollution and the costs of the tax system. The second dividend arises because the welfare gain from using environmental tax revenues to cut labor taxes is much larger when labor taxes also distort the choice among consumption goods. Indeed (ignoring environmental benefits) the overall costs of a revenue-neutral pollution tax are negative in their benchmark simulations, at least for pollution reductions up to 17 percent, and possibly up to 42 percent. In addition, the authors show that the presence of tax-favored consumption may dramatically increase the efficiency gain from using (revenue-neutral) emissions taxes (or auctioned emissions permits) over grandfathered emissions permits. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-24&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Mansur, Erin |
| Abstract: | The 1990 Clean Air Act Amendments initiated a dramatic reduction in emissions of sulfur dioxide and nitrogen oxides by electric power plants. This paper provides an evaluation of the environmental and public health consequences of the trading and banking provisions of Title IV. A sizable shift in the geographic location of emissions under Title IV (in some states of over 20 percent of emissions after Title IV is implemented) is attributable to trading and/or to banking. There has been considerable concern that this shift in emissions would cause harm to downwind areas due to long-range transport of pollution. The authors find the resulting change in atmospheric concentrations and deposition of pollutants, and the change in monetized health benefits, are most unfavorable in the regions where emissions increase. In the East and Northeast including New York State, an area of particular concern, health benefits increase and deposition of sulfur decreases slightly as a result of trading. In the aggregate, trading results in health related benefits nationally of nearly $570 million in 1995 and about $125 million in 2005. The reason is that the geographic shift in emissions away from more populated areas leads to a decrease in exposure to harmful particulates. Meanwhile, cost savings from trading represent about 13 percent of compliance costs in the No Trading scenario in 1995, and about 37 percent in 2005. Banking has the anticipated effect of changing the timing of emissions. Banking causes a reduction of up to 20 percent in 1995 in some states and a commensurate increase in 2005. The geographic pattern of emission changes as a consequence is varied; some states reduce emissions in 2005 as a result of banking. These changes are small compared to the overall reduction in emissions, sulfur deposition, and human health benefits expected to result from the program. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-25&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | With the advent of the Kyoto Protocol and its recognition of the use of forestry activities and carbon sinks as acceptable tools for addressing the issue of the build-up of atmospheric carbon, the potential role of planted forests as a vehicle for carbon sequestration has taken on a new significance. Additionally, the emergence of tradable emission permits and now tradable carbon offsets provides a vehicle for financially capturing the benefits of carbon emission reductions and carbon offsetting activities. In a world where carbon sequestration has monetary value, investments in planted forests can be made with an eye to revenues to (at least two) joint outputs- timber and the carbon sequestration services. The first section of this paper examines the Patagonia region of Argentina, as an example of an area where carbon sequestration values combined with timber values create financial incentives for creating planted forests, which could not be justified on the bases of timber values alone. The paper uses a present value approach to evaluate the costs and benefits of plantation forestry in a "representative" site in Patagonia. A basic timber harvest scenario is developed and then a number of alternative scenarios are examined. These introduce carbon as an additional product to be produced "jointly" with timber. The scenarios include alternative rotation periods, alternative prices for carbon offsets, and a brief examination of the effect of undertaking a specific silvicultural activity. In the second section of the paper the results of this analysis are considered in the context of a discussion of the various types of institutional arrangements that might be required to provide a market for the carbon sequestration services provided by the planted forests. The paper identifies, examines and discusses a number of potential institutional arrangements that exist or are under discussion for marketing carbon sequestration services. A number of problems that may arise with offset credits and some of the innovative institutions that may be created are identified and discussed. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-27&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Darmstadter, Joel (Resources For the Future); McVeigh, James |
| Abstract: | This study provides an evaluation of the performance of five renewable energy technologies used to generate electricity- biomass, geothermal, solar photovoltaics, solar thermal, and wind. The authors compared the actual performance of these technologies against stated projections that helped shape public policy goals over the last three decades. Their findings document a significant difference between the success of renewable technologies in penetrating the U.S. electricity generation market and in meeting cost-related goals, when compared with historic projections. In general, renewable technologies have failed to meet expectations with respect to market penetration. They have succeeded, however, in meeting or exceeding expectations with respect to their cost. To a significant degree, the difference in performance in meeting projections of penetration and cost stem from the declining price of conventional generation, which constitutes a moving baseline against which renewable technologies have had to compete. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-28&r=env |
| By: | Austin, David; Alberini, Anna |
| Abstract: | Proponents of environmental policies based on liability assert that strict liability imposed on the polluter will induce firms to handle hazardous wastes properly and to avoid disposing them into the environment. Economic theory and a few well-publicized cases, however, suggest that a number of factors may dilute the incentives posed by strict liability. In this paper, the authors run regressions relating unintended releases of pollution into the environment (aggregated at the state level, and followed over nine years from 1987 to 1995) to the imposition of strict liability on the polluter, exploiting variation across states in the liability provisions of their mini-Superfund laws, and in the years these were adopted. The authors experiment with instrumental variable estimation, fixed effects, and endogenous switching, and find that only after they explicitly model the endogeneity of states' liability laws is strict liability seen as reducing the seriousness of spills and releases. They also find evidence consistent with the notion that under strict liability, firms may spin off into, or delegate riskier production processes to, smaller firms, which are partially sheltered from liability. This tendency appears to be widespread. |
| Keywords: | strict liability, negligence, hazardous waste, state environmental policy, endogenous policy adoption |
| JEL: | Q28 D72 K13 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-29&r=env |
| By: | Stavins, Robert; Hahn, Robert |
| Abstract: | This paper investigates a central issue in the climate change debate associated with the Kyoto Protocol- the likely performance of international greenhouse gas trading mechanisms. Virtually all design studies and many projections of the costs of meeting the Kyoto targets have assumed that an international trading program can be established that minimizes the costs of meeting overall goals. This conclusion rests on several simplifying assumptions. In this paper, the authors focus on one important issue that has received little, if any, attention- the interaction between an international trading regime and a heterogeneous set of domestic greenhouse policy instruments. This is an important issue because the Protocol explicitly provides for domestic sovereignty regarding instrument choice, and because it is unlikely that most countries will choose tradable permits as their primary domestic vehicle. It is true that costs can be minimized if all countries use domestic tradable permit systems to meet their national targets (allocate permits to private parties) and allow for international trades. But when some countries use non-trading approaches such as greenhouse-gas taxes or fixed quantity standards which seems likely in the light of previous experience cost minimization is hardly assured. In these cases, achieving the potential cost savings of international trading will require some form of project-by-project credit program, such as joint implementation. But theory and experience with such credit programs suggest that they are much less likely to facilitate major cost savings, because of large transactions costs, likely government participation, and absence of a well functioning market. Thus, individual nations' choices of domestic policy instruments to meet the Kyoto targets can limit substantially the cost-saving potential of an international trading program. There is an important trade-off between the degree of domestic sovereignty and the degree of cost effectiveness. Moreover, there is a need to analyze the likely cost-savings from feasible, as opposed to idealized, international policy approaches to reducing emissions of greenhouse gases. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-30&r=env |
| By: | Stavins, Robert; Newell, Richard (Resources For the Future) |
| Abstract: | The possibility of encouraging the growth of forests as a means of sequestering carbon dioxide has received considerable attention because of concerns about the threat of global climate change due to the greenhouse effect. In fact, this approach is an explicit element of both U.S. and international climate policies, partly because of evidence that growing trees to sequester carbon can be a relatively inexpensive means of combating climate change. But how sensitive are such estimates to specific conditions? We examine the sensitivity of carbon sequestration costs to changes in critical factors, including the nature of the management and deforestation regimes, silvicultural species, agricultural prices, and discount rates. We find, somewhat counter-intuitively, that the costs of carbon sequestration can be greater if trees are periodically harvested, rather than permanently established. In addition, higher discount rates imply higher marginal costs, and they imply non-monotonic changes in the amount of carbon sequestered. Importantly, retarded deforestation can sequester carbon at substantially lower costs than increased forestation. These results depend in part on the time profile of sequestration and the amount of carbon released upon harvest, both of which may vary by species, geographic location, and management regime, and are subject to scientific uncertainty. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-31-rev&r=env |
| By: | Sedjo, Roger (Resources For the Future) |
| Abstract: | Marion Clawson passed away in April 1998 at the age of 92. He was a giant in the field of resource and environmental economics who devoted the last decade and one-half of his professional career to forest and forest related issues. He produced over 30 professional books and hundreds of papers. This paper presents a broad overview of his career as an economist, with a focus on his work in and influence on forestry and forest policy. From the early 1970s through to his last professional book in 1983, and his final professional contributions in the mid 1990s, Clawson devoted most of his professional efforts to forest issues. His influence on forests and forest policy was substantial, especially in the context of public policy toward America's publicly owned forested lands. He served as an external critic of the Forest Service, regularly calling for greater attention to be given to issues of economic efficiency in the management of public lands. His influence was probably greatest during the period from the early 1970s, when his service on the President's Advisory Panel on Timber and the Environment stimulated his interest in forestry, through the mid 1980s. During this period he authored several books on forestry and a number of influential articles. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-33&r=env |
| By: | Blackman, Allen (Resources For the Future); Mazurek, Janice |
| Abstract: | The flagship of the Environmental Protection Agency’s regulatory reinvention initiative, Project XL has been touted as a ‘regulatory blueprint’ for a site-specific, performance-based pollution control system. But widespread complaints about the costs of the program beg the question of whether the costs of tailoring regulations to individual facilities are manageable. To address this question, this paper presents original survey data on a sample of 11 XL projects. We find that the fixed costs of putting in place XL agreements are substantial, averaging over $450,000 per firm. While stakeholder negotiations are widely cited as the principal source for these costs, we find that they actually arise mainly from interaction between participating facilities and the EPA. Moreover, EPA management problems are perceived by our survey respondents as having inflated project development costs. Finally, we find that the key factor that explains differences in costs across XL projects is the scope and complexity of the project proposal. These findings suggest that Project XL favors large firms that can afford to pay significant project development costs, that EPA management problems must be resolved to reduce costs, and that there may be a significant economic bias against complex and innovative proposals—precisely the type of proposals that Project XL was designed to foster in order to improve the efficiency of the regulatory system. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-35-rev&r=env |
| By: | Blackman, Allen (Resources For the Future); Harrington, Winston (Resources For the Future) |
| Abstract: | To what extent should developing countries eschew conventional command and control environmental regulation that is increasingly seen as inefficient and rely instead on economic incentives? This paper addresses this question as it pertains to industrial air pollution. The paper discusses the advantages and disadvantages of various economic incentive instruments, presents in-depth case studies of their application in Sweden, the United States, China, and Poland, and proposes a number of policy guidelines. The authors argue that both design deficiencies and pervasive constraints on monitoring and enforcement impede the effectiveness of economic instruments in developing countries. The latter are difficult to rectify, at least in the medium term. As a result, tradable permits are generally not practical. Suitably modified however, emissions fee policies probably are appropriate. They can provide a foundation for a transition to an effective economic incentive system, and can raise much needed revenue for environmental projects and programs. In addition, if political opposition can be overcome, environmental taxes constitute a second-best but potentially effective pollution control instrument. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-39&r=env |
| By: | Blackman, Allen (Resources For the Future) |
| Abstract: | Recent efforts to forge a consensus on the role developing countries should play in reducing global greenhouse gas emissions have focused attention on climate friendly technologies (CFTs), most notably those that enhance energy efficiency. In the medium term, the effectiveness of technology-based climate strategies will depend critically on the rates at which CFTs diffuse in developing countries. This paper reviews some of the key findings of the economics research on technology diffusion and assesses the implications for climate policy. The most obvious lessons from this research are that widespread diffusion of CFTs may take decades, and that diffusion rates in developing and industrialized countries are likely to be quite different. In addition, the literature has implications for a number of strategies for promoting technology diffusion including information dissemination, factor price rationalization, and investment in human capital. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-42&r=env |
| By: | Krupnick, Alan (Resources For the Future); Cropper, Maureen; Alberini, Anna; Simon, Nathalie; Itaoka, Kenshi; Akai, Makoto |
| Abstract: | Most benefit-cost analyses of reductions in air pollutants and other pollutants carrying mortality risks rely on estimates of the value of reductions in such risks produced by compensating wage studies, or contingent valuation studies that value risk reductions in the context of transport or job-related accidents. As the authors argue below, these estimates are inappropriate when valuing risk changes produced by environmental programs. The objectives of this paper are to explain why these estimates are inappropriate and to describe an improved approach to valuing reductions in risk of death from environmental programs, especially programs to reduce air pollution. The authors have implemented this approach in a pilot study in Tokyo, Japan. The paper provides estimates of the value of a statistical life based on the pilot study and describes extensions of the approach based on test results. The preliminary results from the Tokyo pilot indicate that individuals are able to distinguish between different magnitudes of small changes in mortality risks and between the same change in these risks occurring at different times (although the latter has not yet been subjected to an external scope test). Changes to the survey and a big increase in sample size may improve performance on the internal validity tests and the results of the scope tests. Although the current results can only be considered suggestive, if they were to remain after administration of the survey to a larger sample, and subject to some other caveats, they would imply that the VSL's currently used in benefit-cost analyses of environmental policies are significant overestimates. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-47&r=env |
| By: | Konisky, David; Beierle, Thomas |
| Abstract: | The need for greater public involvement in environmental decision-making has been highlighted in recent high-profile research reports and emphasized by leaders at all levels of government. In some cases, agencies have opened the door to greater participation in their programs. However, there is relatively little information on what can be gained from greater public involvement and what makes some programs work while others fail. This paper addresses these questions through an evaluation of public participation in environmental planning efforts in the Great Lakes region. The success of participation is measured using five criteria- educating participants, improving the substantive quality of decisions, incorporating public values into decision-making, reducing conflict, and building trust. The paper then discusses the relationship between success and a number of contextual and procedural attributes of a variety of cases. Data come from a "case survey," in which the authors systematically extract information from previously published studies of 30 individual participation cases. The authors conclude that public participation can accomplish important societal goals and that success depends, in large part, on the actions and commitment of government agencies. |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-99-50&r=env |
| By: | Parry, Ian (Resources For the Future); Pizer, William (Resources For the Future); Fischer, Carolyn (Resources For the Future) |
| Abstract: | This paper examines whether the welfare gains from technological innovation that reduces future abatement costs are larger or smaller than the “Pigouvian” welfare gains from optimal pollution control. The relative welfare gains from innovation depend on three key factors- the initially optimal level of abatement, the speed at which innovation reduces future abatement costs, and the discount rate. We calculate the welfare gains from innovation under a variety of different scenarios. Mostly they are less than the Pigouvian welfare gains. To be greater, innovation must reduce abatement costs substantially and quickly and the initially optimal abatement level must be fairly modest. |
| Keywords: | innovation, welfare, regulation, endogenous, technological, change, R&D |
| JEL: | Q16 Q28 O32 O33 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-15-rev&r=env |
| By: | Walls, Margaret (Resources For the Future); Calcott, Paul |
| Abstract: | Several studies that have solved for optimal solid waste policy instruments have suggested that transaction costs may often prevent the working of recycling markets. In this paper, we explicitly incorporate such costs into a general equilibrium model of production, consumption, recycling, and disposal. Specifically, we assume that consumers have access to both recycling without payment and recycling with payment but that the latter option comes with transaction costs. Producers choose material and nonmaterial inputs to produce a consumer product, and they also choose design attributes of that product—its weight and degree of recyclability. We find that the policy instruments that yield a social optimum in this setting need to vary with the degree of recyclability of products. Moreover, they need to be set to ensure that recycling markets do not operate—that is, that all recycling takes place without an exchange of money between recyclers and consumers. We argue that implementing such a policy would be difficult in practice. We then solve for a simpler set of instruments that implement a constrained (second-best) optimum. We find the results in this setting more encouraging- a modest disposal fee—less than the Pigouvian fee—combined with a common deposit-refund applied to all products will yield the constrained optimum. Moreover, this set of constrained optimal instruments is robust to the possibility that consumers imperfectly sort used products into trash and recyclables. |
| Keywords: | Dfe, deposit-refund, disposal fee, constrained optimum |
| JEL: | H21 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-00-30-rev&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Bharvirkar, Ranjit; Paul, Anthony |
| Abstract: | We investigate the cost-effectiveness and distributional effects of a revenue-raising auction, grandfathering, and a generation performance standard as alternative approaches for distributing carbon emission allowances in the electricity sector. We solve a detailed national electricity market model and find the auction is roughly one-half the societal cost of the other approaches. This result holds under a variety of assumptions about the future state of economic regulation and competition in the electricity sector. The differences in the cost of the approaches flow from the effect of each approach on electricity price. Grandfathering is the best for producers but it imposes a substantial cost on consumers. The generation performance standard yields the lowest electricity price but highest natural gas price. The auction does better than the generation performance standard at protecting households and at preserving asset values for producers. It also yields revenues that can help meet other efficiency and distributional goals. |
| Keywords: | carbon, emission allowance trading, allowance allocations, electricity, restructuring, air pollution, safety valve, auction, grandfathering, generation performance standard, output-based allocation, cost-effectiveness |
| JEL: | Q2 Q25 Q4 L94 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-30-&r=env |
| By: | Fischer, Carolyn (Resources For the Future); Bernard, Alain; Vielle, Marc |
| Abstract: | Political pressure often exists for rebating environmental levies, particularly when incomplete regulatory coverage allegedly creates an “unlevel playing field” with other, unregulated firms or industries. This paper assesses the conditions under which rebating environmental levies is justified for the regulated sector. It combines a theoretical approach based on second-best modeling with numerical simulations aimed at determining the most sensitive parameters. We find that if an adequate tax on production can be levied in the unregulated sector, no rebate is justified for the regulated sector. Moreover, even in the case of constrained taxation in the unregulated sector, a tax rebate or a subsidy in the regulated sector is not necessarily a welfare-increasing policy. The exception occurs when the goods of the competing sectors are close substitutes. We find that these kinds of policy contraints can be quite costly in terms of welfare. |
| Keywords: | environmental levy, tax rebate, fiscal distortions |
| JEL: | Q2 Q43 H2 D61 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-31-&r=env |
| By: | Ghersi, Frederic; Hourcade, Jean-Charles |
| Abstract: | This paper examines compromise spaces between competing perspectives on four key climate change issues- costs, level of domestic action, environmental integrity, and developing world involvement. Based on extensive simulations of a model integration tool, SAP12 (Stochastic Assessment of Climate Policies, 12 models), the analysis considers options for fine-tuning the Kyoto Protocol, such as concrete ceilings or levies on carbon imports; restoration payments to be made on excess emissions; credits for sequestration activities in Annex B countries; and others. It shows the critical importance of the baseline against which the performance of each tool has to be assessed in the absence of direct economic penalties for noncompliance. The restoration payment option (also known as a safety valve) emerges as a superior means of addressing the core policy issues, including environmental integrity, and provides a large compromise space between payments of $35 to $100 per ton of carbon. |
| Keywords: | limate negotiations, 2010 carbon markets, uncertainty about abatement costs |
| JEL: | Q25 D74 D78 D80 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-48-&r=env |
| By: | Wernstedt, Kris (Resources For the Future); Hersh, Robert |
| Abstract: | Recent scientific and technical advances have increased the potential use of longterm seasonal climate forecasts for improving water resource management. This paper examines the role that forecasts, in particular those based on the El Nino-Southern Oscillation (ENSO) cycle, can play in flood planning in the Pacific Northwest. While strong evidence of an association between ENSO signals and flooding in the region exists, this association is open to more than one interpretation depending on- a) the metric used to test the strength of the association; b) the definition of critical flood events; c) site-specific features of watersheds; and d) the characteristics of flood management institutions. A better understanding and appreciation of such ambiguities, both institutional and statistical, is needed to facilitate the use of climate forecast information for flood planning and response. |
| Keywords: | Flooding, Climate, ENSO, Water Resources Planning, Water Policy, Water Management |
| JEL: | Q2 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-56-&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Krupnick, Alan (Resources For the Future); Toman, Michael; Paul, Anthony; Bloyd, Cary |
| Abstract: | This paper considers how moderate actions to slow atmospheric accumulation of greenhouse gases from fossil fuel use also could reduce conventional air pollutants in the United States. The benefits that result would be “ancillary” to greenhouse gas abatement. Moreover, the benefits would tend to accrue locally and in the near term, while benefits from reduced climate change mostly accrue globally and over a time frame of several decades or longer. The previous literature suggests that changes in nitrogen oxides (NOx) would be the most important consequence of moderate carbon policies. We calculate these changes in a detailed electricity model linked to an integrated assessment framework to value changes in human health. A tax of $25 per metric ton of carbon emissions would yield NOx related health benefits of about $8 per metric ton of carbon reduced in the year 2010 (1997 dollars). Additional savings accrue from reduced investment in NOx and SO2 abatement in order to comply with emission caps. These savings sum to $4-$7 per ton of carbon reduced. Total ancillary benefits of a $25 carbon tax are estimated to be $12-$14, which appear to justify the costs of a $25 tax, although marginal benefits are less than marginal costs. At a tax of $75 per ton carbon, greater health benefits and abatement cost savings are achieved but the value of ancillary benefits per ton of carbon reductions remains roughly constant at about $12. |
| Keywords: | climate change, greenhouse gas, ancillary benefits, air pollution, co-control benefits, nitrogen oxides, sulfur dioxide, carbon dioxide, particulates, health |
| JEL: | H23 I18 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-01-61-&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Bharvirkar, Ranjit; McGuinness, Meghan |
| Abstract: | This paper analyzes uncertainties surrounding the benefits and costs of a policy to reduce nitrogen oxides (NOX) emissions from electricity generation in the eastern U.S. Under each of 18 scenarios examined, we find an annual policy would yield net benefits that are at least as great as those expected under the U.S. Environmental Protection Agency’s (EPA) currently planned seasonal policy. Preferred (midpoint) assumptions yield additional benefits of $724 million per year under an annual policy compared to a seasonal one (1997 dollars). The subset of 11 northeastern states benefit the most from an annual policy relative to a seasonal one, but relative net benefits are also positive in the remaining states in the region. An annual policy implemented on a national basis appears to be slightly less cost-effective than the EPA’s policy under midpoint assumptions but it is more cost-effective under half of the scenarios we examine. |
| Keywords: | emissions trading, electricity, particulates, nitrogen oxides, NOX, health benefits, market structure, restructuring, deregulation, value of statistical life, uncertainty |
| JEL: | Q2 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-01-&r=env |
| By: | Morgenstern, Richard (Resources For the Future); Shih, Jhih-Shyang (Resources For the Future); Ho, Mun (Resources For the Future); Zhang, Xuehua |
| Abstract: | Who will pay for new policies to reduce carbon dioxide and other greenhouse gas emissions in the United States? This paper considers a slice of the question by examining the near-term impact on domestic manufacturing industries of both upstream (economy-wide) and downstream (electric power industry only) carbon mitigation policies. Detailed Census data on the electricity use of four-digit manufacturing industries is combined with input-output information on interindustry purchases to paint a detailed picture of carbon use, including effects on final demand. This approach, which freezes capital and other inputs at current levels and assumes that all costs are passed forward, yields upper-bound estimates of total costs. The results are best viewed as descriptive of the relative burdens within the manufacturing sector rather than as a measure of absolute costs. Overall, the principal conclusion is that within the manufacturing sector (which by definition excludes coal production and electricity generation), only a small number of industries would bear a disproportionate short-term burden of a carbon tax or similar policy. Not surprisingly, an electricity-only policy affects very different manufacturing industries than an economy-wide carbon tax. |
| Keywords: | distribution of carbon mitigation costs, industrial impacts of carbon policies |
| JEL: | Q28 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-06-&r=env |
| By: | Banzhaf, H. Spencer (Resources For the Future) |
| Abstract: | This paper suggests two theoretically consistent and empirically tractable ways that a cost-ofliving index can be expanded to include the environment and other public goods. In addition, it presents an empirical illustration of such an index for Los Angeles, California, incorporating air quality and other spatially varying public goods using a hedonic model. The results indicate that the required information can be recovered and that including public goods can make a noticeable difference in the index. |
| Keywords: | air quality, green accounting, hedonic regression, nonmarket valuation, price index |
| JEL: | E31 H40 I00 Q25 R10 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-09-&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Bharvirkar, Ranjit; Bloyd, Cary |
| Abstract: | Planning of the electricity transmission system generally focuses on the pros and cons of providing generation close to the source of the power demand versus remote generation linked via the transmission system. Recent electricity supply problems in the western United States have renewed interest in the role of transmission in assuring the reliability of electricity supply. Recently, the Western Governors’ Association led the development of a planning exercise that examined the tradeoffs over the next 10 years between locating new natural gas powered generation close to the load centers versus new coal, wind, hydro, and geothermal generation in remote areas. Although the analysis concentrated on the direct system costs, the choice of new generation will have both local and global environmental impacts. This paper examines some of the “ancillary” environmental effects of electricity transmission decisions using a suite of models that combine to provide an integrated assessment. |
| Keywords: | electricity, transmission, air pollution, ancillary benefits, nitrogen oxides, sulfur dioxide, carbon dioxide |
| JEL: | L94 Q25 Q41 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-14-&r=env |
| By: | Burtraw, Dallas (Resources For the Future); Palmer, Karen (Resources For the Future); Bharvirkar, Ranjit; Paul, Anthony |
| Abstract: | Paradoxically, owners of existing generation assets may be better off paying for carbon dioxide emission allowances than having them distributed for free. This analysis shows that it takes just 7.5% of the revenue raised under an auction to preserve the asset values of existing generators. |
| Keywords: | carbon dioxide, emission allowance trading, allocation, electricity, restructuring, air pollution, auction, grandfathering, generation performance standard, outputbased allocation, cost-effectiveness |
| JEL: | Q2 Q25 Q4 L94 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-02-15-&r=env |
| By: | Stavins, Robert; Revesz, Richard |
| Abstract: | This chapter provides an economic perspective of environmental law and policy with regard to both normative and positive dimensions. It begins with an examination of the central problem in environmental regulation: the tendency of pollution generators in an unconstrained market economy to externalize some of the costs of their production, leading to an inefficiently large amount of pollution. We examine the ends of environmental policy, that is, the setting of goals and targets, beginning with normative issues, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. We examine this analytical method in detail, including its theoretical foundations and empirical methods of estimation of compliance costs and environmental benefits. We include a review of critiques of benefit-cost analysis, briefly examine alternative approaches to analyzing the goals of environmental policies, and survey the efforts of the Federal governmental to employ these analytical methods. The chapter also examines in detail the means of environmental policy, that is, the choice of specific policy instruments, beginning with an examination of potential criteria for assessing alternative instruments, with particular focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional, commandand- control mechanisms, economic incentive or market-based instruments, and liability rules. In the economic-incentive category, we consider pollution charges, tradeable permit systems, market friction reductions, and government subsidy reductions. Three cross-cutting issues receive attention: implications of uncertainty for instrument choice; effects of instrument choice on technological change; and distributional considerations. We identify a set of normative lessons in regard to design, implementation, and the identification of new applications, and we examine positive issues, including three phenomena: the historical dominance of command-and-control; the prevalence in new proposals of tradeable permits allocated without charge; and the relatively recent increase in attention given to market-based instruments. Finally, the chapter turns to the question of how environmental responsibility is and should be allocated among the various levels of government. We provide a positive review of the responsibilities of Federal, state, and local levels of government in the environmental realm, plus a normative assessment of this allocation of regulatory responsibility. We focus on three arguments that have been made for Federal environmental regulation: competition among political jurisdictions and the race to the bottom; transboundary environmental problems; and public choice and systematic bias. |
| Keywords: | environmental economics, environmental law, efficiency, cost-effectiveness, benefitcost analysis, environmental federalism |
| JEL: | K32 Q28 Q38 Q48 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-30-rev&r=env |
| By: | Fischer, Carolyn (Resources For the Future) |
| Abstract: | Project-based mechanisms for emissions reductions credits, like the Clean Development Mechanism, pose important challenges for policy design because of several inherent characteristics. Participation is voluntary, so it will not occur without sufficient credits. Evaluating reductions requires assigning an emissions baseline for a counterfactual that cannot be measured. Some investments have both economic and environmental benefits and might occur anyway. Uncertainty surrounds both emissions and investment returns, and parties to the project are likely to have more information than the certifying authority. The certifying agent is limited in its ability to design a contract that would reveal investment intentions. As a result, rules for benchmarking emissions may be systematically biased to overallocate, and they also risk creating inefficient investment incentives. This paper evaluates, in a situation with asymmetric information, the efficacy of the main baseline rules currently under consideration- historical emissions, an average industry emissions standard, and expected emissions. |
| Keywords: | climate policy, Clean Development Mechanism, baselines, asymmetric information, offsets, emissions reduction, tradable emissions permits |
| JEL: | D8 Q4 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-32&r=env |
| By: | Bell, Ruth (Resources For the Future); Narain, Urvashi (Resources For the Future) |
| Abstract: | Although there is general public approval of the improvements in Delhi’s air quality in the recent years, the process by which this change was brought about has been criticized. A common perception is that air quality policies were prescribed by the Supreme Court, and not by an institution with the mandate for making environmental policy. A careful review of the policy process in Delhi suggests otherwise. We find that the government was intimately involved in policymaking and that the main role of the Supreme Court was to force the government to implement previously announced policies. A good understanding of what happened is essential, as the Delhi experience for instituting change has become a model for other Indian cities as well as neighboring countries. |
| Keywords: | air quality, Supreme Court, compressed natural gas, Delhi |
| JEL: | Q42 Q53 Q58 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-48&r=env |
| By: | Blackman, Allen (Resources For the Future); Albers, Heidi; Sartorio, Beatriz; Crooks, Lisa |
| Abstract: | Managed forest ecosystems—agroforestry systems in which crops such as coffee and bananas are planted side-by-side with woody perennials—are being touted as a means of safeguarding forests along with the ecological services they provide. Yet we know little about the determinants of land cover in such systems, information needed to design effective forest conservation policies. This paper presents a firstever spatial regression analysis of land cover in a managed forest ecosystem—a shade coffee region of coastal Mexico. Using high-resolution land cover data derived from aerial photographs, along with data on the institutional, geophysical, socioeconomic, and agronomic characteristics of the study area, we find that plots in close proximity to urban centers are less likely to be cleared, all other things equal. This finding contrasts sharply with the literature on natural forests. In addition, we find that membership in coffee marketing cooperatives, farm size, and certain soil types are associated with forest cover, while common property, proximity to small town centers, and the prevalence of indigenous peoples are associated with forest clearing. |
| Keywords: | deforestation, managed forest ecosystem, agroforestry, shade-grown coffee, Mexico, spatial econometrics, land cover. |
| JEL: | O13 Q15 Q23 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-03-60&r=env |
| By: | Pizer, William (Resources For the Future); Tamura, Kentaro |
| Abstract: | Resources for the Future and the Institute for Global Environmental Strategies (Japan) convened a one-and-one-half day workshop on domestic and international climate policy on February 12–13, 2004 in Washington, D.C. On the first day, 55 participants heard presentations from 14 speakers and discussed domestic activities, economics, and politics. The second day featured a smaller group of 27 participants hearing six informal sets of comments and discussing opportunities for international collaboration. Participants included government officials from the Japanese Ministry of the Environment, the U.S. Environmental Protection Agency, and other U.S. administration and congressional staff; representatives from business and environmental groups; and academic experts. Over the course of both days, it was clear that great opportunities exist for informing participants from both countries on recent developments, economic analyses, and political nuances in the other country. For example, American participants were unaware of the Keidanren’s success at exceeding required efficiency standards. Japanese participants were unaware of U.S. treaty tradition, by which ratification cannot occur until implementing legislation is in place—a fact that makes the Kyoto Protocol virtually unratifiable. Participants on both sides benefited from a frank discussion of how and why it may be unwise for the international community to attempt to re-engage the United States in international climate policy until the United States settles on its own course of meaningful domestic action. Looking forward, an important lesson may be taken from U.S. experience with early environmental regulation, where state action provided experience and impetus for federal action. As an alternative to the Kyoto model, distinct national actions may provide experience and impetus for international action. In addition, policies in both the United States and Japan reflect a strong emphasis on technology development and commercialization; this may be an area where bilateral cooperation could be particularly beneficial. |
| Keywords: | climate change, global warming, United States, Japan, Kyoto |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-22&r=env |
| By: | Boyd, James (Resources For the Future) |
| Abstract: | Via technology and operations standards, U.S. regulation exerts an important influence over worldwide marine safety standards. But in addition, several other aspects of U.S. law deserve wider international consideration and adoption. First, the Oil Pollution Act’s natural resource damage provisions are an innovative and effective way to deter marine pollution and provide for the restoration of injured ecological resources. Second, the relatively strict financial requirements imposed on marine transporters help ensure that polluters, rather than the public, pay if damage is caused. Liability and financial responsibility rules are not unknown in other countries. But the United States has a longer history with implementation and applies its rules more expansively. As both environmental concerns and global marine trade flows increase, U.S. experience with these rules will be instructive to other nations contemplating oil pollution reforms. |
| Keywords: | Oil Pollution Act, Natural Resource Damages, Environmental Liability, Financial Assurance, Financial Responsibility, Valuation |
| JEL: | K13 K32 Q38 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-04-36&r=env |
| By: | Pizer, William (Resources For the Future); Tamura, Kentaro |
| Abstract: | Resources for the Future and the Institute for Global Environmental Strategies convened a one and one-half day workshop on domestic and international climate policy May 11–12, 2005, in Tokyo, Japan. The first day included 49 participants hearing presentations from 13 speakers and discussing domestic activities, economics, and politics. The second day included a smaller group of participants listening to a panel of four experts and discussing opportunities for future international climate regimes. Participants included government officials from the Japanese Ministry of the Environment; the Japanese Ministry of Economy, Trade and Industry; the U.S. Environmental Protection Agency; the U.S. Department of State; and the Massachussetts Department of Commonwealth Development; representatives from business and environmental groups; and academic experts. Over the course of both days, it was clear that great opportunities exist for regularly informing experts from both countries on recent policy developments, economic analyses, and political nuances in the other country. For example, U.S. participants had an opportunity to learn the process through which Japanese technology standards are set and implemented, the subtle evolution of mandatory policy discussions, and details of current policies on voluntary trading and an emission registry. Japanese participants benefited from a frank discussion with U.S. experts of how and why it would be difficult to link different domestic emissions trading markets, the current process to establish a regional emissions trading program, and the evolving dynamics in the U.S. Senate. Looking forward, important lessons may be taken from past negotiating experiences. A small group of national leaders, including large emitters of greenhouse gases and major economies, addressing not only climate change but also developmental issues, could be a useful vehicle for meaningful international efforts. Such a small-group process should be carried out in parallel with the multilateral United Nations Framework Convention on Climate Change process. In addition, policies in both the United States and Japan reflect a strong emphasis on technology development and commercialization; this may be an area where bilateral cooperation could be particularly beneficial. |
| Keywords: | climate change, global warming, United States, Japan, Kyoto |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-05-28&r=env |