Environmental Economics

Quotes of the day

Just when it was safe to go back in the water (Pollution, rising costs of coal a concern for TVA, residents):

Despite concerns over air pollution and global warming caused by coal plants, TVA expects to continue to stoke coal in most of its major power plants for decades to come. Although TVA has no plans to build any more coal-fired plants, none of the 59 coal-fired units now in operation are scheduled to be shut down for at least another 15 years.

...

TVA spends nearly $1 million a day on pollution controls, but the federal utility still faces at least a half dozen lawsuits and violation notices over emissions from coal plants. North Carolina’s attorney general has called TVA “a public nuisance” for polluting the Tar Heel state, while some environmentalists want TVA to quit burning coal altogether to limit greenhouse gases they contend cause global warming.

EPA's SO2 auction results

EPA Announces Results of the Sixteenth Annual Sulfur Dioxide Auction:

(3/27/08) On March 25, 2008, EPA held the acid rain auction giving private citizens, brokers and power plants the opportunity to buy and sell sulfur dioxide (SO2) allowances, as part of the cap and trade program to reduce acid rain. When fully implemented in 2010, the Acid Rain Program will have cut SO2 emissions by 50 percent from 1990 levels. ...

The auction includes two types of allowances: 125,000 offered for use in 2008 and 125,000 additional allowances offered seven years in advance to help provide stability in planning for capital investments. These advance allowances will be available for use in 2015. The number of allowances a source purchases will not permit them to emit SO2 at a level that would violate the health-based national ambient air quality standard. The weighted average of winning bids for 2008 is $389.91.

32 of the 125,000 bids in the spot market were purchased by various groups (e.g., Acid Rain Retirement Fund, Bates College Environmental Economics) for the purposes of taking a ton of SO2 off the market.

What is avoiding asthma worth?

Before you think this is just another sports post, read on, there's an env-econ point.  From Sports Illustrated:

World record holder Haile Gebrselassie is almost certain to miss the marathon at the Beijing Olympics because of the city's poor air quality.

The Ethiopian, who has asthma, fears damage to his health by running through the streets of the Chinese capital. The 34-year-old Gebrselassie would be a gold medal favorite if he did take part.

So now you are supposed to ask:  But, Tim, what is it worth to reduce the incidence of asthma in China due to air pollution? 

Well I'm glad you asked.

North Carolina vs the Tennessee Valley Authority

North Carolina gets go-ahead in its TVA pollution suit:

The state of North Carolina can proceed with a lawsuit against the Tennessee Valley Authority that demands the utility clean up its power plants and reduce air pollution, a federal appeals court ruled Thursday.

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Are people in developing countries willing to give up environmental quality and safety for affordable transportation?

An interesting article in today's New York Times on the trade-offs between development and regulation--perhaps an example of the environmental Kuznets curve at work? 

Tata Motors in India is revealing a mass-produced $2,500 car.  Many of the cost cutting measures used to produce and sell the car come at the expense of safety and environmental considerations. 

The upside is a car expected to retail for as little as the equivalent of $2,500, or about the price of the optional DVD player on the Lexus LX 470 sport utility vehicle.

The downside is a car that would most likely fail emission and safety standards on any Western road, and, perhaps, in India in a few years, when the country imposes tougher environmental standards.

[...]

Critics of the Tata car have asked how a car that prunes thousands of dollars off regular prices can possibly comply with safety and environmental norms. The answer may be that the car comes at a particular moment in India’s development, when the country is affluent enough to support strong demand for automobiles but still less regulated than developed countries.

Is China a pollution haven?

Just browsing the news this morning.  From the Washington Post NY TImes:

In its rush to re-create the industrial revolution that made the West rich, China has absorbed most of the major industries that once made the West dirty. Spurred by strong state support, Chinese companies have become the dominant makers of steel, coke, aluminum, cement, chemicals, leather, paper and other goods that faced high costs, including tougher environmental rules, in other parts of the world. China has become the world’s factory, but also its smokestack.

This mass shift of polluting industries has blighted China’s economic rise. Double-digit growth rates have done less to improve people’s lives when the damages to the air, land, water and human health are considered, some economists say. Outmoded production equipment will have to be replaced or retrofitted at high cost if the country intends to reduce pollution.

Tradeoffs: energy vs wilderness

Here is a nice example for those of you teaching environmental economics in the Winter/Spring semester. Forest Service objects to proposed Virginia power plant:

The U.S. Forest Service is warning Virginia environmental officials that pollution from a $1.6 billion coal-fired power plant proposed for Wise County would violate federal clean-air laws.

In a letter to the Virginia Department of Environmental Quality, the supervisor of the Pisgah National Forest in North Carolina said the plant proposed by Dominion Virginia Power would pump enough sulfur dioxide into the air to possibly damage plant life and visibility in the 12,000-acre Linville Gorge Wilderness.

The anticipated 3,300 tons per year in sulfur dioxide emissions from the plant would violate the federal Clean Air Act, which affords special protection to the pristine area, according to Forest Supervisor Marisue Hilliard. Hilliard recommended that the company find ways to reduce emissions.

I'm a new southerner

The winter issue of New Southerner (the mainstream magazine of alternative thinking) is now online and my interview, previewed here and here and here and here and here and here and here and here, shows up under the "Fuss" heading: Coal-to-gas is not a long-term solution, economist warns.

Why are economists always "warning" about something? What is the antonym of warning? Pleasantly surprises?

Coal-to-gas is not a long-term solution, economist pleasantly surprises

I'm a subject matter expert: Part 7

Here is part 7 of my 7 part series:

What can I do, as an individual, to help make the transition to a more sustainable economy?

That is a terrible question to ask an economist because my answer will seem so strange. I don’t think people should go out of their way to live greener, etc., unless this is what they enjoy doing.  I expect people to respond to economic incentives and right now we don’t have the right incentives in place to transition to a more sustainable economy. Higher prices for products that generate pollution during the production and consumption process are necessary to get consumers to change behavior in a big way. Instead of spending a bunch of time recycling and buying green-labeled paper towels, consumer-voters should do as much as possible to get a $1 per gallon increase in the gas tax.

I'm a subject matter expert: Part 6

Here is part 6 of my 7 part series:

How can businesses effectively deal with the impact of environmental legislation? For example, American automakers complain about the costs of manufacturing vehicles that get better mileage. Are their complaints legitimate?

The goal of business firms is to maximize profits. Environmental regulations raise the cost of production and that reduces profit. Business firms will attempt to pass the additional cost of regulation onto consumers in the form of higher prices, but consumers will respond by buying less of the product or postponing the purchase decision.  Are the complaints from business firms legitimate? Sure, businesses complain when the government will do something to reduce their profits. Should we, as consumer-voters, be concerned about their complaints? Not so much.  My view is that businesses should develop products that consumers want to purchase within a given regulatory environment.