Environmental Economics

From the Answer Desk: Property Rights and the Coase Theorem

The Answer Desk has been busy in the first couple of days.  Just so you know how it works, when a question is submitted, John or I will try to track down an appropriate guest contributor to answer the question.  Sometimes this will go quick, sometimes it might take a few days (weeks?).  We'll try to be as quick as we can.  On to the first answer...

Grandfather Mountain

My spouse and I are taking a couple of days off from work (and kids) and enjoying some of the tourist-y things around Boone. Thursday is Grandfather Moutain, "the highest peak in the Blue Ridge Mountain range (elv. 5,964 ft)."

Why should you care?

The Mountain is privately owned and is operated as a scenic travel attraction and a globally recognized nature preserve. Since the Mountain is not supported by tax dollars, [entry and] hiking fees are charged to finance trail maintenance and construction and to insure conservation efforts.

Free-market environmentalism is working here. Check out the GM website (dot com).

Friday: "Whitewater rafting on the beautiful Watauga River!"

Saturday: Home to read all the comments on this post ;->

Fuel Efficiency

Today's NYTimes reports that the USEPA is delaying a report that says that fuel efficiency has declined significantly since the late 1980s (duh):

Some of what the report says reaffirms what has long been known. Leaps in engine technology over the last couple of decades have been mostly used to make cars faster, not more fuel-efficient, and the rise of sport utility vehicles and S.U.V.-like pickup trucks has actually sapped efficiency. The average 2004 model car or truck got 20.8 miles per gallon, about 6 percent less than the 22.1 m.p.g. of the average new vehicle sold in the late 1980's, according to the report.

The problem seems to be that the new energy bill does not improve fuel efficiency or conservation when one goal of the energy bill is (or should be) the reduction in dependence on foreign sources of oil, oil consumption in general and greenhouse gas emissions. Releasing the EPA report this week might be embarrassing.

But what about raising CAFE (corporate average fuel economy) standards in order to achieve this goal? Economists have, for a long time, said that CAFE standards aren't really the way to go.

For one thing, the amount that people drive, and therefore emissions, aren't regulated. The perverse effect of rising fuel efficiency is the increased incentive to drive more miles. If I get 40 mpg instead of 15 mpg it is cheaper to drive so I'll drive more. The positive impact of higher fuel efficiency is reduced.

Another problem is safety. One way to increase fuel efficiency is to make the cars lighter and therefore less safe. The increased miles driven also decreases safety. The increased time spent on the road by each driver and the increased congestion makes it more likely that something bad will happen.

So, what can be done to increase fuel efficiency and safety efficiently? How about raising the gas tax?

On economic efficiency grounds alone, raising the gasoline tax would be a far better approach to reducing gasoline consumption than tightening CAFE standards, because it exploits all potential behavioral responses for reducing fuel use .... Unlike CAFE, a fuel tax does not “work against itself” by encouraging people to drive more; instead it raises the cost of driving--and does so for both existing as well as new vehicles. Gasoline taxes encourage people to buy more fuel-efficient vehicles (and thus create incentives for automakers to produce them), to use more efficient vehicles if they have more than one, and to conserve fuel through their patterns of driving and maintenance.

Source: RFF Discussion Paper 03–44

Better Beach Health Spotlighted in New U.S. Data

USEPA News Release:

U.S. beaches have become more-enjoyable places for Americans to play, thanks to improved water monitoring and state and local actions to address sources of pollution.

EPA's most recent data on beach closings and advisories show that only four percent of beach days were lost in 2004 due to advisories or closures triggered by monitoring for bacteria. Most of the closures were relatively short in duration. More than 2,700 closings were two days or less, and only 59 closings lasted more than 30 days.

...

"The small percentage of beach days lost in 2004 is encouraging," said Assistant Administrator for Water Benjamin H. Grumbles. "Reducing exposure to disease-causing bacteria in beach water will help protect all Americans, especially children, who are more susceptible to pathogens. Finding the sources of pollution will help keep beach-goers safe at their favorite recreational spots. Federal dollars have gone a long way to help states identify problems."

Summary information for 2004 is available at: http://www.epa.gov/waterscience/beaches/2004fs.html

This news makes me happy. When I'm happy I like to sing. Try this one at home:

Sung to the tune of Carole King's "I see the earth move"

I feel the beach demand shifting right
I feel the benefits going up, go-o-ing up
I feel congestion ri-i-sing
With all these people around

Um, sorry 'bout that.

"U.S. to announce 'Beyond Kyoto' climate pact"

The debate over command and control versus incentives is about to heat up.  From Reuters (U.S. to announce 'Beyond Kyoto' climate pact):

The United States, the world's top polluter, is set to unveil a five-nation pact to combat global warming by developing energy technology to cut greenhouse gas emissions, officials said on Wednesday.

[...]

Details of the pact were unclear but it appears to echo recent comments by President Bush who advocates the use of technology to curb growth in greenhouse gas emissions rather than setting Kyoto-style caps on emissions.

[...]

The WWF urged Washington and Canberra to agree Kyoto-style caps on emissions, saying that any regional energy technology deal was only a partial solution. And it said China and India had promised to take part in talks on widening Kyoto.

I especially like this quote:

"A deal on climate change that doesn't limit pollution is the same as a peace plan that allows guns to be fired," said Jennifer Morgan, head of the WWF's climate change program.

I don't agree, but points for creativity.

Cape Hatteras Update

From the AP (07/27/2005):

Three piping plovers have been seen flying, and that means the National Park Service can open parts of an area known as the Hatteras Spit to people and cars.

The park service said Tuesday that it would reopen the ocean and inlet beach to off-road vehicles and pedestrians beginning at 6 a.m. Wednesday. The soundside beach and interior of the spit will remain closed while rangers evaluate the plovers' behavior in those spots.

The piping plovers, which are protected by the Endangered Species Act, hatched June 25. The birds typically fledge for 25 to 35 days. The piping plover — a small, sand-colored shorebird that nests on coastal beaches from South Carolina to Newfoundland — has been federally protected as a threatened species since 1986.

"Reopening these areas to public use has been a high priority for the park," said Patrick Reed, acting superintendent of the Cape Hatteras National Seashore.

Just for kicks, let's think about the economic benefits and costs of the closure.

Wind farm follow-up

Pete Groothuis vacationed out west and sent this S. Dakota wind farm pic to ENV-ECON. Thanks Pete!

What's not to love about wind farm scenic amenities? [click on the thumnail for a bigger pic]

Environmental Benefits: Theory

We've written a lot about "environmental benefits" in the context of benefit-cost analysis. But what are they exactly? And how are they measured? In this geeky, academic post, I'll describe the theory behind environmental benefits. Someday soon I'll describe the methods used to measure these benefits.

Now, some context: Whenever an environmental policy is implemented there are winners and losers. The economic efficiency criterion requires that the gains to the winners exceed the losses imposed on the losers. Benefit-cost analysis is a method used to calculate and compare monetary gains and losses.

For example, when government pursues a water quality improvement policy, gains and losses are distributed to consumers and firms. The losses are relatively straightforward to measure. These are the lost revenues to firms from lost production and/or higher costs of production. The gains to those who benefit from clean water are more difficult to measure.

Big Business Saving Money and the Environment

I was watching the space shuttle launch (is it dusty in here?) and came across this on CNN.com (Hotels said to change sheets less often)...

In a continuing effort to save money, hotel chains are changing sheets for their customers less frequently, sometimes only weekly, according to a published report Tuesday.

[...]

New guests all get new sheets, according to the report, but those with extended stays will no longer see the daily sheet changes that used to be industry standard, the paper said.

[...]

The paper said that hotels are explaining the move as an effort to be more environmentally friendly, using less hot water, detergents and bleach to clean sheets. But the hotels see savings from less laundry and reduced labor costs.

Are hotels trying to save the environment or just trying to increase profits?  I say, who cares? Looks like a win-win to me. 

Now...how often do you change your sheets at home?

Got a Question? e-mail the Answer Desk

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