Environmental Economics

Vox Baby on CAFE standards

Vox Baby on Fuel Economy and Safety:

Karen Lundegaard has an intereting article today in the Wall Street Journal about new thinking about fuel economy and safety.

The story presents a graph from the EPA showing fuel economy over time for cars, trucks, and then their combination. It makes the point well from an earlier discussion of the CAFE standards (here, here, and here). Even though fuel economy per vehicle may have been flat to increasing for both cars and trucks, the shift of more drivers into the less efficient trucks has caused the overall fuel efficiency to fall.

Moral suasion has no teeth

Moral suasion, the act of trying to encourage a certain behavior through persuasion, doesn't do a great job of changing behavior (except maybe during WWII when it was obvious). President Bush urged conservation of gasoline today but I don't expect much about gas demand to change beyond the effect of higher gas prices on consumption:

"We can all pitch in by being better conservers," Mr. Bush said after being briefed on the hurricanes' impact on the energy industry at the Energy Department. "People just need to recognize that these storms have caused disruptions." In addition to urging consumers to cut back to ease the pain of the current supply shortages, he said federal employees should use carpool and public transport and not take non-essential trips.

Thanks to Mr. Nobody for the tip.

Tom Friedman's gas tax

Tom Friedman, in his NYTimes column from 9/21 (Bush's Waterlogged Halo, $$$), says:

Imagine - I know it is a stretch - that the president announced tomorrow that he wanted an immediate 50-cents-a-gallon gasoline tax - the "American Renewal Tax," to be used to rebuild New Orleans, pay down the deficit, fund tax breaks for Americans to convert their cars to hybrid technology or biofuels, fund a Manhattan Project to develop alternatives for energy independence, and subsidize mass transit systems for our major cities.

Could a $0.50/gallon help reduce the deficit? The DOE Energy Information Administration reports that almost 9,000,000 barrels of gasoline is produced each day in the U.S. Multiply this by 42 (gallons per barrel) and 300 (low-ball the days each year) and we get 108 barrels billion gallons of gasoline produced each year in the U.S. Absent any demand response (yes, I'm assuming a vertical demand curve because I'm too lazy to deal with the elasticity and the upper bound number makes sense to use right now), a $0.50/gallon tax would provide additional federal revenue of $54 billion. A big number but not enough to close the $350 billion annual deficit.

Kaaaaaaahn!

From Matthew Kahn's Environmental and Urban Economics:

Environmental economists have convinced themselves of the benefits of raising gasoline taxes. Politicians seem to be slow to embrace this proposal. Why? New Yorker magazine’s James Surowiecki has a good explanation. The New Yorker has better cartoons and sometimes better analysis than the American Economic Review!

PUMP PRESSURE James Surowiecki on why the gas tax won’t budge.
Issue of 2005-09-26

“Of course, in political terms the gas tax’s virtues—simplicity, transparency, immediacy—are vices. Politicians prefer complex systems that allow them to satisfy particular constituencies, reward supporters, and disguise the true costs of things. And, strangely enough, voters implicitly prefer indirect taxes to direct ones. So it may be that the gas tax will remain one of those economically sensible ideas that are doomed to fail.”

THE PAPER RIVER EXPERIMENT

I am teaching environmental economics this fall, and Tuesday was our first day of class. As I have structured the class, it focuses on common-pool resource allocation decisions. So I typically start the class with the example of a river, which I draw on the board. I ask students to name the different ways that we use the river (transportation, recreation, fishing, swimming, electricity, natural beauty, drinking water, dump waste from paper mill, irrigation, runoff from farms, etc.). As I start to populate the drawing with all of these uses, it quickly becomes apparent that some of these uses conflict -- power generation and transportation, for example, or swimming and waste dumping.

So the problem is one of conflicting uses of a scarce resource. For most goods, market processes help us solve those problems, but with common pool resources we either have real limitations to the extent to which we can define property rights, or we have made political choices to manage the common pool resource as a public good.

Measuring the Value of the Environment: Part III (Hedonics)

We're continuing our series on how to include monetary values for environmental and natural resources in benefit cost analysis. Previously we've looked at the theory of benefit estimation, the value of recreation (travel cost method), and the value of health (averting behavior method). Today let's take a look at another way in which values for changes in recreation and health risks are estimated: the hedonic price method. The hedonic price method is the way in which Bureau of Labor Statistics estimates the impact of quality changes for the consumer price index.

What would you be willing to pay to preserve something you didn't know was there in the first place?

I've done a lot of work estimating what people are willing to pay for environmental improvements and to prevent environmental degradation.  But here's one that stumped me...how do you estiamte the value of something you didn't know was there, but suddenly appeared?

Some thoughts on air quality, WTP, and WTA

I took my kids to the local arboretum last weekend, Boxerwood Gardens.  We had a great time - lots of beautiful flowers, big trees, informative signs, etc.  At one point as I was walking up a hill toward an open field, I noticed The Blue Ridge Mountains, only they were sort of gray and barely even visible.  It was not a particularly humid day, but the haze was still pretty thick.  Like I said, I was having a great day with my family, but the lack of visibility really brought me down.

2 peas in a pod: levees and beach nourishment

The city of Wilmington, NC is hiring a lobbyist to make sure the federal government does its part to make sure that big houses are protected from hurricanes (County will hire beach lobbyist):

After the battering area beaches took from Hurricane Ophelia, the New Hanover County Board of Commissioners said Monday that it’s more important than ever for the federal government to live up to its funding responsibility.

Conserve water ... pleez?

Raleigh NC is experiencing a drought (Raleigh wants to conserve water):

Rainfall for this month is four inches below normal for the month as recorded at Raleigh-Durham International Airport.

Falls Lake, Raleigh's primary drinking water source, is almost five feet below its normal level.

As of Tuesday, there is enough water for 104 days in the lake; there are 103 days left in the year.

"We need to take steps now," Mayor Charles Meeker said.

So, obviously, the price of water should rise to reflect its increased scarcity and to promote conservation. Right?