Environmental Economics

Tolls and tourism

Ahead of the official weekend start of the summer, NC is focused on tourism. Last week the issue was the impact of gas prices on tourism. This week we're thinking about the impact of toll roads on tourism, specifically a $5 toll on I-95 at the NC-VA border.

If North Carolina legislators and federal officials agreed, the two states would go into the toll business together. They would collect up to $5 from every car at a shared toll plaza at the border, splitting the proceeds to finance long-sought improvements to I-95 in Virginia and North Carolina.

To an economist, tolls on heavily traveled roads are an efficient way to raise government revenue for roads. If the tolls are low enough, say $5 on a long stretch of highway, it doesn't much affect traffic and those who use the roads pay for their upkeep.

I love the smell of economics in the morning...

Saturday morning, coffee in hand, sunny and cool weather, browsing the news and economics.  What could be better?  I'm always on the lookout for stories that demonstrate basic economic principles and might generate discussion in class.  Here's one of the best one's I've found recently (from Peter Valdes-Dapena, CNNMoney.com staff writer):

In an atmosphere of high fuel prices, the market for used cars with high fuel mileage has gotten red hot.

Gas prices can cause greater fluctuations in used-car prices than in new cars for two reasons: used-car prices are more flexible than new-car prices and used-car shoppers generally have lower incomes than new-car shoppers.

In one extreme example, used Toyota Priuses are in such demand that they lose almost no value in the first year or two of ownership even after being driven tens of thousands of miles.

A full day's supply of vitamin C

This seemed like a good story to post on a Friday:

It has become a big no-no in school lunchboxes because of its unhealthy reputation.

But it seems that Sunny D, formerly known as Sunny Delight, is not half as bad for children as it is for fish.

Around 8,000 litres of concentrate used to make the drink leaked into a watercourse on Wednesday morning, turning the river bright yellow.

Dozens of fish were found floating on the surface, poisoned by the lurid mixture.

The spill of 'sub-standard' juice was a category one pollution incident, the most serious kind, according to the Environment Agency.

What would you be willing to pay to prevent dozens of fish from being killed by stuff I let my kids drink?

The impact of high gas prices on my vacation

The state of NC argues that high gas prices won't deter vacation traveling this year. Or, NCians will stay within the state. I agree, especially with the real macroeconomic indicators chugging along.

For example, we're planning an out-of-state car trip this summer: 1500 round trip miles (with a 4 year old and an almost 2 year old in the backseat ... and a DVD player. I'd tell you where we are going but I'm afraid I might get mobbed by my micro-celebrity fans. Ha, so here is the itinerary: Winchester, KY; LaGrange, KY; DeKalb, IL; Zionsville, IN; LaGrange, KY. Replication warning: Not much in those towns but friends and family).

We'll get about 20 MPGs (sorry everyone, we have a bizarro-Prius -- a kid friendly van) so we'll buy about 75 gallons of gas. At $3/gallon we'll spend $225. At mid-March prices, before the gas price "spike" freak out, $2.50/gallon, we would have spent $187.5. Our additional cost is $37.50 on a one-week trip. At about $75/day, the expected cost of our trip has gone up about 7%. Big deal, we're still going. And we might add a side trip, damnit!

Tourism elasticity

2005 was a good year for tourism in NC (Tourism rises ...):

The state's tourism industry posted its strongest growth since 2000 last year, with spending by travelers rising more than 7 percent to $14.2 billion. ... This year looks to be just as strong, with tourism officials saying high fuel prices shouldn't hurt the state's attractions.

... [Lynn] Minges [executive director of the N.C. Division of Tourism, Film & Sports Development] pointed to a prosperous economy, consumer confidence and a rise in the state's spending on tourism advertising last year -- from $2 million to $3 million -- as reasons for the surge.

A 50% increase in tourism advertising leads to a 7% increase in tourism spending. Assuming nothing else contributed to increased tourism (a dubious assumption but I want to play with the numbers), the elasticity of tourism expenditures to state tourism advertising is 0.14. That seems to be on the weak side to me.

Maybe the state should cut back on tourism advertising and pay college professors a bit more. Just a happy thought.

Is it time the shift the burden for higher prices?

For those familiar with Econ 101, this is just a refresher.  For those not, well, hopefully this makes sense.  Let me start with a quote from today's Washington Post:

The Dow Jones industrial average, which last week neared an all-time high, posted the worst one-day point loss of the year after the Labor Department said consumers paid more last month for gasoline, education, medical care, clothing and electricity as businesses passed along higher prices for energy and materials. [emphasis added]

So here's my question:  Why is it always the 'businesses' fault when prices go up? 

Moral suasion and other nonsense

An example of moral suasion (Greening up ...):

Conservation is becoming a subject of recrimination and debate inside many American homes, perhaps to the greatest extent since the 1970's. Whether prompted (or shamed) by rising gas prices, a dependence on foreign oil or dire warnings about global warning, some Americans who have never allied themselves with the environmental movement are taking it upon themselves to drive less, consume less and recycle more, environmental organizers said.

The article is one of those "small steps for a greener world" deals.

More on the carbon market

From the Daily Grist:

A hullabaloo has erupted in the European Union over its one-year-old carbon-trading market, established to help the E.U. meet its targets under the Kyoto Protocol. It turns out that 21 of the 25 countries involved have come in under their greenhouse-gas emissions targets, leaving a 70.5 million ton surplus. Good news, right? Not so much. Industry types are being accused of tricking governments into high-balling the targets, leaving companies awash in credits they didn't have to work for. Worse yet, news of the surplus was leaked early, leading to a spectacular market crash wherein credits lost some 72 percent of their value. Growing pains or slow-motion train wreck? Time will tell.

Here's the full post at the GristMill: EU Carbon Trading Market Hullabaloo.

Global warming's a bummer dude

News from the Hollywood premiere of "An Inconvenient Truth,"  Al Gore's global warming documentary:

Others attending included snowboarder and Olympic gold medalist Shaun White, who said he was interested in global warming because he believed it had reduced snow pack.

"The lower elevation mountains are not getting as much snow," said White, known as the "Flying Tomato" because of his red hair.

White said the sport would suffer if "you can't go to your local mountain and ride."

That's wack.  No more backside rodeos with a tranny to a frontside 9? Sign Kyoto now!

Is it better to be clean and poor or dirty and...less poor?

We've talked before about environmental Kuznets curves.  In it's simplest form, the EKC implies that a poor country will develop at the expense of the environment, but eventually, additional development will lead to environmental improvements.  Environmental economists have struggled to see the EKC in action.  Some studies suggest the EKC exists while others don't.  Despite the lack of evidence, it looks like developing countries are starting to design EKC based development policy.  From Reuters (via ENN.com):

India said on Tuesday that poor nations had to give priority to ending poverty rather than fighting global warming at 189-nation U.N. climate talks criticised by environmentalists as a rambling talk shop.