Environmental Economics

New book in the env-econ library

Moving to Markets in Environmental Regulation: Lessons from Twenty Years of Experience, by Jody Freeman and Charles D. Kolstad

Here is part of the description:

Over the last decade, market-based incentives have become the regulatory tool of choice when trying to solve difficult environmental problems. Evidence of their dominance can be seen in recent proposals for addressing global warming (through an emissions trading scheme in the Kyoto Protocol) and for amending the Clean Air Act (to add a new emissions trading systems for smog precursors and mercury--the Bush administration's "Clear Skies" program). They are widely viewed as more efficient than traditional command and control regulation. This collection of essays takes a critical look at this question, and evaluates whether the promises of market-based regulation have been fulfilled.

Be on the lookout for a review in 2007!

Nordhaus on the Stern Review

Sometimes on this blog I'll say half-baked things, get a few comments, think I'm a real dimwit and wish I never started blogging. And then sometimes I feel OK about it. This is one of those rare latter times. From Mankiw's Blog:

Yale economist Bill Nordhaus, an expert on climate change, reads the Stern Review of the topic and does not like what he finds. The Review's apocalyptic conclusions are, according to Nordhaus, severely overstated because of its assumption of a near-zero discount rate (0.1 percent per year) and log utility (so marginal utility does not decline much as technological progress causes consumption to rise). Here is an excerpt from Nordhaus:

The Review proposes using a social discount rate that is essentially zero. Combined with other assumptions, this magnifies enormously impacts in the distant future and rationalizes deep cuts in emissions, and indeed in all consumption, today. If we were to substitute more conventional discount rates used in other global-warming analyses, by governments, by consumers, or by businesses, the Review’s dramatic results would disappear....

Suppose that scientists discover that a wrinkle in the climatic system will cause damages equal to 0.01 percent of output starting in 2200 and continuing at that rate thereafter. How large a one-time investment would be justified today to remove the wrinkle starting after two centuries? The answer is that a payment of 15 percent of world consumption today (approximately $7 trillion) would pass the Review’s cost-benefit test. This seems completely absurd. The bizarre result arises because the value of the future consumption stream is so high with near-zero discounting that we would trade off a large fraction of today’s income to increase a far-future income stream by a very tiny fraction.

Thanks to Tyler Cowen for the pointer.

Thanks to Greg Mankiw via Tyler Cowen for the pointer.

Here is Nordhaus' full review of the Review.

 

My university website doesn't work

I just got back from my extended SEA meeting trip* to find a flood of student emails stating that they couldn't get to the online quiz I left for them in my absence. Behold! These aren't sorry techno-excuses.

Check it out at: http://www.appstate.edu/~whiteheadjc. More than half the time you get the "The page cannot be found page." Sometimes, if you try back a few minutes later it works, sometimes it doesn't. This is a big problem when many class periods I begin from my webpage and look at the course calendar, etc.

Does anyone else know of a state university with 15,000 or so students that can't get its professors webpages to work?

I've sent this message to the "help" desk. I'll report back when/if I get a response. That last message I sent there has been ignored for several weeks.

*More on this later. Please try, try, to contain your enthusiasm while waiting over the weekend.

New poll shows Europeans will accept climate change restrictions, but don't want to pay for them

From the Financial Times:

Europeans are overwhelmingly convinced that human activity is contributing to global warming, and a majority would be prepared to accept restrictions on their lifestyle to combat it, according to a poll for the Financial Times.

Research carried out this month by Harris Interactive in Germany, France, the UK, Italy and Spain found that 86 per cent of people believed humans were contributing to climate change, and 45 per cent thought it would be a threat to them and their families within their lifetimes.

More than two-thirds – 68 per cent – said they would either strongly or somewhat support restrictions on their behaviour and purchases in order to reduce the threat.

[...]

Only a minority were prepared to make significant financial sacrifices to eliminate the threat of global warming. A quarter said they would pay one week’s wages or more – roughly the 2 per cent of national income figure that Sir Nicholas Stern suggested rich countries might need to pay – but a third said they would not pay anything at all.

Road? Hell? Good Intentions? 

This reminds me of the time when John and his grad-school roomate Dusty Dave were arguing over doing the dishes and...I have no idea where I was going with this, I just liked John's story about Dusty Dave.

Happy Thanksgiving from Env-Econ

Some tips from Environmental Defense for reducing environmental externalities on Thanksgiving (I don't necessarily agree with all of them, but at least they're not preachy or extreme):

Before eating the big meal and watching the big game, Environmental Defense would like people to consider a few simple steps to protect the environment while enjoying their Thanksgiving celebration.

"This is the time of year when people are thinking about all they have to be thankful for, so it's the perfect time to take easy steps that will help the environment, which has given us so much," said Fred Krupp, president of Environmental Defense.  "For example, when preparing for Thanksgiving dinner, remember to buy food items that use the least amount of packaging and look for packaging that contains recycled, post-consumer content."

"If there are a lot of leftovers after Thanksgiving dinner, use this holiday as an opportunity to start composting food waste, and consider donating extra food to a shelter.  For leftovers, stock up on reusable food containers that can save resources all year long," said Krupp.

"When shopping for food, look for meat and poultry items raised without the routine use of antibiotics.  With the USDA's new organic labels, holiday shoppers will find it easier than ever to select a turkey that is antibiotic free.  This practice can help preserve the effectiveness of important medicines by not contributing to the growing problem of antibiotic resistance, which is caused in part by the overuse of antibiotics in agriculture," Krupp said. 

"Try not to use disposable utensils, plates, napkins or tablecloths during the holiday weekend," said Krupp.  "Bringing out dinnerware and flatware for Thanksgiving dinner is a tradition that is also good for the environment."

"Another way to reduce solid waste is to recycle beverage containers and the aluminum foil that accumulates during the meal and the football game," suggests Krupp.  "Also, consumers should buy locally produced foods whenever possible so that less energy will be used for food transport."

Another classic Thanksgiving tradition is driving to the celebration.  "Considering the usual Thanksgiving traffic, public transportation may be the quickest way to get where you are going, while minimizing pollution," said Krupp.  "If you take the car, carpooling is the best way to go and a good way to spend time with family and friends."

Besides, the likelihood of finding a sober driver increases with more people in the car.

A deforestation Kuznets curve?

Many Nations Forests Regrow:

A large and growing number of countries are reversing the longstanding trend toward destruction of their forests, a surprising new analysis has found.

You think travel is chaotic today? Try it without traffic signs...

We talk a lot here about regulation versus socially responsible behavior.  The simplest of economic models predict that individuals will only act socially if they have the individual incentive to do so...that is if it is in their own interest.  At times, such behavior necessitate government intervention to prevent spillovers.  But in some European cities, localities are experimenting with training people to be socially responsible.  How?  By removing all traffic signs.

"The many rules strip us of the most important thing: the ability to be considerate. We're losing our capacity for socially responsible behavior," says Dutch traffic guru Hans Monderman, one of the project's co-founders. "The greater the number of prescriptions, the more people's sense of personal responsibility dwindles."

I'm off for some R&R

I'm taking off for New York (the city) today to celebrate Thanksgiving with my wife's family.  Should be fun...if you consider 12 people eating a full Thankgiving meal in a 600 square foot apartment fun.  My sister-in-law is cooking Thanksgiving for the first time.  I'm a little scared because this is the same person that called a few years back to ask how to make grilled cheese.  Anyway, the kids'll get to see the parade and the Rockettes and I'll get to see...well...I'll get to see the kids see the parade and the Rockettes.

For those that hang on my every word daily, don't fret.  I have posts in the can for the next several days.  So keep reading--really we just want to keep our site visit numbers up over the holiday.

Happy Thanksgiving to all, and to all a good night...or something like that.

On the difference between economic benefits and economic impacts

From the USEPA:

The U.S. Environmental Protection Agency has reached a major milestone: the completion of construction at the 1,000th site under Superfund, the federal government program that cleans up abandoned hazardous waste sites.

[...]

Locations that once pulled local economies down are now generating new tax revenues and serving as catalysts for broader revitalization. Redevelopment at Superfund sites has resulted in more than 80,000 on-site jobs and $2.7 billion in annual income.

If that's the measuring stick we want to use then shouldn't we dump toxic waste on all land today so we can clean it up and create jobs and opportunities for economic development tomorrow? 

Just wondering.

The poster boy for individual transferable quotas

From NOAA Fisheries:

NOAA Fisheries has published a proposed rule  to modify the Individual Fishing Quota (IFQ) Program for the fixed-gear commercial Pacific halibut fishery and sablefish fishery. The IFQ Program limits access to the halibut and sablefish fisheries to those persons holding quota share (QS) in specific management areas. It was designed to provide economic stability to the commercial halibut and sablefish fisheries. By ensuring access to a certain amount of the total allowable catch at the beginning of the season, and by extending the season over a longer period, the program allows ! QS holders to determine where and when to fish, how much gear to deploy, and how much to invest in harvesting.