Environmental Economics

Quote of the day

In the context of President Bush's call to do something about climate change in 2050 (hey, why not make 3050 the deadline?):

"We do not endorse global carbon trading," White House spokeswoman Dana Perino told reporters before Bush's speech.

So much for the political feasibility of cap-and-trade ... unless the key word is global.

And here is another quote of the, er, day:

"We're the world's leader when it comes to figuring out new ways to power our economy and be good stewards of the environment," Bush said.

Now the whole world thinks that I'm an idiot

Or, at least, all of Mark Thoma's Economist's View readers think that I'm an idiot. Mark comments on Glenn Hubbards advocacy of cap-and-trade (and a reduction in the corporate income tax with the auction revenues) vs. Greg Mankiw's advocacy of a carbon tax:

Looks like it's time for two former chairmen of the Council of Economic Advisers for the Bush administration, Glenn Hubbard and Greg Mankiw, to settle this tradable permit versus carbon taxes issue once and for all. I propose an Econoduel. Mankiw versus Hubbard, whiteboards only, any theory goes, and you cannot be saved by the end of period bell. We'll need a referee, so I'll suggest John Whitehead at Environmental Economics as he seems relatively unbiased - he doesn't think there's much difference between the tradable permits and carbon taxes and doesn't really care which one we put into place, as long as we do something.

As I've said before, in the most basic model, there is no difference in the efficiency aspects of a carbon tax and cap-and trade. I've finally formalized the textbook explanation on this blog. See ECON 101: Carbon Tax vs. Cap-and Trade. Again, I'm not ignorant of the vast literature contrasting these approaches with various tweaks to this most simple model. I simply don't think the tweaks make much practical difference, once we have adopted economic incentives over command and control regulation.

Well it is public land afterall!

I'm sure there's a good Coasian bargaining example in here...but first I need some Doritos:

A highly sophisticated 2-acre pot farm found on state land yesterday is a new kind of drug operation for Ohio. And it might not be the only one.

Officers from four agencies descended on Mackey Ford Wildlife Area on Rt. 762 in Pickaway County yesterday morning to bag more than 10,000 immature marijuana plants. The crop would have been worth an estimated $10.5 million on the street if harvested.

With all the good land being taken up by corn for ethanol, where else were they supposed to grow their pot?

Another alcohol-related impact of ethanol

Biofuel brews up higher German beer prices:

Like most Germans, brewer Helmut Erdmann is all for the fight against global warming. Unless, that is, it drives up the price of his beer.

And that is exactly what is happening to Erdmann and other German brewers as farmers abandon barley — the raw material for the national beverage — to plant other, subsidized crops for sale as environmentally friendly biofuels.

Hat tip: Dancing Carpenter (I'm beginning to figure out what fuels his dance).

Hypermilers: Common sense or insanity?

The hypermilers' philosophy: squeeze every mile they can out of each drop of gas.

Some of their tips are a matter of common sense and could help any driver, especially now, with gas reaching $3.50 a gallon: avoid jackrabbit starts, use alternate routes to avoid stop-and-go traffic, anticipate lights and drive a bit slower.

But those are just a start. Hypermilers slightly overinflate their tires to cut rolling resistance, seize every chance to coast with their gasoline engines off and sometimes "draft" like race cars behind larger vehicles.

There's more...

Carbon tax vs cap-and-trade

An LATimes editorial on climate change economics has four sections:

1. Scary problem
2. Carbon tax vs cap-and-trade
3. The European market got all screwed up (and then we're back to #2)
4. We'll never have a carbon tax

Not wasting away in Margaritaville

Ethanol boom may fuel shortage of tequila:

Mexican farmers are setting ablaze fields of blue agave, the cactus-like plant used to make the fiery spirit tequila, and resowing the land with corn as soaring U.S. ethanol demand pushes up prices.

The switch to corn will contribute to an expected scarcity of agave in coming years, with officials predicting that farmers will plant between 25 percent and 35 percent less agave this year to turn the land over to corn.

Hat tip: Dancing Carpenter.

Vacation Travel Post Mortem

Last Thursday I wrote:

I'm packing up my big honkin' SUV tomorrow with my oversized family of 5 and driving 280 miles (one-way) to Lake Cumberland, Kentucky to visit with friends from Atlanta--who will be driving their oversized family of 5, 330 miles (one-way) in their big honkin' SUV.  Based on the paltry gas mileage we will get--about 18 mpg--I'm figuring our family will consume about 31 gallons of gas.

Turns out, Big Honkin' SUV got 19.8 mpg for the trip and that includes the local travel at Lake Cumberland.  Highway, we were averaging about 21 mpg.  A couple of thoughts:

We've added a new category!

When "marine resources," "land resources" or "fishery resources" just won't do, we've added "coastal management. To kick off the coastal management category here is an update on beach nourishment in Nags Head, NC (Outer Banks plan may resurface) (previous post on same subject):

Twice in a little over a year, voters on the Outer Banks of North Carolina have soundly rejected the idea of paying higher taxes to replenish and widen the beaches with fresh sand.

But sooner or later, Nags Head Mayor Renee Cahoon said, residents will have to face the fact that shrinking beaches will drive away the tourists on which the Outer Banks economy relies.

"I don't think the idea [of beach replenishment] is dead," Cahoon said in a recent interview. "It's just been derailed for a while."

It was derailed most recently on April 17, when Nags Head voters rejected a proposed increase in real estate taxes that would have financed the widening of 11 miles of beach with fresh sand.

Trickle Down Effects of Bad Ethanol Policy

Colin Carter, well-known professor of Agricultural and Resource Economics at UC Davis, has an interesting commentary in the May 21 Christian Science Monitor on the unintended effects of ethanol policy:

Policymakers and legislators often fail to consider the law of unintended consequences. The latest example is their attempt to reduce the United States' dependence on imported oil by shifting a big share of the nation's largest crop – corn – to the production of ethanol for fueling automobiles.

Good goal, bad policy. In fact, ethanol will do little to reduce the large percentage of our fuel that is imported (more than 60 percent), and the ethanol policy will have ripple effects on other markets. Corn farmers and ethanol refiners are ecstatic about the ethanol boom and are enjoying the windfall of artificially enhanced demand. But it will be an expensive and dangerous experiment for the rest of us.