Environmental Economics

Thomas Friedman on carbon offsets

While I'm in Canada I'm catching up with posts that should have gone out last week. I'm able to perform these menial tasks even after consuming huge amounts of Alberta beef. Speaking of beef ...

There is no such thing as a free lunch (Live Bad, Go Green):

... I raise this issue of carbon offsets because they’re symptomatic of the larger problem we face in confronting climate change: everyone wants it to happen, but without pain or sacrifice. On balance, I think carbon-offsetting is a good thing — my family has purchased offsets — if for no other reason than it directs resources toward clean technologies that might not have been funded and, therefore, moves us down the innovation curve faster.

I'm in Canada

For only the third time, I'm in Canada ... again in Edmonton for an all work, sports economics-style, some [?] play adventure. The first trip resulted in a paper, Willingness to pay for amateur sport and recreation programs, forthcoming in Contemporary Economic Policy with another very famous sports economist, Bruce Johnson, and two very famous sports non-economists, Dan Mason and Gord Walker. This second trip should result in, at least, a couple of papers in leading journals (e.g., AER, JPE, QJE, etc) and a number of heavy, beefy meals that will take me a couple of weeks to recover from.

Travel notes:

1. Signs of an oil boom. Guy behind me on the plane asks another guy: "Why are you going to Edmonton." Other guy (from Ft. Worth says): "We're building a couple of oil rigs up there."
2. I found $15C from my trip last year. Based on the current exchange rate, my little speculative move (overbuy Canadian dollars last year) has led to a windfall of about $1C as the U.S. dollar has depreciation over the past 12 months. In other words, last year it cost me $0.90 to buy $1C, this year it will cost me about $0.96.
3. Remember to declare your laptop at Customs. I forgot for the second year in a row. Not as bad as last year (last year I faced a library cop-type customs agent), but I had some explaining to do! I know, this is nothing to joke about.

Incentives matter

From the Winston-Salem (where they know something about cigarettes) Journal via the AP:

Fewer cigarettes have been sold in North Carolina since the state raised its tax on smokes, but revenue from the higher tax grew by $157 million, state officials said today.

Cigarette sales dropped by 18.5 percent as tax revenue increased in the first full year since the tax went up in September 2005, according to data from the state Division of Public Health and the Department of Revenue.

...

North Carolina's tax on cigarettes went from five cents to 30 cents on Sept. 1, 2005. It went up an additional five cents, to 35 cents total, on July 1, 2006.

Note: cigarette demand is inelastic so tax revenue will rise even while sales fall.

The costs of climate mitigation in the WaPo

Read it and weep:

The potential economic impact of meaningful climate legislation -- enough to reduce U.S. emissions by at least 60 percent -- is vast. Automobiles would have to get double their current miles to the gallon. Building codes would have to be tougher, requiring use of more energy-efficient materials. To stimulate and pay for new technologies, U.S. electricity bills could rise by 25 to 33 percent, some experts estimate; others say the increase could be greater.

More and More Ethanol Dominoes

From the Financial Times:

Rising prices for food have led the United Nations programme fighting famine in Africa and other regions to warn that it can no longer afford to feed the 90m people it has helped for each of the past five years on its budget.

The World Food Programme feeds people in countries including Chad, Uganda and Ethiopia, but reaches a fraction of the 850m people it estimates suffers from hunger. It spent about $600m buying food in 2006. So far, the WFP has not cut its reach because of high commodities prices, but now says it could be forced to do so unless donor countries provide extra funds.

Josette Sheeran, WFP executive director, said in an interview with the Financial Times: “In a world where our contributions are holding fairly steady, this [cost increase] means we are able to reach far less people.”

She said policymakers were becoming more concerned about the impact of biofuel demand on food prices and how the world would continue to feed its expanding population.

Even More Ethanol Dominoes

From TimesOnline--more on the trickle down effects of U.S. ethanol policies:

What’s the connection between ethanol, the biofuel produced from corn, and a cherry vanilla ice-cream?

Answer: the first is responsible for pushing up the price of the other.

This month, the price of milk in the United States surged to a near-record in part because of the increasing costs of feeding a dairy herd. The corn feed used to feed cattle has almost doubled in price in a year as demand has grown for the grain to produce ethanol.

Christina Seid, whose family have been making ice-cream at the Chinatown Ice Cream Factory for 28 years, said yesterday that she expected to have to raise her prices, along with all competitors in the short term. “We are holding out as long as we can, but prices will rise,” Ms Seid said.

Discussing a fat tax makes me hungry

It's Friday, must be time for a slightly off topic post.  From Reuters:

A "fat tax" on salty, sugary and fatty foods could save thousands of lives each year, according to a study published on Thursday.

Researchers at Oxford University say that charging Value Added Tax (VAT) at 17.5 percent on foods deemed to be unhealthy would cut consumer demand and reduce the number of heart attacks and strokes.

Before I go on, I should probably mention that I've chosen to lose a few pounds recently--to prevent choosing to lose a lot of pounds later--and I'm a little cranky because of it. 

Anyway, I have a question.

Economics and the wind

No hurricanes in sight. Yet, it is still surprising that coastal households tend not to purchase storm mitigation for their homes. In a chapter in a book (with the above title) edited by Ewing, Rawls and Kruse [pause], my old UNCW buddies Rob Burrus, Chris Dumas and Ed Graham conduct a survey of coastal homeowners to determine their willingness to pay for storm mitigation. They find that:

Survey results indicate that increased insurance deductibles do increase the probability of structural mitigation purchases.

So, instead of dropping coastal homes from the list of insured, why don't insurance companies raise deductibles so that households will self-protect for the manageable damages. Then households'll still have insurance for the unmanageable damages. I'm sure there is some institutional barrier in there somewhere. Anyone? Anyone?

CNN likes us--er, I think that's a good thing?

CNN.com has an interview with Trilby Lundberg of the Lundberg Survey.  I'm not really interested in the interview, but if you scroll to the bottom and click on "From the Blogs: Controversy, Commentary and Debate" you'll find a link to...drumroll...Env-Econ!  Woohoo--scratch another life-long goal off my list.

Other blogs we like

As a follow-up to our new blogroll policy, check out our new "other blogs we like" blogroll (right hand column and scroll down a bit). More suggestions are welcome in the comments section. Thanks!