Environmental Economics

New Year's Resolutions

In 2009 I resolve to:

1. Lose 10 pounds
2. Refrain from using "main street" and "wall street" in the same sentence
3. Get more exercise
4. Discount, by 50%, any pseudonymous comment on my posts and only reply with the pseudonym "Lonewolf" or "Publious"
5. Eat less fatty foods
6. Completely ignore anonymous comments on my posts
7. Drive less
8. Spend more quality time with my kids (e.g., sitting next to them on couch [i.e., laptop and TV])
9. Publish a paper in the AER, JPE or QJE
10. Win a prestigious award or two (some sort of "best paper" award would qualify)

A number of these are out of reach (#9, 6, 10, 1, 4) and the others are quite difficult. I may simply focus on #2 as my official resolution, since it was way easy to achieve my 2008 resolution -- avoid using "tipping point" -- and #8.

The road to Copenhagen runs through Washington, and Beijing, and Delhi, and Brasilia

Ban Ki-Moon comments on the importance of global climate action in the current edition of Newsweek:

This [current] impasse is a prescription for disaster. To break it means accepting two realities. First: the world is waiting for the United States to lea d, and rightly so. The United States remains among the world's most vibrant, entrepreneurial economies. Thanks in part to rising fuel prices, U.S. capital has flooded into "green" energy ventures in recent years. Slowing growth may affect this trend, but won't reverse it. And the new U.S. administration will have climate change high on its agenda.

The second reality is no less obvious: there can be no progress unless the newly developed nations also play a key role. China has surpassed the United States as the largest greenhouse-gas emitter. India will likely soon become the third-largest emitter. Fortunately, many of these nations have already begun moving to combat climate change. China has set national goals for reducing energy use by 2010. It has become one of the world's largest producers of wind power, and it leads in the development of solar energy. Brazil has already built one of the world's cleanest economies, with more than 80 percent of its electricity coming from hydropower, and has become a pioneer in biofuels and hybrid transportation. Meanwhile, Mexico has put more than 1.5 million people to work better managing its forests as a crucial buffer against future climate shocks.

True, the most advanced developing nations have not yet fully shouldered their responsibilities. Yet neither have developed nations. Both things must change before it is too late. Facing this great collective challenge, world leaders cannot wait for others to move. We must act together with the same urgency shown in the financial crisis.

Looking forward to Copenhagen, we should remember the proverbial truth that many roads lead to Rome. Some experts advocate strict emissions limits. Others favor voluntary targets. Still others debate the pros and cons of "cap and trade" carbon markets versus taxes and national conservation regulation. In truth, there is no one solution to climate change. We need all of the above. The important thing is to act, and to act now. When it comes to climate change, it's make-or-break time.

Obama's green job stimulus

On Monday, I will have more on green jobs and green stimulus (the reason for the delay will be clear after I post on Monday), so for now, I'll tease you with this from Business Week:

When it comes to signing off on green projects, Obama's team won't be a pushover. "They're not going to be fooled," says Joseph Romm, senior fellow at the Center for American Progress, a liberal think tank. They demand that all claims be backed up by hard data. That's why Erickson biotechnology industry group has hired a consulting firm to calculate the jobs created by second-generation biofuels.

And that's also why Robert Pollin, an economics professor at the University of Massachusetts at Amherst, is suddenly very popular. Pollin is the co-author of a report on the potential for a green recovery and the developer of an economic model showing how many jobs are created with any given investment. With industry groups, labor unions, environmental groups, and government agencies all vying to convince the Obama team how many jobs their projects can create, he says, "the requests are flooding in. It's a fad and some will be silly, but most are things that are beneficial."

Hey John, this sounds like a really bad idea to me...

Does greed trump sloth? From CNN.com:

David Laibson knows that when he procrastinates, mere deadlines are not always enough to get him going. So, when this Harvard economics professor collaborates on a major project, he'll sometimes promise to deliver a finished product by a certain date -- or else pay his co-authors $500.

Um, John? When's the deadline for the RP/SP book?

Is Environmental Economics (the blog) having an impact?

January 20, 2006, John wrote:

OK, I'm starting to get it. We should raise the gas tax to $1/gal but, if we can tax mileage, that would be better (in terms of efficiency). I dig it (that's 70s cool talk for our youngish readers)! But I'm not getting over the $700 million up front costs, and that's just in NC, anytime soon.

May 8, 2007, I wrote:

...I have a proposal--I'll call it a fuel efficiency payment.  Here's how it works:  All cars are subject to an annual fee based on miles driven.  The fee will be per mile driven and will be inversely proportional to the EPA calculated city fuel efficiency figure.

Here's how it would work.  Each year, drivers will be required to have their mileage checked at an authorized service facility.  Based on the EPA certified city fuel efficiency rating provided by the EPA for the specific type of car, the car owner will pay a fee (call it F) per mile driven. The fee will be equal to the inverse of the EPA fuel efficiency figure.

You think we just sit around our office and spout economics with no real impact?  Read on...

Here's how it would work.  Each year, drivers will be required to have their mileage checked at an authorized service facility.  Based on the EPA certified city fuel efficiency rating provided by the EPA for the specific type of car, the car owner will pay a fee (call it F) per mile driven. The fee will be equal to the inverse of the EPA fuel efficiency figure.

My best post of 2008

I left a comment on a green jobs post the day after pagan celebration of a Christian holy day:

That is why economics is known as the dismal science. We strange economists are most adept at recognizing the opportunity costs of various decisions. No one else really seems to care if opportunity costs offset some, or all, of the benefits of a good idea.

Opportunity cost is a strange notion to some (especially intro micro students) ... it is the value of the next best alternative whenever a choice is made. For example, if I purchase a $1000 flat panel LCD TV, the true cost of the TV is not $1000, but what I could purchase instead (such as $500 in each kid's college education 529 plan [sorry kids]).

In the case of green energy subsidies, if you are an economist then you must at least wonder if this is the best way to spend the money. There are benefits of pushing down the costs of green energy (e.g., improved air quality), and there are opportunity costs. Ignoring the opportunity costs is likely to lead to wasteful spending. Considering the opportunity costs is likely to lead to better social decision making -- regardless of whether the benefits of the subsidies exceed the costs.

The notion of opportunity cost, its recognition and the inevitable result that not all great sounding ideas are really great ideas, is the most important thing that economists bring to many policy discussions. Pointing out the unpleasantantries of opportunity cost is one of the purposes of this blog. The dismal part of the dismal science can not be avoided.

The cavalry arrives again

From Blog Review 815 at "Europe's favourite think tank website" (Adam Smith Institute Blog):

Something that various greens (and Greens) could learn from an environmental economist. Yes, those green collar jobs are a cost of such schemes, not a benefit.

New on the green economics blogroll

Here is the most recent post at Marginal Damage: Environmental Economics and Systems:

The Trouble with Emissions Standards

A great post and associated discussion on the “Environmental Economics” blog took me straight back to the Environmental Economics and Policy module, and reminded me of something I read on Top Gear ...

Cruel, cruel irony

Renewable energy sources work better when the world is warmer (Solar meets polar ...):

As concern has grown about global warming, many utilities and homeowners have been trying to shrink their emissions of carbon dioxide — their carbon footprints — by installing solar panels, wind turbines and even generators powered by tides or rivers. But for the moment, at least, the planet is still cold enough to deal nasty winter blows to some of this green machinery.

... a bus stalled in the middle of the night on Interstate 70 in the Colorado mountains. The culprit was a 20 percent biodiesel blend that congealed in the freezing weather ...

... Winter may pose even bigger safety hazards in the vicinity of wind turbines. Some observers say the machines can hurl chunks of ice as they rotate. ...

... Days are shorter and the sun is lower in the sky during the winter, ensuring less [solar] power production. ...

A Whale Story

Green group sues the Navy to curb the use of sonar in whale habitats.  Courts side with green groups until the Supreme Court steps in.  Green groups decide to drop the law suit in return for...pretty much nothing.

From the Washington Post:

The Navy has settled a lawsuit filed by environmentalists challenging its use of sonar in hundreds of submarine-hunting exercises around the world.

The Navy said Saturday the deal reached with the Natural Resources Defense Council and other groups requires it to continue to research how sonar affects whales and other marine mammals.

It doesn't require sailors to adopt additional measures to protect the animals when they use sonar.

The agreement comes one month after the U.S. Supreme Court ruled in favor of the Navy in another sonar lawsuit the NRDC filed...

The Navy said the settlement, which was reached Friday, calls on it to spend $14.75 million over three years on marine mammal research topics of interest to both the Navy and the plaintiffs.

The Navy said the long-range research program it adopted under the settlement is basically the same as the one it set out to follow in August 2005, two months before the lawsuit was filed.