Environmental Economics

Why didn't I say that?

Great post over at the TerraPass Footprint (Survey says: ...):

Some numbers to begin:

• 53% of consumers would be willing to pay a premium for televisions with green attributes.
• 34% and 44% of Americans are respectively more likely to buy and just as likely to buy environmentally responsible products.
• More than half of all consumers say they have made a green purchase in the last six months.

No, these aren’t the results of the latest TerraPass customer survey. And, believe it or not, this isn’t data assembled pre-recession. These three statistics come from surveys published (in order) by the Consumer Electronics Association, strategic marketing agency Cone and Yahoo!. They have been published within the last four months.

Before November 2008 I might have raised an eyebrow at these kind of numbers and crossed my fingers that they might actually be true. These days I just stare, incredulous, at my computer screen and wonder who really believed them. ...

Perhaps I’m being grossly unfair. And perhaps 70% of consumers really do buy “green”. Or maybe, like so many things, the best of intentions rarely get translated into action until there’s a real economic incentive to do so.

Come back high gas prices, all is forgiven. Or better yet, come soon carbon pricing…

Better yet, come soon carbon pricing (and higher gas prices)!

Where I'll be tonight

UK at USC

Colonial Life Arena

Section 207, Row 1, Seat 9

Columbia, SC

From the Lexington Herald-Leader:

Kentucky's visit to South Carolina on Wednesday night is the most important game of the UK season.

Not only because the contest could go a long way in determining who wins the SEC East. Not just because a road victory would be so vital to shoring up UK's shaky NCAA Tournament resume. ...

Stavins on Economics in Environmental Policy (sort of)

Taking this slightly out of context to fit in with the current discussion of the role economists play in the formation of environmental policy (see here and here), here's a quote from Rob Stavins blog:

The bottom line is that no particular form of government intervention, no individual policy instrument – whether market-based or conventional – is appropriate for all environmental problems.  There is no simple policy panacea.  The simplest market instruments do not always provide the best solutions, and sometimes not even satisfactory ones.  If a cost-effective policy instrument is used to achieve an inefficient environmental target — one that does not make the world better off, that is, one which fails a benefit-cost test – then we have succeeded only in “designing a fast train to the wrong station.”  Nevertheless, market-based instruments are now part of the available environmental policy portfolio, and ultimately that is good news both for environmental protection and economic well-being.

I would just hate for such an unreasonable position to influence policy (heavy sarc intended).

Environmental Economics vs Environmentalism

Yesterday, Dave Roberts at Grist posted his strong (extreme?) views on economists' influence on public policy--environmental policy in particular.  Rather than resort to my usual sarcastic responses, I'm going to try to put together a cohesive substance-filled argument as to why this goofy back and forth between environmentalists and economists is completely counterproductive. 

First the upshot (in case you get bored reading): We're on the same side. 

It always strikes me as odd when environmentalists attack environmental economists and particularly attack the successes environmental economists have had in influencing environmental policy.  Without data to back me up (we're blogging afterall) I'm very comfortable in saying that environmental economists have had as much if not more success in getting effective environmental regulation passed than the entire environmental lobby.  How do I define effective?  Reductions in environmental impacts at least cost to society.

Why then the extreme position by some environmentalists that economics is evil? 

I'm not going to try to answer that, you'll have to ask them, but I would like to address a couple of points that Roberts makes...

A statement I can't sign

From the inbox (2/17):

Dear Economist:

As Congress debates capping our nation’s greenhouse gas emissions, perhaps the most critical decision will be how the credits under the program are allocated - will they be given free to emitting industries or will they be sold at auction?

The attached open statement to Congress makes the case for auctions and has been signed by hundreds of economists, including:

Greg Mankiw and Oliver Hart, Harvard University
Charles Schultze, Brookings Institution
Franklin Fisher, Massachusetts Institute of Technology
Burton Malkiel, Princeton University
Robert Hall and Paul Milgrom, Stanford University
David Romer, University of California at Berkeley
Bruce Meyer, Northwestern University

Getting the initial allocation question right is a critical component of a successful cap-and-trade program. Freely allocating credits to emitting industries will not protect energy consumers from higher prices, and it will prevent the government from collecting the resources necessary to offset the economic implications of capping our nation’s greenhouse gas emissions.

Last year, the Senate considered legislation to this effect, only to have their consideration halted by a procedural motion. That piece of legislation, co-authored by Senators Joe Lieberman (I-CT) and John Warner (R-VA) would have granted windfalls of several hundred billion dollars to emitting industries.

Now, Rep. Henry Waxman, Chairman of the House Energy and Commerce Committee, has publicly stated a desire to move a massive energy bill that could include provisions capping our nation’s greenhouse gas emissions. As a result, we will be releasing the attached economists statement with all of our signatures at an event in Washington, DC on Tuesday, March 3rd. Please reply to Colin Hagan ([email protected]) to add your name to the statement and help ensure that Congress fully understands the implications of the current plan.

For additional information, please visit our website at www.cleanenergy.org.

Sincerely,

Stephen A. Smith, DVM
Executive Director
Southern Alliance for Clean Energy

I can't sign the statement [Download SACEEconomistStatement ] because of this:

... we oppose the free allocation of credits to emitting industries under a carbon cap and trade program and support auctioning 100 percent of the credits immediately.

If it said this:

... we oppose the free allocation of all of the credits to emitting industries under a carbon cap and trade program and support auctioning up to 100 percent of the credits immediately within five years.

I'd be there! Since free permits versus auctioned permits is more of an equity/revenue issue than an efficiency issue, I'd rather not constrain the implementation of a real climate policy.

A reply to Grist

In the comments section in response to two silly posts (here and here):

More on all this here:

http://gristmill.grist.org/story/2009/2/20/14725/1144

Posted by: David Roberts | February 23, 2009 at 08:18 PM

Go read the post and comments at Grist first before you keep reading here.

[Note to Tim: I watched 24, hit the computer and got nothing done ... except this post].

Grist seems a little mad at us

From Grist:

Anyway, this prompted some substance-free snark over on Common Tragedies, followed by more substance-free snark on Environmental Economics, followed by some substance-free mutual high-fiving in the comments. (This kind of cliquishness will surely help spread the proper respect for the social sciences.)

I take offense. My snark most definitely has substance.  

More on this tomorrow (24 is coming on soon), but to get your anticipation up, here's a highlight from Dave Roberts' substance filled post:

This prompted Romm [who Dave Roberts thinks is great--no really, he says so in the post] to go off on a somewhat over-the-top and over-broad rant, which in turn prompted substance-free snark at Common Tragedies and Environmental Economics, along with a great deal of mutual high-fiving in comments. (Sigh.) Tim Haab (who thinks I'm an idiot) says ...

 

Just getting started? Crap, I thought it was half-way over

From Environmental Capital:

...

The whole debate over the clean-energy economy and job creation is just getting started—and is keeping environmental economists busy. Proponents see a virtue in the labor-intensive nature of many clean-energy projects, from retrofitting buildings to installing solar panels. Detractors see a fatal flaw precisely in the labor-intensive nature of green jobs, since that amounts to lower labor-force productivity.

So let’s see—does the green-jobs rhetoric hold water, and should job-creation even be the yardstick for America’s energy policy?

The links I wish I could click today

From Environmental Capital:

Some things that are off the table should be reconsidered, argues the WaPo’s edit page—like a tax on vehicle miles traveled, an alternative gas-tax plan recently shot down by the White House. Other options are definitely still on the table, such as greater reliance on oil shale, says Interior Secretary Ken Salazar, at Green Car Congress.

The biggest push for clean energy will come in a national renewable-energy standard that will probably be wrapped into a wider energy bill, notes Green Inc. California’s gone down that path, and after a rough start, clean-energy installations are finally booming, at Earth2Tech.

But greater use of clean energy requires scientific breakthroughs, not incremental advances, warns Energy Secretary Steven Chu in the L.A. Times—and too much support for clean energy can actually stifle innovation. Whereas Kyoto-style climate schemes tend to spur innovation and reduce emissions, at [econ-hating] Grist.

Note: [Bracketed italicized adjective gratuitously added].

Want to see something scary (at least for mortgage holders)?

Take a look at this graph from Robert Shiller at Yale:

 

Anyone want to guess when I bought my current house?

Hat Tip:  Linda Ghent through Facebook

(Yes, I'm on Facebook, send me a request, I'll be your friend).