Environmental Economics

Someone should do a benefit-cost analysis

From the Associated Press*:

MANTEO, N.C. — The federal budget includes $3 million to restore the deteriorating Bodie Island Lighthouse on North Carolina's Outer Banks.

The Virginian-Pilot of Norfolk reported Thursday that the money is the estimated amount for a complete restoration of the 1872 lighthouse structure north of Oregon Inlet.

Bodie Island light was damaged when the National Park Service acquired it in 2000 from the Coast Guard. Some of the 205 metal steps in the building were corroded and pieces of cast iron metalwork were missing.

Officials at the Cape Hatteras National Seashore say work should start in August and run about 18 months. The light's Fresnel lens also will be restored.

Does anyone have travel cost method data for Bodie Island Lighthouse (it would need a serious adjustment for multi-purpose trips)?

*Do I need to provide a link for an AP article?

LIMDEP rocks!

I use the Delta Method implemented with the Wald command in LIMDEP to estimate confidence intervals for ratios of regression coefficients (i.e., willingness-to-pay):

Wald; start=b; var=varb;
fn1=-b1/b2$

Most others seem to use the more difficult to program Krinsky-Robb (K-R) simulations (10,000 draws and all that) and I've always felt a persistent sense of inadequacy or a tendency to self-diminishment, sometimes resulting in excessive aggressiveness through overcompensation (reference). So, one day, I asked a colleague (whose name I'll withhold to protect his identity) to compare the Delta method with the K-R. Here is the resulting email message (slightly edited to correct my unnamed colleague's numerous and substantive errors): 

Using the Kribnsky-Robb 10,000 random draw method, I get:
 
Per trip mean = $747
95% CI = $559 - $1,032
 
Using the Wald Command, I get the following:
 
[Per trip mean =] $729

...  This gives 95% CI $508 to $951, so narrower confidence intervals than the Krinsky-Robb procedure.

Picture of the Day

John Whitehead Sleep watch data (11-17-08 through 11-24-08)

The problem with using whiteboards in class

Valuable teaching advice for graduate students:  When you drop chalk in class, at worst it leaves a little white spot on your clothes that brushes off.  When you drop a black dry erase marker...

Who says that firms don't run field experiments?

From the NO (Progress Energy will offer solar benefit):

Progress Energy's residential customers may soon receive $1,000 to help pay to install solar water heaters in their homes.

The N.C. Utilities Commission approved the energy conservation program Tuesday.

The Raleigh-based electric utility will offer the incentives to 150 people throughout its service area in the state as part of a pilot project. Progress will run the pilot program for two years to measure its effectiveness in achieving energy savings. The company will also assess whether the amount of the incentive attracts participants.

The folks at Progress Energy must've stayed at the Holiday Inn Express last night!

Krugman on climate change policy critics

I don’t especially mean to pick on [Robert] Samuelson, but this column exemplifies a strange thing about the climate change debate. Opponents of a policy change generally believe that market economies are wonderful things, able to adapt to just about anything — anything, that is, except a government policy that puts a price on greenhouse gas emissions. Limits on the world supply of oil, land, water — no problem. Limits on the amount of CO2 we can emit — total disaster.

Funny how that is.

Source: Anti-green economics.

Deuce

From Peter King's MMQB:

One other note from the road:

Changing planes at DFW on Sunday, I used the men's room near one of the American gates. I walked into one of the toilet stalls with the automatic flushers.

WHOOOOOSH. I closed the door to the stall and sat down.

Three more times I heard the same WHOOOOOSH as I sat there and minded my own business.

Of course, no flush when I get up and leave the stall. Gotta love technology.

Did he really write that?

Will climate change take the fun out of fun?

Researchers Daniel Morris and Margaret Walls at Resources for the Future have written a background paper on "Climate Change and Outdoor Recreation Resources."  In it they describe potential impacts on:

Snowpack — Extended warm seasons may result in more rainfall than snow, which would reduce skiing and snowboarding opportunities, particularly in comparatively warmer areas in California, Nevada, Arizona, and New Mexico.

Fresh waterways — Reduced snowpack and more rain in winter months would mean an earlier spring runoff into streams and reservoirs. That could mean less fresh water flowing in the summer months, when sportfishing and boating are most popular. Fishing depends on water temperature, streamflow levels, and ecological quality, while boating is more sensitive to lake, reservoir, and stream levels.

Noncoastal wetlands — Stretching across 216 million acres of the northern plains and Canada, these wetlands are rich sources of many species of ducks and other waterfowl.  By one estimate, lower water levels due to climate change in the Upper Great Lakes could reduce regional duck populations by nearly 40 percent in the area.

Beaches — Rising sea levels over time could reduce the size of beachfront recreation areas, national seashores, and coastal waterways, the authors find. A full 85 percent of tourism-related revenues in the United States are generated by coastal states.

Forests and Parks — Tree cover, particularly in the western United States, is already feeling the impact of climate change, particularly as a result of drought. Insects have decimated millions of acres of evergreens in the Rocky Mountain region, and dryness has fueled damaging wildfires. Tree dieoffs also resulted in closures of campgrounds, trails, and picnic areas in public parks.

Interestingly, but perhaps not all too surprisingly, they find that there will be both costs and benefits to longer and warmer summers.

We have also shown that some economics literature indicates that the value of these resources for recreation purposes may be higher than ever. Recreation demand is highly dependent on climate, and several studies show that longer and warmer summers are expected to increase the demand for outdoor recreation,from hiking, fishing, and camping to simple beach visits.

Oh, and they cite some of John's North Carolina sea level rise work.

Kumbaya: Part Trey

Subtitle: Misperceptions on the costs of cap-and-trade (or a carbon tax) are cleared up today, right here at this blog

Pictured to the right is the market for energy and/or energy-intensive goods and services, where climate change policy increases the cost of production shifting the supply curve up and to the left. The household "costs" estimates that are flying around* are the increased expenditures on energy and goods and services that use energy, area (a + b). In a benefit-cost analysis sort of way, these "costs" aren't social costs at all, but simply transfers. If the government auctions permits then the (a + b) is money transferred to the government budget. If permits are given away the money is transferred to permit holders. This doesn't mean that consumers don't suffer from higher prices, they do. But, we're supposed to cut back on energy use in the face of higher prices. That's how we mitigate climate change.

The true cost of climate policy is the deadweight loss, area (c + d), the lost economic surplus. Area c is the lost consumer surplus and area d is the lost producer surplus. The numbers represented in the deadweight loss triangle are the ones we should be talking about.

*Background reading:

• Kumbaya
• Kumbaya: Part Deuce
• Between the anterior median sulcus and the anterolateral sulcus
• Disco Inferno

Kumbaya: Part Duece

It oughta be axiomatic: Cap-and-trade proposals have to make energy more expensive. Why are Democrats insisting it shouldn’t?, wonders Roger Pielke Jr. Downplaying the costs could actually boomerang, notes Geoff Styles in a plea for straight talk: “We can’t suddenly start collecting fees on behalf of an environmental service–storing our waste carbon in the atmosphere–that has been free since the dawn of time and expect that this won’t impose a burden on someone.”

Source: ... Cap-and-Evade ...