Environmental Economics

I choose not to run

Has anyone else noticed that Don McManus' career spans at least 15 years:

• Seinfeld, The Race (1994): Duncan Meyer, the boss of Jerry Seinfelds' new girlfriend wants to avenge an undeserved loss in a foot race.
• 24 Day 7 (2009), 5:00 a.m. - 6:00 a.m. and 6:00 a.m. to 7:00 a.m.: Bob, the bad guy who menaces Kim Bauer at the airport with his bad guy "wife". Watch this clip for a glimpse (he's the guy in the car).

Both shows were on my hotel room TV Monday night in Newport, R.I. as I ate room service while recovering from my presentation at the NAAFE Forum (and a jog around Newport).

Game (i.e., comment authentication is) on!

In response to a  pesky (you know who) spammer we've turned on comment authentication for awhile. Sorry for the inconvenience!

Question of the Day

Will there be travel funds?

From the inbox:

On or about April 1st you should have received notification that your abstract (Serial Number 0611) for the paper, Economics of recreational inland striped bass and hybrid striped bass fisheries, that you submitted to the AFS'09 Program Committee was accepted as an oral presentation.  

The Program Committee has just completed assigning all talks to specific sessions each day at specific times and room locations. In nearly all cases, contributed papers were assigned to your first choice of topics.  With rare exceptions, all papers submitted as part of a symposium remained in that symposium.

Our Program has you presenting your oral paper in the following symposium or contributed paper session:

• Invited paper for a symposium (and organizer's last name): Striper 2009: Inland Striped Bass Mgmt - Bulak

Obligatory pre-holiday demand shift post

Last Novemeber, I wrote:

Take the case of high gas prices. From Reuters:

Millions of Americans will drive their cars to visit family and friends over the Thanksgiving holiday even though gasoline is above $3.00 per gallon, travel and leisure group AAA said Thursday.

About 38.7 million Americans, 1.5 percent more than last year, will travel 50 miles or more from home this holiday, AAA estimated, based on a national Web survey of 2,200 adults.

The price per mile of travel is increasing (gas prices are increasing) and miles traveled are increasing relative to last year. The only thing consistent with higher prices and higher quantity is an increase in demand.  If high gas prices were supply driven we would see consumption decreasing, not increasing. 

Well, ditto:

With the Memorial Day weekend and summer driving season approaching, motorists are facing a familiar trend -- surging gasoline prices.

The undercurrent seems to be that drivers are the victim.  Gas prices rise each May in anticipation of the increased demand for gas in late May and into the summer.  In this case, drivers aren't the victim, they're the cause of higher gas prices. 

Want lower gas prices?  DRIVE LESS!

Grist calls it "heavyweight championship," I prefer shirts vs skins

Gore vs. Hansen:  Enviros take sides in debate over House climate bill:

The Waxman-Markey climate and energy bill, now moving through the House, is polarizing the environmental community.  Longtime climate crusader Al Gore says we should do all we can to get the legislation passed; top climate scientist James Hansen says we should demand a different, better bill.  Activists and environmental groups are picking sides or staking out positions in the middle.

More climate quotes of the day

GE’s CEO Jeff Immelt on CNBC:

"Give us some certainty and let's go."

and...

“Look, I’ve said it – there’s got to be a price for carbon. I’ve come to the conclusion that cap-and-trade is the most effective way to create a market and go. There’s going to be people that argue for taxes. But, I – I just think cap-and-trade is the more practical approach. But let’s debate all that stuff, but let’s get it done.”

Krugman on Waxman-Markey

If we’re going to get real action on climate change any time soon, it will be via some version of legislation proposed by Representatives Henry Waxman and Edward Markey. Their bill would limit greenhouse gases by requiring polluters to receive or buy emission permits, with the number of available permits — the “cap” in “cap and trade” — gradually falling over time.

It goes without saying that the usual suspects on the right have denounced Waxman-Markey: global warming isn’t real, emission limits will destroy the economy, yada yada. But the bill also faces opposition from some environmentalists, who are balking at the compromises the sponsors made to gain political support.

So is Waxman-Markey — whose language was released last week — good enough? ...

The legislation now on the table isn’t the bill we’d ideally want, but it’s the bill we can get — and it’s vastly better than no bill at all.

One objection — the claim that carbon taxes are better than cap and trade — is, in my view, just wrong. In principle, emission taxes and tradable emission permits are equally effective at limiting pollution. In practice, cap and trade has some major advantages, especially for achieving effective international cooperation. ...
So opponents of the proposed legislation have to ask themselves whether they’re making the perfect the enemy of the good. I think they are.

Link: http://www.nytimes.com/2009/05/18/opinion/18krugman.html

A 15 minute back-of-the-envelope benefit-cost analysis of tighter fuel standards

Concerning new fuel economy rules ...:

The administration says its plan will save 1.8 billion barrels of oil and cut 992 million tons of global-warming gases over the program's lifetime[*].

If the price of a barrel of oil is about $100 "over the program's lifetime" (61% greater than yesterday's price) then the savings in oil expenditures is $180 billion (about 1.3% of annual GDP).

If the cost per ton of carbon dioxide is $12 then the benefits of cutting 992 million tons is almost $12 billion "over the program's lifetime."

If about 8 million cars and trucks are sold each year [source] "over the program's lifetime" and the price per car rises by about $1300 then the cost to consumers is $52 billion.

Using the back of an envelope, the benefits seem to outweigh the costs:

• Net benefits (in $billions) = [$180 + $12] - $52 = $140

Use the comment area to let me know how close I am to the actual estimate of net benefits. Thank you. I'll be here all week.

*Here is what President Obama actually said:

As a result, we will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years (2012-2016).

Personal note: with 60,000 miles on my 2004 Suburu Forester, I should be about ready to buy a Suburu hybrid in 2012.

Quotes of the Day (on new fuel economy standards)

Waiting in the Providence airport on my way back from the NAAFE Forum, I read this in USAToday with sensible quotes from three prominent economists:

• Because cars and trucks will get better mileage, the cost of driving would be cheaper — so people may drive more. A 2007 analysis by University of California-Irvine researchers estimated that U.S. fuel-efficiency improvements from 2000 through 2004 led Americans to drive 6% more miles.

• The Obama administration says cars and trucks will cost an average of $1,300 more under the plan. That means drivers may keep their old, less-efficient vehicles longer. A 2009 Stanford University analysis found that 20% of the emissions reductions made by raising fuel standards are offset by people who hang onto their gas guzzlers.

"This approach ... doesn't necessarily produce as much (of a reduction) as we think," said economist Robert Stavins of Harvard University, referring to the plan's reliance on fuel-efficiency standards.

Still, it is worth doing, says Stanford University economist Lawrence Goulder. "I don't think one should let the perfect be the enemy of the good here," Goulder said. "When you account for the political realities, this is a major step forward." ...

Economists say a gasoline tax, though politically unpalatable, would be far more cost-effective in slashing gas use and global-warming pollution.

A gas tax gives drivers a big incentive to buy more efficient vehicles, says economist Kenneth Small of the University of California-Irvine. And it encourages people to keep the car or minivan parked in the driveway, because drivers pay a premium for every mile they drive.

When fuel-efficiency standards are raised, though, "The incentive is for consumers and companies to look for a way around" them, Small said.

Surplus leads to lower prices

As the housing slump drags on, Triangle home sellers are lowering expectations and prices. And buyers, buoyed by low mortgage rates and new tax incentives, are starting to respond. It's a subtle crack in a frozen local housing market, where 13,393 unsold homes still await buyers. ...

The average price of new and resold homes sold in April was $216,000, down 9 percent. The average price of resold homes in April was $198,000, down 8 percent. They were the biggest year-over-year declines in at least eight years.

Source: Housing Market Loosens