Environmental Economics

What I hope to read tomorrow

Burton Abrams and George Parsons of the University of Delaware evaluate the efficiency of the recently introduced 'Cash for Clunkers' program and conclude that the cost exceeds the benefit by approximately $2000 per vehicle.

Source: Abrams, Burton A. and Parsons, George R. (2009) "Is CARS a Clunker?," The Economists' Voice: Vol. 6 : Iss. 8, Article 4. DOI: 10.2202/1553-3832.1638

Available at: http://www.bepress.com/ev/vol6/iss8/art4

This is a test of

This is a test of the "post by email" feature in Typepad.

I vote that environmental groups try to scare, er, inform the public with predictions of heat waves

From Environmental Capital:

Environmentalists took their eye off the ball after the House passed the Waxman-Markey bill, and risk losing ground to energy-industry opponents who’ve mustered big-money messages, the WaPo reports. One problem greens face is strategic, “whether to scare the public with predictions of heat waves or woo it with promises of green jobs.” ...

One potential key to the climate bill is the partnership of greens and labor. But if green jobs don’t materialize, will that spell the end of the “blue-green alliance”?, in Climate Wire.

The overall macroeconomic impact of climate change policy will most likely be negative. Since any increase in green jobs will likely be offset by reductions in carbon-intensive jobs, the green jobs argument for climate policy is naive at best and disingenuous at worst.

...and the trees are all kept equal, by hatchet, axe and saw.

I don't like mandates (which explains the title)...but I do like regulations with financial incentives to correct externalities.  That's why I think I like this (from USA Today):

New forests would spread across the American landscape, replacing both pasture and farm fields, under a congressional plan to confront climate change, an Environmental Protection Agency analysis shows.

About 18 million acres of new trees — roughly the size of West Virginia — would be planted by 2020, according to an EPA analysis of a climate bill passed by the House of Representatives in June.

Bans

From the inbox:

Beginning Oct. 1, motor oil filters, wooden pallets and plastic bottles are outlawed from entering any North Carolina landfill.  This new statewide recycling ban will ensure that more items are kept out of the landfill and recycled instead. Here at ASU we already have recycling programs for these materials in place, but we hope that this new ban will assist us in capturing even more of these materials for recycling and keep them out of our waste stream.

Mandates like this usually have unintended consequences. I would expect to see more plastic containers dumped beside the road.

Where I'll be today

From the ASU news:

BOONE—The Association of Student Entrepreneurs and the Energy Center at Appalachian State University are cosponsors of Music on the Mountaintop, a music festival that will be held Aug. 29 at fairgrounds on Roby Green Road off Hwy. 421 East in Boone.

The festival will feature performances by Sam Bush, Keller Williams, The Steep Canyon Rangers, Acoustic Syndicate, and Yo Mama’s Big Fat Booty Band – as well as acts from Western North Carolina.

The festival combines entertainment with an environmental message. It will feature a stage powered by solar energy, recycling and composting, and use of compostable cups and utensils. A “Green Village” will include information booths from N.C. Green Power, Appalachian Voices, High Country Conservancy and others. A cleanup of the New River on Friday, Aug. 28, will be held from 3-6 p.m. beginning at the fairgrounds.

The festival recently was recognized by Blue Ridge Outdoors Magazine for its eco-friendly focus.

The festival will have three stages to showcase various performers, a 35-foot climbing wall, and local and organic food, and craft vendors from the Boone area. ...

And from the inbox yesterday:

Hello Music Lovers!!!

It is almost the time...we're all excited. A few quick things, first off THANKS for buying a ticket! Second, make sure you bring a rain jacket. The weather in Boone is just fine right now, no rain at all but just in case, bring a rain jacket. Thirdly, if you need alcohol for the event, remember NO GLASS and one of our great sponsors, Peabody's Wine and Beer has all the best deals on tasty canned beer! They have hundreds of choices, so please help support them. ...

OK. I think I will.

Or better, he could install Windows Vista as the hurricane's operating system. That would be sure to stop it in it's tracks*.

From CNN.com:

Hurricane experts are throwing cold water on an idea backed by billionaire Microsoft founder Bill Gates aimed at controlling the weather.

Gates and a dozen other scientists have raised eyebrows by submitting patent applications for a technology to reduce the danger of approaching hurricanes by cooling ocean temperatures.

...

Quote of the Day (that's sure to get Aguanomists fired up)

From the Dublin (Ohio) News:

"Why do we not need that [500,000 gallon water] tank," [Dublin, Ohio] Councilman John Reiner asked. "I'm hearing complaints from residents regarding low water pressure.  I'm one of these people who would like to see it changed.  I'm one of those people who, when you run the irrigation system and the dishwasher, the shower goes down to a trickle."

Huh?

From Marginal Revolution:

More generally, my jaw dropped when I read the denouement:

In this more comprehensive model that takes into account trivialities like regional population growth and a reality-based route, the annual benefits total $840 million compared with construction and maintenance costs of $810 million.

I'm not sure what discount rates he is using but even if we put that problem aside this screams out: don't do it.  Given irreversible investment, lock-in effects, and required hurdle rates of return, this still falls into the "no" category.  And that's an estimate from an advocate writing a polemic on behalf of the idea.  I'm not even considering the likelihood of inflation on the cost side or the public choice problems with getting a good rather than a bad version of the project.  How well has the Northeast corridor been run?

Here is the comment I left:

I'm not sure why you say this is a "no" from the quote you extract. If the annual benefits are 840 and the one-time construction costs are 810, the discounted future stream of benefits will be an order of magnitude larger than the costs. Even if the costs double, the simple math says this project is a go. What am I missing?

Update: Funny story. It turns out that the adjective "annual" was left off "costs." Typically, this makes a big difference in the calculations.

Env-Econ 101: Supply and Demand Example

Predict the net effect of the following on the demand for and price of solar panels in the U.S.:

1. Increased production of photovoltaic cells in China
2. Increased federal subsidies for the purchase of solar panels
3. Increased state subsidies for the purchase of solar panels
4. Decreased subsidies for solar panel purchases in Europe

Read below the jump for the answer: