Environmental Economics

My first department chair is retiring and I'm missing the going away party

From the inbox:

I’m writing to check whether you saw the announcement about the retirement reception for Carson Bays.  We imagine that you are too far away and too busy to attend, but we thought you might be able to write something that we could share with Carson at the reception tomorrow afternoon (3:30 – 5:30 p.m.).  As one of the few among us who became a department chair, perhaps you can mention a few lessons that your learned from the master.

My reply:

I was hoping to attend but am slammed with reading day stuff on Thursday. How about this?

I was recently able to collaborate once again with Ju-Chin Huang and Tim Haab, two other ECU assistant professors from the 1990s. We all said at about the same time how we were looking back fondly on those days. Part of the reason was the excellent research environment established by Carson and the rest of the gang who were there at the time. My only complaint is that one year when I did more service than ever and got graded lower than my prior year's annual service review. They say service is a thankless task, but jeez. I mildly complained to Carson who dealt with me in the appropriate way. As an inexperienced department chair myself, I'll always consider Carson a role model and forever regret the one time, I think it was only once, that I added to the steady drip, drip, drip of faculty complaints [make sure everyone knows that I'm laughing as I write this].

And, folks in my department at ASU, it is just a joke!

Moblogging the Business Advisory Council meeting

John Silvia, chief economist at Wells Fargo, predicts that gas prices will keep going up ... increasing demand along with no increases in supply.

A small carbon tax might not have much affect at all

Daniel Esty and Michael Porter:

The best way to drive energy innovation would be an emissions charge of $5 per ton of greenhouse gases beginning in 2012, rising to $100 per ton by 2032. The low initial charge, starting next year, would make the short-term burden on consumers and businesses almost negligible. ...

Our proposal would apply to all greenhouse gas emissions, so that everybody, and every fossil-fuel-dependent form of energy, would be included. Coal-burning power plants would pay based on the emissions measured at their smokestacks. Oil companies would pay for every gallon of gas or oil delivered. Yes, these costs would be passed on to consumers, but this is what motivates changes in behavior and technological investments.

Some will say that even the modest emissions charge we propose is politically impossible, given the death of the cap-and-trade bill that the House passed in 2009. But the ballooning federal deficit has created a new political imperative. A modest emissions charge will look attractive compared with raising individual income taxes or burdening the economy with new corporate or payroll taxes.

via www.nytimes.com

It is a little tough to say that a $5 carbon tax would drive energy innovation at the same time the short-term burden on consumers would be small. Also, the revenue effects look small too. If there are about 6 billion metric tons of greenhouse gases emitted, a $5 tax per ton would generate $30 billion. That is only 3% of a $1 trillion budget deficit. So, a $5 tax per ton doesn't do much at all in the short-term. The idea, I guess, is to get it on the books and crank it up so that something might happen 10-20 years from now.

Note: As always, I'm not sure of my numbers ... corrections welcome.

Daily demand and supply

Higher feul prices increase costs which decreases supply. Expect higher prices for transport-intensive goods:

These should be good times for railroads and trucking companies. After all, an improving economy means that more goods and commodities need to be delivered to the nation’s ports and department stores.

But rising fuel prices have taken a toll on their business.

With diesel prices near their highest levels since 2008, the impact has started to appear in the first-quarter results of companies like Union Pacific railroad and the Arkansas Best Corporation, which has a trucking subsidiary. Some shippers said they expected to raise fuel surcharges.

The timing, some economists say, could not be worse. Consumers are already paying steeper prices at the gas pump and may see prices climb in stores if diesel prices remain high. American manufacturers, meanwhile, are struggling to get back on their feet.

via www.nytimes.com

Me? I'm a locavore so I only pay high prices (and time costs) because I buy local.

Daily Demand and Supply

“People don’t really like paying more, but when it comes to something like coffee that’s a necessity in people’s lives, I’ve found that they are more willing than not to go ahead and pay the difference”.

via chicago.cbslocal.com

I'm starting to teach elasticities tomorrow. I think I might start with that quote.

Intervention

Matt Kahn:

My Chicago teachers were wrong about one key point.  You can get work done in the sunshine.  I work harder here than I did when I was a graduate student in Chicago, or when I worked in New York City or when I worked in "glamorous" Cambridge.  The state's budget crisis will end, UCLA will become "self-sufficient" (i.e privatize) and order will be restored to the Star Wars galaxy.  This is paradise.  Life is too short to be miserable 9 months of the year (we did like Boston's May, September and October).

via greeneconomics.blogspot.com

Matt,

We get it. UCLA is awesome and you are glad you made the move. That's cool. But, now it is time to move past the mantra and simply live the dream. The folks back in Chicago, New York and Boston who (apparently) give you a hard time about not being serious anymore (you moved to California, you blog, you write books) are likely jealous that you have broken the chains and are now soarly freely. Try to ignore their jabs and don't look back.

Sincerely,

John W.

SCC@EPA

Greenstone, M., E. Kopits and A. Wolverton (2011). "Estimating the Social Cost of Carbon for Use in U.S. Federal Rulemakings: A Summary and Interpretation." NBER Working Paper No. 16913, Mar 2011.

Abstract: The United States Government recently concluded a year-long process to develop a range of values representing the monetized damages associated with an incremental increase in carbon dioxide (CO2) emissions, commonly referred to as the social cost of carbon (SCC). These values are currently used in benefit-cost analyses to assess potential federal regulations. For 2010, the central value of the SCC is $21 per ton of CO2 emissions and sensitivity analyses are to be conducted at $5, $35, and $65 (2007$). This paper summarizes the methodology and process used to develop the SCC values, complemented with our own commentary about how the SCC can be used to inform regulatory decisions and areas where further research would be particularly useful.

via www.economicsclimatechange.com

The good looking deserve it because they work dang hard at being good looking

The Onion:

During a televised press conference held Friday afternoon at their chic beachside headquarters, the nation's attractive people demanded that we each immediately mail them a personal check for $200. "Just make it out to 'cash,'" said their physically flawless spokesperson Juliana Marie St. Onge, occasionally glancing up from texting and flashing an alluring smile as she addressed the country. "Aw, don't ask what the money's for, that's no fun. Besides, you know you're just going to send it anyway." Initial reports indicate that most citizens have already mailed their checks, with some including an additional $50 to $1,000 in an effort to make a good impression.

Note to self

I'm running the Anderson and Stafford (SEJ, 2000) pollution permit trading game in my MBA class (managerial economics) tonight. Here are my discussion questions (taken from the 2000 paper):

1. What is the effect of regulation (output restrictions, pollution permits) on profits? Is this bad for the economy?
2. What is the effect of permit trading on profits, relative to regulation?
3. If you bought a permit, why? Use this information to draw the permit demand curve.
4. If you sold a permit, why? Use this information to draw the permit supply curve.
5. Does demand and supply change when permits are allocated in different ways (random allocation, rewarding new tech firms, rewarding old tech firms, auctions)? [We also ran the Veconlab permit experiment. Results are here and here. One of these graphs shows that it doesn't matter whether you are given your permits or must pay for them, each allocation mechanism generates an opportunity cost for the permit.]
6. Does demand and supply help explain permit trading (i.e., price and quantity)?

Next, we'll run the abatement subsidy and pollution tax scenarios and have an in-class final exam (where teams of students turn in answers and teams can discuss their answers with teams). The in-class "final" is worth 3.33% of their grade.

Picture of the Day

I'm predicting a late corn crop in Ohio...