Environmental Economics

A little bit like the tail wagging the dog?

Typically, cars and gas are complements. On the other hand, according to the rules of introductory micro, when gas prices are rising, gas and hybrids are substitutes:

Americans are buying record numbers of hybrid and electric cars as gas prices climb and new models arrive in showrooms, giving the vehicles their greatest share yet of the U.S. auto market.

Consumers bought a record 52,000 gas-electric hybrids and all-electric cars in March, up from 34,000 during the same month last year.

The two categories combined made up 3.64 percent of U.S. sales, their highest monthly market share ever, according to Ward’s AutoInfoBank. The previous high was 3.56 percent in July 2009, when the Cash for Clunkers program encouraged people to trade in old gas guzzlers for more fuel-efficient cars.

via www.newsobserver.com

I always need convincing ... Let's say you are torn between two similarly ranked upscale mid-sized cars: the Chevy Volt and the Volkswagon CC. Something in-between a high end and a stripped down CC costs about $5000 less and delivers 9 MPG less on the highway and 14 MPG less in the city. To keep the math easy, let's say there is a 10 MPG difference. If you drive 12,000 miles per year then you save 1200 gallons per year. If the price of gas is between $3 and $4 per gallon then you save between $500 and $667 each year on gas. All else equal, it only pays to buy the hybird if you expect to keep your car for a long time (10 years at $3/gal, 7.5 years at $4/gal; at a discount rate of zero). Only in the case of a 100% city driver does the hybrid begin to make financial sense. You would need to keep your car for 4.375 years to make the hybrid pay off (at a discount rate of zero).

So, I can understand why someone would buy a hybrid -- saving the planet, etc -- but I don't fully understand why there are big changes in demand when gas prices rise a bit. Unless, there is a chunk of consumers at the margin eco-friendly margin who only need a small bump in gas prices to get them to go green.

Renewable portfolio standards don't raise prices?

Matt Kahn:

An interesting debate is playing out.  The Center for American Progress (CAP) has put out a policy brief that argues that green energy purchase mandates do not raise local electricity prices.  The Renewable Portfolio Standard (RPS) requires that a state's utilities purchase a given percentage of their power from low carbon sources such as wind, solar and hydro.  In California, the RPS is set to rise to 33% by the year 2020.  As of 2009, 12% of California's power comes from renewables. Is the CAP correct that further ramping up of the RPS will offer environmental benefits without imposing costs on electricity consumers?

For the CAP to be correct, it must be the case that the cost of generating renewable power is falling sharply over time.  There is also the issue of "insurance".  Given the variability of wind and sunshine, power producers must have alternative backup generators ready to produce.  Given that good batteries for storing excess power do not exist, there has to be some slack in capacity to be prepared for contingencies such as when its a cloudy day or a day when the wind isn't blowing.  These "backup plans" have costs to maintain them.

It is also the case that renewable power takes a fair bit of land.  Is the opportunity cost of the land that renewables are being located on being incorporated into the cost of providing renewable power?

What the CAP article does not discuss is the incidence of the RPS standards.  Are the public utility commissions by shielding consumers from price hikes simply lowering the profits of the electric utilities?  One way to study this would be to conduct an event study and see if publicly traded electric utilities experience a drop in their stock price when new news about a more aggressive RPS is revealed.  Such a finding would indicate that the stock market believes that their profits will fall because their cost of acquiring electricity has gone up.

If introducing the RPS neither raises consumer prices nor lowers the utility's profits, then such an RPS is a free lunch!  That would puzzle the typical economist!

Is something better than nothing?

Assuming the Environmental Protection Agency’s estimate of the industry’s methane leakage rate — 2.4 percent — is accurate, choosing to build a new gas power plant instead of a new coal plant produces immediate greenhouse emissions benefits, and that would be the case even if the leakage rate were nearly a point higher. Replacing old, inefficient coal plants with new natural gas facilities would presumably produce larger benefits. But using natural gas to run cars wouldn’t reduce net climate impacts for 80 years. Fueling heavy-duty trucks with natural gas wouldn’t result in greenhouse emissions benefits for 300 years.

via www.washingtonpost.com

Coal: Point/Counterpoint

Looks like a slow day at ENV-ECON, so I thought I would share this:

http://blogs.roanoke.com/roundtable/2012/04/coal-pointcounterpoint/

If you add 1 to 1, that's 100% growth

Ohio is making gains in the “green economy,” according to a new report that says the state is one of the nation’s fastest-growing new markets for wind projects.

The report by the American Wind Energy Association said the state added more electricity from wind power on a percentage basis in 2011 than any other state did, although the growth came from a low starting point.

via www.dispatch.com

"How to Write an Anonymous Peer Review"

Kevin Haggerty (editor of the Canadian Journal of Sociology) in the Chronicle:

Writing anonymous peer reviews is an academic "black art." Such assessments are vital to scholarly publishing but we receive no formal training in how to write one.

Drawing on my own experiences as an author and editor, I would like to offer guidance about this for young scholars. Some of my observations are particularly germane to the social sciences, but many recommendations pertain to publishing across all disciplines.

Read the rest.

It's a contraction for it is

Insert Kentucky joke:

John Calipari and the NCAA championship trophy kicked off a whistlestop tour of the state today, and one of the first stops was in Pikeville, Ky., where Calipari received the key to the city. Perhaps the ceremonial plaque was whipped up hastily, but it sports a pair of typos.

via deadspin.com

I believe that "Th" is a simple mistake (still inexcusable on a plaque to Coach Cal), but "It's Rightful Home" is a little embarrassing.

And it makes me a better dancer

I know it's not Friday, but with news like this, why wait?

Drinking alcohol may enhance a person’s problem solving skills, according to a new study.

Scientists found that men who either drank two pints of beer or two glasses of wine before solving brain teasers not only got more questions right, they also were quicker in delivering correct answers, compared to men who answered the questions sober.

via medicaldaily.com

I have a complaint about RePEc

From the inbox:

Dear Blogger,

Congratulations, you made the list!

The Federal Reserve Bank of St. Louis is lauching a blog aggregator, EconomicAcademics.org, to highlight and promote the discussion of economics research. Your blog is part of this effort. This email explains why and how you can help promote the discussion of economic research in the blogosphere.

EconAcademics.org lives at http://econacademics.org/ and aggregates blog posts that discuss economic research. The aggregator looks through blog posts for a link to some research indexed on a RePEc service, currently EconPapers, IDEAS and NEP. IDEAS then also links back from the abstract page to the blog posts.

My complaint? Er, the cool, free stuff from RePEc just isn't free enough?

Another complaint? This creates an incentive to refocus our blogging back to what we really should be doing?

I have a special circumstance

I was trying to say a sharp drop in housing values inside the one-mile radius. But hopefully the values in the second sentence gets the point across.