Environmental Economics

"Examining the BP Deepwater Horizon Oil Spill and the Making of a Consumer Boycott"

Zhongmin Wang:

In a new RFF discussion paper, “Egregiousness and Boycott intensity: Evidence from the BP Deepwater Horizon Spill,” we ... explore the relationship between boycott intensity and media coverage, due to the latter’s ability to influence consumer awareness about egregious events.

In order to test our model empirically, we turned to data collected during the Deepwater Horizon oil spill. The spill represents a single significant event—but its egregiousness changed over time based on reported levels of leaking oil. It also provided us with an easy way to conceptualize the distinction between egregiousness levels and consumer perceptions—the oil spill’s overall severity didn’t change after it was stopped, but consumers’ negative feelings of the event declined over time. Using our market-level model, we determined an area’s boycott intensity by measuring decreases in BP brand’s market share across 257 US counties.

We expected that the oil spill, at any given level of egregiousness, would have caused greater harm in markets closer to the Gulf Coast region and in markets with stronger environmental preferences—a hypothesis that was confirmed by our model. Our findings also indicated that while drivers boycotted BP gasoline as the oil spill was occurring and that boycott intensity increased with the official flow rate, this pattern disappeared quickly after the spill was stopped. In terms of the media’s influence on consumers, boycott intensity appeared to increase with the weekly number of spill-related news hits, suggesting that consumers may have made assumptions about the seriousness of the spill due to the intensity of the media coverage it received at any given time.

via common-resources.org

"Congressman Wants to Know Who Pays for Climate Skeptics’ Research"

I'd like to know too:

A Democratic member of Congress is digging into the funding of a handful of researchers who have questioned the prevailing view on the causes of climate change, The Washington Post reports.

Arizona’s Raul M. Grijalva, the top Democrat on the House of Representatives’ Committee on Natural Resources, wrote letters to seven university presidents asking for information about the funding sources for researchers at their institutions who have publicly questioned whether man-made pollution is to blame for the warming of the earth’s climate.

Mr. Grijalva’s effort follows the revelation that the climate-change skeptic Wei-Hock Soon, an astrophysicist at the Smithsonian Astrophysical Observatory, had much of his research funded by energy-industry groups and others who have supported efforts to discredit research linking carbon emissions and climate change.

Mr. Grijalva addressed his letter to the presidents of:

• Arizona State University
• Georgia Institute of Technology
• Massachusetts Institute of Technology
• Pepperdine University
• University of Alabama at Huntsville
• University of Colorado system
• University of Delaware

The researcher at Colorado, Roger Pielke Jr., has spoken out about the inquiry, calling it a “witch hunt,” the Daily Camera reports.

via chronicle.com

Rather than a witch hunt, it only seems that members of Congress would like to know if those who testify before them might be biased in some way. From the WaPo: 

Grijalva said Soon failed to properly disclose Big Oil’s support for his work when he testified to Congress and at the state legislature of Kansas — testimony that downplayed the seriousness of man-made climate change. “My colleagues and I cannot perform our duties if research or testimony provided to us is influenced by undisclosed financial relationships,” Grijalva wrote.

The economics profession went through this during the most recent recession. High profile economists failed to reveal financial interests that would have shed a different light on the things that they said about the health of the economy. This led to the American Economic Association's disclosure policy. I don't see why testimony before Congress should not be treated the same way. 

"Speaking Ecosystem Services"

Christian Neumann, Linwood Pendleton, Marianne Kettunen and Tundi Agardy:

The value of ecosystems and the associated services they provide is receiving growing attention both in the public and decision-making arena. The language of Ecosystem Services essentially translates the complexity of ecological processes and functions into descriptors that define the socio-economic-ecological link. To overcome the challenge of scientific and non-scientific communities having to find a common language, it is worth keeping a few key aspects in mind.  

Talk about the big picture

The concept of Ecosystem Services has the potential to reconcile growth of the three pillars of sustainability (social, environmental and economic), often considered to be mutually exclusive: the concept recognises functional ecosystems as a foundation for social and economic development. ...

The recent scientific advancement of the Ecosystem Services concept and its application in planning and decision-making have added substantial credibility to the understanding of the role that healthy, functioning ecosystems play for human well-being as well as social and economic development. Consequentially, Ecosystem Services have received growing attention from policy-makers as well as the public. However, this increased attention reveals the science to a broader, non-scientific audience, which is a challenge for both communities, as they often don’t speak a common language.

Know whom you are talking with

Within the scientific community it is important to maintain the scientific precision essential to advancing scientific understanding. However, in communication with the public, policy- or decision-makers or private sector representatives, it is important to recognise that while people might be familiar with the ecosystem services themselves, they are less so with the related concepts and its specific terminology. ...

Different kinds of values and metrics serve different audiences

Assessing the Total Economic Value (TEV) of Ecosystem Services, especially in monetary terms, has played an important role in bringing public attention to the value of nature’s non-market elements. TEV can continue to play such a role in relevant circumstances. In the context of more concrete planning and decision-making situations, however, particularly when informing trade-off decisions, focusing on marginal values of Ecosystem Service change rather than assessing the total values may better respond to audiences’ needs. ...

Credibility matters

Ecosystem Services can be used to support arguments for specific, already existing objectives such as the conservation of a certain area, ecosystem or habitat. To avoid undermining scientific credibility, it is important to reveal such objectives when communicating about Ecosystem Services. Similarly, care should be taken to not ‘oversell’ claims about benefits associated with Ecosystem Services (for example coastal protection from extreme weather events), to avoid later disenchantment of stakeholders and policy- and decision-makers. ...

The language of Ecosystem Services creates new connections

When carefully applied in a relatable manner, the concept of Ecosystem Services has the power to bring together decision-makers and scientists from different disciplines. In turn, the resulting exchanges serve to further support the concept itself, as relationships are built and mutual understanding is developed.

By connecting people and ecosystems, the concept of Ecosystem Services can support the reconcilement of environmental protection and sustainable use with social and economic development – if we speak a language everyone can understand.

via us8.campaign-archive1.com

Who do I think I am?

The guardian of academic integrity or something? I should blissfully enjoy being snowed in and not having to teach negative externality in an 8 am micro class. From the inbox:

Classes that begin before 12:30 p.m. on Thursday, Feb. 26, are canceled. Classes that begin at 12:30 p.m. and later will be held as scheduled.

[ begin rant ]

I understand the need for safety. But the university has absolutely no plan for snow cancellations. Three ideas are:

1. Adding make up days to the end of the semester 
2. Saturday make up days
3. Online lectures / assignments on cancelled days (some faculty already do this; others take a holiday)

Tuesday / Thursday morning classes have now missed two weeks out of the semester. Classes later in the day also get cancelled so that different sections of the same course don't get off track. At some point the students aren't receiving the equivalent of 3 sh of college instruction. The above suggestions may be too costly or impractical but cancelling classes without any discussion of the academic implications is not acceptable. 

[ end rant ]

THat's all well and good, but what is the incentive for sustainability?

Generally speaking, people are getting better and better all the time at managing their own environmental footprints, and the effect that they have on the planet. But, as the world grows ever more environmentally conscious, and as sustainability becomes more a habit of everyday existence, it’s time for businesses – as well as individual consumers – to step up to the plate, too.

via blog.enn.com

Calls to step up to the plate are fine, but if I were a small business owner, my immediate reaction would be "Why?" Why should I invest in costly measures that benefit others? Where are the incentives?

Funny story: I had the opportunity recently to talk about sustainability to leaders and boards of directors of some of the national largest farm cooperatives. After my compelling presentation to an audience of hundreds (I even had a teleprompter--which I promptly ignored), an audience member stopped me and said "I don't know why this whole sustainability thing is such a big deal. My farm has been in the family for over 100 years. We're still in business. Of course we're sustainable."

And there lies the issue: We can talk sustainability, but until the incentives are properly aligned, small businesses will forgo Sustainability for business sustainability.

"Assessing Progress under California’s AB 32 Cap-and-Trade Program"

Something to do at lunch time:

RFF Seminar

Date
February 25, 2015
12:45–2:00 p.m. EST

A light lunch will be provided starting at 12:30 p.m.

Location
RFF First Floor Conference Center
1616 P Street NW, Washington, DC

Registration
Seating is limited and provided on a first come, first served basis. Registration is required.

Webcast
This event will also be webcast live at rff.org/live. Please RSVP for the webcast to receive a reminder email on the day of the event. Video from the webcast will be posted within a few days of the event.

Have a question while watching the live webcast? Tweet your question and include #AskRFF. Questions will be answered as time allows.

About the Event

California adopted a landmark climate law (AB 32) in 2006 and initiated a cap-and-trade program six years later. Now, with the first cap-and-trade compliance period completed, a series of complementary pollution control measures under way, more than $1 billion in new proceeds to invest, and a rebounding economy, the state is looking to go even further.

At this RFF seminar, experts from the Environmental Defense Fund (EDF) will examine the market, emissions, and economic data behind California’s successful climate agenda as detailed in their recent report: Carbon Market California: A Comprehensive Analysis of the Golden State's Cap-and-Trade Program, Year Two. Presenters from RFF, EDF, and California’s largest utility, Pacific Gas and Electric, will discuss the current and future direction of the state’s climate policy, including the status of accomplishments such as putting a carbon price on transportation pollution and establishing a climate dividend for ratepayers.

via www.rff.org

Why are you wearing that tie? It really doesn't go well with those jeans. #AskRFF

"Sports Economics Now Has JEL Classification Codes"

Phil Miller:

The American Economic Association now has JEL classification codes for Sports Economics and subareas within the field.  Here are the codes:

Z2  - Sports Economics

Z20  - General

Z21  - Industry Studies

Z22  - Labor Issues

Z23  - Finance

Z28  - Policy

Z29  - Other

In an email from Peter Von Allmen, the president of the North American Association of Sports Economists,  even though the codes will not be up on the AEA website for awhile, researchers can begin using these codes immediately to classify their research.

It wasn’t all that long ago where Sports Economics research wasn’t taken as seriously as research in International Economics, Labor Economics, Industrial Organization, etc.  This is not to say that there have been no economists who have taken sports economic research seriously over the years and no important contributions from the field to Economics as a whole.  Many Sports Economics papers have been published in top tier journals over the past half century.  The field has its own journal, the Journal of Sports Economics, and many journals have published papers in Sports Economics.  However, in many circles, sports economics research was seen as fun research and not something that serious researchers would pursue as their main area.   These codes are validation that Sports Economics is not just fun.  It’s an interesting and important field within the discipline of Economics.

via thesportseconomist.com

Whatever happened to Market Power?

I'm non-mandatory #andI'mtryingtocatchuponabunchofstuffathome

From the inbox:

All classes that meet before 2 p.m. Tuesday, Feb. 24, are now cancelled. Classes that meet at 2 p.m. and later will meet as scheduled. If this decision changes, notification will be sent by noon.

The adverse weather policy is in effect for staff employees, as follows:

1. Mandatory employees should report/remain at work to maintain mandatory operations.

2. Non-mandatory employees should make reasonable efforts to report/remain at work but   should exercise good judgment and appropriate caution when making travel decisions.

I was scheduled as a substitute for 8 am and 11 am classes. Dang (picture a single tear running down my face).

From the inbox:

The Adverse Weather Policy Discussion will be held as scheduled in IG Greer Auditorium Today, February 24, 2015 from 2:00 - 3:30 PM.

However, given today’s travel conditions, we have also scheduled a second session to be held Thursday afternoon, February 26, 2015 from 2:00 - 3:30 PM in IG Greer Auditorium.

If necessary, additional sessions and/or meetings with individual departments may be scheduled.

Is that irony?

Note: "Do not use very lengthy hashtags."

Who will Krugman enrage with this post?*

Professor Krugman:

Lots of new music I intend to feature soon. But the wonders of online video mean that I also get to watch old live performances, including by bands that I was oblivious about at the time. And here’s the ultimate complain about the weather song, more or less appropriate during the deep freeze we’re in:

[Video: Watch on YouTube.]

via mobile.nytimes.com

My thanks to Professor Krugman. I was on the dance floor every time I heard it.*

*And try to get that image out of your head today. Blame Krugman.

A negative externality problem

I'm teaching sophomore level environmental and resource economics (with no prerequisite). We just finished covering the principles level negative externality market model. Here is the problem set:

Consider the following model:

1. Qd=200-20P
2. Qs=20P
3. MEC=2
4. MSC=MPC+MEC

 

1. At the unregulated (inefficient) private market equilibrium :
   1. What is the consumer surplus?
   2. What is the producer surplus?
   3. What is the external cost?
   4. What are the net benefits?
2. Consider the regulated (efficient) social market equilibrium
   1. What is the consumer surplus?
   2. What is the producer surplus?
   3. What is the external cost?
   4. What are the net benefits?
3. What is the change in net benefits realized moving from the inefficient equilibrium to the efficient equilibrium?

Note that the regulation is a quantity restriction. We're saving taxes for the marginal damage-marginal abatement cost model.

Any suggestions?