Environmental Economics

I'm trying to figure out who my referee might be ... maybe Mark Trail?

Sea turtle eggs! Comment #29 from Referee #2:

Then you call your results "tentative" in the last paragraph – after I’ve pushed through 26 pages of frustrating doubts created by weak exposition. Sorry, I’m really not a happy reader!!

From the punctuation dictionary:

There is some dispute in regards to whether exclamation points belong in formal writing or not. Most conventional grammar rules and grammarians say that they really don’t belong, or at a minimum that they should be used sparingly.  All sorts of arguments have been made against the exclamation point- everything from the fact that the writing should create its own emphasis to the belief that an exclamation point will distract the reader. However, some prolific writers do use exclamation points freely in their work and one best selling author, Tom Wolfe, is known for being a big fan of the exclamation point. 

Comic books frequently use exclamation points for emphasis and to add excitement to their pages. ...

All I can say is ... I'm really not a happy reader either!!!!

Appalachian Experimental and Environmental Economics Workshop | April 29-30, 2016

From the Walker College Sustainable Business News website:

The Department of Economics and the Center for Economic Research & Policy Analysis (CERPA) at Appalachian State University will host its 4th annual Appalachian Experimental and Environmental Economics Workshop on April 29-30, 2016  at the Blowing Rock Art & History Museum (BRAHM) in Blowing Rock NC.  

Participants will explore recent advances and applications of experimental methods—defined broadly to include laboratory, field and survey experiments—in the area of environmental and natural resource policy.

View a program of the scheduled events.

The workshop is arranged to be a catalyst for a special issue at Resource and Energy Economics.  Participants are invited to submit a paper for the special issue.  Papers will be subject to the standard review process; all submissions will undergo the standard review process and reviewing is based on the standard criteria for quality.  

Funding for the event is provided by the the Department of Economics, CERPA,  Appalachian Experimental Economics Laboratory, Research Institute for Environment, Energy and Economics and the Walker College of Business. 

To learn more about the event, visit the website. 

We're very excited with folks coming from all over the country. Highlights include day 1 and 2 kickoff talks by Glenn Blomquist (musing on the current practice of benefit-cost analysis) and Jason Shogren (real economic ends through non-monetary means). Todd Cherry gets kudos for doing a great job organizing the workshop. My most important job is to make copies of the program and get the W-9 forms signed. 

Among other awesome looking papers, the NRDA passive use value study conducted for Florida will be presented for the first time by Andrew Ropicki (Tim and I are co-authors) and Craig Landry will present our NC coastal erosion joint RP/SP demand paper (and this time I think he has the joint estimation working with a little help from Scott Shonkwiler). 

 

Burn!

From Referee #2:

Unfortunately, I find the exposition of the paper rather to be substantially weaker than I would expect for an article of this type at any journal .... I found several aspects of the process for how the survey questions were assigned or presented to respondents, and how the analysis was conducted and interpreted, to be either opaque or at least sloppy in explanation. I would normally consider it a minor comment, but I also found the failure to use commas in a myriad of numerous instances (redundancy for emphasis) to contribute to a frustrating read, as well as occasional failures to recognize that the noun associated with a verb in the sentence (especially a second verb, such as following the word “and”) could not be relaying the meaning that the authors intended.

Guess the rejected paper based on this comment and I'll buy you a beer.

...or we could just increase the gas tax

Interesting results, but the policy recommendations seem like killing an ant with a sledgehammer.

In the first study of its kind, Lawrence Berkeley National Laboratory (Berkeley Lab) researcher Alan Meier, working with Yuche Chen of the National Renewable Energy Laboratory, have estimated the fuel consumption penalty of this popular and fast-growing vehicle add-on. They found that in 2015, roof racks nationwide were responsible for 0.8 percent of light-duty vehicle fuel consumption, or 100 million gallons of gasoline.

Their study was published recently in the journal Energy Policy in a paper titled "Fuel consumption impacts of auto roof racks." In addition to projecting the fuel consumption penalty into 2040, at which time usage of roof racks is estimated to increase by about 200 percent in the United States, they also calculated how effective various policy and technology measures would be at mitigating the penalty.

...

"A national perspective is still needed to justify policy actions," the authors write. "For comparison, the additional fuel consumption caused by roof racks is about six times larger than anticipated fuel savings from fuel cell vehicles and 40 percent of anticipated fuel savings from battery electric vehicles in 2040."

...

"These results suggest that some fuel-saving policies should focus on reducing the number of vehicles driving with empty racks," the researchers write.

So next they analyzed the impact of possible policy, technology, and behavior changes. For example, manufacturers have found that it is possible to make roof racks with greatly improved aerodynamics. A policy to require energy labeling of roof racks could spur greater changes, the researchers note.

Even greater energy savings would come from removing roof racks when not in use. Meier notes that they could be designed so as to be easier to remove. The researchers estimated that a government policy to minimize unloaded roof racks (admittedly extreme) in combination with more energy-efficient designs would result in cumulative savings of the equivalent of 1.2 billion gallons of gasoline over the next 26 years.

Or we could just increase the gas tax and let the market take over.

Read more at: http://phys.org/news/2016-04-roof-racks-fuel-economy.html#jCp

I missed the EPA's benefit-cost reanalysis of the mercury rule last week

The WSJ Weekly Review reminds me:

EPA Defends Cost of 2015 Mercury Rules in Updated Analysis
by: Amy Harder
Apr 16, 2016
Click here to view the full article on WSJ.com

TOPICS: Environmental Regulation

SUMMARY: The Environmental Protection Agency issued an updated cost analysis, defending its issuance of the first-ever federal regulations requiring power plants to cut mercury emissions and other air pollutants.

CLASSROOM APPLICATION: Students can learn about the estimated costs and benefits of the EPA's new mercury regulations.

QUESTIONS: 
1. (Advanced) What are the benefits to people of reducing mercury emissions? What are the costs?

2. (Advanced) What is the effect of the new mercury regulation on electricity prices? Are households made better off by the combination of the mercury regulation and the higher prices?

3. (Introductory) Is a new regulation justified if the benefits outweigh the costs of the regulation?

Reviewed By: James Dearden, Lehigh University

This link to the article might be ungated. Here is an excerpt:

The Environmental Protection Agency Friday issued an updated cost analysis, defending its issuance of the first-ever federal regulations requiring power plants to cut mercury emissions and other toxic air pollutants.

The agency’s move was prompted by a Supreme Court ruling last year that said the agency hadn’t taken into account the costs to industry, as it was required to do, before deciding to adopt the rules.

The Supreme Court, in a 5-4 opinion last June, said the EPA must reconsider the mercury rules because of that omission. The rules, however, have remained in effect during that process.

The EPA says that power plants are the single-largest source of U.S. emissions of mercury, a neurotoxicant that can be particularly harmful to children and unborn babies.

The EPA initially adopted the mercury rules in 2012 and they took effect in April 2015. The agency initially concluded that costs weren’t a relevant consideration when it was deciding on the need for the mercury regulations.

Later, as it was writing the rule, the agency estimated an annual cost to the utility sector of $9.6 billion, compared with public-health benefits of at least $37 billion. The Supreme Court, however, said the agency should have made that calculation earlier, as it was deciding whether to adopt the rules in the first place.

In its updated analysis released Friday, the EPA listed three figures it said supported the case for regulating mercury emissions from power plants. It said utilities’ compliance costs would be a small fraction of their overall sales and their capital expenditures, and wouldn’t make electricity prices rise unduly for customers.

The estimate specifically applied the costs to the ongoing expenses of utilities and consumers. It found that the annual cost of complying with the rules would come to between 2.7% and 3.5% of annual electricity sales (relying on figures from 2000 to 2011). It said the capital costs of complying represent between 3.0% and 5.9% of annual power sector capital expenditures over 10 years. And it said the rules would raise electricity prices 3.1% over 10 years.

Most utilities have already complied with the rule, making Friday’s analysis more important for legal rather than substantive purposes. In one sign that stakeholders have moved on, EPA received just 39 comments as it prepared the updated analysis, compared with nearly one million comments when the rules were being written.

Some industry trade groups had argued that mercury rule would prompt blackouts and skyrocketing electricity prices. Neither scenario has materialized, due largely to the increased production of natural gas, which unlike coal produces no mercury and whose price has dropped sharply since 2008.

Here is a link to a previous post (where you can find more previous posts) on the mercury rule. It seems as if the EPA should have done the benefit-cost analysis ex-ante. But when they did the study the power plants should have said "better late than never" and moved on. The court case and the reanalaysis seem like an enormous waste of money.

But, it's not over:

The updated finding won't put an end to the continuing court fights over the rule, which has helped push dozens of coal-fired power plants to shut down.

The Supreme Court is considering a petition from 20 states led by Michigan that argue the rule should have been scrapped entirely and that a lower court's decision to keep it on the books was illegal.

Last month, the states argued that the move to keep the rule in place "effectively thwarts" the Supreme Court's decision rejecting the mercury rule.

Even if EPA issued its new finding to bring it in line with the Supreme Court's 2015 decision, "EPA never had authority to impose it in the first place," the states wrote (Greenwire, March 18).

The Obama administration's response to the states' Supreme Court petition is due May 6. The justices will then decide whether to hear the states' appeal. They could dismiss the request in a short order.

 Here is EPA's Mercury and Air Toxics Standards website where you can find all of the technical documents. 

Enjoy it while it lasts?

In evaluating benefits and costs, preferences matter. 

For the most part, people like milder weather.  That's why people move to Florida and Arizona during the winter (that and tax breaks, but let's stick with the weather for now).  As temperatures increase, people get more of what they like: longer milder weather. So people may actually benefit from warmer temperatures. 

Here's a picture of January/February temperatures since 1880:

Now, a new Nature study has shown that over the past 40 years, 80% of the U.S. has seen their weather improve (by improve, I mean people like the milder weather):

As climate change unfolds, weather systems in the United States have been shifting in patterns that vary across regions and seasons. Climate science research typically assesses these changes by examining individual weather indicators, such as temperature or precipitation, in isolation, and averaging their values across the spatial surface. As a result, little is known about population exposure to changes in weather and how people experience and evaluate these changes considered together. Here we show that in the United States from 1974 to 2013, the weather conditions experienced by the vast majority of the population improved. Using previous research on how weather affects local population growth to develop an index of people’s weather preferences, we find that 80% of Americans live in counties that are experiencing more pleasant weather than they did four decades ago. Virtually all Americans are now experiencing the much milder winters that they typically prefer, and these mild winters have not been offset by markedly more uncomfortable summers or other negative changes.

Maybe this will give climate change deniers an exit strategy:  warmer weather is better!

Climate change models predict that this trend is temporary, however, because US summers will eventually warm more than winters. Under a scenario in which greenhouse gas emissions proceed at an unabated rate (Representative Concentration Pathway 8.5), we estimate that 88% of the US public will experience weather at the end of the century that is less preferable than weather in the recent past. Our results have implications for the public’s understanding of the climate change problem, which is shaped in part by experiences with local weather. Whereas weather patterns in recent decades have served as a poor source of motivation for Americans to demand a policy response to climate change, public concern may rise once people’s everyday experiences of climate change effects start to become less pleasant.

Then again, maybe not.

Enjoy it while it lasts?

 

More on user fees at national parks

Margaret Walls (emphasis added):

The parks have been blessed, and cursed, with an overwhelming number of visitors in recent years—a record 307 million in 2015. After many years in which visitation stayed relatively constant, many parks have seen increases of 20 to 25 percent over the past 10 years. ...

This growth in popularity has led to overcrowding, especially during the peak summer season. ... 

The Park Service is making some gentle suggestions to travelers to alleviate the problems. It is encouraging people to come to the parks during winter months or eschew the most popular parks and visit some of the lesser-known ones instead. It is also considering more Draconian long-term measures, such as daily limits on the number of visitors and establishing a reservation system for entry. 

But there is a more efficient approach that the Park Service should be seriously considering: changes in the pricing structure. ...

I’ve made the case before that caution should be exercised when employing user fees to finance public goods such as parks. But that’s because user fees ration use. When one person’s visit to a park doesn’t appreciably diminish the experience for others, the fee to use the park should be zero. That doesn’t apply when the public good starts to experience congestion problems, and that’s what’s happening in some of our national parks. Rather than just suggesting that people visit during the winter and go to alternative, less-popular sites, the Park Service should incentivize such behavior through a differentiated fee structure based on season and location. ...

Equity and accessibility are important issues, but an entrance fee is a tiny fraction of the overall cost of visiting a national park, most of which are located far from centers of population. For example, a family of four traveling from Chicago to the Grand Canyon is likely to incur costs of between $1,500 (driving) and $3,000 or more (flying) for a week’s vacation. The $30 entrance fee is a drop in the travel expense bucket. What’s more, the experience itself is diminished if it is spent jostling with crowds on trails and in restaurants and parking lots or if the overcrowding leads to degradation of the resource, which has happened in some parks.

Overcrowding is not the only problem the parks are facing that could be helped out by a shift in the fee structure. The parks are in dire need of a cash infusion. The Park Service’s deferred maintenance backlog sits at $12 billion and includes serious problems with critical water and sewer systems, roads and bridges, and visitor centers, lodges, and other buildings. ...

Figuring out an efficient and fair fee structure will not be easy. It requires detailed data on visitation, for starters, and analysis to shed light on price elasticities of demand for different groups of visitors at different locations. It may also require some experimentation. But to preserve our national parks for the next 100 years, it is necessary. 

via www.rff.org

My guess is that there would be much less resistance to an increase in user fees at National Parks if the fee structure is differentiated. Increase fees when demand is high and reduce them when demand is low. 

A funny economist gets serious about carbon taxes on CNN.com

Yoram Bauman on carbon taxes on CNN.com:

Yoram Bauman learned about the idea that would change his life, and the course of the world, as a nerdy undergraduate at Reed College.

The economics professor's pitch was so simple he couldn't shake it.

 

We should make bad stuff more expensive.

And, by doing that, make good stuff cheaper.

 

"I remember thinking that it was such an intellectually beautiful idea," he told me.

 

It is beautiful. And, as it turns out, this old theory, which dates back at least to the 1920s and an economist named Arthur Pigou, is essential to fixing one of the world's biggest problems.

The Property and Environment Research Center is great and all but ...

Reed Watson:

Today’s myth: As taxpaying citizens, we should not pay to visit our national parks.

Fact: Our national parks are chronically underfunded and visitor fees provide critical, though currently insufficient, funding for park operations and maintenance.

We Americans fancy ourselves a nation of conservationists. We claim ecologically sensitive and culturally significant places are worth protecting for future generations. We celebrate the creation of the national park system as “America’s best idea.” Yet we oppose paying to maintain the national parks we claim to cherish so deeply.

Whether that opposition is rooted in the belief that public parks should be free or that, by paying our taxes, we have already paid our fair share, the result is the same: our national parks have become a crowded and crumbling mess.

As evidence, consider the National Park Service’s $12 billion deferred maintenance backlog. That is $12 billion in crumbling roads, leaking water systems, and dilapidated trails that should have been maintained or repaired, but weren’t because the Park Service lacked funding.

To put that number in perspective, consider that the Park Service’s annual budget is approximately $3 billion. With similar finances, a household with annual income of $100,000 would have $400,000 in unfunded home repairs. Yikes!

If protecting treasured places as national parks was America’s best idea, we have failed to make that idea a reality.

Visitor fees offer the National Park Service an opportunity to climb out of the deferred maintenance hole. Visitor fees align the incentives of park managers with the desires of park visitors for fun and safe experiences, and they provide park managers with a funding source not subject to whimsical congressional appropriations.

Currently, visitor fees make up less than 10 percent of the Park Service’s annual budget. This number is hardly surprising given how cheap most fees are: a seven-day pass into Yellowstone National Park is a paltry $30; day passes to the Cape Cod National Seashore are $3; and nearly two-thirds of all national park properties charge nothing at all.

Park managers, not Congress nor the Park Service, should be allowed to set visitor fees. Congestion pricing—charging more during the busiest seasons—would allow park managers to capture much needed revenue for deferred maintenance projects, while simultaneously addressing the congestion that sours so many visitor experiences. Moreover, technological innovations make recreational fee collection a breeze, while a voucher program would ensure visitation is not limited to the rich.

This week is National Park Week and today is tax day, but those taxes will not save our parks for the future. Sadly, the National Park Service is celebrating its centennial by offering “free” admission into every park. Park visitors should realize that their taxes are not paying the full cost of park maintenance.

On alternating Mondays, PERC’s executive director, Reed Watson, will bust a widely-held environmental myth using research by PERC scholars.

via www.perc.org

This is great stuff but, considering the last sentence, I'm not sure if PERC scholars discovered the efficiency of user fees ... or if user fees are a widely-held environmental myth. 

I'm reviewing transcribed minutes to make sure I didn't say anything stupid

From the 2015 SAFMC SEP meeting: