Environmental Economics

John hasn't had a new reason to hate Duke for a while, then this

Ouch.

Climate Science is SCIENCE whether we call it that or not

Lamar Smith is scary (to me at least):

Emboldened by the election of President Donald Trump, Smith appears increasingly comfortable dismissing those who disagree with his stance on any number of issues under the purview of his science committee, from climate research to the use of peer review in assessing research results and grant proposals. And one key element in his strategy appears to be relabeling common terms in hopes of shaping public dialogue.

“I applaud you for saying you’ll be using the term climate studies, not climate science,” said one audience member. His reference was to Smith’s embrace of a distinction made by a previous speaker, climatologist Patrick Michaels of the libertarian Cato Institute in Washington, D.C., who argues that most climate scientists don’t deserve to be called “scientists” because they have manipulated their data and ignored contrary results. “But I also urge you to use the term politically correct science.”

“Good point,” Smith replied. “And I’ll start using those words if you’ll start using two words for me. The first is never, ever use the word progressive. Instead, use the word liberal. The second is never use the word 'mainstream' media, because they aren’t. Use 'liberal' media. Is that a deal?”

Let me try to lay this out succinctly:  'Science' and 'Certainty' are not synonymous--and they shouldn't be.  Science represents the evolution of thought based on observation, hypothesization (is that word)?, experimentation/data collection, analysization (I'm trying to keep my parallel construction here), and communication.  

Lather, rinse and repeat.

Occasionally the scientific method results in a scientifically certain discovery:  Penicillin works. 

Occasionally the scientific method results in a scientifically certain rejection of consensus: The earth is NOT flat.

But most of the time science is messy...or at least uncertain.  It is rare that an hypothesis is either fully confirmed or fully rejected.  Those hypotheses that are fully confirmed or unequivocally rejected are typically so narrow as to render the conclusion trivial.  Interesting hypotheses are complicated and complex and it takes many scientists and multiple iterations of test/partial confirmation/partial rejection/adjustment/retest/partial confirmation/partial rejection .  

And even when conclusions start to come together, the certainty-levels with which those conclusions can be stated are varying degrees of confidence, and not 100% certainty.

 

 

 

Quote of the Day: President acknowledges women know more than men about technology

'It's going to be an incredible pipeline, greatest technology known to man - or woman,' Trump bragged from the Oval Office.

Read more: http://www.dailymail.co.uk/news/article-4345754/Trump-administration-approves-Keystone-XL-pipeline.html#ixzz4cGOKoyZ

 

Eighty-percent of environmental economists surveyed think cutting EPA regulations will not benefit the U.S. economy

Apologies to those of you who have missed me the last few weeks (hi mom!) as I have recovered from taking care of some lingering neck issues from my years of head banging to 80's hair bands.  I'm back on my feet (computer) and ready to go (from the confines of my family room).

Anyway, I know John posted about our article that (finally) came out in the Review of Environmental Economics and Policy, describing the set of issues upon which a sample of AERE members appear to have consensus, and those for which they don't.  Here are a few highlights from the survey in light of President Trump's budget, keeping in mind that the survey was conducted before the thought of a Trump presidency was even a twinkle in the eye, and some of my thoughts on the results.

• 96% of respondents feel that unregulated markets do not provide public goods in optimal quantities.

Thought: I contend that many people who advocate for free markets fail to recognize the important distinction between 'free' markets and 'unregulated' markets.  From most economists' perspectives, a truly 'free' market is a market in which all of the costs and benefits associated with production and consumption (current and expected future) are fully encumbered by actors in that market today.

Too technical?  

Ok, try this:

'Free' markets have no unintended consequences.  

Still too technical?  

OK, how about one more:

'Free' markets have no spillovers.

I could go one, but hopefully you get the point.  If there are benefits or costs that come from making or consuming something, and those benefits or costs can't or aren't captured in the market from which they originate, the market is failing to do it's job.  That's why we call it a market failure.

An externality occurs when a cost or benefit from making or consuming something ends up costing or benefiting someone else, and that someone else has no choice in the matter.  For example, the health effects of air pollution from coal-fired electricity production in Ohio on the good people of Boston (I assume there are at least some good people in Boston), or the effects of second-hand smoke on those stuck in an airplane with a smoker, or the spill-overs from improved workforce productivity and social benefits of decreased crime from increased education.  

Each of these is an example of a cost or benefit that is generated by activity in a market, but spills over to people outside the market.  The result is that, in these cases, unregulated markets tend to underproduce good things and overproduce bad things (too much pollution, too much second-hand smoke, too little education).  

Why then don't the people in the markets, through generosity, just do the right thing?  

Unfortunately market forces are powerful.  If a good-hearted electricity producer in Ohio decided to voluntarily absorb the costs of pollution, the Ohio electricity-producer's costs of production will go up.  The producer then has the choice of trying to charge higher prices to those buying electricity, or settle for lower profits.  If they choose to raise prices, they are now at a competitive disadvantage to the less-good-hearted producers. Most consumers don't really know (or care?) where they get their electricity, so they are going to choose to buy from the cheapest seller, which now causes a big dilemma for the good-hearted producer: raising prices is off the table, so I either settle for lower profits or I abandon my morals and pollute.

Stakeholders are going to be less than pleased with lower profits, to the point that voluntarily lowering profits is not a long-term sustainable business strategy.  So ruling that out, the good-hearted producer has to either pollute or shut down.

Sorry, that was a long way to go to make the point that this is NOT a 'free' market.  It is an 'unregulated market.' And in the case of an externality, an unregulated market will overproduce bad things and underproduce good things (in the case of education, do you consider the positive benefits you provide to society when you decide how much education to get?  Or do you just consider your personal benefits?).

That is why, 96% of AERE members who responded to our survey think that unregulated markets fail to provide optimal quantities of public goods (an extreme form of externalities).  And it is also why:

Eighty-percent of environmental economists surveyed think cutting EPA regulations will not benefit the U.S. economy

Environmental economists are not market-killers.  In fact, most are advocates for truly free markets: markets that fully capture all benefits and cost of production and consumption through market-based regulations.  Afterall,

Eighty-six percent of respondents agree that emissions taxes or marketable emissions permits are a more economically efficient approach to pollution control than emissions standards.

Sensible market-based regulations make sense.  

 

One million jobs at risk?

Maximilian Auffhammer at the Energy Institute at Haas blog:

Maybe the most significant development is President Trump’s call for a review of the Corporate Average Fuel Economy standards, which were updated under the Obama Administration requiring the auto industry to deliver a fleet average of at least 54.5 mpg by 2025. This means that the average new car sold would achieve roughly the fuel economy of a current day Toyota Camry Hybrid. This is no doubt ambitious and US manufacturers have complained publicly about the significant costs this would entail, which would be largely passed through to consumers (or so they claim). ...

The CAFE standard was introduced after the 1973-4 oil embargo and is so complex that a number of my colleagues are spending significant parts of their careers understanding it and its consequences. The most recent version of the standard regulates vehicles by class (passenger cars vs. light trucks) and within class by footprint (trackwidth times wheelbase). ...

If you do the back of the envelope calculation, this is equivalent to a roughly 28% improvement in gallons per mile (the right measure) from the 2017 model year to 2025 for all passenger cars and small footprint light trucks and a 17% improvement for the bigger “light” trucks. This sounds like a lot. And the car industry is crying wolf. A number of think tanks are immediately translating this burden into massive domestic job losses. However, if you read the collected works of the brilliant former EI student Chris Knittel, you will know that auto manufacturers have funneled technical progress into more power rather than into more fuel efficiency. For example, a 1980 Honda Civic in its base model had 55 horsepower which got 34 mpg. The 2017 base model has 158 horsepower and gets roughly 35 mpg. Same fuel economy – thrice the power. The argument has forever been: “Power. It’s what consumers demand”. Chris’ paper suggests that the historical improvements in fuel efficiency amounted to about 2% per year. The Obama goals are about 3% a year. So an acceleration would be required, yet it’s not a moonshot.

In other words, 1 million jobs are not at risk from higher fuel economy standards. 

Economists believe that the CBO makes credible forecasts

See for yourself: http://www.igmchicago.org/surveys/the-cbo. And here is the information on the survey and panel:

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

And these economists understand the task. In contrast, politicians who don't understand the task put little credibility on CBO forecasts. I don't understand the dichotomy other than politicians are notoriously partisan and therefore prone to saying whatever and behaving however to accomplish their goals. 

Here is a screenshot:

Another one bites the dust (i.e., a paper is off my desk!)

Carlo Carraro (REEP editor):

This issue of REEP also features four regular articles (we have indeed increased the number of articles per issue) on topics that I believe will be of great interest to our readers. ... The fourth article, “What Do Environmental and Resource Economists Think? Results from a Survey of AERE Members,” by Timothy C. Haab and John C. Whitehead, discusses the results of a survey of Association of Environmental and Resource Economists (AERE) members on their opinions and beliefs concerning environmental and resource economics issues. ...

Finally, this issue of REEP also brings some important changes to our editorial team. Charlie Kolstad is stepping down on December 31, 2016, after 11 years of service, including being a founding coeditor and serving as editor for 5 years (2009–14). On behalf of the editorial team, all readers of REEP, and all members of both AERE and the European Association of Environmental and Resource Economists (EAERE), I would like to express our sincere thanks to Charlie for his outstanding contributions to REEP over the last 11 years. Without him (and Robert Stavins), REEP would not have risen in just a few short years to its prominent position among economics and environmental studies journals. Thanks to Charlie and his vision, REEP has consistently been ranked among the top 20 economics journals (out of more than 340) and among the top 10 environmental studies journals (out of more than 120). Charlie has worked hard to attract excellent authors and articles. Together with his profound knowledge of environmental economics and his strong reputation and credibility in our field (and beyond), Charlie has enriched the journal and contributed greatly to its success. He will be greatly missed.

Our thanks to Charlie as well. We cold-submitted a proposal for this paper (that he liked) and he worked with us through 3 (I think) revisions to get it into publishable form. The date on the first email is February 1, 2013 so the proposal to publication process took ... [awkward pause while he does the math] ... over 4 years. We collected the data in Sept/Oct 2012 so you can expect a 10 year follow-up survey in a little bit over 5 years. Here is the link to the paper and a screenshot:  

"The Impact of the Affordable Care Act in NC's Commercial Fisheries" #NAAFE2017

Christina Weigand and Scott Crosson (to be presented at the NAAFE Forum 2017 at 5:30 La Paz time):

NAAFE conference poster preview. I'm sure yall can read this on your phones easily. pic.twitter.com/fn47Ac9O5M

— Scott Crosson (@FishEcon) March 17, 2017

Here is the abstract:

We provide an initial look at our follow up study on the impact of the Affordable Care Act (ACA) on U.S. commercial fisheries.  Earlier work found that In the years immediately preceding the passage of the ACA, North Carolina’s commercial fishermen were more likely to purchase health insurance coverage on the private market if they worked in a more dangerous environment or were more highly vested in fishing.  Our preliminary results show that North Carolina’s commercial fishermen are indeed purchasing health insurance through the ACA in significant numbers.  Insurance coverage has risen overall, although some fishermen are still choosing to remain uninsured.  We provide early estimates on the size of the ACA subsidies and changes in fishing behavior and investment.

"Marine Recreational Fishing and the Social Cost of Carbon"

I've been wanting to write this paper since the EPA/DOE workshop on the SCC:

The Impact of Climate Change on Marine Recreational Fishing with Implications for the Social Cost of Carbon 

John Whitehead, Appalachian State University
Daniel Willard, Environmental Defense Fund

Abstract

We estimate the effects of temperature and precipitation on marine recreational fishing days over a 20 year time period. The data are from the National Survey of Fishing, Hunting and Wildlife-Associated Recreation. Our results suggest that temperature and precipitation have positive effects on marine recreational fishing days in the United States. To determine changes in economic value we simulate the effects of climate change on fishing days with changes in U.S. average temperature and precipitation developed from climate models. We use benefit transfer to estimate the value of fishing days. Considering a 4.5F temperature change and a 7% precipitation change, we find that marine recreational fishing days will increase by 27% and the welfare change is $2.5 billion. This suggests that impacts of climate change on marine recreational fishing could have implications for accurate estimation of the social cost of carbon.

Whitehead, John and Willard, Daniel (2016) "The Impact of Climate Change on Marine Recreational Fishing with Implications for the Social Cost of Carbon," Journal of Ocean and Coastal Economics: Vol. 3: Iss. 2, Article 7.
DOI: http://dx.doi.org/10.15351/2373-8456.1071

via cbe.miis.edu

And now that it is published it doesn't friggin' matter!

Quote of the day

From The Hill's Overnight Energy email and here:

In a letter to Pruitt released on Monday, Rep. Carlos Curbelo (R-Fla.) said Pruitt's comments earlier this month "contradict the conclusions not only of our best scientists but of your own agency."

Curbelo said Pruitt should reconsider them, and he invited Pruitt to visit his south Florida district, which he says has already been affected by climate change.

"Reasonable people can disagree about how to respond to the risks of climate change. But there should be little disagreement that it is something that must be done," Curbelo wrote in his letter, sent Friday.

Curbelo is one of a group of Republicans to introduce a resolution last week acknowledging climate change and calling for more action on it.

I totally agree and will go further. I can see the logic behind doing nothing more than relying on technological change and adaptation and, at the other extreme, imposing a big carbon tax (or cap-and-trade). Reasonable people can disagree along that range of options. But, it is unreasonable to ignore the consensus of scientists who study the issue.