Environmental Economics

A note from Tietenberg and Lewis (Environmental Economics and Policy, 6th edition)

From the instructor's manual (bold is in the original, underlined text is my emphasis):

Chapter 2 provides an overview of basic microeconomics as it applies to natural resource and environmental economics. The chapter includes much of the basic economics terminology and describes the framework from within which the various topics in the text will be presented. As such, the chapter covers a great deal of material. Students without much background in economics may find this material abstract and difficult. You may find it beneficial to spend extra time on this chapter, especially when teaching the non-major. Ensuring that the students have a good grasp of the concepts and tools early in the semester will make teaching the other chapters easier and will facilitate the learning process. 

Whoa, I've spent 5/15 weeks on chapter 2.

Paying people to live in rural areas

My state, Georgia, has created a Rural Development Council to address the issues facing rural Georgia.  (For instance, access to health care is pretty bad.)

The Council released its recommendations a while back, and among them is a plan to pay people to move to rural Georgia:

To reverse the current population migration trend, the council proposes a "Rural Relocate and Reside” program designed to incentivize rural living, especially for professional, high wage earners through a local and state government partnership that

• Is available in counties experiencing less than five percent population growth over five consecutive years (currently 124 counties)
• Provides a one-time, per person/filing jointly 10-year income tax deduction up to $50,000 for new residents
• Allows local governments to pass a referendum to provide a one-time, 10-year, abated property tax exemption to provide more affordable housing and improved cash flow for new residents to pay back school loans/establish businesses/start medical practices
• Provides a one-time per person/filing jointly, 10-year state income tax exemption up to $100,000 where the local property referendum is in place to draw professional-level, high-wage earners

(There are other policy recommendations, too, like providing broadband internet access.  No discussion of expanding Medicaid eligibility though.)

Sure there are plenty of arguments either way for subsidizing people to move to rural Georgia (and yes, these are government subsidies, though they take the form of tax deductions and exemptions - any public economist can tell you that tax expenditures are equivalent to actual expenditures).  What's interesting to me is the effect on Georgia's environment.  Lots of evidence shows that, all else equal, urbanization is good for the environment, since people who live in cities drive less and consume less energy overall.  (Use this cool map and zoom in to the metro area of your choice to see.)

Paying people to live in rural areas thus has a negative side-effect of effectively subsidizing energy consumption. (My colleague Kyle Mangum shows in this paper that housing policy has basically the same effect.)  This is in addition to any other negative side-effects it might have, like reducing overall productivity by reallocating people from more-productive urban areas to less-productive rural areas. These ought to be traded off against whatever benefits the policy may create.

5 out of 7 continents isn't bad, right?

We're working on PhD recruitment this week (if you applied to OSU AEDE and were accepted, join us, we're FUN!).  I put together a Google map with our PhD placements since 2007.  A bit scary that I might be influencing thinking for this many people and this wide an area.   

 

Aguanomics: Optimal regulation

David Zetland:

Back in Nov 2016 (!), I was giving a lecture on institutions and regulation, and I wanted students to understand how (sometimes) markets or other negotiations are more efficient in resolving disputes over damages (from pollution or offense) between the offending and offended parties.

I made the following diagram:

...which looks much clearer here:

Hw can you use this diagram? First, consider the axes: damages and transaction costs, i.e., whether damages are clear (you've lose a leg) or not (you may get cancer) and whether the transactions costs are low (just you and me, kid) or not (the unborn against all SUV drivers).

Now, these axes make it easier to think of regulatory solutions, i.e., prices and markets when damages are clear and transaction costs low (think car accident/insurance); command and control when transaction costs are higher (think car emissions or smoking regulations ); Coasian bargaining when costs are unclear (neighbors agreeing to "think over" the issue of burning rubbish); and, finally, the Good luck! square where damages are unclear and transactions costs high (think climate change).

Bottom line: Choose the "right means" if you want regulation to be as quick and cheap as possible!

via www.aguanomics.com

I think I'll use this in my sophomore level introduction to environmental and resource economics course this semester. My only quibble is I'm substitute "incentive-based policy" for "command and control" above. 

New book: The Shale Dilemma A Global Perspective on Fracking and Shale Development

The Shale Dilemma: A Global Perspective on Fracking and Shale Development

by Gamper-Rabindran, Shanti

University of Pittsburgh Press, February 2018, 472 pages 

The US shale boom and efforts by other countries to exploit their shale resources could reshape energy and environmental landscapes across the world. But how might those landscapes change? Will countries with significant physical reserves try to exploit them? Will they protect or harm local communities and the global climate? Will the benefits be shared or retained by powerful interests? And how will these decisions be made? 

The Shale Dilemma brings together experts working at the forefront of shale gas issues on four continents to explain how countries reach their decisions on shale development. Using a common analytical framework, the authors identify both local factors and transnational patterns in the decision-making process. Eight case studies reveal the trade-offs each country makes as it decides whether to pursue, delay, or block development. Those outcomes in turn reflect the nature of a country’s political process and the power of interest groups on both sides of the issue. The contributors also ask whether the economic arguments made by the shale industry and its government supporters have overshadowed the concerns of local communities for information on the effects of shale operations, and for tax policies and regulations to ensure broad-based economic development and environmental protection. 

As an informative and even-handed account, The Shale Dilemma recommends practical steps to help countries reach better, more transparent, and more far-sighted decisions

http://www.upress.pitt.edu/BookDetails.aspx?bookId=36742

Call for papers: AERE @ the Southern Economic Association Annual Meetings

The Southern Economic Association Annual Meetings will be held November 18-20, 2018 in Washington, D.C.: https://www.southerneconomic.org/conference/

Submit your abstract for presentation in an AERE session at the 2018 SEA here: http://www.mymeetingsavvy.com/aere-sea/login.aspx

You will be asked to enter relevant author information and upload a pdf document with your paper's title, author names and an abstract of no more than 1,000 words. Authors may submit more than one abstract.

Abstracts are due March 15. Authors will be notified of paper acceptance by March 30. A draft AERE program will be available on April 15 when sessions are due to the SEA.

Please note that:

1. The presentation of research in AERE-sponsored sessions is a benefit AERE provides expressly for its members. Although membership is not required to submit an abstract for consideration, if your paper is accepted, you will be required to join AERE, or renew your membership, in order to be placed on the draft program on April 15.
2. Presenters are required by the SEA to register for the SEA meetings.

Trump is in favor of an increase in the gas tax according to a Democratic Senator, but not according to a Republican Senator

CNN (Trump suggests 25 cent increase in gas tax, senator says):

President Donald Trump suggested Wednesday that a 25 cent increase in gas and diesel taxes would be needed to help pay for the administration's new infrastructure plan, according to Democratic Sen. Tom Carper.

In a bipartisan meeting with lawmakers at the White House, Trump noted that the federal gas tax hasn't been raised since 1993, said Carper, the top Democrat on the Environment and Public Works Committee.

 

"He said that he knew it was a difficult thing for legislators to support and said that he would support the leadership to do that and provide the political cover to do that," Delaware's Carper told CNN in an interview. "And he came back to that theme again and again and again."

 

Transportation Secretary Elaine Chao did not rule out a gas tax Tuesday when she spoke to reporters at the White House, but she described it as "not ideal." 

 

"The President has not declared anything out of bounds, so everything is on the table. The gas tax, like many of the other pay-fors that are being discussed, is not ideal," she said.

 

"There are pros and cons. The gas tax has adverse impact, a very regressive impact, on the most vulnerable within our society; those who depend on jobs, who are hourly workers. So these are tough decisions, which is why, once again, we need to start the dialogue with the Congress, and so that we can address these issues on this very important point."

 

Carper said Trump also offered "full-throated support for an increase in user fees" for roads, highways, and bridges.

 

Sen. Jim Inhofe, R-Oklahoma, who was also at the White House meeting Wednesday, took issue with the way Carper characterized Trump's support for a gas tax increase.

 

"He was not advocating that. He was looking at all the options," Inhofe said. "All he said was we need to do something and that is still on the table."

 

Asked if Trump offered political cover to lawmakers who supported a tax hike, Inhofe said he didn't recall "that word being used."

 

"I think that's an exaggeration," he said. "A combination of exaggeration and wishful thinking."

This isn't the first time the president has suggested a higher gas tax to pay for infrastructure (which actually makes a lot of sense) and then was corrected by someone who isn't the president. 

 

We've been promoting an increase in the gas tax for a long time. 

New Energy Economics book

Energy Economics By Peter M. Schwarz

From the publisher:

Energy Economics outlines the fundamental issues and possible solutions to the challenges of energy production and use, and presents a framework for energy decisions based upon sound economic analysis. It considers market forces and policy goals, including economic prosperity, environmental protection, and other considerations that affect societal well-being. This book focuses on both energy choices and the impact of these choices on market performance, environmental conditions, and sustainability. The initial section covers the fundamental economic concepts for analyzing energy markets. Following this, a detailed analysis of established energy sources, specifically fossil fuels and nuclear energy, leads into consideration of energy alternatives such as renewable energy and next-generation alternatives. Electricity production and regulatory trends are covered in depth. The final section considers policy: environmental considerations, sustainability, and energy security. The concluding chapter is a comprehensive vision for our energy future.　

Drawing on current energy headlines, perspectives familiar from the popular press, and views outside economics, this text sharpens students' ability to understand, evaluate, and critique policy using appropriate economic analysis. The text builds a foundation that culminates in a view of a comprehensive energy policy that improves upon the vacillations of past decades.　

You can order it here: https://www.routledge.com/Energy-Economics/Schwarz/p/book/9780415676786

Cleaning up marine debris is expensive. Leaving it there is expensive too.

Good to know I can still publish (or at least I'm smart enough to team up with talented people who can publish and then attach my name to it):

Christopher G. Leggett, Nora Scherer, Timothy C. Haab, Ryan Bailey, Jason P. Landrum, and Adam Domanski, "Assessing the Economic Benefits of Reductions in Marine Debris at Southern California Beaches: A Random Utility Travel Cost Model," Marine Resource Economics (Published online 2/14/2018: https://doi.org/10.1086/697152)

A random utility maximization (RUM) travel cost model is used to characterize trips to beaches by residents of Orange County, CA. The authors collected on-site measurements of marine debris at 31 beaches in the Orange County area. These data, combined with data on beach trips obtained from a general population survey, were used to estimate a RUM model capable of isolating the impact of marine debris on beach choice. The model is used to estimate the economic benefits associated with several hypothetical reductions in marine debris. The estimated per capita seasonal benefit associated with a 25% reduction in marine debris at all beaches in the choice set is $12.91 (aggregate benefits of $29.5 million in 2013 dollars), while the estimated per capita seasonal benefit associated with a hypothetical improvement potentially associated with the full implementation of the Los Angeles River Trash total maximum daily load (TMDL) is $20.36 (aggregate benefits of $46.5 million).

Politico's Morning Energy on the infrastructure plan

Via email:

By Kelsey Tamborrino | 02/13/2018 10:00 AM EDT

With help from Darius Dixon, Annie Snider and Ben Lefebvre

WHERE'S THE ENERGY? While water, roads and airports all get special attention in the White House's new infrastructure plan, the electric grid was largely ignored in the 55-page document the White House rolled out Monday - despite the system's age and the challenges to building it. The plan says nothing about modernizing ailing electric transmission systems to account for factors such as the growth of natural gas, renewable power and electric vehicles, issues that have long been a focus of grid planners and a priority of the previous administration. "This plan ignores American energy and transportation needs of today - as well as tomorrow. It does not modernize our grid so we can reach more distributed energy. It does not plan for advanced vehicles to be on our roads," said Grant Carlisle advocacy director of E2, an affiliate of the Natural Resources Defense Council. "It is unfortunately just not a forward-looking document."

Where the plan does touch on electric issues, it revives a proposal to sell off transmission facilities owned by the Energy Department's power marketing administrations and the Tennessee Valley Authority. OMB thinks those sales would raise $7.4 billion for federal coffers over five years and encourage a more efficient transmission system. But when the White House floated the idea last year, it faced bipartisan opposition from senators worried it would increase power prices in a large swath of the West. The White House plan also calls for Congress to change the Federal Power Act to allow other federal agencies that participate in a FERC NEPA proceeding as a "cooperating agency" in an effort to streamline applications for interstate natural gas pipelines.

WHAT DID MAKE IT: President Donald Trump's infrastructure proposal leans heavily on states, local governments and the private sector to foot most of its bill. The White House is calling for just $200 billion in federal funding, which it hopes will leverage $1.3 trillion in other investment over the next decade, but the pitch faces long odds on Capitol Hill. Here's a rundown of some other highlights:

Privatizing water infrastructure: The plan would make a number of tweaks aimed at easing private investment and ownership of drinking water and wastewater facilities - a move that public health advocates argue could lead to unaffordable rates. Municipal water utilities are so far skeptical of the plan, arguing that the proposal is overly ambitious in how much private funding can be drawn to the sector and pointing out that states and municipalities already bear the lion's share of the cost for water projects. But they are cheering one idea in it: lengthening pollution discharge permits from five years to 15 and allowing automatic renewal "if the water quality needs do not require more stringent permit limits."

Gaga for WIFIA: The proposal would expand WIFIA, the innovative financing program authorized in 2014 that Congress loves since it can leverage a small appropriation for orders of magnitude more in credit assistance. Despite the fact that the program has yet to make its first loan, the Trump proposal would expand it to privately owned infrastructure as well as Superfund and brownfields programs.

Park upgrades paid for by energy leasing: The infrastructure plan would give Interior a mechanism to repair and maintain some of its holdings. Even though the White House would slash Interior's overall budget by more than 16 percent, it would establish a Public Lands Infrastructure Fund paid for with money from new land leasing and royalties on energy production. Interior said the fund will rake in $805 million to put toward National Park Service's estimated backlog of $11.6 billion backlog of repair and maintenance projects. Another $891 million would go toward the Bureau of Reclamation's water systems and new capital construction plans.

Environmental reviews: The proposal asks Congress to get the permitting process down to two years, through quicker NEPA reviews. It wants to limit projects getting held up in court by reducing the statute of limitations to sue from six years down to 150 days. And it wants to stop EPA from vetoing wetlands permits.

But don't hold your breath for these changes anytime soon: Most would require congressional approval, and Senate Democrats would likely be able to block anything as ambitious as the administration's proposal.

SPOTTED: Trump held a meeting on infrastructure with state and local officials on Monday. Also in the room? EPA Administrator Scott Pruitt and Interior Secretary Ryan Zinke.

I don't subscribe to Politico Pro so haven't dug any deeper.