Environmental Economics

Infrastructure week and [shhhh...] climate change

Hey, ignoring the potential for climate change doesn't make me look like a complete idiot (Trump's infrastructure ...)!

Since the beginning of his administration, Mr. Trump and his appointees have steadily worked to roll back climate change regulations. Mr. Trump’s E.P.A. chief, Scott Pruitt, has taken the lead role in the administration’s efforts to undo climate policies and question the validity of climate science. On Wednesday, Mr. Pruitt suggested that global warming could benefit humanity.

Those views are contradicted by research conducted by his own agency.

The 2017 E.P.A. report warned that some 6,000 bridges nationwide face a greater risk of damage in coming decades from the effects of a warming climate. It provides analysis showing that “proactive adaptation” — essentially, planning for global warming before you build — could save the government up to 70 percent in future costs of repairing damage caused by climate change-driven weather events such as deluges, coastal flooding and heat waves. ...

Already the Alaska Highway, built atop permafrost that was never expected to go away, has started buckling as the permafrost melts. A 2010 study concluded that the highway is one of the state’s 4,576 miles of paved road, 5,000 miles of unpaved road, 253 airports, 853 bridges, 131 harbors and 819 miles of railroad that could be damaged by a warming climate in coming decades. The study concluded that the impact of climate change on Alaska’s infrastructure could reach up to $7.6 billion by through 2080.

These costs are about zero if your discount rate is 95%. 

A demand / consumer surplus experiment for your lower level environmental economics course

I used VEconLab's demand experiment in my sophomore level introduction to environmental and resource economics course this week:

This exercise introduces the notion of demand as a function with "steps" that represent maximum willingness to pay, i.e. the marginal value of consumption. Step function graphs facilitate a subsequent understanding of buyers' surplus, since the area under demand can be calculated visually. ... The exercise is designed to highlight the importance of making decisions at the margin, since purchase decisions based on comparisions [sic] of average values and purchase price will lead to lower earnings. One treatment option involves adding a tax to be paid for each unit purchased, which can lead to a discussion of demand shifts. Learning is enhanced by feedback about relative earnings.

I used it to illustrate demand curves (the course has no prequisite) and consumer surplus. I motivated the tax as a tax on pollution. There were 20 rounds, 10 without the tax and 10 with the tax. I estimated the OLS model with 64 students, 20 rounds (clustered standard errors):

The $2 tax reduces quantity by 1/2 units. The estimated choke price is $22 with a confidence interval that does not include the theoretical $18 choke price. 

Here are the results for the no tax treatment (round 10):

Here are the results with the tax (=$2) treatment (round 20):

My attempt at an Onion headline: Under my administration, the skies are clearer, the waters are cleaner ...

From The Hill:

Under President Trump, the Environmental Protection Agency (EPA) has fined far fewer polluters for breaking emissions rules than the Obama administration.

Numbers released Thursday by the EPA in its annual enforcement report revealed that polluters were fined a total of $1.6 billion in penalties in fiscal year 2017 — about a fifth of the $5.7 billion EPA penalties collected the year prior, under President Obama. ...

Inexplicably: 

In its press release about the report, the EPA highlighted the year as one for "deterring noncompliance."

“A strong enforcement program is essential to achieving positive health and environmental outcomes,” said Susan Bodine head of the agency’s compliance office in the EPA statement.

“In fiscal year 2017, we focused on expediting site cleanup, deterring noncompliance, and returning facilities to compliance with the law, while respecting the cooperative federalism structure of our nation’s environmental laws.”

In other words, we ignored a lot of bad stuff, throwing the job to the states who also don't care about enforcing pollution control laws (e.g, North Carolina):

Environmental enforcement experts pushed back on the EPA's statement, however, saying the report's numbers show the opposite. ...

Steven Chester, who served from 2011 to 2014 as deputy assistant administrator in EPA’s compliance office, said that a drop in litigation and enforcement at the agency could mean lasting consequences for the environment. ...

An EPA employee currently working in the office of compliance told The Hill, under the condition of anonymity, that in the days leading up to the release of the report the administration worried about how to spin the dipping enforcement numbers as a positive. ...

In other words, what sort of lame excuse can be provide ...

Days before the EPA released its annual enforcement report, Bodine told her staff in an email not to be concerned with the public’s perception of the enforcement record.

“Some outside entities that are unfamiliar with the true nature of our work here in OECA and have tried to measure the worth of what you do simply through the dollar amount of federal penalties and the number of federal case initiations,” she wrote in an office-wide email reviewed by The Hill.

Numbers, schumbers.

“However it is also important for EPA to help and, if necessary, persuade states to take actions to address violations and informal actions can bring about a return to compliance more quickly.”

Susan Bodine's appointment was confirmed on December 7. From US News and World Report:

Echoing EPA Administrator Scott Pruitt, Bodine said in her confirmation hearing in June 2017 that she believes in "cooperative federalism" – making it states' responsibility to uphold environmental mandates.

Unfunded EPA mandates don't have a happy history (from ALEC):

A major reason that state funding has dried up in recent years is that EPA now oftentimes promulgates new regulations (of which they may have dubious statutory authority) with Congress not agreeing to provide additional funding to the states to implement the programs. However, even if Congress does provide additional funding for implementation, there is no guarantee these monies make their way to the states. In FY2015, for instance, EPA raided $581 million from the states’ Clean Water and Drinking Water Revolving funds to increase spending on other projects, including fighting climate change.

EPA has also proven to be careless in how they evaluate the costs they impose on the states. Existing law – the Unfunded Mandates Reform Act (UMRA) – requires federal agencies to “assess the effects on state and local governments before imposing mandates of $100 million or more per year without providing federal funding to implement the mandate.” EPA gets around this requirement by suggesting that since they are willing and able to impose a federal implementation plan on states that opt against developing a state plan of their own, such regulations are not considered to be “federal mandates.”

Passing the monitoring and enforcement burden onto the states is one way to reduce monitoring and enforcement activities and, therefore, allow business firms and consumers to pollute when they are not supposed to.  

You can also create a "signature"

This is going into my annual review

It ain't over 'til it's over

The Council's Socio-Economic Panel is in the midst of an interesting discussion about #wreckfish in the South Atlantic - listen in until 5 PM and then join us online again tomorrow beginning at 8 AM: https://t.co/dwPU1JelpN pic.twitter.com/a36dhZ5qMR

— SAFMC (@SAFMC) February 6, 2018

My contribution to U.S. fisheries policy in 2017

Source: http://safmc.net/download/Briefing%20Book%20SEP%20Feb%202018/SEP_Meeting_Min_Apr2017.pdf

I drove to Charleston, SC today and listened to R.E.M. the whole dang way

I'm here:

February 6 & 7, 2018

Socio-Economic Panel
Crowne Plaza Hotel
4381 Tanger Outlet Boulevard
North Charleston, SC  29418

Briefing Book 

Webinar Registration 

February 6, 2017, 1:00 PM - 5:00 PM 

February 7, 2017, 8:00 AM - 12:30 PM

Public Comment

Click here to submit public comment on SEP agenda items

Click here to read what others have already said

Note: I listened to Spotify's "This is R.E.M." playlist for about 4 hours. Once that ran out of songs I listened to Radio Free Europe and, my favorite album, Reckoning (1984) to further remind me of my college and grad school days. 

I rage tweeted during executive time this morning

I'm on a one year boycott of the Transdisciplinary Journal of the @ISEEORG https://t.co/AgQINNEpOz

— John C. Whitehead (@johnwhitehead81) February 5, 2018

Predicting Adaptation to Climate Change using Regional Heterogeneity in Mortality Effects of Temperature

Hi!  I am glad to have gotten an invitation from John to guest-blog here.  I am an Associate Professor of economics at the Andrew Young School at Georgia State University. My research on environmental economics is in solar geoengineering, health effects of air pollution and climate change, behavioral economics, and some other stuff.  I teach environmental economics at the undergraduate and PhD level.

So let me start by highlighting some recent research that I've done with co-authors Nolan Miller and David Molitor of the University of Illinois.  In this article in The Conversation, we describe the results from a recent working paper in which we use claims data from Medicare combined with weather monitor data to estimate 1) the effect of temperature extremes on elderly mortality, 2) how these effects differ across different regions of the country, and 3) the extent to which this can inform us about the effects of climate change and the potential to adapt to climate change.

We summarize our findings on the first question:

Our key finding is that both heat waves and cold snaps increase mortality rates. For example, the mortality rate from a day with average temperatures between 90 and 95 degrees Fahrenheit is higher by about 1 death per 100,000 individuals than a day with an average temperature between 65 and 70 degrees. Deaths also increase, by about one-half per 100,000 individuals, on days when the average temperature is less than 20 degrees.

There is also substantial heterogeneity in these effects across the country (FYI the editors of The Conversation didn't want us to use fancy words like "heterogeneity," but I trust that readers of this blog will be OK with them):

In hot places like Miami, cold days have a very large impact on mortality, while the impact of hot days is smaller. In contrast, hot days in Fargo have a very large impact on mortality, but an additional cold day has little effect. In fact, the effect of the hottest days (90 degrees or higher) in the coldest places is about two to three times larger than the effect of the coldest days (less than 20 degrees) in the hottest places.

Finally, we use the cross-sectional heterogeneity across regions to predict the scope for future climate change adaptation.  Basically, as currently-cold places like Chicago warm up and start to look more like currently-warm places like Miami, climate-wise, those currently-cold places will begin to exhibit the temperature-mortality relationship that currently-warm places currently have. Make sense?

This graph summarizes our predictions on the effects of climate change, depending on whether we allow for regional heterogeneity or not and whether we allow for future adaptation or not.  Ignoring heterogeneity (blue bars) makes it look like climate change will be bad for hot places but actually good for cold places.  (This incidentally is what is presented in this recent study by Solomon Hsiang and co-authors, which got quite a bit of press.) But, once you account for regional heterogeneity (green bars), that's not true anymore - climate change is bad everywhere and even worse for cold places than for hot places.  Lastly, when allowing for adaptation (gray bars), climate change isn't as bad.

As we emphasize in the working paper and in the Conversation article, this doesn't mean that adaptation is a silver bullet that solves all climate change problems.  For one thing, we don't model the costs of adaptation, which could be substantial.  Second, we don't consider other responses to climate change like abatement or geoengineering. 

The two main takeaways are that 1) we need to carefully consider regional heterogeneity when modeling climate change impacts, and 2) we need to carefully consider adaptation when modeling climate change impacts.