Environmental Economics

Stated preferences in the AER

American Economic Review Vol. 113, Issue 7 -- July 2023:

The authors mention stated preference research in environmental economics (where it all began, right?) a couple of times. First, we get the obligatory CVM critics pat-on-the-back on page 2010:

The advantages of the stated-preference approach come at potential costs, in particular the concern that actual job choices may differ from stated preferences for jobs (Diamond and Hausman 1994; Manski 1999; Hausman 2012).

They could have chosen some better references to the issue of hypothetical bias, but no. See the comment on Hausman 2012 here. 

But, then the second is more positive (page 2011):

More generally, the stated-preference approach has provided valuable evidence for many economic topics, including environmental policy (Carlsson and Martinsson
2001; Carson 2012), consumer preferences (Revelt and Train 1998), labor supply (Kimball and Shapiro 2008), retirement decisions (van Soest and Vonkova 2014),
and long-term care (Ameriks et al. 2015). 

Congrats to Carlsson, Martinsson and Carson for being singled out from the thousands of articles to choose from!

In spite of some warts (e.g, Hausman 2012), this is progress.

References:

Carlsson, Fredrik, and Peter Martinsson. 2001. “Do Hypothetical and Actual Marginal Willingness to Pay Differ in Choice Experiments? Application to the Valuation of the Environment.” Journal of Environmental Economics and Management 41 (2): 179–92.

Carson, Richard T. 2012. “Contingent Valuation: A Practical Alternative When Prices Aren’t Available.” Journal of Economic Perspectives 26 (4): 27–42.

SBCA Online Learning: Valuing Nonmarket Benefits on July 11 & 12, 2023

From the inbox:

Join us online July 11 & 12, 2023, 1:00 p.m. ET to 3:30 p.m. ET for Valuing Nonmarket Benefits. Presenters Vic Adamowicz, Cathy Kling, Nic Kuminoff, Dan Phaneuf, Christian Vossler, and John Whitehead will provide a primer of the field including both the theoretical basis and current state of best practice for the most common methods. Core topics include basic welfare theory, stated preference methods, hedonic property value approaches, recreation demand modeling, hedonic wage studies, benefit transfer, the value of risk reduction, and other special topics. 

Description: The development of methods to estimate welfare changes for use in benefit-cost analysis began as a nascent field in the U.S. in the middle of the 20th century to support decision making for environmental investments. It then progressed as part of regulatory impact analyses required under multiple presidential executive orders beginning with EO 12291 issued by the Reagan administration. At the same time, the valuation of ecosystem services and natural capital throughout the European community expanded quickly with the U.K. Treasury “Green Book” and E.U. Water Framework Directive. Methodological improvements followed rapidly for both stated and revealed preference methods, leading to the now relatively mature set of methods available to practitioners.

These methods are being routinely applied to support benefit-cost analysis of regulatory programs, prioritization of conservation spending in government and non-governmental organizations, natural resource damage assessment, and private firm’s analyses of sustainability issues in their sector.

In this workshop, we provide a primer of the field including both the theoretical basis and current state of best practice for the most common methods. Core topics include basic welfare theory, stated preference methods, hedonic property value approaches, recreation demand modeling, hedonic wage studies, benefit transfer, the value of risk reduction, and other special topics. The workshop is intended for professionals and analysts who use the results of these studies in their work and wish to better understand the basics of these methods. The course should also serve as a refresher for those who have been away from the field and applications for some time and are looking for a brief review of the current state of the art.

Explore fees and register now

I'm covering benefit transfer. 

Red is bad, right?

Current air quality. Oof.

 

Just your friendly periodic reminder that mileage taxes create disincentives for fuel efficiency.

If there's been one consistent thread since the beginning of Env-Econ.net, it's our endearing commitment to helping you understand the incentives of gas taxes vs. mileage taxes. 

Well, the debate is back in the news again as the governments debate ways to overcome...  

...the myriad hurdles U.S. states face as they experiment with road usage charging programs aimed at one day replacing motor fuel taxes, which are generating less each year, in part due to fuel efficiency and the rise of electric cars.

So here's a[n updated] view from the wayback machine at some of issues that arise from a mileage tax:

It's been [over 16] years now (May 8, 2007) and people still aren't listening to me. 

Taxing miles creates perverse incentives for fuel efficiency.  A $0.015/mile tax (the size of the tax mentioned in the article) is the equivalent of a $0.015 * X tax per gallon where X is mpg.  In words, a mileage tax increases the tax per gallon the more fuel efficient the car.  Now granted, with higher mpg you use fewer gallons to drive an equivalent number of miles, and in the end, everyone driving 100 miles will pay the same tax.  And from a revenue perspective, that might be OK.  But there might be a way to kill fewer birds with one stone.

As I have written a number of times, a more straightforward proposal is to simply raise the gas tax.  Reaising the gas tax accomplishes a number of things 1) It raises revenue, 2) It discourages miles driven, and 3) It increases the incentive for higher fuel efficiency. 

Because my previous posts on this have been written with an ironic twist (I propose a mileage tax that is inversely proportional to fuel efficiency and then show that such a tax is the equivalent of a $1/gallon gas tax), here's the direct, non-ironic version:  A $1/gallon gas tax...

...places a higher burden on those driving less fuel efficient vehicles--that should satisfy those blaming the SUV drivers for all of the problems*.

...places a higher burden on those driving more.  By increasing the marginal cost per mile driven, total miles driven should decrease.

...assuming fuel efficiency and income are negatively correlated--that is, the rich tend to drive larger, more expensive, less fuel efficient cars--[higher gas taxes] place a higher burden on higher incomes.

...provides an incentive for drivers to switch to more fuel efficient vehicles.

It's really simple.  Why worry about complicated milage programs?  The gas tax infrastructure is in place.  Raise the gas tax and meet multiple public policy and economic goals simultaneously.

Peak oil (demand)

From the WSJ (Oil Demand Expected to Peak This Decade as EVs Boom): 

Rising demand for crude oil is set to slow to a trickle within five years and peak before the end of the decade, as electric-vehicle uptake surges and developed nations rapidly transition to cleaner sources of energy, according to a prominent energy forecaster.

The International Energy Agency, a group funded by some of the world’s largest oil consumers, expects demand for transport fuels derived from oil such as gasoline will be the first to peak before starting a steady decline—hastened by a sharp uptick in EVs and a long-lasting shift to remote working spurred on by the Covid-19 pandemic.

Rapidly growing Asian economies will continue to prop up the global appetite for oil in the coming years, and demand for jet fuel, naphtha and other oil products with industrial uses will continue to tick higher, the IEA said in a report released Wednesday. But even in China, which has long been the powerhouse of global oil demand, the appetite for crude will slow markedly before the end of the decade. India will surpass China as the main driver of oil growth as soon as 2027, the IEA said.

The forecast, which the IEA made in an annual report that considers oil demand as far away as 2028, isn’t the first time the Paris-based group has laid out a timeline predicting a zenith for oil. But it envisages a far more rapid shift away from fossil fuels than previously expected—a shift that has been sharply accelerated by the Covid-19 pandemic and the energy crisis that followed Russia’s invasion of Ukraine.

Joe Manchin: “If I can’t go home and explain it to the people West Virginia, I can’t vote for it. I just can’t. I’ve tried everything humanly possible. I can’t get there,”

2023 Berkeley Summer School in Environmental and Energy Economics | August 14-18, 2023

via Max Auffhammer:

Thanks to generous renewal funding from the Alfred P. Sloan Foundation, the Berkeley Summer School will take place again this year – in person! The goal of the summer school is to provide doctoral students nationwide, who have completed the core first year microeconomics and econometrics requirement, with an overview of the most important and current topics in the fields of environmental and energy economics. Previous incarnations of this summer school have helped students identify promising dissertation projects, build networks and gain valuable insights on how to be a productive researcher. This year students will have an opportunity to get feedback on a research idea from one of the instructors. The instructors’ expertise covers a range of important topics. More details and up to date information can always be found on the summer school website. The currently planned lineup of instructors is:

 

Meredith Fowlie, UC Berkeley
Joseph Shapiro, UC Berkeley

Maximilian Auffhammer, UC Berkeley

Susanna Berkouwer, Wharton

Marshall Burke, Stanford 

Koichiro Ito, University of Chicago

(more TBA)

 

The summer school will start on Monday (8/14) at noon with a virtual welcome lunch for all attendees, followed by the first session at 1:30pm PDT. For the remaining four days, there will be a 3-hour lecture in the morning beginning at 9:00am, a one hour lunch followed by another 3-hour lecture. We are planning a number of other exciting activities and will keep you posted. There is no tuition, but space is limited. We provide breakfast and lunch and can accommodate dietary restrictions! Students are expected to attend all sessions.

 

To apply for the summer school, you must be a registered PhD student in an economics department, business or policy school and have completed your first year of coursework. Only PhD students in universities in North America (Canada/USA/Mexico) are eligible to apply. Please submit your application online here.  Please ask your advisor or a faculty member that knows you well to fill out a very brief confirmation that they support your recommendation here.

 

We are funding a number of diversity fellowships to offset travel and lodging expenses, which will require awardees to write a brief application statement to apply, as well as a two-page research proposal for a new idea in the field of EEE (due the week after camp). We will then match up fellows with one of the instructors, who will provide feedback on the idea in a one-on-one meeting. You can apply for the fellowship within the application form linked above.

 

The application deadline is 5pm PST June 23, 2023. We will notify you of your admission by end of June. If you have any questions, please email Karen Notsund, [email protected] or Maximilian Auffhammer ([email protected]).