Environmental Economics

VW Quote of the day

From yesterday, actually (I accidentally saved this one as a draft):

“I feel totally ripped off,” said John Decker, 55, a photographer from Sacramento, who owns a 2013 Jetta SportWagen with the diesel engine. “It just reeks of fraud and that they intentionally misled the buyers of their vehicles into thinking these were clean diesels, environmentally good cars, that were fun to drive.”

via www.nytimes.com

"VW’s Deepwater Horizon?"

Maximilian Auffhammer at the uninspiringly named Energy Institute at Haas blog:

Last week one of the biggest environmental scandals since the Deepwater Horizon disaster made its way to somewhere near the bottom of page 11 of most major newspapers. VW admitted to systematically cheating on emissions tests of its Diesel vehicles. This might sound snoozy, until you read up on the details. ...

In a Lance Armstrongian feat of deception, VW has now admitted to having installed a piece of software called a “defeat device” that turns on the full suite of pollution control gadgets when cars are being smog tested. As soon as you leave the testing station and head out for your Yosemite adventure with Fluffy barking in the back, your car emits 10-40 times (!!!!!!!!!!!) the amount of NOx you just reported on your smog check card. ... The EPA will almost certainly sue VW. The penalties involved here are significant. The EPA can ask for $37,500 per incident, which amounts to roughly $18 billion in fines. Plus there will likely be criminal charges filed against VW executives. ...

In my eyes there are two interesting economic points to be made here. The first, maybe more headline worthy, is trying to determine the optimal fine in order to deter other manufacturers from engaging in such behavior. An economist would argue that what we have here is the classic case of an externality. By selling the dirtier vehicles, VW exposed kids, adults and dogs to massive quantities of local air pollutants. VW is responsible and should be liable for this. Hence VW should correct this market failure by paying the full external costs it caused. This calculation would involve estimating the economic damages from this additional air pollution and passing the bill on to VW. My back of the envelope calculation suggests that for the NOx portion this is about $232 per vehicle over three years (far from $37,500).

But, there is a large law and economics literature on determining the fines to achieve the optimal and efficient amount of deterrence. The problem with just passing on the external damages is that VW was not going to be caught with certainty. If the executives thought there was a 1% chance of getting caught, it might have been more worthwhile to cheat than if they thought that they were going to get caught with certainty. In this case, the penalty should be approximated by the external costs divided by the probability of getting caught. This, of course, would be significantly larger than the external costs alone. ... 

Yikes. Here is the press release from the EPA.

Climate Change and Snot

I like when The Daily Show makes my job easy:

The Daily Show
Daily Show Full Episodes,  More Daily Show Videos,  Comedy Central Full Episodes

Environmental economics in the AER

Always a surprise:

Currie, Janet, Lucas Davis, Michael Greenstone, and Reed Walker. 2015. "Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings." American Economic Review, 105(2): 678-709.

DOI: 10.1257/aer.20121656

Abstract

Regulatory oversight of toxic emissions from industrial plants and understanding about these emissions' impacts are in their infancy. Applying a research design based on the openings and closings of 1,600 industrial plants to rich data on housing markets and infant health, we find that: toxic air emissions affect air quality only within 1 mile of the plant; plant openings lead to 11 percent declines in housing values within 0.5 mile or a loss of about $4.25 million for these households; and a plant's operation is associated with a roughly 3 percent increase in the probability of low birthweight within 1 mile. (JEL I12, L60, Q52, Q53, Q58, R23, R31)

The key to understanding Environmental Economics is understanding unintended consequences

While uncomfortable, sometimes it pays to think beyond the obvious:

People who own all-electric cars where coal generates the power may think they are helping the environment. But a new study finds their vehicles actually make the air dirtier, worsening global warming.

Ethanol isn't so green, either.

"It's kind of hard to beat gasoline" for public and environmental health, said study co-author Julian Marshall, an engineering professor at the University of Minnesota. "A lot of the technologies that we think of as being clean ... are not better than gasoline."

The key is where the source of the electricity all-electric cars. If it comes from coal, the electric cars produce 3.6 times more soot and smog deaths than gas, because of the pollution made in generating the electricity, according to the study that is published Monday by the Proceedings of the National Academy of Sciences. They also are significantly worse at heat-trapping carbon dioxide that worsens global warming, it found.

via hosted.ap.org

I'm not saying the authors are right or wrong--I haven't read the original study and I know how findings in studies can get mangled in press blurbs.  But I've often wondered if those who buy electric cars think about electricity sources when they buy.  I get the sense that buyers are often well-intentioned ('At least I'm not burning those evil fossil fuels.') without considering the unintended (and unseen) consequences.

Something else is wrong with your Hyundai and Kia

Just a few millions:

The Justice Department and the Environmental Protection Agency announced today that the Hyundai Motor Company and the Kia Motors Corporation would pay a combined $100 million penalty as part of a settlement for overstating vehicle fuel economy standards on 1.2 million vehicles, a violation of the Clean Air Act.

The penalty is the largest ever paid for violation of the Clean Air Act, government officials said.

via www.nytimes.com

Since the travel cost variable depends on the cost of fuel per mile and the cost of fule per mile depends on miles per gallon, all of the cost per mile estimates in recreation demand models suffer from measurement error. Proceed to retract your travel cost method journal papers.

Or, nevermind, the travel cost variable is so loaded with measurement error that this addition doesn't matter. 

Video of the Day: Reverse Climate Psychology

The Daily Show
Get More: Daily Show Full Episodes,The Daily Show on Facebook,Daily Show Video Archive

In one day, Ohio is already halfway to the 30% goal

While yesterday's Presidential/EPA announcement of 30% reductions in CO2 emission by 2030 sounds like a drastic reduction, the Columbus Dispatch notes that the baseline matters.  And the baseline is almost 10 years ago (2005).  For Ohio, that means they are already over halfway to the 30% goal.

Regulation Monday (with snark)

President Barack Obama is using his executive authority to take his strongest action yet against climate change -- proposing new EPA regulations.

Oooohhh, new regulations.  This should be fun.

The chief of the Environmental Protection Agency will announce a proposal Monday that will require power plants to cut their carbon emissions by 30% by 2030, a source briefed on the matter told CNN.

30 by 30! The EPA must've hired the marketing experts at ESPN.

States will have a variety of options to meet the goal, the source said.

Variety is the spice of life.

Some Republicans aren't happy, saying the requirement will kill jobs in the coal industry.

"Some Republicans aren't happy"? That's an understatement.  But let's work through the logic.  Some Republicans aren't happy.  Therefore, not all Republicans aren't not happy.  So some Republicans are the opposite of not happy. 

But the White House says it's not just good for the environment, it will also be healthier.

Sort of like fruit for the environment.

"As president, and as a parent, I refuse to condemn our children to a planet that's beyond fixing," Obama said in his weekly address Saturday.

Do you think the president ever plays the president card with his kids? 

"Why Dad?"

"Because I'm the President, that's why!"

"Pfffft."

The U.S. Chamber of Commerce, a business federation, estimated the new regulations will cost the economy $50 billion a year.

And I'm sure the U.S. Chanber of Commerce also reported benefit numbers to go along with the costs.  Let me help.  According to Costanza, the benefits of the new regulations will be in the neighborhood of $100 bazillion...per minute.

"The Administration has set out to kill coal and its 800,000 jobs," Sen. Mike Enzi said in the GOP weekly address Saturday. "If it succeeds in death by regulation, we'll all be paying a lot more money for electricity - if we can get it."

But, maybe, just maybe, we all are paying too little for electricity now?

Maybe?

Bueller?

via www.cnn.com

I predict this story is about the law of unintended consequences

It’s the law of unintended consequences at work.

See...told you so.

European Union efforts to fight climate change favored diesel fuel over gasoline because it emits less carbon dioxide, or CO2. However, diesel’s contaminants have swamped benefits from measures that include a toll drivers pay to enter central London, a thriving bike-hire program and growing public-transport network.

“Successive governments knew more than 10 years ago that diesel was producing all these harmful pollutants, but they myopically plowed on with their CO2 agenda,” said Simon Birkett, founder of Clean Air in London, a nonprofit group. “It’s been a catastrophe for air pollution, and that’s not too strong a word. It’s a public-health catastrophe.”

How bad is it?  Here's a comparison:

The EU limits NO2 to a maximum of 40 micrograms per cubic meter of air. The concentration on Marylebone Road, a stone’s throw from Regent’s Park, was almost 94 micrograms in 2012, according to the most recent data from the EEA.

The level for the site last year was 81 micrograms, and it’s averaging 83 micrograms this year, according to King’s College London. In 1998, when the King’s College data begins, it was 92. That’s about the time the switch to diesel started.

In contrast, Beijing had a concentration of 56 micrograms last year, according to China’s Ministry of Environmental Protection. The Chinese capital has a worse problem with other pollutants, registering almost triple the level of PM10 particles (bigger than PM2.5s) as on Marylebone Road.

via www.bloomberg.com