Environmental Economics

Boyle and Kotchen: The Need for More (Not Less) External Review of Economic Analysis at the U.S. EPA

Abstract: 

Under President Donald Trump, the U.S. Environmental Protection Agency (EPA) has made significant changes to the way it conducts economic analyses of regulatory actions. Changes in the assumptions and methods used in regulatory impact analyses (RIAs) have produced fundamentally different conclusions about the economic benefits and costs of significant regulations. At the same time, the EPA has eliminated its Environmental Economics Advisory Committee (EEAC), which had provided external review of key inputs to the agency’s benefit–cost analyses, such as the value of a statistical life. This article describes the history and activities of the EEAC to increase understanding of the role it served and what has been lost by eliminating it. In addition, we discuss our own experience as recent EEAC members. We also present examples of the very different results produced by the Obama and Trump administrations’ economic analyses of the same EPA rules to illustrate why external review is so important for ensuring that economic analyses are credible, robust, and not influenced by political agendas.

Review of Environmental Economics and Policy, Volume 13, Issue 2, Summer 2019, Pages 308–316, https://doi.org/10.1093/reep/rez006
Published: 13 June 2019

Graphic of the Day: If it quacks like a tax...

Econ 101: Tariffs ARE taxes.  That's all.

Quote of the Day: Word Salad

“I did say, ‘Well, the United States right now has among the cleanest climates there are based on all statistics.’ And it’s even getting better because I agree with that we want the best water, the cleanest water. It’s crystal clean, has to be crystal clean clear.”

President Trump to an interviewer after meeting with Prince Charles to discuss climate change

Quote of the Day: Freedom Fries the Redux

Ladies and gentleman, an actual press release from the Department of Energy (with EMPHASIS ADDED): 

“Increasing export capacity from the Freeport LNG project is critical to spreading freedom gas throughout the world by giving America’s allies a diverse and affordable source of clean energy. Further, more exports of U.S. LNG to the world means more U.S. jobs and more domestic economic growth and cleaner air here at home and around the globe,” said U.S. Under Secretary of Energy Mark W. Menezes, who highlighted the approval at the Clean Energy Ministerial in Vancouver, Canada. “There’s no doubt today’s announcement furthers this Administration’s commitment to promoting energy security and diversity worldwide.”

“Approval of additional LNG exports from Freeport LNG furthers this Administration’s commitment to promoting American energy, American jobs, and the American economy. Further, increased supplies of U.S. natural gas on the world market are critical to advancing clean energy and the energy security of our allies around the globe. With the U.S. in another year of record-setting natural gas production, I am pleased that the Department of Energy is doing what it can to promote an efficient regulatory system that allows for molecules of U.S. freedom to be exported to the world,” said Assistant Secretary for Fossil Energy Steven Winberg, who signed the export order and was also in attendance at the Clean Energy Ministerial.

I was going to make a joke about spreading molecules of gas wherever I go, but then I thought that might be beneath me.

Quote of the Day: Hayek the prognosticator

Somehow seems appropriate (and ironic):

"In principle the industrial protectionism and government-supported cartels and agricultural policies of the conservative groups are not different from the proposals for a more far-reaching direction of economic life sponsored by the socialists."

 F.A. Hayek, page 107 , Individualism and Economic Order, 1947

Hat Tip to Brad Gentner for finding this one

Daily Demand and Supply: Bill Nye Explains the Law of Demand...and Carbon Pricing, MFers.

Warning:  NSFW (Unless you work at a University and part of your job is to watch stuff like this and post it on a blog).

The highlights of this have been around all week, but most of the clips are just Bill Nye the Science Guy saying "motherf***ers.   But this segment on Last Week Tonight really does a nice job of simply explaining how Carbon Pricing works.  If you don't want to watch the whole thing, just fastforward to the 9:27 mark or so, and sit back and enjoy.

Bill Nye explains the Law of Demand from 10:21 to 10:37.

Now if I can just figure out how to use this in class without trigger warnings.

Quote of the Day: Political science is NOT sound science

From Politico:

“In USDA, we want good scientific discovery,” [USDA Secretary Sonny] Perdue said, when asked about the mandated research-disclosure language. “We want peer-based evidence there. We know that research, some has been found in the past to not have been adequately peer-reviewed in a way that created wrong information, and we’re very serious when we say we’re fact-based, data-driven decision makers. That relies on sound, replicatable science rather than opinion. What I see unfortunately happening many times is that we tried to make policy decisions based on political science rather than on sound science.”

 

It's time to stop wondering when the renewable switch will occur and start asking how do we manage the transition

CNN:

The renewable energy sector is projected to generate more electricity than coal during the month of April, according to a recent report published by the Institute for Energy Economics and Financial Analysis. That's never happened before.

Technological change, government policies, and changing consumer preferences have all but guaranteed the switch from fossil fuels to renewables.  To me, the economics of the switch are less interesting (people prefer cheaper techonologies...duh!), than the question of how we manage the economic transition. How do we retrain the workforce in communities reliant on traditional forms of energy production?  How do we transition the infrastructure in those communities?  How do we tackle tough questions like whether coal reliant communities should be rejuvenated?  How do we manage the inevitable pressures of additional income inequities due to the transition?

There are a lot of questions economists need to think about.

When the renewable switch will occur isn't one of them.

 

Gina McCarthy: The Role of Environmental Economics in U.S. Environmental Policy

Abstract:

This Editorial, written by a former United States Environmental Protection Agency (EPA) Administrator under President Barack Obama, is adapted from the author's keynote address on June 25, 2018 at the World Congress of Environmental and Resource Economists in Gothenburg, Sweden. It reviews the important history of environmental economics and how it has influenced rulemaking at the EPA. It discusses how attacks on science are being used to weaken environmental regulations and how these attacks extend to the science of environmental economics. It concludes with a call to action that reminds environmental economists that continuing to do good science is as important as ever.

Here is the link: https://doi.org/10.1093/reep/rez001

The "External Environmental Economics Advisory Committee (E-EEAC)"

Ha! Take that Scott Pruitt: 

The External Environmental Economics Advisory Committee (E-EEAC) is an independent organization dedicated to providing up-to-date, non-partisan advice on the state of economic science as it relates to the U.S. Environmental Protection Agency's programs. The E-EEAC was established following the dissolution in June 2018 of the original EEAC, a committee that had operated for over 25 years within the Environmental Protection Agency's science advisory board structure. The members of the E-EEAC believe that, despite the retirement of the internal committee, advances in economic research remain crucial to achieving welfare-enhancing environmental policies.

Like its predecessor, the E-EEAC consists of economists who apply their expertise to analyze the benefits, costs, and design of environmental policies. The goal of the E-EEAC is to operate in this capacity until the EPA reconstitutes an internal environmental economics advisory committee composed of independent economists.

Here is the website: https://www.e-eeac.org/. Here is a press release from CMC: https://www.cmc.edu/news/professor-mary-evans-to-co-lead-new-environmental-economics-organization. And here is another from UCLA: https://luskin.ucla.edu/ucla-luskin-faculty-launches-organization-to-fill-research-gap-at-epa/.