Economics and the Environment
Today marks the beginning of Climate Week NYC 2014, which will feature more than 100 events around New York City in support of the UN Climate Summit. Summit representatives are expected to discuss the economic benefits of carbon pricing and national climate commitments, as well as the ability of cities to offer policymakers “some of the lowest-hanging fruit” for preventing damages from climate change.
During Climate Week, join RFF for an RFF Policy Leadership Forum on Economics and the Environment, with EPA Administrator Gina McCarthy. Tune in on September 25 to view the live webcast at www.rff.org/live. Questions can be submitted via Twitter using #AskRFF and will be answered as time permits.
EPA Clean Power Plan Comment Period Extended
The deadline to submit comments on the EPA’s Clean Power Plan has been extended to December 1, though the agency is “still working towards a June deadline” for its finalized regulation. The 45-day extension was granted by the Obama administration to give the public a greater opportunity to offer additional input that will ultimately result in a “practical, flexible, and achievable” plan.
In a new installment of RFF’s Expert Forum on the Clean Power Plan, experts from RFF, Alstom Power, and NRG Energy comment on the practicality of the plan’s assumption that existing natural gas power plants can meet an average utilization of 70 percent. Readers are encouraged to share their thoughts on this question and more by commenting on Common Resources.
Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.
A Global High Shift Scenario: Impacts And Potential For More Public Transport, Walking, And Cycling With Lower Car Use
[Yale Environment 360] Expanding public transportation and infrastructure that promotes walking and biking throughout the world’s cities could save $100 trillion and cut transportation-related carbon emissions by 40 percent by 2050, according to an analysis by researchers at the University of California, Davis, and the Institute for Transportation and Development Policy. Urban transportation accounted for roughly one-quarter of all transportation-related emissions in 2010, the report said, and these emissions could double by 2050 as growth continues in major cities in China, India, and other developing countries. – via Univ. of California Davis | Institute for Transportation and Development Policy
Household Electricity Expenditures as a Percentage of Income 2008-2012
[WFPL] A new data mapping project from the Kentucky Energy and Environment Cabinet highlights the disparities in income and electricity prices both around the country and in the commonwealth. The Kentucky Department of Energy Development and Independence took median household income data from the American Community Survey, and combined that with federal Energy Information Administration data on electricity prices. The result is a national heat map that shows the areas where residents devote more of their household income to paying their electric bills. – via Kentucky Energy and Environment Cabinet, Department for Energy Development and Independence
India’s car market has expanded rapidly since the country’s economic reforms in the early 1990s, a trend that is expected to continue well into the future; its passenger fleet alone is projected to swell from 22 million to 112 million vehicles between 2010 and 2030. In the wake of this growth, India is considering the adoption of fuel economy standards in its quest to curb fuel usage and foreign oil dependence. At the same time, India’s lenient taxation of diesel fuel (selling 30 to 50 percent below petrol) has worked against it by encouraging market “dieselization” and overall diesel consumption by new car owners.
India has significant potential to meet its goals through a tax on diesel fuel that could correct some of the imbalances created by its current policy, though a tax on diesel vehicles themselves would be a more politically feasible option. In our new RFF discussion paper, we consider the welfare implications of a price-equalizing diesel fuel tax, a diesel car tax that would prompt a similar market share reduction in diesel cars, and a smaller diesel fuel tax that would result in the same fuel savings as a car tax. To quantify the efficiency of a fuel tax relative to a car tax, we use a JD Power APEAL survey to model joint consumer decisions about which car to buy and how much to drive it based on the strategy in place. Read More
Next week, world leaders will meet at the United Nations in New York City at the invitation of UN Secretary-General Ban Ki-moon. The purpose of the meeting is to discuss actions the leaders will take to limit their country’s emissions of greenhouse gases in an effort to forestall global climate change. For many, success of the meeting will be measured by the ambition of the stated actions—that is, how aggressive will the emissions reductions offered by each country be?
Although ambition may be a good measure of success, climate policy watchers will be just as interested in the specific actions that give rise to the stated emissions reductions. It is the efficacy of the action that makes stated ambition credible but, unfortunately, there are many ineffective actions that can be taken.
One heavy-hitting climate policy watcher is World Bank Special Envoy for Climate Change Rachel Kyte. Earlier this year, Kyte reiterated her support for climate policy actions that take the form of prices on emissions of carbon dioxide (often termed “carbon pricing”). She encouraged “countries, sub-national jurisdictions, and companies to join a growing coalition of first movers to support putting a price on carbon.” The governments and organizations comprising this coalition are not supporting a specific level of ambition in terms of emissions reductions; rather, they are supporting a specific effective action—carbon pricing. Read More
This is the third in a series of questions that highlights RFF’s Expert Forum on EPA’s Clean Power Plan. Readers are invited to submit their own comments to the questions and/or the responses using the “Leave a Comment” box below. See all of the questions to date here.
With a boom in natural gas production in the United States, many view this fuel source as a possible “bridge” to a low-carbon future. In fact, building block #2 of EPA’s Clean Power Plan assumes that states can increase the average utilization of existing natural gas power plants to 70 percent, substantially higher than current rates. RFF asked the experts about the practicality and cost-effectiveness of this building block. Do such opportunities exist, and at what cost? Would an increase in the utilization of existing gas facilities render them unavailable to balance the intermittent supply from renewable energy generation?
Is it possible for existing natural gas power plants to increase average utilization by 70 percent (building block #2) and, if so, at what cost?
“Recent history suggests a dramatic change in capacity factor is very possible, but prior experience does not provide evidence that it would be sufficient to achieve the building block target of 70 percent on average for all gas plants.”
—Dallas Burtraw, Darius Gaskins Senior Fellow, Resources for the Future (See full response.)
“If you address this from the technical perspective, there is no question that the natural gas combined cycles that EPA focuses on are fully capable achieving and maintaining a 70 percent capacity factor. To achieve this, however, four issues will need to be addressed with careful modeling and planning.”
—Robert Hilton, Vice President, Power Technologies for Government Affairs, Alstom Power Inc. (See full response.)
“A more gradual phase-in of building block #2 over time would avoid this reliability-driven rush to new gas-fired generation, . . . allow a more thoughtful transition to increasingly competitive renewables and other clean energy resources, . . . and lower CO2 emissions from the power sector as a whole at a lower cost.”
—Steve Corneli, Senior Vice President, Policy and Strategy, NRG Energy (See full response.)
Over the last decade, the shale gas boom has emerged as the biggest story in US energy. Gas extracted from shale formations accounted for only 1.6 percent of total US natural gas production in 2000, a share that ballooned to more than 40 percent by 2013. Its transformative influence on the American energy industry has led many scholars and policymakers to explore what factors were at work in shale’s initial development and explosive growth. The market structure behind the shale expansion is commonly cited, and is of particular interest to countries currently attempting to develop their own shale gas resources.
An often-repeated but unsubstantiated market claim by industry and media observers is that the US shale industry was created by thousands of small- and medium-sized firms, with drilling dominated by mom-and-pop companies. This view has already influenced policymaking in countries such as China, where shale development has been opened to newly established small firms with little or no prior drilling experience. In a new RFF discussion paper, we conduct the first empirical study of the structure of the US shale gas drilling market and prove that these common views of the industry are both inaccurate and misleading. Read More
Invasive species impose severe ecological and economic changes on their new ecosystems—the United States alone suffers billions of dollars’ worth of damage every year due to the introduction and proliferation of non-native species. Bioinvasions often are viewed as a problem to be tackled by a top-down central decisionmaker seeking to control invaders across large swaths of public land. In many regions around the world, however, bioinvaders spread, without regard to jurisdictional boundaries, over large landscapes that contain numerous, independently owned parcels of land, complicating control efforts.
In a new article in the American Journal of Agricultural Economics, “Individual and Cooperative Management of Invasive Species in Human-Mediated Landscapes,” my colleague James Wilen and I model the spread of invasive species and their spatial-dynamic externalities to explore how and when bottom-up coordinated control among independent landowners might achieve socially desirable levels of invasion control. How expansive would such cooperative management agreements need to be, and under what economic and invasion conditions are they likely to be most effective? Read More
One of the indicators the World Bank uses to measure the sustainability of a country’s growth is adjusted net savings (ANS), which includes an estimate of the costs of health damages from exposure to outdoor air pollution. This pollution damage indicator is published annually in the World Development Indicators, together with estimates of annual average PM10 (particulate matter less than 10 microns in diameter) in cities of 100,000 or more. Estimates of health damages associated with PM10 exposure are the monetized value of Disability-Adjusted Life Years (DALYs) associated with PM10 exposure in these cities, expressed as a percent of each country’s gross national income (GNI).
In a new RFF discussion paper, commissioned by the World Bank, we review the current methodology for estimating the cost of air pollution damages and identify better data sources to enable more accurate estimates of pollution exposure and health costs. We note two shortcomings to the current approach to modeling exposure to outdoor air pollution. The first problem is that current estimates ignore the approximately 5 billion people who live outside cities of 100,000 or more. Although, historically, outdoor air pollution has been considered an urban problem, a comparison of the 2010 Global Burden of Disease (GBD) and World Bank estimates suggests that half of deaths due to outdoor air pollution occur in rural areas. Read More
Climate change takes center stage in New York City two weeks from now when world leaders will attend the United Nations Climate Summit—a stepping stone along the path to a new global climate agreement to emerge in Paris in late 2015. Don’t expect a “kumbaya” moment at the summit. Rather, expect to see a very public display of country negotiating positions and an equally public display of reaction to those positions.
Summit organizers hope these leaders will unveil commitments to aggressively reduce future greenhouse gas emissions—commitments that would become the foundation for a new, legally binding Paris agreement. However, reflecting the ongoing international negotiations running up to Paris, one can expect each leader’s commitments to be vague, but also to see considerable specificity about the legally binding nature of the agreement. The European Union is advocating for an agreement whereby commitments would be binding under international law (a treaty), while the United States argues for legally binding domestic commitments absent a new treaty. Read More
In 1990, the Acid Rain Program introduced market-based environmental policy on the largest scale ever attempted. The program capped the total level of acid rain–causing sulfur dioxide emissions from the US electricity sector and allowed utilities to trade under that fixed cap—a so-called cap-and-trade system. Ironically, though much of the original motivation for that program was, as indicated by the name, to reduce acid precipitation, economic assessments of the program have largely focused on health benefits, rather than the ecosystem services stemming from a reduction in acidification. That trend has continued with evaluations of more recent EPA regulations.
In a new RFF discussion paper, “Valuation of Ecosystem Services in the Southern Appalachian Mountains,” RFF colleagues Dallas Burtraw, Alan Krupnick, and Juha Siikamäki and I, along with Susie Chung Criscimagna of Eden Housing, Bernard Cosby of the University of Virginia, and David Evans of EPA, estimate the monetary value of reducing acidity in the southern Appalachian region. Our estimates were based on the stated preference method, which allowed us to survey households about their willingness to pay (WTP) for the restoration of ecosystem services in the region. Based on their answers, we determined that households across the region would be willing to pay $15.67 per year each—or about $208 million in total—to restore the environment of the southern Appalachians to a healthy state. Aggregated and discounted into the future, and allowing for a 50-year delay for the ecosystems to recover, these annual values come to a present value of $3.7 billion. Yet it’s worth noting that these ecosystem service benefits still pale in comparison to the total economic benefits of reducing air pollution, which stem overwhelmingly from public health.
Using two versions of the stated preference method to survey participants allowed us to discern and rank relative household interest in potential policies, resulting in an approach that valued wholesale ecosystem changes as well as the individual values of ecological policy attributes. This was achieved by combining a dichotomous choice contingent valuation (in which respondents vote for or against policies) and a choice experiment (in which preferred programs are selected from a group of options), both of which were linked to detailed ecosystem models that incorporated regional aquatic, terrestrial, and animal characteristics. By gathering information on both individual and holistic policy preferences, our results better support the benefit-cost analysis of multidimensional environmental policies that require some regulations to be traded off or prioritized over others.
Employing a model that gauges the public’s WTP for environmental goods can also bolster conservation fundraising efforts, as marketing that targets public payments often benefits from information on how much potential donors are willing to contributed for the restoration of individual services. Our approach ultimately offers social scientists and economists the opportunity to use the estimates we generated to evaluate other policy scenarios; although high costs prevent economic studies from being performed for every option, benefit transfers offer a systematic way to reuse information in different situational contexts. This potential for data recycling is a valuable tool for policymakers evaluating strategies for multidimensional ecosystems—especially those that require informed regulations tailored to their individual needs.