New Issue of Resources Magazine: On the Frontiers of Climate Policy

Resources 189; 2015For more than 60 years, experts at RFF have been analyzing the economic impacts of environmental policies. This year, in particular, we are engaged on the frontiers of several important climate-related policy decisions at the regional, national, and international levels.

One conversation under way is focused on the significant commercial developments in the US Arctic, from fishing and shipping to oil and gas exploration. Scientists find there are observable consequences of global warming in the region, so new development—particularly of oil and gas—brings both opportunities and challenges. In the new issue of Resources, articles by former deputy secretary of the Interior David J. Hayes and Carol Lloyd of the National Petroleum Council explore how we balance this development with protection of the Arctic’s pristine environmental assets, while ensuring that local communities reap the benefits.

On the national level, some of our scholars are focused on EPA’s Clean Power Plan—the first policy that will significantly reduce emissions from the existing fleet of power plants across the United States. Many of the most important policy choices will be made by state governments, which will decide how to meet the federally set goals. Most of the technology and policy options available as compliance mechanisms are not new to the states or the electric utilities. A number of these options are outlined in this issue by RFF’s Karen Palmer and Anthony Paul, who have been working extensively with various stakeholders.

Finally, RFF is engaged in the coming international climate negotiations to be held in Paris at the end of the year. A key question is how to compare nations’ pledges and efforts to ensure a fair and measurable outcome. RFF Visiting Fellow Joe Aldy of Harvard and University Fellow Billy Pizer of Duke have been tackling this question and, in this issue, suggest a series of metrics to guide a comparative analysis of the national action plans.

The international community has its 
eyes set, in particular, on the United States, where the record on climate policy over the past decade has not been considered aggressive or adequate. Indeed, critics of US policy are asking whether there is political support in the United States to back up our government’s pledges. In my view, political support is growing, as seen in public opinion polls, state actions, and changing public discussion. But the proof is in the pudding.

RFF is not in the business of advocacy or lobbying, but we have done—and will continue to do—extensive analysis of the policy options for addressing climate change.

In this issue:

Infographic

Pits versus Tanks: Comparing Storage Methods for Fluids Used in Fracking

Commentary

Getting Past the “Yuck Factor”: Recycled Water in Florida and Other States
Yusuke Kuwuyama and Hannah Kammen

Q&A

A View of the Environmental Policy Landscape from Outside the Beltway
An Interview with Paul Portney

Features

Should We Price Carbon from Federal Coal?
Alan Krupnick, Nathan Richardson, Joel Darmstadter, and Katrina McLaughlin

The Road to Paris and Beyond: Comparing Emissions Mitigation Efforts
Joseph E. Aldy and William A. Pizer

America’s Awakening as an Arctic Nation
David J. Hayes

The Promise of US Arctic Oil and Gas Potential
Carol Lloyd

Complying with EPA’s Clean Power Plan: Policy Options for States
Karen Palmer and Anthony Paul

Falling Oil Prices: Implications in the United States
Stephen P.A. Brown

To view all articles from this issue of Resources, visit our website.

RFF ON THE ISSUES: North American energy and climate policy; Park funding legislation stalls

In this edition:

  • Insight into opportunities for North American energy and climate partnerships
  • A roundup of RFF research on assessing and funding US parks

North American Energy and Climate Policy                

Energy ministers from the United States, Canada, and Mexico have established a working group designed to “enhance cooperation and integrate more climate change–related policies” into their energy dialogues. Group members have said that they will focus on “aligning regulations to control emissions from the oil and gas sector,” as well as improving grid efficiency and clean energy technologies. Read More

How Bad is the Nation’s Transportation Infrastructure, and What are Future Spending Needs?

In last week’s blog post, we described the current dilemma in funding the Federal Highway Trust Fund (HTF). Congress just passed another in a long series of short-term extensions for surface transportation funding, but a long-term solution is what is needed. In this entry, we provide additional context for the problem by giving an overview of the current state of roads and bridges in the United States. We then review estimates of how much funding is projected to be needed in the future.

There is no consensus for assessing the quality and performance of the nation’s roads or bridges, but there are a number of measures that can provide benchmarks. The general picture, contrary to popular opinion, is that the quality of both roads and bridges has been improving nationwide over the last 25 years, but a good deal of infrastructure remains in fair or poor condition. In addition, there is a great deal of heterogeneity across states in the quality of roads and bridges. Finally, roadway congestion has become a significant problem in many urban areas, but congestion levels have fallen recently in many cities.

Figure 1. Bridge Conditions by County

Figure 1. Bridge Conditions by County

Bridges. Federal Highway Administration (FHWA) data shows that the number of bridges listed as structurally deficient has halved since 1992, with roughly 9,000 bridges removed from the structural deficiency list since 2010. Despite these marked improvements, there remains a significant backlog of improvement projects nationwide – a quarter of bridges remain rated as either structurally deficient or functionally obsolete, and many are over 50 years old. Former Transportation Secretary Ray LaHood explained, “[structurally deficient bridges] need to be really either replaced or repaired in a very dramatic way … I don’t want to say they’re unsafe, but they’re dangerous.” Overall, ARBTA reports that more than $115 billion in bridge work awaits funding. Read More

Crude Oil Prices, Climate Change, and Global Welfare

This post originally appeared on Robert Stavins’s blog, An Economic View of the Environment.

A few weeks ago, I participated in a panel session titled, “The Remarkable Transformation of the Energy Sector: Does it Also Transform Our World.” The motivating question was: “Is the dramatic decline in oil prices a complete gift to the West because of the enormous funds being saved, or is it an unintended Trojan horse because development of renewable energy as well as new fossil-fuel sources will decline in the West, posing longer new challenges?”

The other members of the panel – from private industry – had vastly more expertise (and relevant insights) on fossil-fuel markets, but here’s what I had to say. This is hardly at the sweet spot of my professional competence, so I welcome your comments and corrections! In general, how would you answer that question?

Causes

I start (and started) from the premise that the dramatic decline in crude oil prices that took place from August, 2014 ($96/barrel), to March, 2015 ($44/barrel), was due – on the one hand – to decreased demand, a function of slow economic growth in Asia, Europe, and elsewhere, endogenous, price-driven technological change leading to greater fuel efficiency, and policy-driven technological change that also has been leading to greater fuel efficiency, such as more stringent Corporate Average Fuel Economy (CAFE) standards in the United States; and – on the other hand – was due to increased supply, partly a function of the growth of unconventional (tight) U.S. oil production (a product of the combination of two technologies – horizontal drilling and hydraulic fracturing).

Read More

This Is the Time for a Long-Term Solution to Highway Funding

In this series of blog posts, RFF researchers take a look at the current state of the Nation’s transportation infrastructure and evaluate various policies for financing the Highway Trust Fund.

Facing a May 31st deadline to extend surface transportation funding, Congress is opting for a two month extension, the 33rd short-term measures to shore up  the Highway Trust Fund in the last 6 years. The Fund faces insolvency at the end of this very short time frame, forcing a discussion about a much-needed long-term solution to the Fund’s continuing deficit.

The Fund was established in 1956 to launch the Interstate Highway System and finances roughly one quarter of all roadway spending nationwide, including highway and bridge expansion and maintenance. The major sources of revenue for the Fund are taxes on gasoline and diesel fuels. The per-gallon tax rates on these fuels, 18.4 cents for gasoline and 24.4 cents for diesel, have remained unchanged since 1993. In real terms, the value of these taxes has decreased by nearly 40% since that time.

Offsetting the effect of inflation on Highway Trust Fund revenue, gasoline consumption steadily rose from 1990 to 2007. Figure 1 shows that the Fund’s expenditures and revenues matched quite well during this period.  In 2008, however, the Great Recession marked declines in both economic activity and miles driven. Following the first decline in vehicle miles traveled in 20 years, gasoline sales and Highway Trust Fund revenues have remained low.

Yet, federal spending for roads and bridges continued its upward trajectory.  Over the past twenty years, Highway Trust Fund outlays have been growing at about 2.5% a year, roughly on pace with the growth rate in economic activity. The widening gap between expenditures and revenues, displayed in Figure 1, has increased the need for a long-term funding solution.

Figure 1. Highway Trust Fund Outlays and Revenues (current dollars)

highway fund chart 2

With no surface transportation funding bill since 2005 lasting longer than two years, Congress has continually propped up the Fund with transfers from federal funds — totaling $62 billion since 2008. Despite these infusions, the United States has dropped from eighth to sixteenth globally in road infrastructure quality during that time (World Economic Forum 2008, 2014).

Without Congressional fixes – whether short or long term – these troubling trends are likely to continue, even with a recovering economy. New Corporate Average Fuel Economy (CAFE) standards starting at the 2012 model year will gradually require much better fuel economy from all cars through the 2025 model year. With vehicles using less gasoline, the Fund will generate decreased revenue. Despite low oil prices and a rebounding economy, the Federal Highway Administration projects that it is unlikely that vehicle miles traveled will reach the high growth seen in the 1990s and early 2000s.

Given these trends, CBO sees shortfalls reaching $168 billion by 2025, with annual shortfalls over the next decade increasing from $13 to $22 billion. Without a departure from current policy, this deficit will need to be addressed by either continued General Fund transfers or significant cuts to federal surface transportation funding—an unattractive proposition given the poor state of our roads and bridges.

In the two months leading up to the July 31st deadline for Congressional action, we will continue the debate on how to address the Nation’s crumbling infrastructure and the Highway Trust Fund’s precarious financial situation. In next week’s blog post here on Common Resources, we will discuss the poor state of roads and bridges in the United States. After outlining the need for highway funding, we will discuss various funding mechanisms in subsequent posts.

Parks and Recreation this Memorial Day Weekend

This weekend, local, state, and national parks around the country are opening their beaches, offering discounted admission, and providing a host of special programs to attract the thousands of people looking to head outside for Memorial Day weekend. Of course, they’re also hoping to attract the associated revenue, as many parks attempt to address funding issues in the face of continuing budget cuts.

RFF experts Margaret A. Walls and Juha V. Siikamäki have been working to help decisionmakers better understand the costs and benefits of parks, and provide options for parks that are facing such challenges. Below are samples of their recent research.

Private Funding of Public Parks: Assessing the Role of Philanthropy

Margaret A. Walls

“Is there a role for philanthropy in all of this? The short answer is yes. However, the real question lies in what this role should be. In some cities, conservancies and other park organizations are well established. But other communities should explore the potential of direct-giving mechanisms through the establishment of endowment or trust funds. Ultimately, these funds might be able to provide sustainable year-to-year funding through their interest earnings.”

Paying for State Parks: Evaluating Alternative Approaches for the 21st Century

Margaret A. Walls

“It is important to understand that no one-size-fits-all approach will work for state park systems given the diversity in their lands and facilities and the differences in size and scope. Moreover, the problems facing many states vary in degree of severity, with some states facing a genuine crisis and others on better footing.” Walls notes that some options to explore include: user fees, privatization, dedicated public funding, and voluntary private contributions.

State Parks: Assessing Their Benefits

Juha V. Siikamäki

“The estimated recreation services from the two million acres of state parks established between 1975 and 2007—about one-fifth the total acreage of state parks—already exceed the currently reported operation and management costs of the entire U.S. state park system ($3.85 billion versus $2.3 billion, annually). In total, the entire U.S. state park system is estimated to generate about 2.2 billion hours of nature recreation, worth an estimated time value of about $14 billion, annually. Although the capital cost sunk in park real estate is not included in this calculation, it is unlikely that adding it to the assessment would make the overall costs of state parks greater than their benefits.”

The State of the Great Outdoors: America’s Parks, Public Lands, and Recreation Resources

Margaret A. Walls, Sarah R Darley, Juha V. Siikamäki

“Some … have expressed concern about a decline in participation in many outdoor activities, not just hunting and fishing. They have decried what they call “nature-deficit disorder” among children and a general lack of connection with nature and the outdoors by all Americans. The decline in outdoor recreation … is thought to be contributing to the nation’s obesity problems, another particular concern for children. Indeed, … recreation is down from previous years. On the other hand, other survey information seems to show that overall participation has held steady, but that shifts have occurred among specific activities.”

Examining the Benefits of Invasive Species Prevention: The Role of Invader Temporal Characteristics

Hemlock woolly adelgid

Hemlock woolly adelgid (Adelges tsugae), Jacobsburg Environmental Education Center, Northampton County. (source: Nicholas A. Tonelli / flickr)

International trade and travel can enable otherwise innocuous species to wreak havoc in new and novel environments. Evaluating the economic benefits of preventing the arrival and establishment of a damaging, invasive species through quarantine or preventative measures requires considering its total long-term damages from the time of its arrival onward.  Previous literature has recognized that the spatial dynamics of bioinvasions—including spread rates, invasion range sizes, and geographic resource distribution—must be considered when estimating total invasion costs. However, most empirical studies of invasion impacts abstract away from invasion dynamics by only estimating short-term damages, limiting the usefulness of such estimates for evaluating quarantine and prevention policy.

In a new article in the journal Ecological Economics, Benefits of Invasion Prevention: Effects of Time Lags, Spread Rates, and Damage Persistence,* my colleague Andrew Liebhold, of the US Forest Service, and I theoretically examine a broader set of temporal factors affecting long-term damages, including invasion lags (i.e., the time between an invader’s arrival and the initiation of damages) and damage persistence. These attributes address the substantial invasion lag that most invading species exhibit and the considerable variation across species in how long damages last at an invaded location. We also empirically estimate long-term damages for three bioinvaders in the United States, from the time of their introduction to their potential future saturation of the eastern United States. The invaders in question are three forest insect species currently spreading through North America: the gypsy moth (Lymantria dispar), the hemlock woolly adelgid (Adelges tsugae), and the emerald ash borer (Agrilus planipennis). Each of these damaging forest pests differs in terms of its spread rate, damage persistence, and lag between introduction and spread, offering useful illustrations of the temporal patterns in question. Read More

A Look at New Markets for Credit Trading under US Standards for Automobile Emissions and Fuel Economy

In the United States, the Corporate Average Fuel Economy (CAFE) standards that require automakers to produce fuel-efficient vehicles have been in place since the late 1970s. But major changes have come about in recent years to both the rules themselves and how they are to be implemented. Perhaps the most significant change is that automakers must reduce not only oil consumption but also greenhouse gas (GHG) emissions from their vehicles. Specifically, the new rules require significant reductions in both fuel use and GHG emissions by 2025. The figure included here shows the reductions in fuel consumption under the CAFE rules since their inception, as regulated by the National Highway Traffic Safety Administration (NHTSA), as well as the reductions in both fuel consumption and GHG emissions that are forecast under the new rules up to model year 2025. GHG emissions are regulated separately, by the US Environmental Protection Agency (EPA), but the two agencies have attempted to harmonize the rules. The standards require each manufacturer’s fleet of vehicles to meet a minimum average miles per gallon (NHTSA rules) and a maximum GHG emissions rate (EPA rules). Cars and light trucks are subject to separate standards, and those for trucks are less stringent.

CAFE Standards (gallons per 100 miles) and EPA GHG Standards (grams CO2 per 100 miles). Note: See the RFF discussion paper  referenced in this blog post for source information and more details.

CAFE Standards (gallons per 100 miles) and EPA GHG Standards (grams CO2 per 100 miles) 
(Note: See the RFF discussion paper referenced in this blog post for source information and more details.)

Because the new regulations become much stricter over time, requiring fuel consumption and GHG emissions to fall by roughly 50 percent, a number of new provisions were added to give automobile companies more flexibility to meet the standards. In a new RFF discussion paper, we examine these new flexibilities, which include the ability for manufacturers to trade fuel consumption and emissions credits between cars and trucks in their own fleets, and to trade credits with other manufacturers. We take a close look at this latter provision, which for the first time allows for the creation of a market for buying and selling emissions and fuel consumption credits. In addition, EPA’s rules allowed manufacturers to over-comply with target levels of GHG emissions before the rules went into effect and bank those credits for future compliance beginning in 2012. NHTSA has always allowed some banking of credits to meet the fuel economy standards. Read More

Joel Darmstadter: If Not a Carbon Tax and Universality, What Then?

RFF’s own Joel Darmstadter gave the commencement speech at Penn State’s College of Earth and Mineral Sciences’ graduation ceremony on May 8.  His remarks touched on the very difficult policy challenges associated with addressing climate change against the background of two important impending milestones: the implementation of the Clean Power Plan and the international climate negotiations in Paris this winter.

 

Remarks by Joel Darmstadter, Senior Fellow, Resources for the Future. May 8 2015

President Barron, Trustee Pope, Dean Easterling, Honored Faculty, Class of 2015, Ladies and Gentlemen:

When a college — whose very name signals attention to the world’s natural resources — honors its graduates in a year when concern over those resources is particularly in the spotlight, it’s a unique occasion. And I’m grateful for having been asked to share in the occasion.

RFF Sr. Fellow Joel Darmstadter

RFF Sr. Fellow Joel Darmstadter

On the key issue of greenhouse warming — my topic tonight — two especially notable milestones await us. In the first case, although it continues to face some defiant hostility, EPA’s ambitious carbon abatement strategy—labeled the “Clean Power Plan”— is due to be implemented within the next several months.

As significant as that achievement will be, it will be followed not long after by perhaps an even more pivotal event: the November international Paris conference — perhaps the last opportunity for some years — to negotiate a global protocol of policies required to confront the climate change threat.

My remarks, which take the science of climate change as a given, are primarily directed to some of those key policy challenges, especially the elusive pursuit of a U.S. and global tax on carbon dioxide emissions, which might help us achieve, rather than merely stumble toward, a multi-country climate accord. (I should add that what you’ll be hearing are my personal views — not necessarily those of my colleagues at Resources for the Future.)

A very old joke pokes fun at some economists’ predilection for theoretically elegant, but useless, solutions. Several marooned and starving fellows, with just one unopened can of beans at hand, turn to the economist in their group, who, without hesitation, says “let us assume we had a can opener.”

A Global Carbon Tax: Advice and Dissent

Fast forward to a proposition you wouldn’t expect to be almost as evasive: let us assume we had a global carbon tax (i.e., a price on carbon) — a measure that would oblige all the world’s countries to   limit emissions of CO2 to levels beyond which dangerous climatic change appears likely. A global carbon tax set at, say, around $30 per metric ton of CO2 is meant to avoid the damage that that additional ton would inflict on worldwide society. (Time doesn’t allow consideration of non-carbon greenhouse gases.) Read More

RFF ON THE ISSUES: Fracking contamination concerns; Clean Power Plan legality

In this edition:

  • A survey of homeowner opinions on shale gas development risks
  • Commentary on legal challenges to EPA’s Clean Power Plan 

Fracking Contamination Concerns                                       

A new report in the Proceedings of the National Academy of Sciences offers “the first case published with a complete story showing organic compounds attributed to shale gas development found in a homeowner’s well.” The study’s authors analyzed drinking water from three Pennsylvania houses, noting that “contamination may have stemmed from a lack of integrity in the drill wells” rather than the fracking process itself. Read More