Aligning Carbon Markets: The Case of California and the Regional Greenhouse Gas Initiative
Incrementally aligning policies in distinct carbon markets—linking by degrees—can allow programs to experience immediate benefits of sharing best practices in program design. Together with colleagues at RFF and Yale, we’ve examined the details and prospects for the cap-and-trade programs in California and the Northeast. Read more here.
New Issue of Resources Magazine
Image: Resources for the Future
In keeping with the theme for RFF’s 60th anniversary year, the latest issue of Resources magazine looks ahead to the next decade of economic policymaking. Check out features by RFF president Phil Sharp and others including:
Options for US Climate Policy
Pete Nelson and Kristin Hayes
With national cap-and-trade legislation off the table, RFF experts are focusing on three alternatives for reducing greenhouse gas emissions: the Clean Air Act, a carbon tax, and a clean energy standard.
Ensuring Competitiveness under a US Carbon Tax
Carolyn Fischer, Richard Morgenstern, and Nathan Richardson
Tax exemptions, industry rebates, and border tax adjustments can help protect the competitiveness of industries affected by a carbon tax, but they are not equally efficient at achieving economic and environmental goals.
Taxing Carbon: Potential Deficit and Emissions Reductions
Roberton C. Williams III
An innovative modeling approach shows that a US carbon tax could provide a large new source of federal revenue and achieve emissions reductions—but the costs rise dramatically over time with a stringent target.
The Institutional Blind Spot in Environmental Economics
Dallas Burtraw
Although economic tools aim to be efficient and cost-effective, environmental policymaking largely has favored regulation over market-based approaches. One reason may be that economists don’t fully consider how their prescriptions interact with existing federal, state, and local institutions.
To view all articles from this issue of Resources, visit our website or download the Resources app for iPad, iPhone, or Android.
RFF on the Issues
Funding New Energy Technologies
A new initiative by the US Department of Energy is funding research and projects to improve clean energy products. Assistant Secretary of Energy David Danielson noted that one of the goals of the initiative is to improve the cost-competitiveness of these technologies, a move that would ultimately remove their dependence on subsidies.
RFF Research Director and Senior Fellow Margaret Walls was invited to discuss government financing for new energy technologies in a Wall Street Journal online forum, where she calls for the implementation of a price on carbon: “The most important first step to bring these technologies to market is not direct government financing but a carbon price. . . . As carbon-intensive fossil fuels become more expensive, private industry will . . . search for new low-cost alternatives. And as consumers demand more efficient products to lower their energy costs, industry will have incentives to provide them.” She also explains how a carbon tax could be implemented.
This Week in the RFF Library Blog
Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:
Insurance as a Risk Management Instrument for Energy Infrastructure Security and Resilience
The Office of Electricity Delivery and Energy Reliability has released a report that examines the key risks confronting critical energy infrastructure and ways in which the insurance industry can help manage these risks. In most developed countries, insurance is one of the principal risk management instruments for aiding in recovery after a disaster and for encouraging future investments that are more resilient to potential hazards. — via U.S. Department of Energy
Retail Gasoline Price Impact of Compliance with the Renewable Fuel Standard
Contrary to the recent wave of hyperbole coming from the oil industry, the Renewable Fuel Standard (RFS) and its associated “RIN credits” have not been a factor in this spring’s higher retail gasoline prices, according to new analysis conducted by Informa Economics, Inc. In fact, the study found ethanol costs significantly less than gasoline at the wholesale level and is reducing pump prices…— via Informa Economics for the Renewable Fuels Association
Natural Catastrophes and Man-made Disasters in 2012
This study reports on the worldwide economic losses from over 300 natural catastrophes and man-made disasters recorded in 2012 and the cost to the global insurance industry. It specifically analyses the catastrophes cost to society, the insured losses and the gap between insured and non-insured economic losses, which points to… — via Swiss Reinsurance Company
The Impact of Corruption on Climate Change: Threatening Emissions Trading Mechanisms?
…Corruption impacts the success of emissions trading schemes by reducing the overall reliability and effectiveness of GHG markets. The implementation of cap-and-trade systems in both developed and developing countries has been recurrently tainted by cases of fraud and bribery, abuses of power… — via United Nations Environment Programme
Trade and Climate Change
This publication uniquely examines the intersection between trade and climate change from four different but correlated perspectives: the science of climate change, economic aspects, multilateral efforts to tackle climate change, and national climate change policies and their trade effect. — via Brookings Institution
For more from the RFF Library Blog, click here.
Looking for a Sustainable Funding Model for State Parks
Many state park systems are struggling. And in some states, the legislature is making matters worse. It is time to rethink the approach to financing parks and work toward a more sustainable and efficient long-term funding system.
The Kansas City Star recently reported that the Kansas state legislature is proposing to rob Peter to pay Paul – or more accurately, rob the state park system to pay for other state services and programs. The state cut personal income tax rates last year, eliminated taxes on small businesses, and made other changes that drastically reduced revenues – by $800 million per year, or 12.8% of state revenues, by some estimates. As a result, it is now searching for money anywhere it can find it.
One proposal on the table is to take from the state parks department – specifically, take money from a fund whose revenues come from fees paid in the parks, mostly cabin rental fees. To add to the park agency’s budget woes, earlier this year the legislature cut funding that the parks received from state lottery revenues and from the state Department of Transportation. In total, the agency’s budget may drop by 18% in one year.
The state parks agency feels especially aggrieved by the recent move as it has been raising fees and cutting costs to become more self-sufficient over the past year. It is not alone in this regard. Over the past few years, as general fund revenues have declined significantly, many states have increased fees in their state parks. Since the federal government passed the Federal Lands Recreation Enhancement Act (FLREA) in 2004, many federal recreation sites have also charged fees. The FLREA is up for reauthorization in 2014 and many feel that one provision in that law is key to its success: fee revenues collected at a site stay with the site and are used for capital improvement projects, maintenance, park programs, and other activities that benefit visitors.
The enterprise fund model that local governments often use for some of the services they provide works similarly. Accounting and financial reporting under an enterprise fund occurs separately from that of general revenue funds and by law, the money may only be used on expenditures of the fund; it may not be used to support ongoing municipal operations or to cross-subsidize the general fund. In the case of parks, revenues earned in the parks would stay in the parks.
Almost no state park systems use the enterprise fund approach (New Hampshire is a notable exception). The Little Hoover Commission, an independent state oversight agency in California, just released a long-awaited study on California state parks and one of its main recommendations is a move toward an enterprise fund model. The Commission also recommends California look hard at the number of parks it operates and think about turning some over to local and regional park authorities.
In my recent report on state park funding options, I suggested that enterprise funds be given serious attention. For one thing, they would prevent the problem that occurred in Kansas (and in Arizona in 2011 and several other states). But I also warned that states need to be careful not to over-rely on user fees to fund their parks. For one thing, no state has successfully operated a fully self-financed state park system; some public funding is needed. Furthermore, charging a price rations use and in some cases this is inefficient. If there is no congestion and use of the park is “nonrival”—i.e., one person’s use does not take away the amount left for others to enjoy—then charging an entrance fee inefficiently limits use of the park. Fees are appropriate for many services – camping, lodging, equipment rentals, and the like – but not everything.
What’s more, many state parks are badly in need of repairs and upgrades. Charging higher fees in such a setting could backfire. In Washington state for example, funding for state parks has plummeted, and the state turned to fees as a revenue source. As Lynda Mapes of the Seattle Times reports,
The Legislature launched the Discover Pass in 2011, charging visitors $30 a year to use state park facilities.
It was a radical step: No park system in the country is so heavily supported by user fees, and the Discover Pass generated only about half the hoped-for revenue. The cutting got deeper.
“It’s sad,” said Tom Pew, who takes care of a swath of parks from Nisqually to Eatonville to outside Chehalis … We are just getting by with keeping the campgrounds and the restrooms clean. The heavy emphasis on the collection of the fees, that takes staff time too,” Pew said. “We have less contact with the public, and the contact we do have is in more of a negative manner.”
Water Smart—Dollar Smart
Each year, the US government spends billions of dollars to build, maintain, and manage water infrastructure and water resources. Federal principles directing how the US Army Corps of Engineers and other agencies assess, plan, and invest in flood control, water storage, navigation infrastructure, and other water resources date back to 1983. The realities of science, economics, and ecology have long since thrown into doubt the utility of the old principles. Are structural approaches to flood control always better and smarter? How big is “big enough” to evaluate project impacts? What are best practices for tallying project costs—and benefits?
At long last, prompted by Congress, the 1983 principles (and accompanying details) have been updated. The new principles and requirements take major steps in moving federal water management into the 21st century.
- Their target is more comprehensive, applying to all federal agencies, projects, and programs that relate to water resources infrastructure and management. The goal is greater consistency in how agencies evaluate and manage projects.
- The framework is more holistic, requiring a watershed focus and an evaluation of how projects affect natural systems and their functions. Such a focus may prod agencies to consider more options, including how nature itself might offer some low-cost solutions to flood control through, for example, floodplain acquisitions. Its provisions on ecosystem services align with ideas set forth by my RFF colleague Jim Boyd and I.
- The decision processes emphasize collaboration, an imperative for managing water resources in which federal agencies, states, tribes, local governments, and the private sector all own and manage critical water infrastructure and resources.
- The requirements acknowledge risks, uncertainties, and complexities, pointing to the relevance of science and adaptive management that facilitates nimble adjustments in light of new knowledge and circumstances.
The new Principles and Requirements will likely preoccupy water policy wonks and budget bean counters. But their implications potentially touch communities across the nation struggling to repair antiquated water infrastructure, stave off damages of catastrophic storms, secure water supplies, and enhance water quality. Water is life, and this nation’s communities can’t afford missed opportunities for better, cheaper, smarter ways to manage water—whether for drinking, irrigation, and power—and reduce risks from flooding, contamination, coastal erosion, and degradation of natural systems that keep water clean and sustain water supplies. The new Principles and Requirements lay the foundations for creative and cost-effective water management solutions.
RFF on the Issues
Genetically Modified Foods
Select US grocery stores announced that they will not sell genetically modified salmon, despite the Obama administration’s preliminary approval of the product. Whole Foods also said that it will label all genetically modified foods by 2018—a requirement many advocacy groups have pressured the FDA to implement for all grocery stores.
At an RFF First Wednesday seminar moderated by Visiting Scholar Randall Lutter, experts in agricultural biotechnology discussed the future of genetically modified foods, debating how labeling products as genetically modified could affect the marketing, consumption, and economic sustainability of these foods. Video of the seminar is available here.
This Week in the RFF Library Blog
Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:
Levees and the National Flood Insurance Program: Improving Policies and Practices
The Federal Emergency Management Agency’s (FEMA) Federal Insurance and Mitigation Administration (FIMA) manages the National Flood Insurance Program (NFIP), which is a cornerstone in the U.S. strategy to assist communities to prepare for, mitigate against, and recover from flood disasters. The NFIP was established by Congress with passage of the National Flood Insurance Act in 1968, to help reduce future flood damages... — via National Research Council
Canadian Oil Sands: Life-Cycle Assessments of Greenhouse Gas Emissions
This report discusses the basic methodology of life-cycle assessments and compares several of the publicly available studies of GHG emissions data for Canadian oil sands crudes against each other and against those of other global reference crudes. As congressional concern over the environmental impacts of Canadian oil sands production may encompass both a broad understanding of the resource… — via Congressional Research Service
Oil Sands and the Keystone XL Pipeline: Background and Selected Environmental Issues
…Although some groups have opposed previous oil pipeline permits, opposition to the Keystone XL proposal has generated substantially more interest among environmental stakeholders. Pipeline opponents are not a monolithic group: some raise concerns about potential local impacts, such as oil spills or extraction impacts in Canada; some argue the pipeline would have national energy and climate change policy implications. — via Congressional Research Service
Transitions to Alternative Vehicles and Fuels
Light-duty vehicles (LDVs) in the US may be able to reduce petroleum use by 50% by 2030, and by 80% by 2050; and reduce greenhouse gas (GHG) emissions by 80% by 2050, according to the newly published results of a two-year study by a committee convened by the National Research Council. — via National Research Council
Light-Duty Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy Trends: 1975 Through 2012
EPA is touting significant greenhouse gas (GHG) reductions from the transportation sector in a new report, finding that stricter agency fuel economy and GHG rules for mobile sources helped contribute to a 13 percent reduction in carbon dioxide (CO2) emissions from vehicles between 2007 to 2012. — via U.S. Environmental Protection Agency
For more from the RFF Library Blog, click here.
New RFF Publications
A regular listing of the newest RFF discussion papers, issue briefs, and reports.
- The Controversy over US Coal and Natural Gas Exports | Joel Darmstadter | RFF Issue Brief 13-01
- Experimental Departures from Self-Interest When Competing Partnerships Share Output | Josh Cherry, Stephen W. Salant, and Neslihan Uler | RFF Discussion Paper 13-07
- What Changes Energy Consumption, and for How Long? New Evidence from the 2001 Brazilian Electricity Crisis | Francois Gerard | RFF Discussion Paper 13-06
- Regulating Greenhouse Gases from Coal Power Plants under the Clean Air Act | Joshua Linn, Erin Mastrangelo, and Dallas Burtraw | RFF Discussion Paper 13-05
- Economic Ideas for a Complex Climate Policy Regime | Dallas Burtraw and Matt Woerman | RFF Discussion Paper 13-03
Thinking Like an Economist within the Complex Climate Policy Regime
Building on recent work that highlights the need to account for institutions in crafting economic solutions to environmental problems, Matt Woerman and I look specifically to the implementation of climate policy—and how incentive-based thinking can help. Read more here.
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