Hugging Trees

Kevin Lewis

January 29, 2010

The Economics of Allowing More U.S. Oil Drilling

Robert Hahn & Peter Passell
Energy Economics, forthcoming

This paper examines the likely impact of developing U.S. energy resources on oil prices. In addition, we examine the benefits and costs of allowing drilling in the Arctic National Wildlife Refuge and the areas of the Outer Continental Shelf that were until recently closed to drilling. We find that allowing oil drilling in ANWR and the off-limits OCS would be likely to have a very modest impact on oil prices - on the order of one percent. However, a benefit-cost analysis of developing ANWR and off-limits OCS suggests that the benefits are likely to exceed the costs.


Quality and the Commons: The Surf Gangs of California

Daniel Kaffine
Journal of Law and Economics, November 2009, Pages 727-743

In open‐access settings, high‐quality resources are lucrative, yet fencing out potential entrants may be very costly. I examine the endogenous creation of property rights, focusing on the incentives that resource quality provides to close the commons. Analytical examples explore the incentives of locals to increase or decrease the strength of property rights conditional on how locals and nonlocals value the quality of the resource. The empirical analysis looks at a unique resource - surf breaks - and estimates the relationship between the exogenous quality of the resource (waves at the surf break) and local attempts to seize the common surf break. Using cross‐ sectional data on 86 surf breaks along the southern California coast, this paper finds that a 10 percent increase in quality leads to a 7-17 percent increase in the strength of property rights.


Estimating least-developed countries' vulnerability to climate-related extreme events over the next 50 years

Anthony Patt, Mark Tadross, Patrick Nussbaumer, Kwabena Asante, Marc Metzger, Jose Rafael, Anne Goujon & Geoff Brundrit
Proceedings of the National Academy of Sciences, forthcoming

When will least developed countries be most vulnerable to climate change, given the influence of projected socio-economic development? The question is important, not least because current levels of international assistance to support adaptation lag more than an order of magnitude below what analysts estimate to be needed, and scaling up support could take many years. In this paper, we examine this question using an empirically derived model of human losses to climate-related extreme events, as an indicator of vulnerability and the need for adaptation assistance. We develop a set of 50-year scenarios for these losses in one country, Mozambique, using high-resolution climate projections, and then extend the results to a sample of 23 least-developed countries. Our approach takes into account both potential changes in countries' exposure to climatic extreme events, and socio-economic development trends that influence countries' own adaptive capacities. Our results suggest that the effects of socio-economic development trends may begin to offset rising climate exposure in the second quarter of the century, and that it is in the period between now and then that vulnerability will rise most quickly. This implies an urgency to the need for international assistance to finance adaptation.


Justice for All? A Cross-Time Analysis of Toxics Release Inventory Facility Location

Heather Campbell, Laura Peck & Michael Tschudi
Review of Policy Research, January 2010, Pages 1-25

This paper contributes to the environmental justice literature by addressing several outstanding issues in a single study. Using a cross-time data set that allows us to control for the prevalent "chicken-and-egg" or "which-came-first" problem, we analyze the relative importance of poverty and race/ethnicity in an analysis that includes economic costs, potential legal costs, and potential collective action. Because the most appropriate functional form is not obvious, we use several methods, including Tobit, Poisson, and ordinary least squares, on different forms of the dependent variable. In every case, controlling for the population present at the time of disamenity location and controlling the other factors mentioned, we find evidence of disproportionate collocation based on race/ethnicity, but not on poverty alone. We also find that the potential for collective action decreases the likelihood of receipt of the studied disamenities.


Heterogeneous Harm vs. Spatial Spillovers: Environmental Federalism and US Air Pollution

Spencer Banzhaf & Andrew Chupp
NBER Working Paper, January 2010

The economics of environmental federalism identifies two book-end departures from the first-best, which equates marginal costs and benefits in all local jurisdictions. Local governments may respond to local conditions, but ignore inter-jurisdictional spillovers. Alternatively, central governments may internalize spillovers, but impose uniform regulations ignoring local heterogeneity. We provide a simple model that demonstrates that the choice of policy depends crucially on the shape of marginal abatement costs. If marginal costs are increasing and convex, then abatement cost elasticities will tend to be higher around the local policies. This increases the deadweight loss of those policies relative to the centralized policy, ceteris paribus. Using a large simulation model, we then empirically explore the tradeoffs between local versus second-best uniform policies for US air pollution. We find that US states acting in their own interest lose about 31.5% of the potential first-best benefits, whereas the second-best uniform policy loses only 0.2% of benefits. The centralized policy outperforms the state policy for two reasons. First, inter-state spillovers are simply more important that inter-state heterogeneity in this application. Second, welfare losses are especially small under the uniform policy because elasticities are much higher over the relevant range of the cost functions.


Without zoning: Urban development and land use controls in Houston

Zhu Qian
Cities, February 2010, Pages 31-41

Houston is the only major city in North America without zoning. The growth of Houston illustrates a traditional free market philosophy in which land use zoning is seen as a violation of private property and personal liberty. This paper explores how the lack of zoning has an impact on land use controls and urban development in Houston. Using a theoretical framework derived from institutional economics and public choice theories for institutional analyses of land development controls, it explores how local land use policies made by both the local government and non-governmental sectors shape urban development in Houston. The study results show that despite the city's lack of zoning, local land use regulatory policies made by the municipality have significant influence on urban development. Additionally, civic and private organizations such as super neighborhoods and homeowner associations fill the gaps left by the lack of land use zoning. These two aspects contribute to land use controls and urban development of the city. The study finds that land use controls by private contract and by government legislative intervention are not mutually exclusive or immutable; that equity goals are not met in market approaches, and public planning intervention is necessary; and that deed restrictions might be better at facilitating property sales and maintenance than at improving neighborhood welfare and governance.


The Greenness of China: Household Carbon Dioxide Emissions and Urban Development

Siqi Zheng, Rui Wang, Edward Glaeser & Matthew Kahn
NBER Working Paper, December 2009

China urbanization is associated with both increases in per-capita income and greenhouse gas emissions. This paper uses micro data to rank 74 major Chinese cities with respect to their household carbon footprint. We find that the "greenest" cities based on this criterion are Huaian and Suqian while the "dirtiest" cities are Daqing and Mudanjiang. Even in the dirtiest city (Daqing), a standardized household produces only one-fifth of that in America's greenest city (San Diego). We find that the average January temperature is strongly negatively correlated with a city's household carbon footprint, which suggests that current regional economic development policies that bolster the growth of China's northeastern cities are likely to increase emissions. We use our city specific income elasticity estimates to predict the growth of carbon emissions in China's cities.


Finessing the fuel: Revisiting the challenge of radioactive waste disposal

William Pickard
Energy Policy, February 2010, Pages 709-714

It is pointed out that the apparent decision of the United States to end development of the Yucca Flat, Nevada repository for permanent disposal of radioactive waste may inadvertently place it at variance with the disposal principles of the International Atomic Energy Agency (IAEA) which caution nuclear nations that "The burden on future generations shall be minimized by safely disposing of high level radioactive wastes at an appropriate time, technical, social and economic factors being taken into account." It is then shown that the IAEA's ten technical criteria for underground disposal can seemingly be met by storing vitrified waste a kilometer underground in the crystalline basement rock of a mid-continent shield, where: (a) it should be invulnerable to redistribution by incompetence, natural disaster, or terrorism and (b) there is no obvious pathway for leakage into the biosphere. Finally, a method is proposed by which the storage impasse may be broken.


Do Oil Windfalls Improve Living Standards? Evidence from Brazil

Francesco Caselli & Guy Michaels
NBER Working Paper, December 2009

We use variation in oil output among Brazilian municipalities to investigate the effects of resource windfalls. We find muted effects of oil through market channels: offshore oil has no effect on municipal non-oil GDP or its composition, while onshore oil has only modest effects on non-oil GDP composition. However, oil abundance causes municipal revenues and reported spending on a range of budgetary items to increase, mainly as a result of royalties paid by Petrobras. Nevertheless, survey-based measures of social transfers, public good provision, infrastructure, and household income increase less (if at all) than one might expect given the increase in reported spending. To explain why oil windfalls contribute little to local living standards, we use data from the Brazilian media and federal police to document that very large oil output increases alleged instances of illegal activities associated with mayors.


Trade sanctions, financial transfers and BRIC participation in global climate change negotiations

Huifang Tian & John Whalley
Journal of Policy Modeling, January-February 2010, Pages 47-63

Two effects are at issue in evaluating country incentives to participate in global carbon emission initiatives: a utility loss from reduced consumption due to reduced use of fossil fuels and a gain from lowered temperature change. The latter accrues to all countries. Own country emissions reductions are typically not in the self interest of countries and hence countries will not participate in global climate negotiations, unless the perceived damage from climate change is very large and much larger than damage estimates in the Stern review. We use Stern based damage estimates and investigate how the incentives for large population low wage rapidly growing countries in the BRIC group (Brazil, Russia, India, China) to participate in global climate change negotiations both as a sub-global coalition and individually can be affected by penalties (tariffs) inflicted or financial transfers made to them by the OECD. We assess what levels of other country trade measures linked to non-participation are needed to induce compliance as an all or nothing discrete choice. We also analyze participation linked to financial transfers. We use a general equilibrium model calibrated to a 2006-2056 base case, and capture induced changes in the global trade equilibrium in our analyses. Our results suggest that only very high tariffs of over a hundred percent by all other countries, or even higher tariffs by the OECD alone, could induce participation by BRIC countries. Equally, large financial transfers would be needed.


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