Standards vs. Incentives

Here is some additional reading from the US EPA on standards vs. incentives.

More detail is provided in this document (also from EPA). 

Here is a nice paper on the topic from the World Resources Institute.

What are some success stories where economic incentives have been used to reduce pollution?

Incentives and electricity use

Here's an interesting (and short) article from the WP regarding electricity use and incentives. Obviously it's a complicated issue, but interesting in that both producer and consumer face incentives to reduce electricity.

Here is a short video describing an incentive to reduce energy use from Duke Progress. $25/year isn't much of an incentive, but I just signed our house up to check it out.

With regard to the article, what are the incentives for the producers? What are the incentives for consumers?

With regard to the Duke incentive, why are they doing this?

Other than reducing your power bill, what are some other examples of economic incentives to reduce electricity use?

Welcome CERMES students!

Welcome CERMES students!

From today forward we will be joined by 14 students from the Centre for Resource Management and Environmental Studies (CERMES) at the University of the West Indies - Cave Hill.

These students come from Barbados, Belize, The Bahamas, Canada, Guyana, Jamaica, St. Lucia, Trinidad & Tobago and the U.S. I hope I didn't forget anyone...and I really hope that they will be more active on the blog than my UNCW students. Of course, it's not possible for them to be less active.

Biodiversity as a global public good

Below is an excerpt from a recently published manuscript regarding the conservation of biodiversity.  

Citation:  Rands, Michael RW, et al. "Biodiversity conservation: challenges beyond 2010." Science 329.5997 (2010): 1298-1303.

Here is a link to the full article

"...To address the continued global loss of biodiversity, we propose the pursuit of three interconnecting priorities: (i) to manage biodiversity as a public good, (ii) to integrate biodiversity into public and private decision-making, and (iii) to create enabling conditions for policy implementation. 

Managing biodiversity as a public good. An appreciation of biodiversity as a public good (65) and of its economic value (66) is, we believe, central to future effective conservation. Biodiversity loss is rarely the intended consequence of human actions; more often it is an unintended side effect of decisions taken for other reasons—an economic “externality” (67). Biodiversity is a special kind of externality, as the impacts of a particular action are often distant in space and time (e.g., local rainforest loss may affect the global carbon cycle, with consequences for future generations). This makes effective regulation difficult, as no single body has jurisdiction over the world’s biodiversity. It also makes transaction-based solutions difficult, because those who damage biodiversity are often widely separated, in space or time, from those who experience the consequences. Actors have few incentives or opportunities to change their behavior, whether they are smallholder households planning their annual agricultural cycles or large multinational companies determining their corporate priorities. Thus, understanding and managing biodiversity as a global public good, which must be provided through conscious collective choices (68), is fundamental to achieving its conservation (5).

The recognition of biodiversity as a public good is not a new concept, and in recent years economists have made substantial progress in developing valuation techniques that quantify the local and global benefits of biodiversity (69). Measuring the economic values of biodiversity (5) and estimating spatially explicit economic values of services across landscapes to inform management decisions (70) are vital. However, making these values explicit is insufficient to bring about a change in behavior, unless supporting public policies are in place that either reward positive individual actions or penalize harm. Economists need to work more closely with conservationists and policy makers to develop intervention strategies that shift individual actors toward more biodiversity-friendly behavior, using regulatory devices as well as incentives, thereby securing the provision of biodiversity conservation as a global public good. 

Integrating biodiversity into public and private decision-making. The value of biodiversity must be made an integral element of social, economic, and political decision-making, as is starting to happen with carbon and climate change. Government, businesses, and civil society all have crucial roles in this transition.

For government, maintenance of stocks of natural capital must become an explicit, accountable, and implemented element of policy. Concern for biodiversity cannot be restricted to a nation’s environment ministry but must extend across all sectors of government, such as treasury, industry, and defense. Policy change will require clear and cost-effective metrics of natural capital consumption and depletion (71) and the development of systems of public accounts that include both sustainability (72) and the specific issue of biodiversity loss (5). Government staff and politicians may need in-service training in biodiversity science and ecological economics, with effective research support. Research investment will need to focus on applied transdisciplinary problems. Government will need to remove perverse subsidies detrimental to biodiversity, such as in agriculture, forestry, and fisheries. Fishing subsidies encourage overexploitation of two-thirds of fish stocks across the globe, threatening both the fishing industry (worth $80 billion to $100 billion per year) and the 27 million people dependent on it (5, 73). Government policy needs to integrate biodiversity conservation, poverty alleviation, and the demands of a sustainable economy (74) to meet the Millennium Development Goals (75). 

The actions of the private sector are central to the future of biodiversity, as the CBD recognized in the context of the 2010 biodiversity target. Corporate environmental performance is increasingly important to investors and therefore corporate leaders (76), and many initiatives now exist to address corporate biodiversity impacts in particular business sectors or individual corporations (e.g., in minerals extraction). Yet a recent survey found that only two of the Financial Times Stock Exchange (FTSE) 100 companies recognize biodiversity to be of strategic importance to their business (5). Biodiversity lacks the visibility achieved by energy and climate change as issues important to corporate decision makers (77). Consistent government regulation is important in providing a level playing field for corporate environmental innovation and competition, but there are challenges in extending regulation internationally (78)...."

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There's a lot of stuff here related to our class. Personally I was really excited to read this in Science, as these are messages that colleagues and I have been trying to deliver for a long time. I highly recommend reading the whole article.

Anyone care to attempt a summary sentence or two?

Real world applications of the Coase Theorem

Real world applications of the Coase Theorem are tough to come by.
Here are a few that might come close:

Biker gang in Sweden paid to move out

Residents paid to accept noise from wind turbines in Oregon

Really rich people, views and redwoods in California

Ronald Coase 1910-2013

Ronald Coase, father of the Coase Theorem, passed away on Monday at the age of 102.   Read about Professor Coase here at the NYT.

Ethanol subsidies and gas taxes

Here is an interesting editorial by Charles Lane at the Washington Post.  The topic is ethanol subsidies.

More on the topic here at Dickinson College. 

Here is an academic article on the topic, where the authors conduct a welfare analysis of the subsidy program (warning: math).

Here is an editorial by Valarie Karplus at the NYT, making a case for higher gas taxes. 

Reading academic articles

You're going to be doing a lot of reading in this class... at least I hope you do. One of the things you'll quickly learn is that reading academic articles (about economics or environmental studies, or anything else) is very different than other types of reading. First, it's hard work. You have to read slowly. You have to read everything at least once, and some parts multiple times. You'll encounter language and vocabulary and math that you don't understand (you'll have to look it up). You have to take notes. Yes, this is a lot of trouble. But, if you want to understand things deeply, this is the price you have to pay.  Real knowledge isn't going to land in your lap without hard work, and you can't find it on a bumper sticker or a YouTube video. You have to read, and then read more. Some of you may hide behind the "its too boring" claim, justifying not reading by saying you're not interested in the topic.  I hope you don't fall into that trap, because honestly, when you really understand something, it absolutely ceases to be boring.  

Dig in. Engage your brain. Read like crazy.

Here is a blog post on the topic of critical reading by Jennifer Raff, a research fellow at UT Austin and occasional cage fighter. She's in the natural sciences (using genetics to answer questions related to anthropology), but much of what she says is pertinent to all disciplines. Hat tip to NR for the link.
 
More on the topic here and here and here.

Agriculture and pollution externalities

Since we'll be talking about hog production externalities on Tuesday, here's a short document from NRDC on livestock pollution.

Here is a cool article from Stanford that summarizes the results of a modeling effort related to the environmental externalities of meat production. I like that they discuss the need for interdisciplinary research and propose pricing policy to reflect the true (social) cost of production. That's Pigouvian taxation.
Here is a link to the research article at the Journal of Environmental Modeling and Assessment. 

More on the topic here from FAO.
Here at the NYT

Here is a report from the Pew Commission that quantifies the external costs of hog production. The good stuff starts on page 18. (warning: graphics-heavy pdf file)

Health externalities from air pollution

A new study from MIT quantifies the adverse health effects from various forms of air pollution in the US. Not surprisingly, road emissions are the leading cause of premature deaths from air pollution. Electricity generation is a close second. Note the discussion of the incidence of damage and population density.  This will come up in class... the marginal external damage from a unit of pollution depends in large part on where that pollution is emitted.