The political history of cap & trade

Good reading here at Smithsonian.com

Turtle bycatch improving

Here's an article from the local paper describing the downward trend in sea turtle bycatch. Turtle- excluder devices (TEDs) seem to be helping on a national scale but the NC fishers interviewed for the article don't seem to think that bycatch is an issue here. The article also cites a decreased number of vessels in the water (due to low profit causing exit from the industry) and a performance standard.

the Coase Theorem in action

Here at the WSJ

Here at the Independent

the true cost of a gallon of gas

Here is a report suggesting that externalities bring the true cost of a gallon of gas up significantly (between $5 and $15). The report is several years old and pre-9/11, so we can probably assume that the numbers would be higher today.

Here's a piece by Ezra Klein at the Washington Post from 2010 that discusses the same issues.

More here at Catalyst.

Collective action requires incentives

Gernot Wagner (an economist at Environmental Defense Fund) has a thought-provoking piece in yesterday's New York Times. He hits on a lot of issues that we've been discussing in class or will discuss later in the semester. Notably topics are the need for incentives to curtail externalities and the notion that it's easy to make marginal movements toward being "green" when you're rich.

Elkhorn coral and pollution

Next week we'll be beginning our discussion of externality theory, which allows us to look at the inefficiency created when costs are created by a market but are not accounted for in the price of the good. Once we understand the cause of the inefficiency, we can develop measures to address it.

Externality theory is easily understood in the context of pollution in its many forms. Here is a study suggesting that white pox disease in elkhorn corals is attributable to improperly treated human waste. We can categorize solutions into two broad groups: "command-and-control" (standards) and incentive-based systems.

What are the external costs associated with this pollution?
What solutions might work?

The cost of air pollution

A new study out of MIT calculates the long-term economic costs of lax air pollution standards in China. These costs include increased expenditure on health care and lost work and leisure time due to illness. The study estimates the total lost value (between 6 & 9 percent of GDP) and suggests that even modest pollution control efforts could have turned the loss into an economic gain via enhanced productivity. However, the authors of the study did not estimate the costs of implementing tighter standards. These would have to be accounted for to understand the true net change in economic welfare.

In related news, the US EPA is putting forth seven new environmental regulations for air pollution in the US. These regulations are being criticized for the extra costs that they will impose on businesses that have to comply. Read about it here at the News & Observer. The costs are indeed real (the price everyone pays for power will increase), but this is only half the story. There are also significant benefits to pollution control, as shown in the above MIT study. Fewer deaths and less illness means more productivity. Less illness means people can work harder, longer, stronger and smarter. Fewer sick children and elderly means parents and caregivers can work more. Framing the issue based only on an estimate of the costs or benefits is incorrect and misleading. We need both.

More on energy externalities

Great article here at Politico describing the external costs of our energy.
Everyone should read this.

The most important question of our age?

I think this is it: What is the backstop energy source?

The only options right now are nuclear, solar, hydro, geo, and of course fossil fuels like oil, natural gas and coal. Every one has pros and cons, which means this is great stuff for economic analysis. Will nuclear ever be safe? Will coal ever be clean? Will solar ever be cost effective? Is there something else on the horizon?

We know that we have to start addressing these questions, but we can't agree on how to do it.

Here's a link to an article discussing the results of a survey of consumer attitudes. Here's another poll on the same set of issues. Note the serious split between those that say "more" and those that say "less" for just about everything currently on the table. No wonder our politicians can't put together an energy policy... no matter what they advocate, around half the country will be opposed.

Pigouvian tax on gasoline

Interesting article here at 3P.

Note the importance of incentives in affecting behavioral change and the discussion of standards vs. market-based policies. I also like the discussion of the vulnerability to price shocks. Curtailing our use of gasoline is a kind of insurance against economic instability. As much as I like these arguments for raising the price of gas, we also have to recognize reasons for keeping the price of gas low (at least for some users). The U.S. is really big geographically speaking, so within country commerce may depend more critically on cheap transport than in smaller nations. Check out the linked Economist article. It's short and good.