Tag: Environment

Liability for Harm Versus Regulation of Safety

That’s the classic question that Steven Shavell posed 25 years ago, and the debate over whether these two are potentially substitutes continues today.

The BP catastrophe has certainly brought more than its share of discussion on the issue.  Paul Krugman weighs in on the side that the continuing spill is Exhibit A that liability is a failure the private sector needs a stern regulatory hand to guide it.  Tyler Cowen frames the argument and takes Krugman to task on one point:

There is in fact an agency regulating off-shore drilling and in the case under question it totally failed.

Point, Cowen.

Of course, not all regulation is as inept as the Minerals Management Service (MMS) seems to be in this case.  One problem is that MMS is charged both with regulating environmental and safety concerns AND is responsible for approving leases to the provide sector.

And, which do they choose? According to the Washington Post:

Minerals Management Service officials, who can receive cash bonuses in the thousands of dollars based in large part on meeting federal deadlines for leasing offshore oil and gas exploration, frequently changed documents and bypassed legal requirements aimed at protecting the marine environment, the documents show.

Emphasis is mine, though the point sort of jumps out at you, doesn’t it? But, it’s not like the appearance of financial impropriety is a new thing with the MMS.  On the heels of the spill, in fact, President Obama recommended bifurcating the agency to mitigate the clear incentive compatibility problem.

Continue reading Liability for Harm Versus Regulation of Safety

Two Tales, One American Power Act

The American Power Act is the latest climate bill making its way through the Senate. For both of my classes this term we have talked about the tradeoffs between policies that economists like and policies that might have a chance of passing. Ted Gayer at Brookings definitely puts the APA in the latter camp:

The bill auctions only 24.8 percent of the allowances in the early years (the share devoted to auctions is highlighted in blue), the remainder of the allowances being given away to such things as electricity local distribution companies, trade-exposed industries, refiners, commercial developers of carbon capture and storage, and a National Industrial Innovation Institute. The auctioning ramps up to 79.5 percent of allowances in 2030, and then full auctioning only occurs in 2035

And concludes:

By failing to use a full allowance auction to offset economically harmful taxes and deficits, the Senate bill sacrifices economic gain for political support from interest groups.

Robert Stavins, on the other hand, seems to look up at the sky and see a different color.  Stavins is perhaps the most prominent environmental economist in the field, and he  seems pretty upbeat about the whole thing:

Over the entire period from 2012 to 2050, 82.6% of the allowance value goes to consumers and public purposes, and 17.6% to private industry. Rounding error brings the total to 100.2%, so to be conservative, I’ll call this an 82%/18% split.

I’m going to have to side with Gayer on this one.  It may well be the case that on average the “value” goes to some “public purposes,” but it sure doesn’t seem that way looking at the early splits (Here’s the blown up version for those of you preparing to squint).

Gayer Table

For the first 13 years of the program, more than half of the allowances are going to industry, it appears.  Not until 2025 do we see the industry percentage phased out (rapidly) and the auction percentage jump (also rapidly).  So, to put it another way, today’s Congress is committing the 2025 Congress to implement the tough changes that will accompany climate change. I am going to put the odds on this commitment being credible as “improbable.”

Continue reading Two Tales, One American Power Act

A Gallon of Prevention…

… is certainly worth a barrel of cure.  Instead of having these guys with big yellow boots (I thought only 4-year old boys ran around in public in galoshes out of season), perhaps it would pay to have more egghead types crunching data on safety risk.  That was the message I gave in both my classes this week, as we sat down to read Shultz and Fischbeck’s “Workplace Accident and Compliance Monitoring: The Case of Offshore Platform Inspections,” from RFF’s Improving Regulation.  In that paper, they identify a set of factors (using factor analysis and a logistic regression model) that does a pretty good job of identifying the high-risk platforms.  Pretty good compared to what?  Well, certainly much better than random chance, and also better than the Minerals Management Service inspectors who were extensively interviewed for the project.

Neither Shultz nor Fischbeck have been in the press too much, but yesterday we finally did hear from one of them here:

Data problems date back at least a decade. According to John Shultz, who as a graduate student in the late 1990s studied MMS’ inspection program in depth for his dissertation, the agency’s data infrastructure was severely limited. “The thing I regret most is that, to my knowledge, MMS has not fixed the data management problem they have,” said Shultz, who now works in the Department of Energy’s nuclear program. “If you have the data you need, the analysis becomes fairly straightforward. Without the data, you’re simply stuck with conjectures.”

Anyone interested in taking a look at the Shultz and Fischbeck is welcome to contact me, for the paper or for a PowerPoint of their work.  Anyone interested in doing research or an independent study related to transportation fuels regulation should also contact me.

Handing out the Goodies

No, this isn’t a post about the goodies at this-coming Monday’s Econ TeaBA (where, rumor has it, Professor Galambos will explain the competitive market model to Professor Corry in 15 minutes.  Whether he can make good on this promise remains to be seen.  In either case, please, no wagering at the TeaBA).

This is a post about who will benefit and who will lose from the climate legislation.  We have been talking about the distributional issues in Economics 280 for a couple of weeks, that there are many ways to get the same “quantity,” but who wins and who loses can vary radically.  The projected shares are a big key to determining political feasibility — businesses like free permits much more than auctioned permits, and certainly much more than (egads) paying a tax.  On this front, we will be reading a paper called “Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production” in our political economy course next week.  The basic idea here is that representatives from states with high per-capita carbon emissions are less likely to support costly carbon restrictions. (Actually, I haven’t read the paper yet, but I would have bet a dollar that’s what it says. That is, I would bet a if I hadn’t discouraged wagering in the previous paragraph).

As for the distribution front, Ted Gayer from Brookings has some preliminary estimates on who is going to capture the value of freely-allocated and auctioned permits over the first 20 years of the program.   The program will start with about 75% of the permits being handed out and more than half of the value of those permits accruing to electric utilities.  Less than 10% of the revenue will flow to deficit reduction or to offset other taxes.   Between 2026 and 2027, however, the percentage of auctioned permits jumps and ascends from 20% to a full 100%.    And, if you believe that is a credible commitment, I would encourage you to sleep it off and rethink your position tomorrow.  Consumer relief — that is, higher prices reduce consumer benefits — stays steady about 10% throughout.  Believe him or not, Gayer’s short brief is worth reading precisely because he hits the heart of the environmental policy debate.

The Grim Climate Change Arithmetic

Der Spiegel, a widely-read German publication, lays out the bad news this week with “How China and India Sabotaged the UN Climate Summit.”  I’m not sure I agree with laying the blame at the feet of the developing world (I thought it was doomed form the get-go).   Even so, the article quotes Chancellor Merkel, in a lucid moment, who puts things in perspective:

“Let us suppose 100 percent reduction, that is, no CO2 in the developed countries anymore. Even then, with the (target of) two degrees, you have to reduce carbon emissions in the developing countries. That is the truth.”

We talked about climate arithmetic a bit in class this morning in Econ 280. It’s very difficult to imagine a scenario where the US reduces its CO2 emissions enough even to stabilize “our share” of atmospheric concentrations.  That is, reducing carbon emissions on the order of 50-80% of current levels.   Of course, to stabilize global concentrations, the entire world would have to fall in line with such a strategy, and Der Speigel piece points out that this isn’t going to happen.

In other news…

Cap n Tax, Continental Style

A few weeks ago, Povolny Lecturer and funnyman Yoram Bauman stood up for the “cap and tax” proposal.  He didn’t literally propose a tax, but emphasized that the higher price associated with the cap was the incentive to reduce energy consumption.

CapntaxOn the other side of the pond, there actually is a cap & trade system in place, and it is really all over the price.  Carbon prices have ranged from €8 to €30, and the volatility can stymie long-term investments.  In other words, there is likely to be an inverse relationship between carbon prices and the payoff to greener (or at least lower-carbon) energy sources.  If investors don’t believe that carbon prices will be high, then green investments simply won’t be as attractive.

Enter the British Conservative Party, which has proposed a “Cap and Tax” of its own.  The basic idea is that because of the tendency for carbon prices to bottom out, a carbon tax would kick in if permit prices went below a certain level.  This would provide some stability to the market, as well as a potential revenue source.

That’s pretty clever.

Now, getting a government to make a credible commitment to a long-term tax is another story.

How did Copenhagen Fail Thee? Let Me Count the Degrees…

Bad news on the climate front according to Joeri Rogel and colleagues in their pessimistic new article in Nature, “Copenhagen Accord pledges are paltry.”  Their bottom line is that even if we were to gird up our loins and somehow comply with the agreements of the recent Copenhagen accord, we’re still looking at 2C+ increases in global mean temperature.  (And for those of you who think those accords will actually be met probably could stand a splash of cold water in the face).

Taking a look at the figure on the right, you can see that the authors have done a probabilistic analysis of likely scenarios, with the 50% percentile being the “expected” or “best guess” case. As you can see, that is somewhere north of 2C, with 3C not being out of the question within 90 years.

If you have been paying attention I doubt you will find this all that novel of a conclusion.  In the recent Povolny lecture, Yoram Bauman expressed pessimism on the climate front.  The emerging tigers like China and India aren’t going to curb emissions and potentially hamstring economic growth.  Rich countries are rich and can afford to take adaptive steps.  Poor countries can’t adapt, but also are too poor to do anything but see how the experiment plays out.

That seems about right to me.

An Oz. of Prevention

The indefatigable Ralph Nader came, he saw, he sold some books, and he raised some hell.  Are you wasting the prime of your life with hang ups you should have dealt with as a teenager? Do you find yourself spending more time looking at yourself in the mirror than keeping tabs on Congress? Mr. Nader isn’t shy about asking the tough questions.

I was amazed and surprised with his digression on the 1872 Mining Law and his browbeating of the audience about our ignorance of the statute and its implications.  Having done some research on the subject myself, I would put the ball back in his court.  Does he know that environmental group opposition is stifling volunteer cleanups of abandoned mines? In this month’s Atlantic Monthly there is a short piece describing the situation. The basic problem is that there is a single policy instrument in place to prevent pollution and to govern cleanups.  It turns out, this is like throwing one stone at two birds:

But as these volunteers prepare to tackle the main source of the pollution, the mines themselves, they face an unexpected obstacle—the Clean Water Act. Under federal law, anyone wanting to clean up water flowing from a hard-rock mine must bring it up to the act’s stringent water-quality standards and take responsibility for containing the pollution—forever. Would-be do-gooders become the legal “operators” of abandoned mines like those near Silverton, and therefore liable for their condition.  In mid-October, Senator Mark Udall of Colorado introduced a bill that would allow such “good Samaritans” to obtain, under the Clean Water Act, special mine-cleanup permits that would protect them from some liability. Previous good-Samaritan bills have met opposition from national environmental organizations, including the Sierra Club, the Natural Resources Defense Council, and even the American Bird Conservancy, for whom any weakening of Clean Water Act standards is anathema.

In other words, it is the environmental groups who are standing in the way of environmental progress in this case.  The reasons for this are straightforward, predictable, and understandable.  It is all described cogently in this testimony on similar proposed legislation from ten years ago!

The sad state of affairs is that as the various  groups dig in their heels, the acid drainage continues to pollute the waters in the west.  Again, from The Atlantic:

Just a few miles from Silverton, in an icy valley creased with avalanche chutes, groundwater burbles out of the long-abandoned Red and Bonita gold mine. Loaded with aluminum, cadmium, and lead, it pours downhill, at 300 gallons a minute, into an alpine stream. The Silverton volunteers aren’t expecting a federal windfall anytime soon—even Superfund-designated mine sites have waited years for cleanup funding, and Udall’s bill has been held up in a Senate committee since last fall. Without a good-Samaritan provision to protect them from liability, they have few choices but to watch the Red and Bonita, and the rest of their local mines, continue to drain.

(Environmental Policy) Change Isnt Easy, Tuesday at 7pm

Lawrence alum, George B. Wyeth, will kick off the Povolny Lecture Series this Tuesday, April 20, at 7 p.m. in Science Hall 102. Mr. Wyeth picked up his B.A. from Lawrence back in 1973, notably serving as editor-in-chief of The Lawrentian. He leveraged his success here into a Masters in Public Policy at UC-Berkeley and a law degree from Yale. After a stint in the private sector, he joined the U.S. Environmental Protection Agency in 1989 and is now the Director at the National Center for Environmental Innovation.

Well, to be accurate, right now he is the the Stephen Edward Scarff Memorial Visiting Professor, teaching a course on policy implementation with Professor Chong Do-Hah. His talk is “Change isn’t Easy: An Inside Perspective.” Like his course, the talk will address the public administration challenges of addressing environmental problems.

We hope to see you there.

Take a Deep Breath

Good news on the clean air front — it’s getting cleaner.   In fact, it’s been getting cleaner for a long, long time.   Don’t believe me?  Well, then go check out the new EPA Air Quality Trends that was released earlier this week.  Of the six criteria pollutants (NOx, SOx, CO, PM, O3, and Pb), the trend is continually downward.  Hazardous air pollutants (HAPs) are also on their way down.  That’s despite a growing population, growing vehicle fleet, and (until recently) a growing economy.

Almost makes me want to go out and eat a big hand full of dirt.


The Nature of the (Urban) Farm

From our pals over in Environmental Studies:

Does meeting with fellow students and faculty to talk about running a farm in the ghettos of Oakland, dumpster diving to feed pigs, and corralling runaway turkeys in downtown Oakland sound like fun?

During the Spring term  Green Roots and the Environmental Studies program will be sponsoring a for credit campus read program.  The book is Farm City: The Education of an Urban Farmer, by Novella Carpenter.  Her work covers topics including sustainable agriculture, urban communities, and healthful eating.  As a special treat, the author will be in the Fox Cities in mid-April, just before Earth Day!

Contact Andrew Knudsen knudsena@lawrence.edu or Jason Brozek jason.brozek@lawrence.edu for more information.


This article in The Times reports on a study by the Royal Academy of Engineering, claiming that

Roof-mounted wind turbines and solar panels are “eco-bling” that allow their owners to flaunt their green credentials but contribute very little towards meeting Britain’s carbon reduction targets.

I guess if one were to engage in conspicuous consumption using eco-bling, this might work a lot better.