Cleaning Up Environmental Policy
Dora Costa & Matthew Kahn
NBER Working Paper, April 2010
Abstract:
"Nudges" are being widely promoted to encourage energy conservation. We show that while the electricity conservation "nudge" of providing feedback to households on own and peers' home electricity usage works with liberals, it can backfire with conservatives. Our regression estimates predict that a Democratic household that pays for electricity from renewable sources, that donates to environmental groups, and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge. A Republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent.
----------------------
Coming Clean and Cleaning Up: Is Voluntary Self-Reporting a Signal of Effective Self-Policing?
Michael Toffel & Jodi Short
Harvard Working Paper, March 2010
Abstract:
Administrative agencies are increasingly establishing voluntary self-reporting programs both as an investigative tool and to encourage regulated firms to police themselves. Effective self-policing is critical to contemporary regulatory designs that rely heavily on regulated entities to monitor and assure their own regulatory compliance. We investigate whether self-reporting, or the voluntary disclosure of legal violations, can reliably signal effective self-policing efforts that might warrant a reduction in regulatory scrutiny. We find voluntary disclosure to be associated with improvements in regulatory compliance and environmental performance, indicating that self-reporting is associated with effective self-policing. In addition, we find evidence that regulators subsequently reduced scrutiny of voluntary disclosers, which suggests that self-reporting can help regulators economize government enforcement resources and develop cooperative relationships with firms that are committed to self-policing.
----------------------
Paul Sparks, Donna Jessop, James Chapman & Katherine Holmes
British Journal of Social Psychology, forthcoming
Abstract:
Social concerns with the imperative of environmentally sustainable life-styles sit rather awkwardly with ideas about the widespread denial of global environmental problems. Given the very obvious threat and denial dimensions to these issues, we conducted two studies assessing the impact of self-affirmation manipulations on people's beliefs and motives regarding pro-environmental actions. In Study 1, participants (N=125) completed a self-affirmation task and read information on the threat of climate change. Results showed that the self-affirmation manipulation resulted in lower levels of denial and greater perceptions of personal involvement in relation to climate change. In Study 2, participants (N=90) completed a self-affirmation task and read some information on recycling. Findings showed a beneficial effect of a self-affirmation manipulation on intentions to increase recycling behaviour (among lower recyclers). The results are discussed in relation to the potential benefits of self-affirmation manipulations for promoting pro-environmental actions.
----------------------
Is Cap & Trade Fair to the Poor? Short-Sighted Households and the Timing of Consumption Taxes
Brian Galle & Manuel Utset
George Washington Law Review, forthcoming
Abstract:
Many forms of consumption tax, including recent proposals to impose a tax on the use of carbon, impose disproportionate burdens on the poor. Commentators who propose mitigating this impact with tax rebates for low-income families have overlooked the importance of the timing of consumption for these households, as well as the difficulties of "smoothing" income from one time period to another. We survey a wide array of evidence suggesting that poor households lack affordable mechanisms for both borrowing and saving, such that a lump-sum rebate, or even monthly rebates, would not leave the household as well off as they were in the absence of any tax. In addition, we show that the cognitive features of a rebate will be problematic for short-sighted households - those who heavily favor the present over the future. For example, they may impatiently spend rebates too quickly, leaving little money for later necessities, and potentially increasing overall carbon usage. And they likely will procrastinate both learning how to overcome these problems, as well as putting off investing in less carbon-intensive goods. We do not, however, argue against carbon pricing. Instead, we offer new methods of structuring taxes and rebates to overcome these problems. For instance, we suggest that rebates be offered on a "self-directed" debit card, subject to a sticky default cap on weekly withdrawals. This implement "nudges" short-sighted households away from impatience, while offering affordable credit and modern banking to all. These same mechanisms can be used for other forms of transactional consumption taxes, such as state sales taxes or a possible national value-added tax.
----------------------
Can Pollution Tax Rebates Protect Low-Income Families? The Effects of Relative Wage Rates
Don Fullerton & Holly Monti
NBER Working Paper, April 2010
Abstract:
Pollution taxes are believed to burden low-income households that spend a greater than average share of income on pollution-intensive goods. Some propose to offset that effect by returning revenue to low-income workers via reduced labor tax. We build analytical general equilibrium models with both skilled and unskilled labor, and we solve for expressions that show the change in the real net wage of each group. A decomposition shows the effect of the tax rebate, the effect on the uses side of income (higher product prices), and the effect on the sources side of income (relative wage rates). We also include numerical examples. Even though the pollution tax injures both types of labor, we find that returning all of the revenue to the low-skilled workers is still not enough to offset the effect of higher product prices. Moreover, changing wage rates may further hurt low-skilled labor. In almost all of our examples, the rebate of all revenue to low-skilled labor still does not prevent a reduction in their overall real net wage.
----------------------
Self-organized global control of carbon emissions
Zhenyuan Zhao, Dan Fenn, Pak Ming Hui & Neil Johnson
Physica A: Statistical Mechanics and its Applications, forthcoming
Abstract:
There is much disagreement concerning how best to control global carbon emissions. We explore quantitatively how different control schemes affect the collective emission dynamics of a population of emitting entities. We uncover a complex trade-off which arises between average emissions (affecting the global climate), peak pollution levels (affecting citizens' everyday health), industrial efficiency (affecting the nation's economy), frequency of institutional intervention (affecting governmental costs), common information (affecting trading behavior) and market volatility (affecting financial stability). Our findings predict that a self-organized free-market approach at the level of a sector, state, country or continent, can provide better control than a top-down regulated scheme in terms of market volatility and monthly pollution peaks. The control of volatility also has important implications for any future derivative carbon emissions market.
----------------------
Harry de Gorter & David Just
Applied Economic Perspectives and Policy, Spring 2010, Pages 4-32
Abstract:
The efficacy of alternative biofuel policies in achieving energy, environmental and agricultural policy goals is assessed using economic cost-benefit analysis. Government mandates are superior to consumption subsidies, especially with suboptimal fuel taxes and the higher costs involved with raising tax revenues. But subsidies with mandates cause adverse interaction effects; oil consumption is subsidized instead. This unique result also applies to renewable electricity that faces similar policy combinations. Ethanol policy can have a significant impact on corn prices; if not, inefficiency costs rise sharply. Ethanol policy can increase the inefficiency of farm subsidies and vice-versa. Policies that discriminate against trade, such as production subsidies and tariffs, can more than offset any benefits of a mandate. Sustainability standards are ineffective and illegal according to the WTO, and so should be re-designed.
----------------------
The Poverty Implications of Climate-Induced Crop Yield Changes by 2030
Thomas Hertel, Marshall Burke & David Lobell
Stanford Working Paper, February 2010
Abstract:
Accumulating evidence suggests that agricultural production could be greatly affected by climate change, but there remains little quantitative understanding of how these agricultural impacts would affect economic livelihoods in poor countries. Here we consider three scenarios of agricultural impacts of climate change by 2030 (impacts resulting in low, medium, or high productivity) and evaluate the resulting changes in global commodity prices, national economic welfare, and the incidence of poverty in a set of 15 developing countries. Although the small price changes under the medium scenario are consistent with previous findings, we find the potential for much larger food price changes than reported in recent studies which have largely focused on the most likely outcomes. In our low productivity scenario, prices for major staples rise 10-60% by 2030. The poverty impacts of these price changes depend as much on where impoverished households earn their income as on the agricultural impacts themselves, with poverty rates in some non-agricultural household groups rising by 20-50% in parts of Africa and Asia under these price changes, and falling by equal amounts for agriculture-specialized households elsewhere in Asia and Latin America. The potential for such large distributional effects within and across countries emphasizes the importance of looking beyond central case climate shocks and beyond a simple focus on yields - or highly aggregated poverty impacts.
----------------------
Is Ethnic Diversity Good for the Environment? A Cross-Country Analysis
Jayoti Das & Cassandra DiRienzo
Journal of Environment & Development, March 2010, Pages 91-113
Abstract:
Using cross-country data, the major thrust of this study is to establish the existence of a nonlinear relationship between environmental performance and ethnic diversity, while controlling for factors known to affect a country's ability to meet environmental standards. Using the Environmental Performance Index developed by Columbia and Yale Universities in collaboration with the World Economic Forum, this study finds that countries with moderate levels of ethnic diversity experience the greatest environmental performance as they reap the benefits of a civically engaged society with creative, innovative, and efficient human talent pool and do not bear the negative effects of a highly fractionalized society that typically suffers from poor communication and social cohesion, among other societal ills. The policy implications are important, as policy makers need to understand how ethnic diversity affects a country's ability to meet environmental goals such that these effects are accounted for in new environmental policies and initiatives.
----------------------
Edward Huang
Harvard Working Paper, March 2010
Abstract:
This study assesses the effect of public subsidies on vehicle selections, using data from the 2009 U.S. Cash for Clunkers program that awarded $2.85 billion to scrap nearly 700,000 gas-guzzlers. Because of the program's arbitrary thresholds for higher cash rebates, consumers with similar vehicle tastes were occasionally subject to different rebates - which may be viewed as a social experiment. Simple graphical comparisons show that these rebates effectively changed consumers' vehicle selections, providing evidence that public subsidies can be a demand-driven instrument to shape the national fleet, in contrast with the supply-driven fuel economy regulations on automakers.
----------------------
Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing
Lucas Davis & Erich Muehlegger
NBER Working Paper, April 2010
Abstract:
This paper measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991-2007. We find large departures from marginal cost pricing in all 50 states, with residential and commercial customers facing average markups of over 40%. Based on conservative estimates of the price elasticity of demand these distortions impose hundreds of millions of dollars of annual welfare loss. Moreover, current price schedules are an important pre-existing distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs.
----------------------
United States Farm Commodity Programs and Land Use
Bruce Gardner, Ian Hardie & Peter Parks
American Journal of Agricultural Economics, April 2010, Pages 803-820
Abstract:
We estimate the impact of government payments on United States land use, using county-level data from the National Resources Inventory and the Census of Agriculture in 1987, 1992, and 1997. Although payments were made under decoupled support programs, effects on land use are found to be significant. On average for the years studied, our simulations indicate that United States cropland acreage would have been 89 million acres (22%) less if program payments had been reduced to half their observed level (holding market prices of commodities constant). Percentage reductions are largest in marginal crop producing areas of the nation.
----------------------
Michael Dahlstrom & Dietram Scheufele
Environmental Communication, March 2010, Pages 54-65
Abstract:
Cultivation theory claims that individuals who watch a greater amount of television are more likely to accept the representation of reality as presented on television. This study introduces the variable of exposure diversity and attempts to investigate if the diversity of television channels viewed plays a significant role beyond the amount of television viewed in the cultivation of concern about environmental risks. Data from the 2002 annual Life Style Study conducted by Synovate for DDB-Chicago was paired with a corresponding content analysis of environmental television coverage. Ordinary-Least-Squares regression suggests that exposure diversity is associated with concern of environmental risks above and beyond both the effects of the amount of television watched and individual differences, suggesting the variable of exposure diversity holds promise for further explicating cultivation theory.