- Email: [email protected]
Introduction to symposium
ARTICLE IN PRESS
Journal of Environmental Economics and Management 47 (2004) 483–485
Introduction to symposium Gilbert E. Metcalf a,b, b
a Department of Economics, Tufts University, Medford, MA 02155, USA National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138, USA
Received 25 November 2003; accepted in revised form 11 December 2003
Over the past 5 year, the National Bureau of Economic Research has been expanding its activities in the area of environmental economics. It recently formed an environmental economics working group chaired by Don Fullerton of the University of Texas, Austin. The Bureau’s interest coincides with a remarkable expansion of interest in using the lessons of economics to help shape environmental policy both domestically and internationally. The passage of the Clean Air Act Amendments of 1990 that opened up market trading in sulfur dioxide (SO2) emissions among electric utilities along with the Kyoto Agreement to limit greenhouse gas emissions have helped fuel that interest. In addition, new data sets have become available, new statistical techniques have emerged, and new developments in theory have all contributed to this growth in research activity. To encourage research in this area the National Bureau of Economic Research convened a conference titled ‘‘Advances in Empirical Environmental Policy Research.’’ The conference was held on May 17–18, 2002 in Newport, RI. Papers from that conference were submitted for publication to the Journal of Environmental Economics and Management. The papers included in this symposium were subjected to the standard JEEM peer review process. The first paper by Wayne Gray and Ronald Shadbegian investigates the allocation of environmental regulatory activity across pulp and paper mills in the United States. It asks whether differential benefits of abatement influence regulatory activity under a variety of economic theories of pollution regulation. While the final results are not entirely conclusive for supporting one view of allocating regulatory activity over another, the paper provides initial results that shed light on the important question of how scarce regulatory oversight is undertaken. The paper goes beyond simply considering the allocation of regulation to consider the impacts on the environment. Gray and Shadbegian’s paper should stimulate further research on the important political economy question of how pollution is distributed across different socioeconomic groups. Environmental economists over the years have noted that benefit valuations based on willingness to pay (WTP) generally differ sharply from valuations based on willingness to accept
Fax: +617-627-3917. E-mail address: [email protected].
0095-0696/$ - see front matter r 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.jeem.2003.12.006
ARTICLE IN PRESS 484
G.E. Metcalf / Journal of Environmental Economics and Management 47 (2004) 483–485
(WTA) measures. Even after controlling for income effects arising from the different endowments implied by the two measures, experimental researchers have continued to find anomalies that, for some, called into question the underlying neoclassical assumptions of consumer behavior. In his paper for this symposium, John List carries out a novel study by developing experiments conducted in well-functioning markets for sportscards. Combining rigorous economic theory with a deep institutional understanding of the sportscard market, List argues convincingly that much of the disparity between WTP and WTA disappears as market participants gain experience in trading. As participants gain experience the remaining differences between WTP and WTA can be explained by neoclassical theory. In particular, List finds that ‘‘compensated’’ WTP measures better approximate WTA and argues that the discrepancy between WTP and WTA can be largely explained by income effects. In addition to contributing to our understanding of these valuation measures, List’s study serves as an excellent introduction to experimental methods that other economists might find useful. The paper by Kerry Smith, Holger Sieg, Spencer Banzhaf, and Randy Walsh estimates the benefits arising from new environmental regulations taking into account price changes arising from the new regulations as well as income and preference heterogeneity across residents in the affected region. While the individual heterogeneity in preferences for public goods is unobserved, the researchers are able to elicit benefit measures by observing locational and price changes arising after the policy intervention. By embedding the benefit analysis in a general equilibrium locational model, they are able to use changes in property values to identify benefits across different individual types. The distribution of measured benefits exhibits high variation across income groups and location within the affected region. This paper should be of great interest to researchers interested in measuring large environmental changes, which have the potential to affect prices as well as locational decisions of affected individuals. Policy analysts have often been reluctant to recommend greater reliance on environmental taxes due to the fact that most distributional analyses find these taxes to be regressive. In their paper, Sarah West and Roberton Williams consider how different methodologies for computing tax incidence affect the degree of tax regressivity. They focus on a gasoline tax and consider various welfare measures as well as different uses of the tax revenues. To capture possible behavioral responses to the gas tax, they estimate a consumer demand system for gasoline, other goods, and leisure. Their study reminds us that the use of the tax proceeds plays an important role in determining the ultimate regressivity of the tax reform. In addition, behavioral responses mitigate the measured regressivity of the tax system. The final paper by Michael Greenstone investigates whether the Clean Air Act Amendment of 1970 (CAAA70) was responsible for the large reductions in sulfur dioxide concentrations occurring after its passage. Greenstone first notes that SO2 concentration levels were already declining prior to CAAA70 thereby making it difficult to determine the new law’s impact on concentration levels. He then exploits variation across time and communities relying on the attainment status of counties and finds that nonattainment status can only explain a modest portion of the decline in overall SO2 concentrations. This is striking given previous work that suggests that nonattainment status is important for predicting reductions in total suspended particulate concentrations. Greenstone also finds support for the view that the SO2 nonattainment designations frequently did not coincide with the statutory definition of nonattainment. Greenstone’s paper raises important questions and is likely to generate further research in this area.
ARTICLE IN PRESS G.E. Metcalf / Journal of Environmental Economics and Management 47 (2004) 483–485
485
The conference was a success because of the contributions of many different individuals. The conference was funded through the generosity of an NSF grant to the NBER under the direction of William Nordhaus of Yale as well as through NBER funds provided by Martin Feldstein, President and CEO of the NBER. James Poterba, director of the Public Economics program at the Bureau, along with Martin Feldstein provided valuable assistance in conference planning. In addition, Brett Maranjian and other members of the Conference Department organized our conference in Newport and did a superb job of supporting the conference activities. That the conference was a success was due in no small part to the Conference Department’s typically thorough and professional approach. The discussants who participated at the conference, Scott Barrett, David Bloom, Magda Lovel, Maureen Cropper, Ken Small, Don Fullerton, Eli Berman, and Spencer Banzhaf, provided excellent commentary which improved the quality of the papers and they contributed to a lively intellectual exchange throughout the conference. Joe Herriges, editor of the Journal of Environmental Economics and Management, also participated in the conference and played a critical role throughout the peer review and editorial process to ensure that the final papers met the quality standards of the journal. Empirical research in environmental economics is expanding in many new directions as the types of environmental problems multiply and the data sets and methodologies available to economists expand. The papers in this symposium represent an important contribution to this empirical literature and it is the hope of the NBER that they will stimulate discussion and further research in this increasingly important field.
Journal of Environmental Economics and Management 47 (2004) 483–485
Introduction to symposium Gilbert E. Metcalf a,b, b
a Department of Economics, Tufts University, Medford, MA 02155, USA National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138, USA
Received 25 November 2003; accepted in revised form 11 December 2003
Over the past 5 year, the National Bureau of Economic Research has been expanding its activities in the area of environmental economics. It recently formed an environmental economics working group chaired by Don Fullerton of the University of Texas, Austin. The Bureau’s interest coincides with a remarkable expansion of interest in using the lessons of economics to help shape environmental policy both domestically and internationally. The passage of the Clean Air Act Amendments of 1990 that opened up market trading in sulfur dioxide (SO2) emissions among electric utilities along with the Kyoto Agreement to limit greenhouse gas emissions have helped fuel that interest. In addition, new data sets have become available, new statistical techniques have emerged, and new developments in theory have all contributed to this growth in research activity. To encourage research in this area the National Bureau of Economic Research convened a conference titled ‘‘Advances in Empirical Environmental Policy Research.’’ The conference was held on May 17–18, 2002 in Newport, RI. Papers from that conference were submitted for publication to the Journal of Environmental Economics and Management. The papers included in this symposium were subjected to the standard JEEM peer review process. The first paper by Wayne Gray and Ronald Shadbegian investigates the allocation of environmental regulatory activity across pulp and paper mills in the United States. It asks whether differential benefits of abatement influence regulatory activity under a variety of economic theories of pollution regulation. While the final results are not entirely conclusive for supporting one view of allocating regulatory activity over another, the paper provides initial results that shed light on the important question of how scarce regulatory oversight is undertaken. The paper goes beyond simply considering the allocation of regulation to consider the impacts on the environment. Gray and Shadbegian’s paper should stimulate further research on the important political economy question of how pollution is distributed across different socioeconomic groups. Environmental economists over the years have noted that benefit valuations based on willingness to pay (WTP) generally differ sharply from valuations based on willingness to accept
Fax: +617-627-3917. E-mail address: [email protected].
0095-0696/$ - see front matter r 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.jeem.2003.12.006
ARTICLE IN PRESS 484
G.E. Metcalf / Journal of Environmental Economics and Management 47 (2004) 483–485
(WTA) measures. Even after controlling for income effects arising from the different endowments implied by the two measures, experimental researchers have continued to find anomalies that, for some, called into question the underlying neoclassical assumptions of consumer behavior. In his paper for this symposium, John List carries out a novel study by developing experiments conducted in well-functioning markets for sportscards. Combining rigorous economic theory with a deep institutional understanding of the sportscard market, List argues convincingly that much of the disparity between WTP and WTA disappears as market participants gain experience in trading. As participants gain experience the remaining differences between WTP and WTA can be explained by neoclassical theory. In particular, List finds that ‘‘compensated’’ WTP measures better approximate WTA and argues that the discrepancy between WTP and WTA can be largely explained by income effects. In addition to contributing to our understanding of these valuation measures, List’s study serves as an excellent introduction to experimental methods that other economists might find useful. The paper by Kerry Smith, Holger Sieg, Spencer Banzhaf, and Randy Walsh estimates the benefits arising from new environmental regulations taking into account price changes arising from the new regulations as well as income and preference heterogeneity across residents in the affected region. While the individual heterogeneity in preferences for public goods is unobserved, the researchers are able to elicit benefit measures by observing locational and price changes arising after the policy intervention. By embedding the benefit analysis in a general equilibrium locational model, they are able to use changes in property values to identify benefits across different individual types. The distribution of measured benefits exhibits high variation across income groups and location within the affected region. This paper should be of great interest to researchers interested in measuring large environmental changes, which have the potential to affect prices as well as locational decisions of affected individuals. Policy analysts have often been reluctant to recommend greater reliance on environmental taxes due to the fact that most distributional analyses find these taxes to be regressive. In their paper, Sarah West and Roberton Williams consider how different methodologies for computing tax incidence affect the degree of tax regressivity. They focus on a gasoline tax and consider various welfare measures as well as different uses of the tax revenues. To capture possible behavioral responses to the gas tax, they estimate a consumer demand system for gasoline, other goods, and leisure. Their study reminds us that the use of the tax proceeds plays an important role in determining the ultimate regressivity of the tax reform. In addition, behavioral responses mitigate the measured regressivity of the tax system. The final paper by Michael Greenstone investigates whether the Clean Air Act Amendment of 1970 (CAAA70) was responsible for the large reductions in sulfur dioxide concentrations occurring after its passage. Greenstone first notes that SO2 concentration levels were already declining prior to CAAA70 thereby making it difficult to determine the new law’s impact on concentration levels. He then exploits variation across time and communities relying on the attainment status of counties and finds that nonattainment status can only explain a modest portion of the decline in overall SO2 concentrations. This is striking given previous work that suggests that nonattainment status is important for predicting reductions in total suspended particulate concentrations. Greenstone also finds support for the view that the SO2 nonattainment designations frequently did not coincide with the statutory definition of nonattainment. Greenstone’s paper raises important questions and is likely to generate further research in this area.
ARTICLE IN PRESS G.E. Metcalf / Journal of Environmental Economics and Management 47 (2004) 483–485
485
The conference was a success because of the contributions of many different individuals. The conference was funded through the generosity of an NSF grant to the NBER under the direction of William Nordhaus of Yale as well as through NBER funds provided by Martin Feldstein, President and CEO of the NBER. James Poterba, director of the Public Economics program at the Bureau, along with Martin Feldstein provided valuable assistance in conference planning. In addition, Brett Maranjian and other members of the Conference Department organized our conference in Newport and did a superb job of supporting the conference activities. That the conference was a success was due in no small part to the Conference Department’s typically thorough and professional approach. The discussants who participated at the conference, Scott Barrett, David Bloom, Magda Lovel, Maureen Cropper, Ken Small, Don Fullerton, Eli Berman, and Spencer Banzhaf, provided excellent commentary which improved the quality of the papers and they contributed to a lively intellectual exchange throughout the conference. Joe Herriges, editor of the Journal of Environmental Economics and Management, also participated in the conference and played a critical role throughout the peer review and editorial process to ensure that the final papers met the quality standards of the journal. Empirical research in environmental economics is expanding in many new directions as the types of environmental problems multiply and the data sets and methodologies available to economists expand. The papers in this symposium represent an important contribution to this empirical literature and it is the hope of the NBER that they will stimulate discussion and further research in this increasingly important field.