Table of Contents

The Social Cost of Inertia: How Cost-Benefit Incoherence Threatens to Derail U.S. Climate Action

Melissa Luttrell, The University of Tulsa College of Law

Regulating Pot to Save the Polar Bear: Energy and Climate Impacts of the Marijuana Industry

Gina S. Warren, Texas A&M University (TAMU) - School of Law

The Debate of the Green Paradox

Yuting Li, Graduate School of Chinese Academy of Social Sciences

Intra�Industry Trade Liberalization and the Environment

Michael Benarroch, University of Winnipeg - Department of Economics
James D. Gaisford, University of Calgary - Economics

The Economics of Transboundary River Management

Erik Ansink, VU University Amsterdam - Institute for Environmental Studies (IVM), VU University Amsterdam - Department of Spatial Economics
Harold Houba, VU University Amsterdam, Tinbergen Institute, VU University Amsterdam, Department of Econometrics

Climate Change, Heat Stress, and U.S. Dairy Production

Nigel Key, U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)
Stacy Sneeringer, U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)
David Marquardt, United States Department of Agriculture (USDA)

Initial Public Offerings and Air Pollution: Evidence from China

Yan Luo, University of Hong Kong - School of Business, Fudan University
Xiaolin Qian, University of Macau
Jinjuan Ren, University of Macau - Faculty of Business Administration

The Effect of Smog – Ozone Warnings and a Vanpool Program on Traffic Volume in York County of South Carolina

Eleftherios Giovanis, University of London, Royal Holloway College - Department of Economics, University of Bologna - University of Bologna

Payment for Ecosystem Services from Forests

Jennifer Alix�Garcia, University of San Francisco - College of Arts & Sciences
Hendrik Wolff, University of Washington - Department of Economics


ENVIRONMENTAL ECONOMICS eJOURNAL

"The Social Cost of Inertia: How Cost-Benefit Incoherence Threatens to Derail U.S. Climate Action" Free Download
Duke Environmental Law & Policy Forum, Forthcoming

MELISSA LUTTRELL, The University of Tulsa College of Law
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As EPA rolls out controversial regulations on power plant emissions of greenhouse gases, a vocal group of legislators, industry groups, and legal and economic scholars are crying foul, arguing that EPA didn’t “follow the rules� when it conducted its cost-benefit analyses of these regulations.

This article traces the origin of these cost-benefit rules, finding that the methodological handbook alleged to be the “worldwide gold standard� was actually developed through a very flawed process, one that intentionally excluded majority viewpoints in several relevant academic disciplines. Unsurprisingly, it also contains serious methodological mistakes. If these mistakes were to be more aggressively applied to regulations implementing domestic climate change regulations (that is, if EPA and other executive agencies do “follow the rules,� as demanded by the critics of these regulations in Congress, academia and regulated industry), this would threaten to derail serious U.S. action on climate change.

This article also describes how the executive order that spawned these rules is impossible to comply with literally, because it creates a series of “max/min� problems with no common solution. This creates a conundrum that, over and over again, is resolved under these cost-benefit rules in favor of maximizing quantifiable, monetized “net benefits,� at the expense of promoting a set of competing yet also important deontological factors that the text of the parent executive order ostensibly puts on equal footing.

"Regulating Pot to Save the Polar Bear: Energy and Climate Impacts of the Marijuana Industry" Free Download
Columbia Journal of Environmental Law Vol. 40, No. 3

GINA S. WARREN, Texas A&M University (TAMU) - School of Law
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It goes by many names -- cannabis, marijuana, pot, chronic, grass, reefer, weed, Mary Jane. Whatever the name, the trend is clear: the shwag is legal but the herb ain’t green. Nearly half of all U.S. states have enacted -- or have pending -- legislation to legalize, decriminalize, or in some way permit the use and cultivation of marijuana. As a result, marijuana has become a significant topic of conversation in the U.S. -- especially in the areas of social policy and criminal law. One conversation yet to reach fruition, however, is the industry’s projected impacts on energy demand and the climate. As the industry grows, so will its negative externalities. Indoor cannabis cultivation is the most energy-intensive industry in the U.S., requiring electricity to power lamps, to maintain consistent temperature and humidity levels, and to power fans for ventilation, among other things. This energy consumption, unless otherwise mitigated, results in significant greenhouse gas emissions. This article explores the opportunities that legalization brings in addressing the negative impacts on energy usage and climate change. It concludes that simply incorporating the marijuana industry into the existing energy regulatory framework will do little to address its negative impacts. It recommends that state and local policymakers take advantage of the unique opportunity to require indoor cultivators to utilize carbon-free electricity as a condition of licensing.

"The Debate of the Green Paradox" Free Download
Review of Environment, Energy and Economics (Re3), Forthcoming

YUTING LI, Graduate School of Chinese Academy of Social Sciences
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The theory of the “Green Paradox� subverts the traditional theoretical foundation of the environmental policies. The crucial question is whether the green paradox holds and how large the impact is in reality, which has provoked heated debate among economists. This article identifies and reveals the virtues and weaknesses of the green paradox theory through a comparative literature review. Both theoretical studies and empirical work are covered. It is found that the theory is at least logically sound, though it can be extended and modified in different ways. In addition, the evidence from data and empirical studies is mixed.

"Intraâ€?Industry Trade Liberalization and the Environment" Fee Download
Review of International Economics, Vol. 22, Issue 5, pp. 886-904, 2014

MICHAEL BENARROCH, University of Winnipeg - Department of Economics
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JAMES D. GAISFORD, University of Calgary - Economics
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This paper examines how trade liberalization affects national and global pollution in a multi�country model incorporating monopolistic competition and intra�industry trade as well as inter�industry trade. Each country produces skill�intensive differentiated goods and labor�intensive goods. Pollution is a by�product of production but pollution abatement can be undertaken. Regardless of country characteristics, if the differentiated�good sector is sufficiently cleaner (dirtier) then, without any change in environmental taxes, a multilateral reduction in import protection accorded to the differentiated good or to both goods typically leads to a decline (rise) in pollution in all countries. Pollution havens tend not to arise.

"The Economics of Transboundary River Management" Free Download
Tinbergen Institute Discussion Paper 14-132/VIII

ERIK ANSINK, VU University Amsterdam - Institute for Environmental Studies (IVM), VU University Amsterdam - Department of Spatial Economics
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HAROLD HOUBA, VU University Amsterdam, Tinbergen Institute, VU University Amsterdam, Department of Econometrics
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We survey the economics of transboundary river water allocation, which emerged in the 1960s and has matured over the last decade due to increasing concerns over water scarcity and pollution. We outline the major approaches and pay specific attention to the strategic aspects of transboundary river water allocation. These strategic aspects are captured by employing game theory to assess the economics of transboundary river water allocation in a simple model of river sharing. This model allows us to show how conflict and cooperation over transboundary water resources may occur. It also allows us to pay specific attention to the efficiency, sustainability, and fairness of solutions to this model. We compare and contrast both cooperative and non-cooperative approaches and we relate their solutions to illustrative examples.

"Climate Change, Heat Stress, and U.S. Dairy Production" Free Download
USDA-ERS Economic Research Report Number 175

NIGEL KEY, U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)
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STACY SNEERINGER, U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)
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DAVID MARQUARDT, United States Department of Agriculture (USDA)

In the United States, climate change is likely to increase average daily temperatures and the frequency of heat waves, which can reduce meat and milk production in animals. Methods that livestock producers use to mitigate thermal stress — including modifications to animal management or housing — tend to increase production costs and capital expenditures. Dairy cows are particularly sensitive to heat stress, and the dairy sector has been estimated to bear over half of the costs of current heat stress to the livestock industry. In this report, we use operation-level economic data coupled with finely scaled climate data to estimate how the local thermal environment affects U.S. dairies’ effectiveness at producing outputs with a given level of inputs. We use this information to estimate the potential decline in milk production in 2030 resulting from climate change-induced heat stress. For four climate model scenarios, the results indicate modest heat stress-related production declines over the next 20 years, with the largest declines occurring in the South.

"Initial Public Offerings and Air Pollution: Evidence from China" Free Download

YAN LUO, University of Hong Kong - School of Business, Fudan University
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XIAOLIN QIAN, University of Macau
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JINJUAN REN, University of Macau - Faculty of Business Administration
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Faced with a deteriorating global environment, both corporations and regulatory bodies have become more responsive to environmental conservation problems. However, existing literature has not adequately addressed the question of whether and how firms’ business activities influence the environment. In this study, we investigate the impact of firms’ financing activities on the environment. Using the daily air pollution indices (APIs) of 120 Chinese cities from 2001 to 2012, we find that air pollution is alleviated after firms’ initial public offerings (IPOs). We propose that firms’ IPOs influence the ambient air pollution through three channels: production scale, technical reform, and corporate governance effects. We find that the proceeds acquired in IPOs result in enlarged production scales that increase pollution, while the investment of these proceeds in social responsibility related technical reform and enhanced corporate governance reduce pollution. Moreover, we discover that firms with a higher state-ownership emit fewer pollutants, thus supporting the positive monitoring role of the Chinese government. Although our study investigates the impact of IPOs on air quality in China, the proposed analytical framework also applies to studies of other financing activities in global markets. This study has important policy implications for government regulations in environmental controls.

"The Effect of Smog – Ozone Warnings and a Vanpool Program on Traffic Volume in York County of South Carolina" 
Environment and Planning B: Planning and Design advance online publication, doi:10.1068/b130018p (2014)

ELEFTHERIOS GIOVANIS, University of London, Royal Holloway College - Department of Economics, University of Bologna - University of Bologna
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Ground-level ozone is a critical criteria pollutant that is significantly generated by transportation patterns. We study the effect of smog-ozone warnings, triggered by the Environmental Protection Agency, on traffic volume in York County, South Carolina during the period 2006-10. In addition, the subperiods 2006-07 and 2008-10, where the ozone smog-alert thresholds 0.080 parts per million (ppm) and 0.075 ppm, respectively, are examined. The approach followed in this paper is a differences-in-differences (DID) regression. Additionally, a regression discontinuity design in the DID framework is applied. We find a negative and significant decrease in weekday peak-hour traffic volume in the treatment group during 2008-2010.

"Payment for Ecosystem Services from Forests" 
Annual Review of Resource Economics, Vol. 6, Issue 1, pp. 361-380, 2014

JENNIFER ALIX�GARCIA, University of San Francisco - College of Arts & Sciences
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HENDRIK WOLFF, University of Washington - Department of Economics
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Every year from 2000 to 2010, our planet lost native forests roughly the size of Costa Rica (FAO 2010). This rapid deforestation has dramatically changed the chemical composition of the world’s atmosphere, the level of biodiversity, and the presence of vegetation key to maintaining watershed function and preventing landslides. There has been a boom in the design of local and international policy instruments to prevent further deforestation and to encourage forest growth. This article reviews the theory and evidence surrounding forest-related payment for ecosystem services (PES) schemes intended to slow and reverse deforestation. We cover the most recent work touching on a range of issues related to PES programs, including research on targeting, contract design, environmental effectiveness, challenges to program implementation, spillovers, and distributional considerations of conditional cash transfers. We also highlight areas of potential future research.

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Environmental Economics eJournal

DON FULLERTON
Professor, University of Illinois at Urbana-Champaign - Department of Finance, National Bureau of Economic Research (NBER), CESifo (Center for Economic Studies and Ifo Institute)

LAWRENCE H. GOULDER
Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University - Department of Economics, Research Associate, National Bureau of Economic Research (NBER), University Fellow, Resources for the Future

WILLIAM D. NORDHAUS
Yale University - Department of Economics, National Bureau of Economic Research (NBER)

PAUL R. PORTNEY
University of Arizona - Eller College of Management

ROBERT N. STAVINS
Albert Pratt Professor of Business and Government, Harvard University - Harvard Kennedy School (HKS), University Fellow, Resources for the Future, Research Associate, National Bureau of Economic Research (NBER)

TOM TIETENBERG
Mitchell Family Professor of Economics, Colby College - Department of Economics