Federalism and the California waiver decision

Time will tell whether the Obama administration’s announcement is merely a symbolic reversal meant to signify greater attention to climate change, or a meaningful commitment to facilitating state leadership in environmental policy. If the former, the decision will be of little consequence, as it will take far more to impose meaningful limits on the nation’s contributions to climate change. If the latter, it could signify a long-overdue change in the shape of environmental law.

That is Jonathan Adler, writing at the NYTimes Room for Debate blog earlier this week about the decision by the new administration to make EPA reconsider granting California a waiver to pass tough vehicle emissions (read: fuel efficiency) standards.  Here is a bit more I liked:

While widely criticized, the Bush administration was well within its legal authority to reject California’s greenhouse gas regulation waiver request. However much Californians are concerned about global warming, it is difficult to argue that the state “needs” these rules to prevent climate effects there. Global climate change is a global phenomenon. The relevant airshed is not the greater Los Angeles basin, but the earth’s atmosphere as a whole, and California’s rules — even once adopted in a dozen states more — will have no meaningful effect on the climate-related threats that California fears. The Obama administration is also operating well within its legal authority to reverse course and grant the waiver. Elections have consequences.

Do check out the entire thing, with interesting contributions from several different experts.

Cash for clunkers

One of the proposals being floated in the stimulus package involves a so-called “cash for clunkers” program where the federal government would purchase older, more polluting, less fuel efficient vehicles and retire them.  RFF Senior Fellow Winston Harrington has done some previous research on these types of programs, which have been employed by various states for many years.  One of the upshots of his previous research — here is a (gated) paper from The Review of Eonomics and Statistics and here is an ungated discussion paper — is that these state- and local-level programs are unlikely to produce very much in the way of emissions reductions for local pollutants.  I was curious if his results would also apply in the context of a national policy for scrapping gas guzzlers.  Winston was kind enough to offer a long and interesting reply, which with his permission I’ve posted in its entirety here.

Scrappage programs for gas guzzlers wouldn’t be as bad as they were in a local emissions context.  In the latter case, the programs were reasonably cost effective (at least compared to many of the local alternatives available) as long as you had a short-term program, although the emissions reductions weren’t very large in any event and very difficult to quantify (it would depend on how vehicle replacement affected the fleet).  In a continuous program there were some incentive problems that would be hard to overcome:

1. All cars of the same vintage had the same emission standards, as did all light trucks (which were slightly higher).  So you couldn’t target vehicles based on their new-vehicle standards very efficiently.  You could, of course, base acceptance on the program on current emission rate, as determined by an emission test on the used vehicle, but you would risk creating incentives to tamper with the vehicle to increase its emissions, and therefore its eligibility.
2. Another way around the targeting problem was to base eligibility on age, and most programs did this.  But again, there is a perverse incentive to hold a dirty vehicle that you otherwise might get rid of until it’s old enough to be eligible.
3. You had to be careful that the program wasn’t “retiring” vehicles that weren’t being used anyway.  There were safeguards against this in most programs (e.g. vehicle had to be registered to be retired)
4. Finally, all programs were limited in geographic extent, because they were used to help meet local SIP [DH: state implementation plan] requirements.  But then, there was nothing to prevent owners from going outside the area to replace the vehicle with one as dirty or worse.  For that matter, if vehicles have a higher scrap value inside a region than outside, it might suck dirty vehicles in from the outside.

I don’t think a gas guzzler program would suffer from these incentive problems, with the possible exception of 3 above. You really can target gas guzzlers. The eligible vehicles would still probably be pretty old, not worth very much and therefore not driven very much.  I guess this raises the question of whether owners of old gas guzzlers that aren’t driven very much would replace them with newer gas sippers that they would drive more.  You really might not be that much better off.  Still, it’s probably better than corn ethanol.

Here is a recent discussion paper from Winston, suggesting a (large) VMT tax for the DC area would be highly welfare improving.

World Bank: IGCC = clean technology

Oh dear god.  David Wheeler over at the Center for Global Development’s Views from the Center blog writes that the World Bank’s Clean Technology Fund Trust Fund Committee is voting on investment criteria that would make “best available coal technology” eligible for subsidy as a clean technology (it’s a good post).  I believe this refers to higher-efficiency IGCC plants that could hypothetically later be retrofitted for CCS.  I think that at this point, CCS is so untested at large scales that claiming IGCC plants to be low-carbon technology because of this potential extension is completely ridiculous.  Let’s just start clearing space for all the sweet fusion power plants that we might possibly build someday maybe.

I guess can see a situation in which investing in modern coal plants would increase energy efficiency and reduce emissions in the short term, to be replaced/augmented by low-carbon energy technologies (CCS, wind, solar) when the costs and technology uncertainty have decreased in the future.  In addition, it will probably be important for the developing world to have some capacity to start using CCS — if it works, if costs fall, and if there is no sufficiently prevalent superior alternative.  Regardless, under the present levels of uncertainty associated with scaling up CCS any time soon, the path dependency problem of subsidizing IGCC plants under the guise of clean technology is troubling.

Technology transfer is going to have to play an enormous role in solving climate change., but this is probably not the way to move forward.

Twisted green stimulus logic of the day

From RenewableEnergyWorld.com, which, by the way, is one of the best sources for renewable news on the web. Tam Hunt, who’s is apparently a lecturer at Daniel’s alma mater, thinks we can mandate our way out of recession. He wonders, “Where the local stimulus packages are?”. When I saw that title my initial reaction was “states can’t run deficits, so that pretty much takes Keynesian stimulus packages of the table.” Despite acknowledging this budgetary reality, Hunt suggests some crazy other ideas states can use to promote green growth:

One way states can provide a boost is through enacting aggressive renewable energy standards.

Local governments can also enact their own building energy efficiency standards. By doing so, they can spur local investment in energy efficiency projects, creating jobs and leading to cost savings for homeowners and businesses through energy savings.

Last, by choosing to build renewables under CCA, local governments can provide jobs and local infusions of capital that will help kick start local economies more generally.

This is pretty brilliant stuff. If we want to avoid depression, but are concerned about the deficit implications of fiscal stimulus, we can instead simply mandate people to build things. The mind boggles….

German agency meats out advice

The EPA’s approximate German counterpart, the Federal Environmental Agency, recommended that citizens reduce their meat consumption and move toward a more Mediterranean diet.  The agency cited health reasons, but also noted the impact it would have on the nation’s carbon footprint.  It’ll be interesting to see if a broader information campaign emerges and to what degree it influences behavior.  For reference, Germans eat about two-thirds as much meat as the average consumer in America, France, and Spain as of 2002.

The major issues are the energy intensity of livestock production (lots of energy is wasted in processing plant matter using an animal’s digestive system) as well as the potent GHG emissions by the animals themselves:

I think making this information more prominent would be useful — even a small lifestyle change could make a substantial difference.  Still, I can’t imagine an American agency going after livestock farmers — even Oprah couldn’t get away with it.

H/T: Mark Bittman (great NYTimes food blog if you haven’t seen it).

Cool bike technology of the day

This is awesome:

From Good Blog. H/T to Scott.

Burning Car??

Outside RFF today.

Your guess is as good as mine as to what happened.

Now we wait the homeland security investigation

Exogenous legal institutions as a channel to growth?

Most of the empirical literature on the relationship between legal institutions and growth employs cross-country data, but these data may be of limited use in learning how specific rules and laws affect specific paths of development. This paper exploits policy-induced variation in legal institutions across American Indian reservations to study a specific casual mechanism from institutions to growth. The variation is due to federal legislation, implemented during the 1950s and 1960s, that forced some American Indian tribes to transfer judicial jurisdiction to state courts while other tribes retained jurisdiction. The evidence indicates that American Indians on reservations under state jurisdiction were less likely to be denied home loans during the recent housing boom and the results are robust to corrections for potential selection bias. Other findings indicate that lender market concentration is lower on reservations under state courts, and that more per-capita housing credit has flowed to these reservations in recent years. These findings are consistent with a theory developed here that lenders are more uncertain about creditor rights under tribal law.

That is Dominic Parker on the effect that (exogenous changes in) legal institutions have had on access to credit on American Indian reservations.  The basic idea is that the U.S. imposed a known (i.e., less uncertain) legal framework on some reservations, and the reduction in uncertainty about creditor rights increased credit flows in these places.

The natural extension is to ask whether small countries with bad institutions can get an instant boost if they import the external legal instutions of mature, stable countries.  But it is not clear to me that uncertainty about creditor rights is the relevant constraint in most countries with bad institutions.  Rather, it seems to me that bias and corruption are more likely channels for hindering credit flows.  (In fact Parker is explicit in his paper that he is looking at the reduction in uncertainty about creditor rights, not the removal of bias and corruption, as the channel for improving credit access.)  Can Haiti import not only Great Britain’s legal institutions but also its enforcement capabilities?  The new and exogenous legal institutions have to be credible, and this seems like a much different challenge in many developing countries compared to American Indian reservations.

Here is Parker on whether federal land programs crowd out private conservation.

Google does it again

This is not really related to energy or the environment, but I am a blogger and dammit I’m going to post cool stuff.  Last night my roommate tipped me off to the fact that Google has begun answering questions:

Then today, I google mapped my office building, and Gmaps gave me a big list of organizations that reside at this address:

Google will eventually own all of civilization.

Taxing mileage

Over at the NYT Green Inc. blog, Kate Galbraith asks whether mileage taxes will replace gas taxes.  The post is interesting and it has some arguments for and against.  But it misses what economists would probably consider the main point: the taxes should be used to reduce the externalities associated with driving.  In other words, rather than forcing society to bear the cost of extra pollution, congestion, oil dependence, etc., we should use taxes to force drivers to pay the dollar-equivalent of those costs.  In response to the taxes, drivers will their behavior so that we get the socially optimal level of driving/fuel use (and the socially optimal level of pollution, congestion, etc.).

The next question then is whether the externalities associated with driving are more correlated with fuel use, or mileage.  And it turns out the mileage-related externalities are much larger.  Consider this paper, which estimates that mileage-related externalities are an order of magnitude larger (see Table 2 on page 36).  Even if you would quibble with the specific numbers, the general direction is clear: mileage taxes would more directly address the major causes of external social costs from automobile use.  And as an added bonus, the types of systems used to assess mileage taxes could be easily used to impose congestion-specific fees — a major benefit, since congestion is the single largest externality associated with automobile travel.

H/T: Tim Haab.

SCOTUS excerpt of the day

From the inbox, via Earthjustice:

We thought you might be interested in the following excerpt from the transcripts from yesterday’s U.S. Supreme Court Hearing.  All agree that the water pollution permit that the mining company Coeur Alaska, Inc. and the state of Alaska is seeking is in clear violation of the Clean Water Act and that the tailing, fill or otherwise, would kill nearly all life in the lake.

Even the mining company’s attorney Ted Olson admits this, as recorded in the official transcript from yesterday’s hearing.  From the court transcript, dialogue between Ted Olson, attorney for Coeur Alaska Inc. and Justice Souter:

MR. OLSON: And what’s being put in this settling area, this lake, is the sand, which is the same consistency of the bottom of the lake. It’s inert material. It does not changing the chemical composition. It is not hurting the water quality of the lake.

JUSTICE SOUTER: But it’s going to kill every living creature in the lake, right?

MR. OLSON: Putting sand or rocks -

JUSTICE SOUTER: Wait a minute. It is going to kill everything in the lake.

MR. OLSON: Yes, it is, Justice Souter.

The above statements from Attorney Ted Olson, representing Coeur Alaska Inc. is an open admission that the dumping of the mine waste into the lake would “kill everything.”

The full court transcript is available at the following URL: http://www.supremecourtus.gov/oral_arguments/argument_transcripts/07-984.pdf

Attention urban planners: my alley is full of latent research

From ScienceDaily:

If you leave it up to the rats, New York City beats New Orleans any day.  This surprising finding comes from new research by Tel Aviv University zoologists and geographers, who are working together to invent a novel way to test urban designers’ city plans. Instead of using humans as guinea pigs, the scientists went to their nearby zoo and enlisted lab rats to determine the functionality of theoretical and existing plans…

“Using our model of rat behavior, it takes just a few minutes for city planners to test whether a new plan will work. It’s a way to avoid disasters and massive expense.” He expects that the choices the rats make will eventually be optimized and plugged into a computer tool.

…“We put rats in relatively large areas with objects and routes resembling those in Manhattan,” explains Prof. Eilam. The rats, he found, do the same things humans do: They establish a grid system to orient themselves. Using the grid, the rats covered a vast amount of territory, “seeing the sights” quickly.  In contrast, rats in an irregular plan resembling New Orleans’ failed to move far from where they started and didn’t cover much territory, despite travelling the same distances as the “Manhattan rats.”

Cool stuff, though I’m not sure why it is surprising that people and rats more easily navigate a grid than a system of “unstructured and winding streets.”  At any rate, in the interest of science, I should probably rearrange my pizza boxes to better simulate potential development around WMATA’s planned Silver Line.

What are you doing right now?

If the answer is “nothing”, you should watch the Treasury Secretary discuss the role markets play in solving climate change. Live streaming here at 2pm today. Sorry for the late notice.

Resources for the Future

cordially invites you to a

Policy Leadership Forum

A Conversation with the Honorable Henry M. Paulson, Jr.

U.S. Secretary of the Treasury

“How Markets Can Help Address Climate Change and

Other Major Environmental Problems”

RFF President Phil Sharp will moderate a public conversation with Treasury Secretary Henry M. Paulson, Jr., on Monday, January 12, from 2 to 3 p.m.

They will discuss Secretary Paulson’s tenure, his views on the important role that finance and markets can play in addressing environmental challenges, as well as his thoughts about the future. Following the conversation, there will be a question-and-answer session with the audience.

A live webcast of this event will be available at: www.rff.org/live

More on the Stavins quote

To recap, what Rob actually said was this:

“Let’s say I want to have a dinner party. It’s important that I cook dinner, and I’d also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I’m not going to get very clean and it’s not going to be a very good dinner. And that is an illustration of the fact that it is not always best to try to address two challenges with what in the policy world we call a single-policy instrument.”

Translation: just because two things can be accomplished simultaneously, doesn’t mean that doing them simultaneously is more efficient than doing them separately.

This does not mean that Stavins (and others who question the coupling of labor and environmental policy) doesn’t think that its a good idea to promote employment or to reduce carbon emissions because such policies are costly. In fact it means the opposite. It means that promoting work and mitigating climate change are both so important that we should at least attempt to maximize our success in achieving both goals in the face of resource constraints. No one’s saying that it’s impossible that climate policy will create jobs, we’re just saying its not obvious either.

UPDATE: Great minds think alike (riiiiight……). As I was writing this Tim was apparently making the same point. His translation is even better:

the point is not that we shouldn’t try to meet both goals–good dinner and good shower–but rather, the policy of addressing both at once is STUPID.

Also while I’m at it, Romm’s comment (or post of a comment) on John’s post highlight’s my point exactly. Romm writes:

BTW, it’s quite unclear that the poor would be hit the most by energy tax increases; the rich generally consume way more resources than the poor and would thus bear a higher burden of energy taxes. It’s empirically clear that energy subsidies in the US, in China or India go overwhelmingly to the well-off. Conversely, an energy (or CO2) levy would fall mostly on the rich.

Ummmm, no. This is just like the green jobs myth. Its sounds great, the greens want to believe it, and, you know what, its even technically possible. But its not obvious, and should therefore be verified before we allow it to define our public policy. And when you look at the data, alas, it’s not true. It turns out energy price increases are in fact regressive, just like we thought. Note that my paper does not take this to mean that we shouldn’t raise energy prices instead, but simply that we should take economic reality into consideration rather than our green wishes when we design a carbon bill.

John, Tim – HELP!

All of us at CT don’t even know how to begin to respond to this:

Seriously, Dr. Stavins, just because you haven’t figured out how to walk and chew gum at the same time, doesn’t mean nobody else can.

I’m hoping that Environmental Econ can help clarify Stavins’ point in a simple (and funny) manner. I can think of few people who have done more to advance environmental regulation than Rob Stavins, and find the whole post infuriating.

I’d just like to quickly point out that one of the related posts at the bottom of an article deriding environmental economists is titled “RFF Must Read – The Stern Report Got it Right”. Things to note:

• Apparently economists suck, except when they agree with climate progress
• Stavins is a university fellow at RFF
• Apparently RFF is “center-right”. WTF?

UPDATE: John weighs in.

And, another by the way, walking and chewing gum at the same time are much easier dual activities than cooking dinner in the shower. My guess is that Rob CAN, in fact, walk and chew gum at the same time. Stimulating a macroeconomy and cleaning the environment are both difficult things to do by themselves. Trying to do both at once is like, well, trying to cook dinner in the shower.

Sweet article on transmission and renewables

In the MIT Technology Review. Lots of good information indicating that the main barriers to renewable energy investment are bureaucratic, not technological or economic. Which means that any sort of green stimulus aimed at promoting renewable electricity would be pretty useless unless its simultaneously accompanied by regulatory overhaul. And I definitely don’t see that happening before President’s Day.

Here’s just one interesting passage from the article. Def check out the whole thing:

The Midwest Independent Transmission System Operator, which manages the grid in a region covering portions of 15 states from Pennsylvania to Montana, has received hundreds of applications for grid connections from would-be energy developers whose proposed wind projects would collectively generate 67,000 megawatts of power. That’s more than 14 times as much wind power as the region produces now, and much more than it could consume on its own; it would represent about 6 percent of total U.S. electricity consumption. But the existing transmission system doesn’t have the capacity to get that much electricity to the parts of the country that need it. In many of the states in the region, there’s no particular urgency to move things along, since each has all the power it needs. So most of the applications for grid connections are simply waiting in line, some stymied by the lack of infrastructure and others by bureaucratic and regulatory delays.

More green infighting – federalism edition

Or “Electricity Transmission Clusterf*ck Story of the Day”. From Climate Wire (more CT commentary on transmission here):

States defend turf as Congress weighs expanding power over grid (01/08/2009)

Evan Lehmann, E&E reporter

A top utility regulator expressed concern yesterday about states losing approval power over proposed transmission lines, underscoring the challenge of updating the nation’s aging web of power lines as new sources of electricity, like wind, come online.

New Jersey utility regulator Frederick Butler, who presides over a national group of state commissioners, reacted to plans in Congress — and to suggestions by President-elect Barack Obama — that point to growing support for federal jurisdiction over the placement of transmission lines that could carry energy between states.

“We don’t like the idea of pre-emption,” Butler told reporters. “We don’t want to be just told what to do. We want to be consulted. We want to have a voice.”

He added that states should have “veto” power over proposed lines that could have negative impacts on the environment and rates in local regions that federal officials might not fully understand.

The assertions come as Congress considers ways to create a national grid that is more reliable, wastes less power and is able to move a growing amount of renewable energy throughout the country. One plan calls for $75 billion to be spent constructing a high-voltage “backbone” that would connect major energy centers around the country.

Congress took the first step toward a national grid in 2005, when it gave the Federal Energy Regulatory Commission authority to override states in congested areas and to give the go-ahead for new lines that serve the national interest.

So far, that new power is untested. One utility has taken advantage of the rule, though the outcome is still pending. Southern California Edison is asking FERC for permission to build a 270-mile line from the Palo Verde nuclear plant near Phoenix to Palm Springs, Calif. Edison appealed to FERC after the Arizona Corporation Commission rejected the plan, saying it would cause environmental damage and boost prices in Arizona.

Obama wants a ‘whole new’ grid

It’s unclear where Obama stands on the thorny issue of pre-empting states. But he has expressed support for significant transmission upgrades. In October, he said one of the “most important infrastructure projects that we need is a whole new electricity grid.”

“Because if we’re going to be serious about renewable energy, I want to be able to get wind power from North Dakota to population centers like Chicago,” he added.

Butler pointed to a downside to that notion, though he generally agrees that upgrades are needed.

Installing a superhighway of transmission lines makes it easier to access power produced from faraway coal plants, he said, rather than work harder on local efforts to save energy. It could also mean that developers are less likely to build local alternative energy projects, like wind.

“The more transmission you build, the less impetus there is to do efficiency,” Butler said.

But he acknowledged that “strategically sited” transmission lines could bypass power plants in coal states, while running through countryside laced with wind farms to promote clean energy.

Butler is president of the National Association of Regulatory Utility Commissioners, a group that includes regulators from every state. The diverse origins of the association’s members make it difficult for them to agree on specific policies.

Butler, for example, acknowledged that he’s “open to the concept” of a nationally administered grid. But that’s not a consensus viewpoint within the association of regulators, many of whom vigorously defend their states’ jurisdiction over transmission siting.

“I’m open to the concept of having someone at the national level oversee this, because … there is some need for a national grid that is not a byzantine, jerry-rigged” grid, he said. “But at the same time, I don’t think states should be pre-empted out of that.”

Regulators sitting on the association’s climate change task force are assembling in Washington over the next two days to update its policy on global warming. Currently, the group supports federal legislation to reduce greenhouse gases through a cap-and-trade program.

Green infighting

From Greenwire, a preview of what’s to come as government attempts to promote green investment. Like any other market, the renewable energy and efficiency market consists of both complements AND substitutes. It’s really hard not to appear to be picking winners in these situations, which inevitably invokes outcry from the losers. In this instance, interest groups backing energy efficiency and distributed renewable energy are attempting to block a large transmission investment aimed at bringing geothermal and solar energy to badly congested markets. We’re gonna need all of the above if we are gonna significantly reduce our carbon emissions from electricity, but that doesn’t seem to matter a whole lot to the critics listed here. I’ll post the whole article below the jump.

Greening the ghetto and other randomish

1. In this week’s New Yorker*, Elizabeth Kolbert has a good article on Van Jones, author of “The Green Collar Economy”. Jones’ has added a third win to the green-jobs debate, by claiming that not only can we solve climate change and create jobs, we do so in a way that ensures those jobs go to troubled urban youth. In other words we can “green the ghetto”. Interestingly, the piece starts out in New Bedford, MA, where my mother’s family is from. New Bedford was once the whaling capital of the world**, but, like many old cities on the east coast, it enters the 21st century crippled by unemployment and gang violence. It has also been severely affected by the recent wave of home foreclosures.

Now I think we all have a responsibility to help places like New Bedford make the transition into the 21st century, but am unconvinced that Jones’ solution is the best one, for either the city or the environment. The city needs more teachers, police, and affordable healthcare. The environment needs high quality, low cost clean energy alternatives. Given that our society is resource constrained, it’s not obvious that paying troubled youths to caulk up New Bedford houses maximizes aggregate welfare along these dimensions. In the article, Van is quoted as saying, “Your goal has to be to get the greenest solutions to the poorest people.” I’ll let ya’ll decide what, if anything, that actually means.

* This week’s edition also has great articles on Hannah Arrendt (what would she say about green jobs?), Barney Frank (IMO the smartest man in the House), and Bon Iver (eh).

** In re whales and New Bedford, this is pretty crazy.

2. In other news, California is still totally effed. Grist has a good summary of how the Governator is blowing up environmental commitments (albeit comparatively ambitious ones) in search of stimulus. I’m not sure how exactly a state with balanced budget mandate and a $42 billion deficit seeks to create stimulus…..   Just another example of what’s the matter with California.

3. And in super secret news, word on the street is that outgoing Treasury Secretary, and, apparently Christian Scientist, Henry Paulson will be at RFF this Monday to discuss TARP climate change. Deets to follow soon.

In which Seinfeld meets environmental policy

Robert Stavins on green jobs:

“Let’s say I want to have a dinner party. It’s important that I cook dinner, and I’d also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I’m not going to get very clean and it’s not going to be a very good dinner. And that is an illustration of the fact that it is not always best to try to address two challenges with what in the policy world we call a single-policy instrument.”

New rule: if an idea is analogous to something Kramer did, you shouldn’t base policy on that idea.

H/T: Environmental Capital via EnvEcon.

Update: Maybe we could get out of this recession if we take all our bottles to Michigan.