SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

Newell, Richard G.; Pizer, William A..

We estimate a carbon mitigation cost curve for the U.S. commercial sector based on econometric estimation of the responsiveness of fuel demand and equipment choices to energy price changes. The model econometrically estimates fuel demand conditional on fuel choice, which is characterized by a multinomial logit model. Separate estimation of end uses (e.g., heating, cooking) using the 1995 Commercial Buildings Energy Consumption Survey allows for exceptionally detailed estimation of price responsiveness disaggregated by end use and fuel type. We then construct aggregate long-run elasticities, by fuel type, through a series of simulations; own-price elasticities range from -0.9 for district heat services to -2.9 for fuel oil. The simulations form the basis of...

How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies?

Palavras-chave: Commercial energy demand; Carbon policy; Climate change; Discrete choice; Resource /Energy Economics and Policy; Q28; Q48; Q41; C35; C15.

Ano: 2005

URL: http://purl.umn.edu/10625

Parry, Ian W.H.; Pizer, William A.; Fischer, Carolyn.

This paper examines whether the welfare gains from technological innovation that reduces future abatement costs are larger or smaller than the "Pigouvian" welfare gains from optimal pollution control. The relative welfare gains from innovation depend on three key factors - the initially optimal level of abatement, the speed at which innovation reduces future abatement costs, and the discount rate. We calculate the welfare gains from innovation under a variety of different scenarios. Mostly they are less than the Pigouvian welfare gains. To be greater, innovation must reduce abatement costs substantially and quickly and the initially optimal abatement level must be fairly modest.

Prices vs. Quantities Revisited: The Case of Climate Change

Palavras-chave: Innovation; Welfare; Regulation; Endogenous; Technological; Change; R&D; Environmental Economics and Policy; Q16; Q28; O32; O33.

Ano: 2002

URL: http://purl.umn.edu/10621

Uncertainty about compliance costs causes otherwise equivalent price and quantity controls to behave differently. Price controls - in the form of taxes - fix the marginal cost of compliance and lead to uncertain levels of compliance. Meanwhile quantity controls - in the form of tradable permits or quotas - fix the level of compliance but result in uncertain marginal costs. This fundamental difference in the face of cost uncertainty leads to different welfare outcomes for the two policy instruments. Seminal work by Weitzman (1974) clarified this point and derived theoretical conditions under which one policy is preferred to the other. This paper applies this principal to the issue of worldwide greenhouse gas (GHG) control, using a global integrated climate...

How Important is Technological Innovation in Protecting the Environment?

Palavras-chave: Climate change; Policy under uncertainty; Price and quantity controls; General equilibrium modeling; Demand and Price Analysis; Q28; D81; C68.

Ano: 1997

URL: http://purl.umn.edu/10498

Parry, Ian W.H.; Pizer, William A.; Fischer, Carolyn.

Economists have speculated that the welfare gains from technological innovation that reduces the future costs of environmental protection could be a lot more important than the "Pigouvian" welfare gains over time from correcting a pollution externality. If so, then a primary concern in the design of environmental policies should be the impact on induced innovation, and a potentially strong case could be made for additional instruments such as research subsidies. This paper examines the magnitude of the welfare gains from innovation relative to the discounted Pigouvian welfare gains, using a dynamic social planning model in which research and development (R&D) augments a knowledge stock that reduces future pollution abatement costs. We find that the...

The EU Emissions Trading Directive: Opportunities and Potential Pitfalls

Palavras-chave: Environmental Economics and Policy.

Ano: 2000

URL: http://purl.umn.edu/10883

Kruger, Joseph; Pizer, William A..

The European Union is on the verge of establishing an emissions trading program ten times the size of the Acid Rain trading program in the United States. Its design takes advantage of many lessons from existing experience with trading programs, as well as economic theory, and innovates in important ways. While we view this as an impressive development, concerns about equity, enforcement, and efficiency remain. Specifically, a lack of data and weaker environmental institutions in some EU Member States raises questions about both allowance allocations and compliance and enforcement. Although much attention has focused on whether prices will be "too low" in the first phase of the program, a greater risk is that uncertainty about program elements, technology...

Climate Change Catastrophes

Palavras-chave: European Union; Climate change; Emissions trading; Environmental Economics and Policy.

Ano: 2004

URL: http://purl.umn.edu/10679

Most studies that compare price and quantity controls for greenhouse gas emissions under uncertainty find that price mechanisms perform substantially better. In these studies, the benefits from reducing emissions are proportional to the level of reductions, and such linear benefits strongly favor price policies (Weitzman 1974). Catastrophic damages, however, challenge that intuition as consequences become highly nonlinear. Catastrophe avoidance offers huge benefits, and incremental adjustments on either side of the associated threshold are relatively unimportant, suggesting a strong preference for quantity controls. This paper shows that with catastrophic damages, both price and quantity mechanisms offer large gains over the business-as-usual alternative,...

The Analysis of Randomized Experiments with Missing Data

Palavras-chave: Climate change; Global warming; Prices versus quantities; Stock externalities; Integrated assessment; Uncertainty; Environmental Economics and Policy; Q28; D81; C68.

Ano: 2003

URL: http://purl.umn.edu/10499

Imbens, Guido W.; Pizer, William A..

The otherwise straightforward analysis of randomized experiments is often complicated by the presence of missing data. In such situations it is necessary to make assumptions about the dependence of the selection mechanism on treatment, response, and covariates. The widely used approach of assuming that the data is missing at random conditional on treatment and other fully observed covariates is shown to be inadequate to describe data from a randomized experiment when partially observed covariates are also present. This paper presents an alternative to the missing at random model (MAR) which is both consistent with the data and preserves the appeal of MAR. In particular, the proposed family of models minimize the discrepancy with MAR while explaining...

Jobs Versus the Environment: An Industry-level Perspective

Palavras-chave: Research and Development/Tech Change/Emerging Technologies.

Ano: 2000

URL: http://purl.umn.edu/10596

Morgenstern, Richard D.; Pizer, William A.; Shih, Jhih-Shyang.

The possibility that workers could be adversely affected by environmental policies imposed on heavily regulated industries has led to claims of a "jobs versus the environment" trade-off by both business and labor leaders. The present research examines this claim at the industry level for four heavily polluting industries: pulp and paper mills, plastic manufacturers, petroleum refiners, and iron and steel mills. By focusing on labor effects across an entire industry, we construct a measure relevant to the concerns of key stakeholders, such as labor unions and trade groups. We decompose the link between environmental regulation and employment into three distinct components: factor shifts to more or less labor intensity, changes in total expenditures, and...

Workshop Report: Pollution Abatement Costs and Expenditures (PACE) Survey Design for 2000 and Beyond

Palavras-chave: Jobs-environment trade-off; Distribution of environmental costs; Translog cost function; Labor and Human Capital; C33; D24; J40; Q28.

Ano: 2000

URL: http://purl.umn.edu/10526

Burtraw, Dallas; Krupnick, Alan J.; Morgenstern, Richard D.; Pizer, William A.; Shih, Jhih-Shyang.

Modeling Economywide versus Sectoral Climate Policies Using Combined Aggregate-Sectoral Models

Palavras-chave: Environmental Economics and Policy.

Ano: 2001

URL: http://purl.umn.edu/10652

Pizer, William A.; Burtraw, Dallas; Harrington, Winston; Newell, Richard G.; Sanchirico, James N..

Economic analyses of climate change policies frequently focus on reductions of energy-related carbon dioxide emissions via market-based, economywide policies. The current course of environment and energy policy debate in the United States, however, suggests an alternative outcome: inefficiently designed and/or sector-based policies. This paper uses a collection of specialized, sector-based models in conjunction with a computable general equilibrium model of the economy to examine and compare these policies at an aggregate level. We examine the relative cost of different policies designed to achieve the same quantity of emissions reductions. We find that excluding a limited number of sectors from an economywide policy does not significantly raise costs....

The Cost of Environmental Protection

Palavras-chave: Carbon; Carbon dioxide; Climate change; Climate policy; General equilibrium model; Partial equilibrium model; Cost; Environmental Economics and Policy; Q25; D58; D61; Q48.

Ano: 2005

URL: http://purl.umn.edu/10502

Morgenstern, Richard D.; Pizer, William A.; Shih, Jhih-Shyang.

Expenditures for environmental protection in the U.S. are estimated to exceed $150 billion annually or about 2% of GDP. This estimate, based on largely self-reported information, is often cited as an assessment of the burden of current regulatory efforts and a standard against which the associated benefits are measured. Little is known, however, about how well reported expenditures relate to true costs. The potential for both incidental savings and uncounted burdens means that actual costs could be either higher or lower than reported expenditures. A significant literature supports the notion that increases in reported environmental expenditures probably understate actual economic costs. Estimates of the true cost of a dollar increase in reported...

Instrument Choice for Environmental Protection When Technological Innovation Is Endogenous

Palavras-chave: Environmental costs; Fixed-effects; Translog cost model; Environmental Economics and Policy; C33; D24; Q28.

Ano: 1998

URL: http://purl.umn.edu/10530

Fischer, Carolyn; Parry, Ian W.H.; Pizer, William A..

This paper presents an analytical and numerical comparison of the welfare impacts of alternative instruments for environmental protection in the presence of endogenous technological innovation. We analyze emissions taxes and both auctioned and free (grandfathered) emissions permits. We find that under different sets of circumstances each of the three policies may induce a significantly higher welfare gain than the other two policies. In particular, the relative ranking of policy instruments can crucially depend on the ability of adopting firms to imitate the innovation, the costs of innovation, the slope and level of the marginal environmental benefit function, and the number of firms producing emissions. Moreover, although in theory the welfare impacts of...

Climate Policy in the United States and Japan: A Workshop Summary

Palavras-chave: Technological innovation; Externalities; Environmental policies; Welfare impacts; Environmental Economics and Policy; Q28; O38; H23.

Ano: 1998

URL: http://purl.umn.edu/10812

Pizer, William A.; Tamura, Kentaro.

Resources for the Future and the Institute for Global Environmental Strategies (Japan) convened a one-and-one-half day workshop on domestic and international climate policy on February 12-13, 2004 in Washington, D.C. On the first day, 55 participants heard presentations from 14 speakers and discussed domestic activities, economics, and politics. The second day featured a smaller group of 27 participants hearing six informal sets of comments and discussing opportunities for international collaboration. Participants included government officials from the Japanese Ministry of the Environment, the U.S. Environmental Protection Agency, and other U.S. administration and congressional staff; representatives from business and environmental groups; and academic...

Discounting the Distant Future: How Much Do Uncertain Rates Increase Valuations?

Palavras-chave: Climate change; Global warming; United States; Japan; Kyoto; Environmental Economics and Policy.

Ano: 2004

URL: http://purl.umn.edu/10771

Newell, Richard G.; Pizer, William A..

Costs and benefits in the distant future-such as those associated with global warming, long-lived infrastructure, hazardous and radioactive waste, and biodiversity-often have little value today when measured with conventional discount rates. We demonstrate that when the future path of this conventional rate is uncertain and persistent (i.e., highly correlated over time), the distant future should be discounted at lower rates than suggested by the current rate. We then use two centuries of data on U.S. interest rates to quantify this effect. Using both random walk and mean-reverting models, we compute the certainty-equivalent rate that is, the single discount rate that summarizes the effect of uncertainty and measures the appropriate forward rate of...

How Large Are the Welfare Gains from Technological Innovation Induced by Environmental Policies?

Palavras-chave: Discounting; Uncertainty; Interest rate forecasting; Climate policy; Intergenerational equity; Risk and Uncertainty; D90; E47; C53; H43; Q28.

Ano: 2001

URL: http://purl.umn.edu/10743

Parry, Ian W.H.; Pizer, William A.; Fischer, Carolyn.

This paper examines whether the welfare gains from technological innovation that reduces future abatement costs are larger or smaller than the Pigouvian welfare gains from optimal pollution control. The relative welfare gains from innovation depend on three key factors ¾ the initially optimal level of abatement, the speed at which innovation reduces future abatement costs, and the discount rate. We calculate the welfare gains from innovation under a variety of different scenarios. Mostly they are less than the Pigouvian welfare gains. To be greater, innovation must reduce abatement costs substantially and quickly and the initially optimal abatement level must be fairly modest.

Economies of Scale and Technical Efficiency in Community Water Systems

Palavras-chave: Innovation; Welfare; Regulation; Endogenous; Technological; Change; R&D; Environmental Economics and Policy; Q16; Q28; O32; O33.

Ano: 2002

URL: http://purl.umn.edu/10448

Shih, Jhih-Shyang; Harrington, Winston; Pizer, William A.; Gillingham, Kenneth.

In this study we use datasets from the 1995 and 2000 Community Water Supply surveys to examine the production costs of water supply systems. We first estimate the economies of scale in water supply by estimating the total unit cost as well as individual component cost elasticities. For total unit cost elasticity, we find that a 1% increase in production reduces unit costs by a statistically significant 0.16%. For individual component cost elasticities, we find that higher economies of scale exist in capital costs, outside costs, other costs, and materials costs; labor costs and energy costs exhibit lower but still positive economies of scale. These economies of scale may reflect production economies or suggest that larger systems are better than smaller...

Regulating Stock Externalities Under Uncertainty

Palavras-chave: Small water systems; Water supply; Capacity development; Economies of scale; Community water systems; Resource /Energy Economics and Policy; Q25; Q28.

Ano: 2004

URL: http://purl.umn.edu/10788

Newell, Richard G.; Pizer, William A..

Using a simple analytical model incorporating benefits of a stock, costs of adjusting the stock, and uncertainty in costs, we uncover several important principles governing the choice of price-based policies (e.g., taxes) relative to quantity-based policies (e.g., tradable permits) for controlling stock externalities. Applied to the problem of greenhouse gases and climate change, we find that a price-based instrument generates several times the expected net benefits of a quantity instrument. As in Weitzman (1974), the relative slopes of the marginal benefits and costs of controlling the externality continue to be critical determinants of the efficiency of prices relative to quantities, with flatter marginal benefits and steeper marginal costs favoring...

Calculating the Costs of Environmental Regulation

Palavras-chave: Stock; Externality; Regulation; Policy; Uncertainty; Price; Quantity; Tax; Tradable permit; Pollution; Climate change; Greenhouse Gas; Instrument choice; Risk and Uncertainty; Q28; D81; C61.

Ano: 2000

URL: http://purl.umn.edu/10471

Pizer, William A.; Kopp, Raymond J..

Decisions concerning environmental protection hinge on estimates of economic burden. Over the past 30 years, economists have developed and applied various tools to measure this burden. In this paper, developed as a chapter for the Handbook of Environmental Economics, we present a taxonomy of costs along with methods for measuring those costs. At the broadest level, we distinguish between partial and general equilibrium costs. Partial equilibrium costs represent the burden directly borne by the regulated entity (firms, households, government), including both pecuniary and nonpecuniary expenses, when prices are held constant. General equilibrium costs reflect the net burden once all good and factor markets have equilibrated. In addition to partial...

Climate Policy Design under Uncertainty

Palavras-chave: Social cost; Cost-benefit; Cost-effectiveness; Environmental regulation; Environmental Economics and Policy; Q20; Q28; H41; L50; D58.

Ano: 2003

URL: http://purl.umn.edu/10762

The uncertainty surrounding both costs and benefits associated with global climate change mitigation creates enormous hurdles for scientists, stakeholders, and decision-makers. A key issue is how policy choices balance uncertainty about costs and benefits. This balance arises in terms of the time path of mitigation efforts as well as whether those efforts, by design, focus on effort or outcome. This paper considers two choices-price versus quantity controls and absolute versus relative/intensity emissions limits-demonstrating that price controls and intensity emissions limits favor certainty about cost over climate benefits and future emissions reductions. The paper then argues that in the near term, this favoritism is desired.

Optimal Choice of Policy Instrument and Stringency Under Uncertainty: The Case of Climate Change

Palavras-chave: Carbon; Climate; Policy; Intensity; Global warming; Uncertainty; Price; Quantity; Environmental Economics and Policy; D81; Q54; Q58.

Ano: 2005

URL: http://purl.umn.edu/10584

Considerable uncertainty surrounds both the consequences of climate change and their valuation over horizons of decades or centuries. Yet, there have been few attempts to factor such uncertainty into current policy decisions concerning stringency and instrument choice. This paper presents a framework for determining optimal climate change policy under uncertainty and compares the resulting prescriptions to those derived from a more typical analysis with best-guess parameter values. Uncertainty raises the optimal level of emission reductions and leads to a preference for taxes over rate controls. The first effect is driven primarily by uncertainty about future discount rates while the second arises because of relatively linear damages and a negative...