Author: rbouvier consulting

2019 Second Quarter Journal Reviews

2019 Second Quarter Journal Reviews

Measuring Willingness to Pay for Environmental Attributes in Seafood

Hilger, J., Hallstein, E., Stevens, A.W. et al. Environ Resource Econ (2019) 73: 307. 

We found this article very interesting because of our recent work with CEI on growing farmed scallop in Maine.  Most research suggests that consumers are willing to pay for environmental attributes (like sustainable harvest) in seafood, but the majority of that research are stated preference, rather than revealed preference, studies. In other words, they are studies of what consumers say they’re going to do, rather than studies of what consumers do.  It is more difficult to design a controlled experiment that adequately captures consumers’ actual behavior than it is to design a survey! This article uses a “natural experiment” by which the researchers compared sales of seafood before and after a sustainability labeling scheme (using red, yellow, and green labels) was implemented. The researchers found that consumers did express preferences for wild-caught versus farmed seafood, US-caught versus no-US caught seafood, and selective harvest methods to less selective harvest methods. Another interesting aspect of this paper is the discussion of the yellow label, which was described as “proceed with caution” on the label but actually meant that not enough information was available to make a final decision. Consumers seem to have responded to this ambiguity by substituting away from this alternative altogether.

Do energy efficiency standards hurt consumers? Evidence from household appliance sales.

Journal of Environmental Economics and Management

Volume 96, July 2019, Pages 88-107

Arlan Brucala; Michael J.Roberts

In yet another article investigating policy and its effect on consumers, this article looks at Energy Star ™ labels on washers, dryers, and air conditioners, and the effect of those standards on prices and consumer behavior.  Contrary to expectations, the authors find that stricter standards increase consumer welfare, by encouraging substitution towards more durable and energy-efficient goods.        

Urban afforestation and infant health: Evidence from MillionTreesNYC

Journal of Environmental Economics and Management

Volume 95, May 2019, Pages 26-44

This is a fascinating study of the effect of planting trees on infant health in urban areas. Whereas most of the literature on the positive effect of trees on health looks at the effect of proximity to green space on health, this article takes advantage of the MillionTreesNYC program in New York City to study the effect of planting trees on infant health. The authors use a database from the US Centers for Disease Control to compare the health of infants born to women in New York City to those born to women in similar areas where no afforestation occurred.  They take advantage of several cutting-edge statistical methodologies to control for confounding factors, such as socio-demographic factors. Their findings imply that a twenty percent increase in in urban forest cover (such as occurred under the program) decreased prematurity and low birth weight among mothers in New York City by 2.1 and 0.24 percentage points, respectively, relative to similar mothers outside of NYC. While this doesn’t seem like much, the difference in low birth weight is equivalent to that of a mother who doesn’t smoke to a mother who smokes two cigarettes a day during pregnancy. The effect seemed to be greater among African American women, indicating that urban afforestation may be significant equity effects as well.

Taking the Measure of Plastic Bag Bans

Taking the Measure of Plastic Bag Bans

MichaelisScientists [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]

Americans go through 102.1 billion plastic bags each year, and those bags end up everywhere. Whether they’re in whale stomachs, or in our water as microplastics, the volume has people concerned.

In an effort to reduce the amount of plastic, bans on single-use plastic bags are on the rise. California and New York already have state-wide bans, and Maine has just become the third state to do so. In other states, cities like Boston, Seattle and Chicago have their own bans, and more seem likely to follow.

While it’s popular to attack plastic bags, it’s still important to ask questions to make sure the bans are necessary and effective.

Are plastic bags as bad as people think? What are the alternatives, and are they any better? What impact do these bans have on people’s behavior and the environment?

It turns out that when you look at the whole lifecycle of different bags, and the unintended consequences of the bans, the results aren’t straightforward.

Cost of Bag Production

The environmental cost of production is a good starting point in measuring the impact of different bags. Contrary to what you might think, from this perspective, plastic bags win out.

Plastic bags are made by using ethylene. Ethylene   is a by-product of the crude oil refining process and natural gas production.   Manufacturing plants have also gotten very efficient at making plastic, so this process doesn’t generate many greenhouse gases per bag.

Paper bags, on the other hand, require cutting down trees and then processing them in an energy-intensive way. A 2005 Scottish study noted that paper bag production uses about four times as much water as plastic and creates three times the amount of greenhouse gases. It should be noted that in the United States, many paper manufacturing facilities use biofuels and co-gen systems to generate the power used in the manufacturing process which may mitigate some of these emissions.

Even cotton tote bags aren’t better for single use. This is because you need to factor in the land and water used to grow the cotton, as well as the processing and production. One study found that you’d need to use the tote bag at least 131 times to be better than a single-use plastic bag, based on the production impact.

Recycling and Decomposing

One of the biggest problems with plastic bags is what happens after they’re used. This is true whether they’re used once or a couple of times.

While the bags can technically be recycled, municipalities don’t accept them with other recyclables. This puts the burden on the consumer to save them and bring them to a place that will accept them, and most people don’t go to the trouble.

When plastic doesn’t get recycled, it either goes into a landfill or ends up as litter.

In a landfill, plastic takes an average of 500 years to decompose. The volume of these bags in the trash also comes at a cost. California alone spends $25M annually on disposal of plastic waste in landfills.

Paper, on the other hand, decomposes in just two to six weeks. It can also be easily recycled.

Other Impacts of Plastic in the Environment

Additionally, when plastic ends up as litter, the environmental impact is much worse than with paper.

Plastic has become one of the most common kinds of waste products, with much of it ending up in the ocean. A study from UC Santa Barbara found that each year, the world’s oceans receive almost 8 million metric tons of plastic.

As an example of how widespread this is, a recent dive by American explorer Victor Vescovo found a plastic bag at the bottom of the Mariana Trench, seven miles below the surface.

One of the biggest concerns with this is the impact on marine animals. Many are tempted to eat plastic bags, thinking they’re food, but instead the bags block their digestion.  As many as 1 million sea animals die each due to the plastic in the oceans. Among them was a dead sperm whale found in April 2019 with 48 pounds of plastic in its stomach.

A less publicized issue is the fact that plastic bags can cause problems in urban settings by clogging waterways and drains. This was discovered as one of the primary factors in flooding in Bangladesh in 1988 and 1998, which led them to ban plastic bags in 2002.

Microplastics are another concern. These form when the plastic breaks down into smaller and smaller pieces.

No one has enough evidence to show any specific health impacts of microplastics, mostly because it is unethical to ask human test subjects to ingest microplastics due to known health hazards of plastic in general, but the amount and range makes it worth watching. A 2017 study found that 94% of tap water samples from the United States contained microplastics and other studies have found high concentrations of microplastics in fish and shellfish commonly eaten by humans.

Another study also noted that when plastic bags are exposed to sunlight, they begin to give off ethylene, and continue to do so even after the sun sets.  This ethylene can contribute to the creation of atmospheric carbon monoxide, a greenhouse gas.  

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These factors are what make the plastic bag bans so popular, even though from a production standpoint, they can do less environmental damage than the alternatives.

Considering Consumer Behavior

One issue that policymakers often overlook is how consumers will react to their policies. Production and disposal are only one part of the story. It’s also important to consider if people actually do reuse those bags, for what purpose, and how consumers will change their behavior after a plastic bag ban.

In some cases, people do use the plastic bags again, though often only one other time. The most common examples are to line small trash cans and to pick up after dogs. Those needs don’t disappear with the bans, and those are things you can’t use tote bags for.

As a result, one side effect of the bans is that people buy more trash bags for those purposes. Rebecca Taylor, an economist at the University of Sydney, saw a 120% increase in sales of small, four-gallon trash bags. From an environmental perspective, trash bags are worse than the single-use bags, since trash bags are thicker than grocery bags. This means they use more plastic, and it takes longer for them to degrade.

A quick glance at the comments section of the Portland Press Herald, in an article announcing the ban, revealed that many commenters were “hoarding” their plastic bags in response to the ban, or even buying rolls of plastic bags in advance of the law’s April 2020 effective date.

Additionally, the use of paper bags increases significantly after bans. A survey of a few areas in California found that paper bag usage jumped from 3% to 16%. This meant increased production for paper bags, as well as higher volumes of paper trash.

Still, the bans do encourage people to reuse bags by 40%. The bans also reduce the amount of plastic that ends up as trash, which is the other piece to consider.

Conclusion – It’s Complicated

Economists are notorious for responding “it depends” when asked a question comparing two alternatives.  The impact of bans on plastic bags is no different.  Depending on what you measure, you can find support for using plastic bags, and support for banning them.   

It’s important to remember that the impact doesn’t stop with the manufacturing. It continues with how the bags are used, and what happens with them when they’re no longer in use. It’s also important to recognize that no law is ever passed in a vacuum. We need to consider how people will respond, what alternatives are available to them, and what the unintended consequences may be.   

References:

The Buzz About B-Corps: Triple Bottom Line Accountability

The Buzz About B-Corps: Triple Bottom Line Accountability

Triplebotline [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)]


For generations most companies have measured their success or failure by the amount of profits and losses they experience.  This is in part because financial gains and losses are easy to quanitfy, but also because legally a company owes a fiduciary duty of care to its stockholders, and must weigh stockholder impact when making corporate decisions.  That impact is generally measured in dollars and sometimes is taken to the extreme of “maximizing shareholder value” above all else.  Publicly held companies, companies that sell stock to the general public, are required to prepare annual reports that contain these gains and losses and file those reports with the U.S. Securities and Exchange Commission (SEC).  Most companies also issue a similar report for their stockholders and prospective investors. 

But business is changing, and more and more companies are seeking to measure their achievements in a manner that considers more than just how much money they make; they want to include their social and environmental impact as part of their success too.  In a business world where the common approach is to increase profit and maximize the benefit to your stockholders, and in some cases face stockholder lawsuits for NOT doing this, how can you find a way to include your social and environmental impacts as part of your bottom line reporting?

Enter the benefit corporation and Certified B-Corporations (often abbreviated to B-Corp).

Benefit Corporations and Certified B-Corps came into existence to help companies that want to take a triple bottom line approach to how they do business and how they report on their success.  Benefit Corporations and Certified B-Corps are often thought to be the same thing, but there are some important differences.

Benefit Corporation

A benefit corporation is a company that has legally incorporated as a benefit corporation in their state.  Currently 34 states allow for companies to file as benefit corporations; a few of these states allow for benefit LLCs as well.  If your state allows benefit corporations, you file to become one in the same way you file to become a traditional corporation.  But what exactly is the difference between a benefit corporation and a traditional corporation? 

When you file as a benefit corporation your legal obligations and duties are expanded to include the company’s impact on society and the environment.  It allows company decision makers to take actions that might create a greater benefit to society or lessen the company’s impact on the environment even if those actions reduce company profits or shareholder value.  Company decision makers are protected from potential shareholder claims when the company takes such actions.

Benefit corporations publish annual reports just as traditional corporations do, but they don’t just report on the financial bottom line, the company’s social and environmental impacts are reported as well. 

Certified B-Corp

You may have seen the Certified B-Corporation logo popping up on websites, product labels, and office front doors in the past few years.  The Certified B-Corporation came into existence to provide a way for those in states that do not currently have the option of incorporating as a benefit corporation to be able to “consider the impact of their decisions on their workers, customers, suppliers, community, and the environment” in addition to the financial impact.

The certification is issued by the non-profit B-Lab.  Companies who wish to become Certified B-Corporations must apply via the bcorporation.net website.  They undergo a review to assess the company’s impact on “its workers, customers, community, and environment.”  If the company scores high enough on its review, they must then agree to transparency by making the report available on the B-Corp website.  Finally, they must take the step of amending their bylaws, or other legal governing documents, to “require their board of directors to balance profit and purpose” when make decisions. 

The B-Corp website states that there are currently 2,500 Certified B-Corps around the world.  There are many companies that are both benefit corporations and Certified B-Corps.  Having the third-party B-Corp certification can demonstrate that a company is not just paying lip service to triple bottom line accounting, but is actually actively pursuing a more sustainable way of doing business.

Benefit corporations and B-Corp certification provide triple bottom line minded companies with a way of doing business that is in alignment with their purpose.  Putting society and the environment on par with profits creates new avenues for such organizations to measure their success.  The transparency required provides consumers and investors with the information they need to make decisions on which companies are in line with their personal values.  In the end, having more companies that take a triple bottom line approach to doing business benefits us all.

Costly Change to Mercury Emission Standards

Costly Change to Mercury Emission Standards

On December 28, 2018, the Trump administration announced that the Mercury and Air Toxic Standards (MATS) that restrict mercury emissions were too costly and without enough benefits to make them necessary. Those in favor of the restrictions argue that the real cost comes from changing the standards.

Why is mercury an issue?

Mercury is a heavy metal that is released into the atmosphere from a variety of sources, with coal burning power plants being one fo the primary sources.  Once mercury is released into the air, rain and snow send it to the waterways, where it converts to the toxic methyl mercury. From there, it contaminates the water we drink and begins to work its way up the food chain beginning with smaller fish and accumulating at higher amounts in larger fish, such as salmon or tuna exposing humans to further risk.   

Difference in cost-benefit analysis

The debate about the restrictions e. centered around the cost-benefit analysis of MATS, and specifically around what should be considered a co-benefit.

The original analysis issued by the EPA  in 2011 factored in the co-benefits [JG1] of reducing particulate matter (PM) as well as the direct benefit from cutting back on hazardous air pollutant (HAP) emissions. In this analysis, the projected health savings were $59 billion to $140 billion annually. This more than offset the estimated $10.9 billion annual cost of regulating emissions.

Some of the health benefits identified include preventing:

  • 6,800-17,000 premature deaths
  • 120,000 cases of aggravated asthma
  • 850,000 days of people missing work
  • 5.1 million days of restricted activity

In 2018, though, the Environmental Protection Agency (EPA) produced a Supplemental Cost Finding proposing that including co-benefits related to PM is flawed, and the analysis should only consider quantifiable benefits from HAP reductions.

Using this revised approach, the health-related co-benefits would only be $4 to $6 million annually. Compared to the billions needed to enact the regulations, the new finding claims that it is not “appropriate or necessary” to regulate emissions, since it’s not cost-effective.

The proposal also indicates that while there are other benefits, they are unquantified and not enough to support the stricter standards.

Timing and intent

One of the surprises of the revised analysis is the timing. When MATS was passed, facilities had up to 5 years to meet the standards. This means that the majority have already paid to install the necessary technology to reduce emissions. Changing the standards now won’t give them that money back. On the other hand, many utilities are already recouping their investment through regulated pricing.

This has raised some questions about the intent of the supplemental analysis and who would benefit from the change.

Benefiting the coal industry

Power plants are the primary source of most pollutants, and within the power sector, coal-fired plants produce 99% of mercury emissions. They also generate the majority of other pollutants. As a result, they’re the most impacted by MATS.

Those coal plants would therefore stand to gain the most. It’s uncertain how helpful this would be, however, given that coal-fired power generation has fallen more than 40% since 2007.

Opening the door to health problems

Changing the cost-benefit approach could set a dangerous precedent. It could set a new standard the way health benefits are considered for all future standards and environmental rulings. Such a change is significant because of the potential damages.

Mercury is a neurotoxin that can damage the brains and nervous systems of unborn babies and young children. As a result, consuming fish with high mercury levels can cause serious harm, especially for children, nursing mothers, and women who are pregnant or might become so. The EPA estimates that each year, more than 300,000 newborns may have a higher percent of learning disabilities due to mercury exposure.

Other health impacts can affect all ages and include damage to the brain, heart, kidneys, liver, and immune systems. This can lead to muscle weakness, loss of peripheral vision, lack of coordination, speech impairment, and impaired hearing and walking.

Mercury is widespread – including in Maine

What makes the health implications even more worrisome is that mercury is widespread, and it lingers for a long time. A study by the EPA in 2009 found that 48% of lakes and reservoirs nationwide had levels of mercury exceeding the guidelines (0.3 parts per million).

Maine is far from immune, since prevailing winds bring mercury emissions from coal-powered plants in the west. The state of Maine already warns people that due to pollutants, they should not have more than two servings of fresh-caught fish per month, depending on where fish are caught.

But restrictions on mercury emissions have been making a difference. According to research done by Nicholas Fischer of Stony Brook University in New York, mercury has been decreasing in the Gulf of Maine. This has also led to lower levels of mercury in tuna, declining at the rate of 2% per year.

Rolling back standards has potential for increased costs in several areas

Those gains would likely be lost, though, if the new proposal goes through. Also, while the coal industry might have a reduction in costs, other sectors – such as recreation, education, and employment – could see higher costs.

For example, the original cost-benefit analysis pointed to 5.1 million days of restricted activity due to emissions. Those impacted won’t be out skiing, hiking, hunting, or fishing, something that hurts states like Maine who have economies that are dependent upon eco-tourism.

The cost impacts on  education is another factor. Mercury negatively impacts the brainmdevelopment of young children who are exposed to it; children effected by mercury exposure will need extra care and support in educational settings. According to the National Education Association, a  student who needs this sort of assistance can cost $9,369 more to educate than a student who does not need assistance.

When  these students become adults, their opportunity for employment and earnings will likely be   reduced by those early health impacts.

Mercury levels also have implications for the fishing industry. Bluefin tuna are only now beginning to make a comeback after conservation efforts. They’ve recovered enough to allow some fishing in the Gulf of Maine, including an 801-pound catch in 2018. Ttheir economic impact is considerable. In 2013, a single bluefin sold for more than $1.75 million at a Japanese auction.

Unfortunately, these tuna are also likely to have elevated levels of mercury, especially if emissions increase. If the fish become more dangerous to consume, they’ll be less viable in the Maine economy.

Additionally, mercury has a negative health impact directly on fish. Elevated mercury levels can slow growth and development in wildlife and fish, and reduce their rate of reproduction. That doesn’t bode well for an economy that relies heavily on fishing and brought in $616.50 million in 2015.

Conclusion

Although the health benefits from reduced emissions are not easily quantifiable, they are still significant and shouldn’t be discounted. It also seems counter-productive to remove standards when the costs of implementing them have already been paid. The Trump administration would do better to leave the standards in place so the people of Maine, and the rest of the country, can enjoy the benefits.


 [JG1]Define co-benefit 8

Wind power is back!

Wind power is back!

Photo: US Department of Energy

This past week, newly elected governor Janet Mills ended former governor Paul LePage’s ban on wind farms in certain areas of the state

As an environmental economist, I am in favor of increased wind power in the state.  Renewable energy sources, such as wind, solar, and in certain circumstances, hydropower, will help with our  much needed transition away from fossil-fuel based energy..  Furthermore, wind power provides well-paying jobs in construction in primarily rural areas of the state, as well as property taxes, the potential for income for rural landowners, and other tangible benefits to host communities. 

However, concerns about large-scale wind farm development include potential negative impacts on nearby residents, tourism, and wildlife.  Questions include:

  • Do wind farms enhance or detract from tourism? Answer: it depends on the context.  Some studies have found that proposed wind farms affect potential demand for tourism, but those studies are hypothetical, not actual. A recent study in Scotland found that there was no correlation between existing windfarms and tourism-related employment.    Other case studies have shown that wind farms can actually be a boon to tourism, if local tourism agencies market them as a tourist attraction .   More work needs to be done on looking at the effect of actual, operating wind farms on tourism in different contexts.  In any case, the concern about conflicts between wind farms and tourism can be mitigated by proper planning and siting.
  • Do wind farms have a significant impact on migratory birds?  The answer here depends on what you consider significant, and again, it depends on the context.  Wind turbines located in migratory corridors have been linked to avian mortality, and those deaths are increasing as wind power generation itself increases.   Still, some studies suggest that wind-power related avian deaths are less than those associated with other forms of energy, and much less than those associated with the average housecat.  However, that does not mean we should brush those concerns away lightly. New technologies in turbine and blade design, as well as proper modeling and siting procedures – as well as simply shutting down generation during peak migration – should mitigate this concern.
  • Do wind farms increase or decrease property values or property taxes? Evidence shows that large-scale wind development in residential areas does have a negative impact on homes in direct proximity (much like any other energy-related infrastructure), and that this effect declines as distance to the wind farm increase.  However, properties in rural areas that are host to a turbine can see an increase, as the potential for income from the land is realized https://www.cfra.org/news/180719/are-property-values-affected-wind-farms.  There also is evidence that the added property tax revenue from a wind farm can reduce a town’s overall mil rate.  Again, these concerns can be mitigated by proper planning and siting.        

In other words, evidence abounds on both sides of the debate, and is context-specific. We do need to be cautious about where these facilities are located, from an environmental and aesthetic context. But in the words of Governor Mills: “It is time for Maine to send a positive signal to renewable energy investors and innovators.”

Note:  This blog post is based on a  “Maine Voices” column written by Dr. Bouvier and published in February of 2018 \lsdpri

France’s Yellow Vest Riots: Death Knell for a Carbon Tax?

France’s Yellow Vest Riots: Death Knell for a Carbon Tax?


By the time this blog post comes out, the “yellow vest” riots in France may be old news. But this fall, people took to the streets of France, seemingly angered by a proposed fuel tax. Opponents of carbon taxes were quick to declare victory: if France, a country with a fairly liberal (in the American sense of the word) populace, reacted with such anger to a proposed carbon tax, then clearly it is not a sound policy.

Not so fast. As any student of political science could tell you, context matters. France’s president, Emmanuel Macron, was fairly unpopular among certain groups before the tax was proposed. Part of this was class based: Macron is seen by some as the “president of the rich,” partially due to the repeal of a tax on the very wealthy, which only served to stoke already simmering class resentments. The proposed fuel tax would have hit low-income rural voters the hardest, a constituency that was already smarting under an oil tax that Macron had implemented earlier in the year. If Macron hadn’t already angered that constituency, would the riots have occurred? It’s hard to say. France, after all, is a party to the Paris accord, and Macron was elected in part based on his promise to do something about climate change.

Secondly, not all carbon taxes are created equal. The proposed policy in France took the shape of a fuel tax, one that would have increased the already high price that French consumers pay at the pump. A certain amount of an increase in fuel price is pretty much unavoidable. As greenhouse gases are formed by the combustion of fossil fuels, policies to reduce the use of those fuels is naturally going to impact, in one way or another, the users of those fuels. But the proper design of such a policy could help lessen their impact.

Carbon taxes can be placed at several different places in the “life” of a carbon atom. A tax on gasoline, which is what France proposed, is placed at the very end of the production and consumption process. It would affect low income and rural consumers more heavily, because those users consume disproportionately more gasoline. (Macron didn’t help his case by suggesting that rural folks carpool more often, displaying a serious misunderstanding of the lives of his rural constituents.)

Other forms of a carbon tax could be imposed (at least theoretically) during the extraction process: i.e., when the fossil fuel is extracted from the earth. In France, however, there is very little oil and natural gas production. Most of France’s energy comes from fossil fuel free nuclear power. While that means that France’s energy sector is much less carbon intensive than other countries’, it doesn’t leave them much wiggle room to reduce emissions elsewhere.

Thirdly, the way the revenue from the tax is “recycled” matters.  By recycling the revenue and returning it to households in some way, governments can reduce the regressivity of the carbon tax. Current proposals include reducing the payroll tax, reducing the capital gains tax, or simply returning it to households on a per person basis, much like the Alaskan Permanent Fund.  You can read more about revenue recycling in our earlier blog post.

The difficulty is that such schemes are complicated, and hard to explain to the general public. Add that complexity to Macron’s apparent communication problems, simmering class resentments, and increasing economic stress, and you have a problem. But don’t assume that all carbon taxes are politically infeasible. Like most other policies, they need to be designed – and communicated – effectively.

Image: Lionel Allorge [GFDL (http://www.gnu.org/copyleft/fdl.html), CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0) or FAL], from Wikimedia Commons

2018 Fourth Quarter Journal Reviews: Property Values

2018 Fourth Quarter Journal Reviews: Property Values

Property Value Impacts of Wind Turbines and the Influence of Attitudes toward Wind Energy

Richard J. Vyn

Land Economics, Volume 94, Number 4, November 2018, pp. 496-516 (Article)

This article uses a hedonic analysis to investigate the effect of wind turbines on property values, and whether that effect seems to differ between communities that are opposed to wind power, versus those that support it. Past studies investigating the effect of wind turbines on property values have been mixed, with some studies showing negative effects, while other studies show no effects. This study hypothesizes that there may be other characteristics of the communities that influence any property value effects. Results indicate that property value impacts in communities that were opposed to the wind farm prior to construction were greater than those in communities in which no prior opposition was found. The author concludes that turbine impacts in a jurisdiction “may be influenced by attitudes toward wind energy in that jurisdiction, and that public perception regarding wind energy and its potential impacts is a prominent contributing factor to the nature of observed impacts on property values.”

Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market

Ortega, Francesc and Taṣpınar, Süleyman, 2018.

 “Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market,” Journal of Urban Economics, Elsevier, vol. 106(C), pages 81-100.

This paper analyzes the effects of Hurricane Sandy on the New York City housing market from 2003-2017. Their results indicate a persistent negative effect among properties within the flood zone that had not been damaged by the storm. In contrast, properties that had been damaged by the storm suffered an immediate negative price effect that was up to three times as great, followed by a gradual convergence to the level of nondamaged properties. The authors conclude that the housing market in New York City has been affected by greater awareness of flood risk following Hurricane Sandy.

Mercury pollution, information, and property values

Chuan Tang, Martin D. Heintzelman, Thomas M. Holsen

Journal of Environmental Economics and Management 92 (2018): 418-432.

Continuing our property value theme, Tang et al. investigated the influence of mercury pollution on property values, as an implicit value of mercury pollution reduction. They looked at approximately 83,000 property transactions in New York State over a 9-year period.  Results demonstrated that property values within one mile of a lake for which an advisory had been issued were 6-7 percent lower than similar properties surrounding a lake for which no such designation had been made. Their results “can serve as a partial indication of the benefits of the Mercury and Air Toxic Standards (MATS), which includes the first mercury emission standard in the United States.” It’s worth noting that the Environmental Protection Agency is currently reviewing a proposal that could undermine the MATS.

Eliciting preferences for urban parks

Toke Emil Panduro, Cathrine Ulla Jensen, Thomas Hedemark Lundhede, Kathrinevon Graevenitz, Bo Jellesmark Thorsen

Regional Science and Urban Economics Volume 73, November 2018, Pages 127-142

Yet another article investigates the effects of urban parks on adjacent property values.  The authors estimate residents’ willingness to pay for park availability in Copenhagen, Denmark, by investigating the effects of distance to a park and park density on apartment rents.  The authors claim: “‘Parks provide recreational opportunities for urban residents and visitors. Urban green spaces furthermore provide climate regulation functions, harbor biodiversity and provide other ecosystem services… However, in the absence of thorough insights into the values of urban green space, the need for such regulation [to provide urban parks] may be neglected whenever new neighborhoods are planned and developed.” One of the interesting things about this paper is that it investigates both proximity to and density of green spaces and finds that both measures are important and capture different components of willingness to pay.  The article finds that proximity to green space has a positive effect on apartment rents (meaning that people are willing to pay more to live near a green space, all else being equal), and that there may be a “saturation point” beyond which an additional park does not add significantly to household welfare. 

January 8: Crafting an Economically Sustainable Working Waterfront

January 8: Crafting an Economically Sustainable Working Waterfront

Date:  January 8, 2019

Time: 4:00PM

Location:  Gulf of Maine Research Institute, 350 Commercial Street, Portland

Dr. Rachel Bouvier will be the featured presenter at the next Waterfront Alliance Meeting on Tuesday, January 9th.  She will be joined by other community members as part of a discussion on the topic:  Crafting an Economically Sustainable Working Waterfront.

FMI: https://www.waterfrontalliancemaine.org

Defining Safety Levels for Particulates Could Hurt Your Health – and the Economy

Defining Safety Levels for Particulates Could Hurt Your Health – and the Economy

You’ve probably heard about some of the recent changes from the Environmental Protection Agency (EPA). But you might have missed the proposal about particulate matter (PM), since it didn’t get as much press. Or even if you saw it, you might not have recognized all the implications because they’re not immediately obvious.

This proposal is to define a safety threshold for what’s called PM 2.5, and it’s a reversal of the EPA’s prior stance. Until recently, the EPA said that no amount of particulate matter can be considered safe. Changing that could have serious impacts on our health – and the economy.

What is PM 2.5, and where does it come from?

Even if you’ve never heard of particulates, you’re likely familiar with them. These are the fine particles of liquids and solids that contribute to haze-filled cities and poor air quality. In fact, another name for PM is particle pollution.[1] This is because the tiny size allows these particles to get everywhere – including deep in your lungs.

PM 2.5 is a specific kind, named because the particles are only 2.5 micrometers in size. For comparison, an average human hair is 75 micrometers in width.[2]

These tiny materials are everywhere, coming from a number of places, including cigarettes and fireplace smoke. But the vast majority come from two sources:

–          50% is from industrial production, with 20% of that from coal-powered plants

–          35% is from gas-powered vehicles of all kinds[3]

Costs and benefits with current policy 

Under the current policy, with no level of particulate matter considered “safe,” any reduction of PM 2.5 below current levels is considered a benefit, and can be included in federal cost-benefit analyses.

In other words, if regulations to reduce greenhouse gases simultaneously reduce PM 2.5 (as they would, given that they share many of the same sources), that reduction counts as a co-benefit. And those co-benefits can play a significant role in the cost-benefit analysis of any proposed regulation to reduce greenhouse gases.

For example, the Clean Power Plan from the Obama era had an estimated $20 billion in climate benefits. But the benefits go up when you consider that the same technology used to reduce power plant emissions would also cut PM levels. Those changes result in an additional $13 to $30.3 billion in health benefits, effectively doubling the benefits.

Similarly, the Mercury and Air Toxics standards save $4 to $6 million by reducing toxins. And in this case, the co-benefit from reducing particulates is even higher, coming in between $37 and $90 billion.[4]

Proposed change reduces benefits

Now, under the proposed changes, lowering PM levels below the suggested “safety levels” won’t count as a benefit. After all, if anything below the threshold is already considered safe, bringing it down even further won’t be helpful.

This means that moving forward, climate change initiatives like the Clean Power Plan wouldn’t be able to factor in the lower levels of PM 2.5. And without that, the initiative might not get implemented, because the cost would be considered too high without the co-benefit to offset it.[5]

Damages from air pollution

 The impact on regulations is a concern, but those aren’t the only considerations. Air pollution already causes damages between $75 and $230 billion annually. And PM 2.5 contributes more to that than their size indicates.

Even though these particulates only account for 6% of emissions by weight, they cause 23% of the damages. The damages from PM 2.5 alone are between $17.25 and $52.9 billion annually. [6]

Health and economic impact

Most of the economic damage caused by PM 2.5 is due to increased health costs.[7] Health issues associated with PM 2.5 include:

–          Respiratory illnesses like bronchitis

–          Premature death

–          Low birth weight

–          Higher risk of asthma

–          Greater risk of heart disease

–          More instances of lung cancer

These conditions all carry increased economic cost. Some of this is a result of increased medical care, such as hospital visits and medication. [8]

But the costs also come from lost work time and reduced productivity. People who need to take time off for appointments and medical care won’t be as effective. Similarly, those who can’t breathe as well have less energy and will be less productive, even if they don’t require urgent care.

In addition, since particulates contribute to poor air quality, people might be more likely to stay inside. This means lost revenue from outdoor recreation and the potential of reduced health from lower levels of activity.

Poor air quality actually could have a negative impact on region’s workforce. Putting a priority on quality of life is becoming more common – including looking at factors like air quality. If an area has a distinct haze, or higher levels of respiratory conditions, people may choose to leave, or to not move there to begin with.[9]

Conclusion

While it’s impossible to identify all the effects of the EPA’s proposed safety threshold, it’s clear that the negative impacts could be far-reaching. Given that, the EPA and other agencies should take all of the risks into account before accepting a change that could cause such extensive damages to our environment, our health, and our economy.

Photo Credit:   Eltiempo10 [CC BY-SA 4.0], from Wikimedia Commons

[1] https://airnow.gov/index.cfm?action=aqibasics.particle

[2] http://www.sciencemag.org/news/2018/08/kill-climate-rule-trump-s-epa-wants-redefine-danger-soot

[3] http://www.rff.org/blog/2007/what-do-damages-caused-us-air-pollution-cost

[4] http://www.sciencemag.org/news/2018/08/kill-climate-rule-trump-s-epa-wants-redefine-danger-soot

[5] Ibid

[6] http://www.rff.org/blog/2007/what-do-damages-caused-us-air-pollution-cost

[7] Ibid

[8] https://www.brookings.edu/blog/jobs/2011/05/06/we-are-what-we-breathe-the-impacts-of-air-pollution-on-employment-and-productivity/

[9] https://www.forbes.com/sites/quora/2018/05/29/how-the-air-quality-where-you-live-might-be-affecting-your-health/#2881f8b37017

The Avoided Cost of Stormwater Remediation

The Avoided Cost of Stormwater Remediation

Here’s something to think about during the next rainstorm: where does all that rainwater go?  For most of us, it’s not something to which we give more than a passing thought. But if you’re concerned about saving money and protecting water quality, it’s worth a closer look.

In many older New England towns, the infrastructure that conducts sewage from our homes to our wastewater treatment plant is old, crumbling, and not up to today’s needs. During relatively dry times, the system works pretty well.  Pipes convey sewage to the sewage treatment plant where it is treated and then released.  But during times of intense rainfalls, that excess water running down our streets to our storm drains can overwhelm those older pipes. During those times, the pipes essentially overflow, and raw sewage mixed with stormwater can make it into rivers and oceans.  These discharges are called combined sewer overflows, and despite heroic efforts to separate them, they do still exist (see our prior blog posts Money Down the Drain Part 1 and Part 2).  Recently in Portland, Maine a heavy rainfall, combined with human error, contributed to a million-plus gallon spill of partially treated sewage directly into Casco Bay.

There are several different strategies for a city or municipality attempting to address its stormwater issues. Coming up with those strategies may be a job for an engineer. Prioritizing those strategies, on the other hand, may be a job for an economist: someone who can weigh the costs and the benefits of each, keeping in mind that there may be hidden costs and benefits to each alternative that are not immediately obvious. Determining the financial costs of each strategy is relatively easy.  But coming up with the benefit – the return on investment, or bang for your buck –  isn’t as straightforward.

Stormwater management can bring economic and fiscal benefits in terms of “avoided costs.” By reducing the flow of stormwater that needs to be treated, the municipality saves the money that it would otherwise have needed to treat it.  That’s not insubstantial.  Treating a gallon of stormwater can cost substantial amounts of money in operations and maintenance costs (think electricity, chemicals, filter replacement, sludge disposal, etc.). Every gallon of runoff that is diverted from the treatment plant is that much money saved.

In addition to avoided treatment costs, there are avoided property damage costs.  Floods that are caused or exacerbated by excess stormwater (sometimes called “urban flooding”) can cause damage to property. A 2014 study in Cook County, IL, found that chronic and systematic urban flooding had led to property damage claims of over $773 million over a five year period.  This number is likely a significant underestimate, as flood insurance only covered a small portion of all damage costs.  Less easily measured are the costs of disruption to emergency services like police, fire and ambulance services,  and losses to private companies  that not only may lose inventory but business as well.

The benefits of dealing with stormwater include the avoided costs of treatment, as well as the avoided costs of flood damage, but that’s not all.  Other categories of avoided costs include the costs of treating waterborne diseases. Untreated wastewater that flows into our rivers, streams, and oceans can carry with it diseases and pathogens.  Treating those diseases in humans has economic costs.  A recent study published in the journal Environmental Health estimated that the “economic burden” – defined as both direct treatment costs and indirect opportunity cost, such as lost productivity – of recreational waterborne illness cost the nation upwards of $2.2 – $3.7 billion annually.  That’s a lot of money.

Moreover, contaminated wastewater that flows into our waters can have a detrimental effect on industries that depend on clean water.  For example, a recent study from the University of Maine estimated that the closures of shellfish beds caused by toxic algal blooms linked to pollution from combined sewer overflows led to at least $3.6 million in lost revenue over a nine year period. That amounted to approximately 27.4% of revenue from those beds.

Estimating the avoided costs associated with a particular stormwater management option depends on how much stormwater is treated or diverted relative to the baseline, as well as the location attributes of the site and the impacts untreated stormwater can have on the environment it is released into.  It isn’t always easy to calculate, but it is information that is needed in order to know the true benefits of a stormwater treatment system.

Stay tuned for upcoming blog posts on the benefit of green infrastructure in stormwater treatment and the fiscal impacts of urban flooding.