Designing Environmental Policy: Lessons from the Regulation of Mercury Emissions

In its waning days, the Clinton administration decided that it was appropriate to regulate mercury emissions from power plants. The incoming Bush administration had to decide how best to regulate these emissions. The Bush administration offered two approaches for regulating mercury emissions from power plants. The first was to establish uniform emission rates across utilities, as mandated by the 1990 Amendments. The second was to establish a cap on mercury emissions while allowing emissions trading in order to reduce the cost of achieving the goal. This paper presents the first cost-benefit analysis of this issue that takes account of IQ benefits. We find that the benefits of the mercury regulation are likely to fall short of the cost. This assessment is based on a number of assumptions that are highly uncertain. The finding of negative net benefits is robust to many, though not all, reasonable variations in the model assumptions. We also find that the emissions trading proposal is roughly $15 billion less expensive than the command-and-control proposal.

The Fatality Risks of Sport-Utility Vehicles, Vans, and Pickups

This paper presents a model of vehicle choice and empirically examines the risk posed by light trucks (sport-utility vehicles, vans, and pickups) to those that drive them and to other drivers, relative to the risk posed by cars. It compares the relative risk of dying and the relative crash frequencies of light trucks versus cars. The identification strategy uses information on pedestrian fatalities by vehicle type to correct for the sample selection bias that may exist due to the lack of reliable data on non-fatal crashes. Using data on all two-vehicle fatal crashes from 1991 through 1998, the results suggest that a light truck driver is 0.29 to 0.69 times as likely to die than is a car driver and is 1.48 to 2.63 times as likely to kill the opposing driver than is a car driver. Other data suggest that light trucks are approximately 2.2 times as likely to get into a crash than are cars.

The Fatality Risks of Sport-Utility Vehicles, Vans, and Pickups Relative to Cars

Mypaper examines the public health consequences of the regulatory subsidy given to light trucks. The empirical challenge is to disentangle the causal effects of light trucks from the selection bias that may occur due to drivers sorting into different vehicle types depending on their unobservable characteristics.Iaddress this by using state variation of snow depth as an instrumental variable for vehicle miles traveled of light trucks and cars. This instrument has strong first-stage explanatory power. Since snow depth is likely a direct determinant of crashes,Imeet the exclusion criteria by restricting the dependent variable to those crashes that occurred in the summer.Myfindings suggest that, given a crash, light trucks are more dangerous to others but less dangerous for those driving them. However,Ialso find that light trucks are more likely to crash than cars, which neutralizes the safety advantage to those who drive them.Myestimates for aggregate fatalities suggest that a world of light trucks leads to substantially more fatalities than a world of cars.

The Fatality Risks of Sport-Utility Vehicles, Vans and Pickups

This paper presents a model of vehicle choice and empirically examines the risk posed by light trucks (sport-utility vehicles, vans, and pickups) to those that drive them and to other drivers, relative to the risk posed by cars. It compares the relative risk of dying and the relative crash frequencies of light trucks versus cars. The identification strategy uses information on pedestrian fatalities by vehicle type to correct for the sample selection bias that may exist due to the lack of reliable data on non-fatal crashes. Using data on all two-vehicle fatal crashes from 1991 through 1998, the results suggest that a light truck driver is 0.29 to 0.69 times as likely to die than is a car driver and is 1.48 to 2.63 times as likely to kill the opposing driver than is a car driver. Other data suggest that light trucks are approximately 2.2 times as likely to get into a crash than are cars.Sample Selection Bias, Externalities, Public Health

Quasi-experimental and experimental approaches to environmental economics

This paper argues that an increased application of quasi-experimental and experimental techniques will improve understanding about core environmental economics questions. This argument is supported by a review of the limitations of associational evidence in assessing causal hypotheses. The paper also discusses the benefits of experiments and quasi-experiments, outlines some quasi-experimental methods, and highlights threats to their validity. It then illustrates the quasi-experimental method by assessing the validity of a quasi-experiment that aims to estimate the impact of the Endangered Species Act on property markets in North Carolina. The paper's larger argument is that greater application of experimental and quasi-experimental techniques can identify efficient policies that increase social welfare

The Political Economy of Mercury Regulation

In its waning days, the Clinton administration decided that it was appropriate to regulate mercury emissions from power plants, but left the specifics of that task to the incoming Bush administration. The Bush administration considered two approaches for regulating mercury emissions from power plants. The first was to establish uniform emission rates across existing utilities, and more restrictive emission rates for new utilities. The second was to establish less restrictive emission standards for new and existing sources, and to also establish a cap on mercury emissions while allowing emissions trading in order to reduce the cost of achieving the goal. This paper makes two contributions. First, we summarize the costs and benefits of controlling mercury emissions from power plants under the two approaches. We find that, for both approaches, the benefits of the mercury regulation are likely to fall far short of the cost. However, the emissions trading proposal is roughly $15 billion less expensive than the command-and-control proposal. Second, we examine the role of politics and economics in the determination of environmental policy.

The Market Value of Reducing Cancer Risk: Hedonic Housing Prices with Changing Information

In this paper, we use housing price changes occurring after the release of a regulatory agency\u27s environmental risk information to estimate the value people place on cancer risk reduction. Using a large original data set on the repeat sales of houses, matched with detailed data on hazardous waste cancer risk and newspaper publicity, we find that housing prices respond in a rational manner to changes in information about risk. Since the new information indicated that the sites in our sample pose relatively low cancer risk, the informational release led residents to lower their risk beliefs, resulting in an average housing price increase of $56 to$87. This price change implies a statistical value per case of cancer of $4.3 million to$8.3 million, which is similar to the estimates obtained in labor market studies of the value of a statistical life. Newspaper publicity about the local sites increased housing prices, suggesting that residents perceived the news as good