Evaluating New Policy Instruments of the Corporate Average Fuel Economy Standards : Footprint, Credit Transferring, and Credit Trading

Acknowledgements I am very grateful to my thesis advisors Ted McConnell, Maureen Cropper, and Rob Williams for their guidance. I would also like to thank Euan Phimister, Catia Montagna, Keith Bender, and two anonymous referees for helpful comments and suggestions.Peer reviewedPublisher PD

Traffic fatalities and economic growth

The authors examine the impact of income growth on the death rate due to traffic fatalities, as well as on fatalities per motor vehicle and on the motorization rate (vehicles/population) using panel data from 1963-99 for 88 countries. Specifically, they estimate fixed effects models for fatalities/population, vehicles/population, and fatalities/vehicles and use these models to project traffic fatalities and the stock of motor vehicles to 2020.The relationship between motor vehicle fatality rate and per capita income at first increases with per capita income, reaches a peak, and then declines. This is because at low income levels the rate of increase in motor vehicles outpaces the decline in fatalities per motor vehicle. At higher income levels, the reverse occurs. The income level at which per capita traffic fatalities peaks is approximately $8,600 in 1985 international dollars. This is within the range of income at which other externalities, such as air and water pollution, have been found to peak. Projections of future traffic fatalities suggest that the global road death toll will grow by approximately 66 percent between 2000 and 2020. This number, however, reflects divergent rates of change in different parts of the world-a decline in fatalities in high-income countries of approximately 28 percent versus an increase in fatalities of almost 92 percent in China and 147 percent in India. The authors also predict that the fatality rate will rise to approximately 2 per 10,000 persons in developing countries by 2020, while it will fall to less than 1 per 10,000 in high-income countries.Economic Theory&Research,Environmental Economics&Policies,Fiscal&Monetary Policy,Roads&Highways,Economic Conditions and Volatility,Inter-Urban Roads and Passenger Transport,Roads&Highways,Economic Theory&Research,Environmental Economics&Policies,Inequality

Why have traffic fatalities declined in industrialized countries ? Implications for pedestrians and vehicle occupants

This paper examines whether the relationship between traffic fatalities and per capita income is the same for different classes of road users and investigates the factors underlying the decline in fatalities per vehicle kilometer traveled (VKT) observed in high-income countries over recent decades. Formal models of traffic fatalities are developed for vehicle occupants and pedestrians. Reduced-form approximations to these models are estimated using panel data for 32 high-income countries over 1964-2002. The results suggest that the downward-sloping portion of the curve relating traffic fatalities per capita to per capita income is due primarily to improved pedestrian safety. The more detailed models shed light on some factors influencing pedestrian fatalities per VKT, but much of the reduction in pedestrian fatalities remains unexplained. Increased motorization and a reduction in the proportion of young drivers in the population, however, clearly played a role. In contrast to pedestrian fatalities, occupant fatalities do not show a significant decline with income. What does explain declines in occupant fatalities per VKT are reductions in alcohol abuse and improved medical services, and a reduction in young drivers. The importance of demographic factors suggests that in countries where young persons (between 15 and 24 years of age) comprise an increasing share of the driving population, adopting policies to improve young driver education and reduce speeds will be crucial.

Public transport subsidies and affordability in Mumbai, India

This paper describes the role of public transport and the nature and incidence of transport subsidies in Mumbai, India. Mumbai has an extensive rail and bus network, and public transport is used for over 75 percent of all motorized trips in Greater Mumbai. Both rail and bus fares in Mumbai are subsidized: BEST, which operates public buses in Mumbai, is also an electric utility, and subsidizes bus fares from electricity revenues. We analyze the incidence ofthese subsidies, and their effect on mode choice, using data from a survey of households in Greater Mumbai. In Mumbai, as in many cities, the middle class is more likely to use public transport for travel than the poor. The poor, however, also use public transit, and their expenditure on public transit constitutes, on average, a larger share of their income than it does for the middle class. It is, therefore, the case that the poor benefit from transit subsidies in Mumbai, as well as the middle and upper-middle classes; however, the poorest 27 percent of the population receives only 19 percent of bus subsidies and 15.5 percent of rail subsidies. Indeed, 26 percent of the lowest income households surveyed do not use rail, while 10 percent do not use bus, implying that they receive no transit subsidies. Expenditure on transport accounts for 16 percent of income in the lowest income category (Transport Economics Policy&Planning,Transport in Urban Areas,Urban Transport,Roads&Highways,

The implications of hyperbolic discounting for project evaluation

The neoclassical theory of project evaluation is based on models in which agents discount the future at a constant exponential rate. But there is strong empirical evidence that people discount the future hyperbolically, applying larger annual discount rates to near-term returns than to returns in the distant future. This has led some policymakers to argue that, in evaluating programs with benefits spread over decades (such as subway systems and abatement of greenhouse gases), a low long-term discount rate should be used. In fact, some economists have suggested that higher discount rates be applied in the present and lower rates in the future. The authors demonstrate that this is incorrect. The problem with hyperbolic discounting is that it leads to time-inconsistent plans -- a person who discounts the future hyperbolically will not carry out the consumption plans he makes today. The authors note that if social decisionmakers were to use people's 1998 hyperbolic rates of time preferences, plans made in 1998 would not be followed -- because the low discount rate applied to returns in, say, 2020, will become a high discount rate as the year 2020 approaches. Since it makes sense to analyze only plans that will actually be followed, the authors characterize the equilibrium of an intertemporal game played by an individual who discounts the future hyperbolically. Along an equilibrium consumption path, the individual will behave as though he were discounting the future at a constant exponential rate. The individual's consumption path is, however, Pareto inferior: He would be better off if he could force himself to consume less and save more. This provides a rationale for government subsidization of interest rates or, equivalently, lowering the required rate of return on investment projects. Although hyperbolic discounting provides a rationale for lowering the required rate of return on investment projects, it does not provide justification for those who seek to treat environmental projects differently from other investment projects.Environmental Economics&Policies,Economic Theory&Research,Payment Systems&Infrastructure,International Terrorism&Counterterrorism,Financial Intermediation,Banks&Banking Reform,ICT Policy and Strategies,Inequality,Economic Theory&Research,Environmental Economics&Policies

Willingness to Pay for Mortality Risk Reductions: Does Latency Matter?

Using results from two contingent valuation surveys conducted in Canada and the United States, we explore the effect of a latency period on willingness to pay (WTP) for reduced mortality risk using both structural and reduced form approaches. We find that delaying the time at which the risk reduction occurs by 10 to 30 years significantly reduces WTP for respondents aged 40 to 60 years. Additionally, we estimate implicit discount rates equal to 8% for Canada and 4.5% for the United States—both well within the range established previously in the literature.value of a statistical life, mortality risks, cost–benefit analysis

The Benefits of Achieving the Chesapeake Bay TMDLs (Total Maximum Daily Loads): A Scoping Study

Concerns about nutrient pollution in the Chesapeake Bay have led to the establishment of pollution limits—total maximum daily loads (TMDLs)—which, by 2025, are expected to reduce nitrogen loadings to the Bay by 25 percent and phosphorous loadings by 24 percent from current levels. This paper outlines how the benefits associated with achieving the Chesapeake Bay TMDLs could be measured and monetized. We summarize studies that measure the benefits of improved water quality in the Bay and evaluate whether these studies could be used to value the water quality benefits associated with the TMDLs.In cases where studies conducted in the Bay watershed either do not exist or are out of date, we discuss whether results from studies conducted elsewhere could be transferred to the Chesapeake Bay. We also discuss original studies that would be useful to conduct in the future.Chesapeake Bay restoration, total maximum daily loads, benefits of water quality improvements

Rates of Time Preferences for Saving Lives in the Hazardous Waste Site Context

What is the rate at which people discount future lives saved? The answer to this question has important implications when comparing policies on the grounds of cost per life saved, especially in the context of hazardous waste site remediation, where risk reductions may occur at different times, depending on the permanence of the remedy. We estimate this rate by asking a sample of Italian residents to choose between saving 100 lives now and X lives in T years, where both X and T are varied to the respondents. Assuming constant exponential discounting, the responses to these questions imply a rate of time preference for saving lives of 12%. There is little evidence that this rate is systematically associated with observable individual characteristics of the respondent. There is, however, strong evidence that it declines with the time horizon when the lives would be saved, ranging from 16% for T=10 to less than 4% for T³40. We fit a hyperbolic discount model, finding that it yields a similar value of the discount function for T=10 (the shortest horizon we used in the survey), and that it discounts the future less heavily than the regular exponential discounting model for longer time horizon. We apply our estimated discount functions to two alternate remedial plans for a heavily contaminated area in Italy, and find that—due to the high estimated discount rates—the less permanent solution is found to be more cost-effective.Value of a Statistical Life, Latent Risk Reductions, Individual Discount Rates, Rate of Time Preference for Saving Lives, Contaminated Sites, Remediation

Public choices between lifesaving programs : how important are lives saved?

In developing and industrial countries alike, there is concern that health and safety policy may respond to irrational fears - to the"disaster of the month"- rather than address more fundamental problems. In the United States, for example, some policymakers say the public worries about trivial risks while ignoring larger ones and that funding priorities reflect this view. Many public health programs with a low cost per life saved are underfunded, for example, while many environmental regulations with a high cost per life saved are issued each year. Does the existing allocation of resources reflect people's preoccupation with the qualitative aspects of risks, to the exclusion of quantitative factors (lives saved)? Or can observed differences in the cost per life saved of environmental and public health programs be explained by the way the two sets of programs are funded? The authors examine the preferences of U.S. citizens for health and safety programs. They confronted a random sample of 1,000 U.S. adults with choices between environmental health and public health programs, to see which they would choose. The authors then examined what factors (qualitative and quantitative) seem to influence these choices. Respondents were asked about pairs of programs, among them: smoking education or industrial pollution control programs, industrial pollution control or pneumonia vaccine programs, radon eradication or a program to ban smoking in the workplace, and radon eradication or programs to ban pesticides. The survey results, they feel, have implications beyond the United States. They find that, while qualitative aspects of the life-saving programs are statistically significant in explaining people's choices among them, lives saved matter, too. Indeed, for the median respondent in the survey, the rate of substitution between most qualitative risk characteristics and lives saved is inelastic. But for a sizable minority of respondents, choice among programs appears to be insensitive to lives saved. The interesting question for public policy is what role the latter group plays in the regulatory process.Health Monitoring&Evaluation,Public Health Promotion,Insurance&Risk Mitigation,Insurance Law,Water Conservation,Health Monitoring&Evaluation,Insurance&Risk Mitigation,Insurance Law,Water Conservation,Environmental Economics&Policies