The Environmental Kuznets Curve from Multiple Perspectives

The analysis finds that in addition to U-shaped paths of environmental quality arising for growth in income per capita, growth in population can also produce socially efficient patterns that are U-shaped. Sufficient conditions for both types of paths are identified for a range of models and parameters, including symmetrical models with homothetic, constant-returns functions such as with CES functions. Similar results are also shown to arise in decentralized economies under either homogeneous or heterogeneous income levels.Environmental Kuznets Curve, Economic Growth, Environmental Quality

The Welfare Effects of Environmental Taxation

Recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second-best setting than in a first-best setting. This question has mainly been addressed indirectly, by asking whether the second-best optimal environmental tax is higher or lower than the first-best Pigouvian rate. Even this indirect question, though, has itself been approached indirectly, comparing the second-best optimal environmental tax to a proxy for its first-best value, an expression for marginal social damage (MSD). On closer examination, however, MSD becomes ambiguously defined and variable in a second-best setting, making it an unreliable proxy for the first-best Pigouvian rate. With these concerns in mind, the current analysis reevaluates the central welfare question both directly and indirectly and finds that when compared directly to its first-best Pigouvian value, the second-best optimal environmental tax generally rises with increased revenue requirements. Even in cases where the second-best optimal environmental tax is lower than its first-best value, the welfare gains may be greater than in a first-best setting. These results suggest that the marginal fiscal benefit (revenue recycling effect) exceeds the marginal fiscal cost (tax base effect) over a range of environmental tax rates that, for benchmark models, extends above the first-best Pigouvian rate. Results in the tax interaction literature are fully consistent with these interpretations once the effects of normalizations and numeraires are fully recognized. These findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods.Optimal Environmental Tax, Second-best, Double Dividend, Tax Interaction Effect, Revenue Recycling, Tax Base Effect, Pigouvian Rate, Excess Burden

Comment on “Landing Fees versus Harvest Quotas with Uncertain Fish Stocks”

In “Landing fees vs. harvest quotas with uncertain fish stocks”, Martin Weitzman maintains that the conventional view among both fisheries economists and fisheries managers is that “prices” are inferior to “quantities” as instruments for regulating the fishing industry. Weitzman takes the opposite position, appealing to two well-established ideas in economics: 1) his own seminal insight on “prices vs. quantities”(Weitzman 1974), and 2) the “powerful general theme in economics that a ‘price signal’ can compress into a simple reduced form all relevant information for inducing correct decentralized decisions.” His paper is an attempt to capture and formalize his intuition on the subject using a standard dynamic fishery model with a stochastic stock-recruitment relation which introduces uncertainty, and evaluating the performance of both landing fees and harvest quotas in comparison to a hypothetical “perfect-information” optimal solution. The basic model is a well-known type which gives rise to a “bang-bang” optimal escapement target, S*. Weitzman rigorously solves the optimizing fishery manager’s dynamic programming problem for each management regime, and shows that the result for a constant landing fee (corresponding to S*) is identical to the “perfect-information” solution, but that both are superior to the harvest quota. This result is undoubtedly correct for the models being appraised. The basis for this finding is less clear, however, since the assumptions which have given rise to this result are not explicitly identified. Indeed, on closer examination, the source of these striking results appears to be unrelated to “prices vs. quantities” in the classic sense. Furthermore, the theme in economics that a ‘price signal’ can compress information and induce correct decentralized decisions appears to be unrelated since there are no differentiated decentralized decisions to be made in the model

The Welfare Effects of Environmental Taxation

Recent literature has investigated whether the welfare gains from environmental taxation are larger or smaller in a second-best setting than in a first-best setting. This question has mainly been addressed indirectly, by asking whether the second-best optimal environmental tax is higher or lower than the first-best Pigouvian rate. Even this indirect question has itself been approached indirectly, comparing the second-best optimal environmental tax to a proxy for its first-best value, marginal social damage (MSD). On closer examination, however, MSD becomes ambiguously defined and variable in a second-best setting making it an unreliable proxy for the Pigouvian rate. Given these observations, the current analysis reevaluates these welfare questions and finds that when compared directly to its first-best value, the second-best optimal environmental tax generally rises with increased revenue requirements. Even in cases where the second-best environmental tax is lower than its first-best value, the welfare gains may be greater than in a first-best setting. These results suggest that the marginal fiscal benefit (revenue recycling effect) exceeds the marginal fiscal cost (tax base effect) over a range of environmental tax rates that, for benchmark models, extends above the first-best Pigouvian rate. These findings reinforce the intuition that environmental policy complements rather than competes with the provision of other public goods.Keywords: Revenue recycling, Second-best, Tax interaction effect, Pigouvian rate, Excess burden, Double dividend, Optimal environmental tax, Tax base effec

Determinants of Urban Land Market Outcomes: Evidence from California

Our understanding of the effects of land use regulations and other aspects of urban form has been hindered by limited aggregate data and gradual temporal changes in policies. More widely available GIS data on land use and land economics presents opportunities to overcome these obstacles. This study was undertaken to explore the potential for land economics research that draws on parcel level spatial data for urban land markets, and uses differences across a sample of cities as the source of variation. Policy obstacles such as protected open spaces and other land use regulations, like the limitations caused by land forms such as water bodies and mountains, can be expected to alter the supply of land in ways that will be reflected in land market outcomes across cities. Based on a sample of data for 46 California cities, this exploratory analysis analyzed land market outcomes as a function of population, income and other factors in a closed-economy model, including a ratio that measures the concentration of developed lands within a city’s radius or perimeter. The approach produced robust relationships consistent with other studies, and results consistent with expectations not just in terms of the signs of the estimated coefficients but in terms of their magnitudes as well. Indeed, the elasticity of land development with respect to population has been estimated to be 0.79-0.82 based on open city models. The evidence suggests that both land forms and land use regulations have a positive effect on land prices; however, it was not possible with the current data to distinguish the amenity effects of proximity to oceans and mountains from the supply constraints on radial city expansion. The analysis, nevertheless, provides encouraging evidence for future research of this kind.This is the author's peer-reviewed final manuscript, as accepted by the publisher. The published article is copyrighted by Elsevier and can be found at: http://www.journals.elsevier.com/land-use-policy/.Keywords: closed city model, urban land market, land use regulations, identification proble

Towards Greater Certainty in Upper Klamath Basin Water Management

In 2001, an extreme drought tightened water supply in the Upper Klamath Basin (basin) while earlier 2001 increases in Endangered Species Act (ESA) water requirements for basin fish species elevated demands. The Bureau of Reclamation (Reclamation), which manages irrigation water in parts of the basin located near the Oregon-California border, responded by severely curtailing water allocations to Reclamation Project (project) irrigators for the 2001 growing season. Consequently, project irrigators lost approximately $35 million in farm income, demonstrating that ESA requirements have significantly changed how water must be managed in the basin. These circumstances prompted Reclamation to establish a federally-funded water bank to provide greater supply certainty in the basin. Yet this certainty is undermined by several significant factors which influence the cost effectiveness and geographic impacts of future bank operations. These include unspecified higher ESA water requirements due to a recent ninth circuit court ruling, greatly increased energy rates to irrigators due to a mid-2006 contract termination with the regional energy provider, uncertain water returns from land idling due to a shortage of data on subirrigation, and unknown annual availabilities of groundwater. Furthermore, although the bank has provided a water supply cushion, greater certainty at a lower cost would result from increased geographic and institutional flexibility in water bank operations. This paper evaluates the potential impacts of the above uncertainties on water bank cost-effectiveness and land idling distribution. Additionally, given the infrastructural and institutional limitations on water transfers in the basin, the cost effectiveness of different levels of water trading flexibility will be compared to assess both realistic and potential banking arrangements. The above objectives are addressed using a mathematical optimization model and a Geographic Information System (GIS) of hydrologic, agronomic and economic data. The model reflects farmer behavior by minimizing farm losses in the context of institutional and physical constraints. Irrigated areas in the basin are spatially arranged in a GIS divided into 15 county-defined units, each with different soil classes, crop rotations, irrigation technologies (impacting energy requirements), and land values. Results are anticipated to provide greater certainty over the spatial and economic impacts of energy price increases and possible changes in ESA requirements. Furthermore, they are anticipated to clarify the significance of subirrigation and groundwater to water management decisions in the basin. The water bank analysis is expected to confirm well documented evidence that increased flexibility induces greater cost effectiveness, but the spatial impacts of these adjustments are uncertain. In the Klamath, cost effectiveness of flexibility may imply that an irrigation infrastructure should be established capable of monitoring and measuring individual transfers

Economics of oilseed crops and their biodiesel potential in Oregon's Willamette Valley

This study assesses the economic potential of biodiesel production in the Willamette Valley for six oilseeds as potential feedstocks: canola, flax, camelina, yellow mustard, sunflower, and safflower. We evaluate costs and returns from feedstock production, oilseed crushing, and biodiesel processing. Our analysis is based on the best available information on cost of production, yield, other technical parameters, market prices, and government subsidies and tax credits

Biofuel Economics in a Setting of Multiple Objectives & Unintended Consequences

This paper examines biofuels from an economic perspective and evaluates the merits of promoting biofuel production in the context of the policies’ multiple objectives, life-cycle implications, pecuniary externalities, and other unintended consequences. The policy goals most often cited are to reduce fossil fuel use and to lower greenhouse gas emissions. But the presence of multiple objectives and various indirect effects complicates normative evaluation. To address some of these complicating factors, we look at a several combinations of policy alternatives that achieve the same set of incremental gains along the two primary targeted policy dimensions, making it possible to compare the costs and cost-effectiveness of each combination of policies. For example, when this approach is applied to U.S.-produced biofuels, they are found to be 14 to 31 times as costly as alternatives like raising the gas tax or promoting energy efficiency improvements. The analysis also finds the scale of the potential contributions of biofuels to be extremely small in both the U.S. and EU. Mandated U.S. corn ethanol production for 2025 reduces U.S. petroleum input use by 1.75%, and would have negligible net effects on CO2 emissions; and although EU imports of Brazilian ethanol may look better given the high costs of other alternatives, this option is equivalent, at most, to a 1.20% reduction in EU gasoline consumption.This is the author's peer-reviewed final manuscript as accepted by the publisher. The published article is copyrighted by Elsevier and can be found here: http://www.journals.elsevier.com/renewable-and-sustainable-energy-reviews/Keywords: biofuel, ethanol, cost-effectiveness, biodiesel, net energy, indirect land use change effects, GHG, multiple objectivesKeywords: biofuel, ethanol, cost-effectiveness, biodiesel, net energy, indirect land use change effects, GHG, multiple objective

Pay or Waive: An Economic Assessment of Property Owner Compensation Laws in the U. S.

Land-use regulations are contentious everywhere because of their potential negative effects on private property values. In recent years, “pay or waive” compensation legislation has been passed in a number of U.S. states, requiring governments to compensate property owners for losses due to land-use regulations or grant exemptions from the regulations in lieu of compensation. We provide an overview of the compensation statutes in six U.S. states, discuss the economic issues raised by the statutes, and examine the effects of the statutes in practice. Although these laws require that “just compensation” be estimated accurately and consistently, measuring the effects of land-use regulations on property values is extremely challenging in practice. We find that rather than providing relief to property owners unfairly burdened by land-use regulations, the compensation statutes appear primarily to discourage local governments from developing and implementing land-use regulations.This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Review of Environmental Economics and Policy, following peer review. The published article is copyrighted by the Author(s) and published by Oxford University Press on behalf of the Association of Environmental and Resource Economists. The definitive publisher-authenticated version is available online at: http://reep.oxfordjournals.org/content/8/1/103Keywords: Land Value, Land Markets, Land Use, Zonin

How have land-use regulations affected property values in Oregon?

"This study examines the ways in which land-use regulations in general and Oregon's land-use planning system in particular may affect property values. The study is focused on Oregon, but it is framed within the broader context of research in economics. Our analysis of Oregon land value data finds no evidence of a generalized reduction in value caused by Oregon's land-use regulations, a result that is consistent with economic theory and with other research in the economics field. Economists recognize three potential effects of land-use regulations on land values: restriction effects, amenity effects, and scarcity effects. The first effect likely will be negative for restricted properties, but in many cases amenity and/or scarcity effects have a positive and potentially offsetting effect. As a result, and despite the widespread belief that most land-use regulations have negative effects on property values, the opposite may be true in many cases. We collected data on samples of parcels indicating the levels and trends of land values in parts of Oregon over the past 40 years--beginning before Oregon's land-use planning system was in place. By comparing land value patterns for regulated lands with those for unregulated lands, and by comparing patterns in Oregon with patterns for similar areas in Washington State (where land-use planning has only recently been enforced), we scrutinized the ways in which Oregon's land-use planning system has affected property values. The analysis was based on land value data for a sample of parcels in five counties, three in Oregon (Lane, Jackson, and Baker) and two in Washington (Lewis and Kittitas). The data are for intervals between the mid-1960s or early 1970s (before the implementation of Oregon's land-use planning system) until the early 2000s. The results of this analysis indicate that: [1] Land values (adjusted for inflation) have generally risen since the introduction of Oregon's land-use planning system in 1973, both for rural lands zoned for farm and forest use and for developable lands both inside and outside of urban growth boundaries (UGBs). [2] Since 1973, when Oregon's land-use planning system was adopted, the rate of change in land values in Oregon has been about the same as for similar lands in Washington. [3] The data indicate that over the past 40 years, lands with the most stringent development limits (e.g., those with exclusive farm or forest use zoning) have increased in value at about the same rate as lands without such restrictions. [4] The value of lands outside the Eugene urban growth boundary in Lane County, Oregon grew slightly faster than properties inside the UGB. [5] Finally, there is no evidence of slower rates of increase overall for the Oregon lands studied compared to lands in the Washington counties studied. The data presented here do not, therefore, support the belief that Oregon's land-use system has systematically reduced the value of restricted properties. The results are consistent, however, with the design of Oregon's land-use planning system and with economic principles. Oregon's land-use planning system is not intended to limit the amount of development that occurs, but rather it is intended to influence the location of development in ways that are consistent with various land-use planning goals. Among those goals is an interest in concentrating the location of development within urban growth boundaries rather than allowing dispersed and fragmented developments. Sprawl or scattered development can raise costs for public services and infrastructure and produce adverse effects when incompatible land uses (e.g., farming and residential) are mixed. In addition, our analysis finds that government programs such as Oregon's special tax assessments for farmlands are likely to be "capitalized" into land prices, raising them by as much as 14 percent on average. These findings are consistent with results from other economic studies. Studies from many other parts of the country, and some within Oregon, have found evidence of positive, negative, and neutral effects from land-use regulations, reflecting the fact that there are often substantial positive amenity and scarcity effects that can offset some or all of the negative restriction effects associated with land-use regulations."--Exec. Sum.Published June 2007. Reviewed January 2015. Facts and recommendations in this publication may no longer be valid. Please look for up-to-date information in the OSU Extension Catalog: http://extension.oregonstate.edu/catalo