Monday, December 31, 2012

Quantifying the health and environmental benefits of wind power [and] natural gas

Abstract: How tangible are the costs of natural gas compared to the benefits of one of the fastest growing sources of electricity – wind energy – in the United States? To answer this question, this article calculates the benefits of wind energy derived from two locations: the 580 MW wind farm at Altamont Pass, CA, and the 22 MW wind farm in Sawtooth, ID. Both wind farms have environmental and economic benefits that should be considered when evaluating the comparative costs of natural gas and wind energy. Though there are uncertainties within the data collected, for the period 2012–2031, the turbines at Altamont Pass will likely avoid anywhere from $560 million to $4.38 billion in human health and climate related externalities, and the turbines at Sawtooth will likely avoid $18 million to $104 million of human health and climate-related externalities. Translating these negative externalities into a cost per kWh of electricity, we estimate that Altamont will avoid costs of 1.8–11.8 cents/kWh and Sawtooth will avoid costs of 1.5–8.2 cents/kWh.
► This study compares the benefits of wind energy with natural gas.
► The Altamont Pass windfarm will avoid $560 million to $4.38 billion in externalities.
► The Sawtooth wind farm will produce about $18 million to $104 million in human health and climate benefits.
► Natural gas prices rise by 1.5–11.8 cents/kWh if they include the cost of such externalities.Full-size image (36 K) 
Fig. 1. Growth of the global wind energy market, 2000–2011. Source: REN21 (2012).

a U.S. Agency for International Development, 1300 Pennsylvania Avenue NW, Washington, DC 20004, USA 
b Vermont Law School, Institute for Energy and the Environment, South Royalton, VT 05068-0444, USA Tel.: +1 330 493 3461; fax: +1 404 385 0504. 
Energy Policy via Elsevier Science Direct  
Volume 53, February 2013, Pages 429–441
Keywords: Wind energy; Wind turbines; Wind power

Estimating Arizona residents’ willingness to pay to invest in research and development in solar energy

Abstract: We estimate Arizona residents’ Willingness to Pay (WTP) to invest in a solar energy research and development fund using data obtained from a Dichotomous-Choice Contingent Valuation mail survey. We examine differences in WTP estimates using different categorizations for respondent uncertainty. We also employ both commonly used Maximum Likelihood and less frequently applied Bayesian estimation techniques. We find that respondent uncertainty has an economically significant impact on WTP estimates, while WTP estimates are robust to different estimation techniques. Our robust specification with strict uncertainty coding indicates the average Arizona household is WTP approximately $17 per month to invest in research and development in solar energy.
► We estimate Willingness to Pay using Bayesian and Maximum Likelihood.
► Willingness to Pay estimates are robust to estimation techniques.
► Arizona residents are willing to pay $17 to invest in R&D in solar energy.
Full-size image (32 K)
Fig. 1. Percent WTP by bid amount.
Full-size image (19 K)
Fig. 2. WTP draws for ML models 7–9.
Full-size image (21 K) 
Fig. 3. WTP draws for Bayesian models 10–12. 
by Julie M. MuellerE-mail the corresponding author, The W.A. Franke College of Business, Northern Arizona University, PO Box 15066, Flagstaff, AZ 86011,United States; Tel.: +1 928 523 6612; fax: +1 928 523 7331
Energy Policy via Elsevier Science Direct 
Volume 53; February, 2013; Pages 462–476
Keywords: Contingent valuation; Bayesian estimation; Solar energy

Sunday, December 30, 2012

The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather

In "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather" which appeared in 2007 (Volume 97, Issue 1) of the American Economic Review at Olivier DeschĂȘnes and Michael Greenstone measured the economic impact of climate change on US agricultural land by estimating the effect of random year-to-year variation in temperature and precipitation on agricultural profits. Their preferred estimates indicate that climate change would increase annual profits by $1.3 billion in 2002 dollars (2002$) or 4 percent. They claimed that this estimate was robust to numerous specification checks and relatively precise, so large negative or positive effects are unlikely. They also found the hedonic approach—which was the standard in the previous literature—to be unreliable because it produces estimates that are extremely sensitive to seemingly minor choices about control variables, sample, and weighting.

In a 2012 comment on the paper Anthony C. Fisher, W. Michael Hanemann, Michael J. Roberts, and Wolfram Schlenker  American Economic Review, Volume 102, Issue 7 pages 3749-60. utilizing a series of studies employing a variety of approaches found that the potential impact of climate change on US agriculture is likely negative.  They note that Deschanes and Greenstone (2007) report dramatically different results based on regressions of agricultural profits and yields on weather variables. The divergence is explained by (1) missing and incorrect weather and climate data in their study; (2) their use of older climate change projections rather than the more recent and less optimistic projections from the Fourth Assessment Report; and (3) difficulties in their profit measure due to the confounding effects of storage.

In a reply Olivier DeschĂȘnes and Michael Greenstone (American Economic Review 2012, Volume 102, Issue 7, pages 3761–3773 or ) admit that Fisher et al. (2012) (hereafter, FHRS) uncovered coding and data errors in the 2007 paper. They "acknowledge and are embarrassed by these mistakes".
Deschenes and Greenstone summarize FHRS’ main critiques of the 2007 study (DG) as follows:
(i) there are errors in the weather data and climate change projections used by DG; 
(ii) the climate change projections are based on the Hadley 2 model and scenarios, rather than the more recent Hadley 3 model and scenarios;
(iii) standard errors are biased due to spatial correlation;
(iv) the inclusion of state by year fixed effects does not leave enough weather variation to obtain meaningful estimates of the relationship between agriculture profits and weather;
(v) storage and inventory adjustment in response to yield shocks invalidate the use of annual profit data; and
(vi) FHRS argue that a better-specified hedonic model produces robust estimates, unlike the results reported in DG.

DG claims that four of these critiques have little basis. Nevertheless, in their reply they report estimates based on corrections and the climate model used in 2007 and a more recent one.
The New DG reanalysis of agricultural profits with corrected data leads to three primary findings. First, contrary to the results in DG (2007), the corrected data suggest that an immediate shift to the projected end-of-the-century climate would reduce agricultural profits. This impact is larger when projections from more recent climate models are used and smaller in econometric models that allow for local shocks to input and output prices and productivity.
Second, the PDV over the remainder of the century of the projected impacts from a recent climate model is roughly $164 billion, or about 5 years of current annual profits. This estimate is likely to overestimate the loss, because it fails to allow for any technological advances or adaptation in response to higher temperatures. Third, the estimated losses are more than 50 percent smaller than those from the standard approach and generally statistically insignificant when one uses a textbook distributed lag model and calculates the dynamic cumulative effects that account for farmers’ dynamic inventory adjustments in response to temperature realizations.

The resulting change in per-acre profits is multiplied by the number of acres of farmland in the county and then the national effect is obtained by summing across all 2,342 counties in the “REPLY” sample. The same calculation is applied to contemporaneous and lagged weather variables. Average annual aggregate profits in the 2,342 counties in the sample are US$(2002) 32.8 billion. Standard errors are clustered at the county level.

California Air Resources Board Quarterly Auction 1

The California Air Resources Board (ARB) held its first auction of greenhouse gas allowances (GHG) on November 14, 2012. The auction included a Current Auction of 2013 vintage allowances and an Advance Auction of 2015 vintage allowances. Below are key data and information on the results of the auction.
All 23.1 million allowances sold in California's first cap and trade auction.
California Air Resources Board Chairman Mary D. Nichols stated "The auction was a success and an important milestone for California as a leader in the global clean tech market. By putting a price on carbon, we can break our unhealthy dependence on fossil fuels and move at full speed toward a clean energy future.  That means new jobs, cleaner water and air -- and a working model for other states, and the nation, to use as we gear up to fight climate change and make our economy more competitive and resilient.”
On November 20, 2012 in the Silicon Valley Mercury News at Dana Hull notes:
There were three times as many bidders than buyers, a sign that the business community is taking the new carbon market seriously. A ton of carbon sold for $10.09 at the auction, just slightly above the $10 floor price established by regulators... More important, all of the 23.1 million permits offered at the auction to cover 2013 emissions were purchased, raising $233 million and calming fears that the market would be under-subscribed.  The money will be funneled to residential customers of the state's utilities to offset higher electricity rates that are expected to result from the shift to clean energy.

Customer value of smart metering: Explorative evidence from a choice-based conjoint study in Switzerland

Abstract: Implementing smart metering is an important field for energy policy to successfully meet energy efficiency targets. From an integrated social acceptance and customer-perceived value theory perspective we model the importance of customer value of smart metering in this regard. We further shape the model on a choice-based conjoint experiment with Swiss private electricity customers. The study finds that overall customers perceive a positive value from smart metering and are willing to pay for it. Further, based on a cluster analysis of customers’ value perceptions, we identify four customer segments, each with a distinct value perception profile for smart metering. We find that energy policy and management should integrate a solid understanding of customer value for smart metering in their initiatives and consider different smart metering market segments within their measures.
► We model the importance of customer value of smart metering.
► We shape the model on a choice-based conjoint experiment.
► Overall customers perceive a positive value from smart metering.
► Customers are willing to pay for smart metering.
► There are four distinct customer segments with different value perceptions.
Full-size image (27 K)
Fig. 1. Customer value of smart metering.
Within the experiment customers would be willing to pay a premium of up to 9 CHF Swiss Francs current exchange rate 1CHF=1.09 US Dollars) to get their most desired smart metering product (3.04+1.55+1.30+2.38+0.93).  However, customers would also demand a discount of the same value if their smart metering product did not fit their needs. The results of our willingness-to-pay calculation for the different tariffs indicate that consumers are willing to pay more (3.04 CHF for a tariff of 11/17 Rp./kW h) to get the tariff model with the lowest risk or they would expect a discount of 3.56 CHF when forced to accept the highest offered tariff model. A possible interpretation is that they are willing to pay to avoid the risk related to high tariffs (Chapman et al., 2001; Faruqui and Mauldin, 2002; Herter, 2007; Faruqui et al., 2010). The related chance of falling into the lowest tariff seems either to be unsuitable to balance this risk or seems not to have been realized by respondents.

To compare the costs of smart metering with the willingness-to-pay we could calculate how long it takes for the costs to be amortized. In the recent published impact assessment of smart metering in Switzerland (SFOE, 2012) five scenarios for smart meter implementation and related costs were reported. The scenarios range from “status quo”, which does not foresee the implementation of smart meters and which uses the existing infrastructure, to the scenario “nationwide implementation +”, which consists of an implementation of smart meters at 97% of the metering points until 2035, a smart meter enabling infrastructure, dynamic tariffs, data collection in a 15 min. interval as well as load management for various appliances. The scenario “nationwide implementation +” allows for all of our services to be offered. Whereas the total accumulated costs between 2015 and 2035 of the scenario “status quo” would amount to 4319 million CHF, those of the scenario “nationwide implementation +” would amount to 5236 million CHF (SFOE, 2012). The costs include investment,
operating, communication costs and costs for business processes (SFOE, 2012)..... If we subtract the total accumulated costs of the scenario “status quo” from those of the scenario “nationwide implementation +” we arrive at the added costs due to the implementation of smart metering, which amount to 917 million CHF.

EmpowerHouse - Solar Decathlon Team, Habitat for Humanity and D.C. Goverment Celebrate Completion of Innovative Model for Affordable, Green Housing
After several years of planning, design and construction, a team of students from The New School and Stevens Institute of Technology who participated in the 2011 U.S. Department of Energy Solar Decathlon celebrated the completion of Empowerhouse, an innovative model for affordable, energy efficient green housing located in the Deanwood neighborhood of Washington. Developed in partnership with Habitat for Humanity of Washington, D.C. (DC Habitat), and the D.C. Department of Housing and Community Development (DHCD)...It is the first Passive House—the leading international energy standard—in the District of Columbia, and already a recipient of a Mayor’s Sustainability Award.
Due to the success of this project, Parsons is now in the planning stages of a second project to build a home with Habitat in Philadelphia."

The Solar Decathlon is a biannual, international competition that challenges collegiate teams from around the world to design, build, and operate solar-powered houses, which were exhibited on the National Mall in September and October 2011. The Empowerhouse team took the competition beyond the Mall by designing and constructing a house specifically for Habitat on a site in the Deanwood neighborhood east of the Anacostia River in Washington D.C. At the competition, it won the Decathlon’s first Affordability contest, as well as several additional categories. At the conclusion, it was moved to Deanwood and expanded into a two-family home for local residents....
Each unit of the 2,700 square foot two-family house is designed as a "site net-zero" system (producing all of its energy needs), but each achieves peak efficiency when joined. The house adheres to Passive House principles, which have only just begun to be recognized in the United States, and consumes up to 90 percent less energy for heating and cooling than a typical home. Through the use of these principles, the house had one of the smallest photovoltaic arrays of any in the competition, and its heating and cooling will require the same amount of power as it takes to operate a hair dryer. The principles followed include high levels of insulation, airtight construction, high-performance windows and doors, minimized thermal bridging, and windows and shading placed to control solar heat gain....

Estimating the value of economic benefits associated with adaptation to climate change in a developing country: A case study of improvements in tropical cyclone warning services

Abstract: Linking tropical cyclone activity with anthropogenic climate change is subject to on-going debate. However, modelling studies consistently have projected that climate change is likely to increase the intensity of cyclones and the related rainfall rates in the future. A precautionary approach to this possibility is to adapt to the adverse effects of the changing climate by improving early warning services for cyclones as a ‘no or low-regrets’ option. Given limited funding resources, assessments of economic efficiency will be necessary, and values for benefits are an essential input. This paper aims to estimate the benefits to households of an improved cyclone warning service in Vietnam. Choice experiment surveys with 1,014 respondents were designed and conducted to inform this paper. The benefit estimates of the maximal improvements in a number of attributes of cyclone warning services (i.e. forecasting accuracy, frequency of update, and mobile phone based warnings) are approximately USD7.1–8.1 per household, which would be an upper bound estimate. Results from the marginal willingness to pay for the attributes suggest that investments should be dedicated to improvements in the accuracy of warning information and a warning service based on mobile phone short message.
► Willingness to pay for improvements in tropical cyclone warning services in Vietnam was estimated.
► Choice experiment surveys with 1014 respondents were designed and conducted.
► The willingness to pay for maximal improvement program is about USD7.1–8.1 per household.
► Investments in cyclone warning services should be directed towards improvements in accuracy and mobile phone based warnings.
Keywords: Choice experiments; Willingness to pay; Adaptation to climate change; Tropical cyclone warning services; Developing countries; Vietnam 
Full-size image (16 K)

by Thanh Cong Nguyena, b, E-mail the corresponding author, Jackie Robinsona, E-mail the corresponding author, Shinji Kanekoc, E-mail the corresponding author, Satoru Komatsuc, E-mail the corresponding author  
a School of Economics, University of Queensland, Brisbane 4072, Australia. Tel.: + 61 7 3365 4028 (Office), + 61 4 6861 2202 (Mobile); fax: + 61 7 3365 7299.
b Faculty of Environment and Urban, National Economics University, Hanoi, Vietnam  
c Graduate School for International Development and Cooperation, Hiroshima University, Higashi-Hiroshima 739-8529, Japan
Ecological Economics  via Elsevier Science Direct
Volume 86, February 2013, Pages 117–128

Carbon Taxes Make Ireland Even Greener

Over the last three years, with its economy in tatters, Ireland embraced a novel strategy to help reduce its staggering deficit: charging households and businesses for the environmental damage they cause.

The government imposed taxes on most of the fossil fuels used by homes, offices, vehicles and farms, based on each fuel’s carbon dioxide emissions, a move that immediately drove up prices for oil, natural gas and kerosene. Household trash is weighed at the curb, and residents are billed for anything that is not being recycled.

The Irish now pay purchase taxes on new cars and yearly registration fees that rise steeply in proportion to the vehicle’s emissions.

Environmentally and economically, the new taxes have delivered results. Long one of Europe’s highest per-capita producers of greenhouse gases, with levels nearing those of the United States, Ireland has seen its emissions drop more than 15 percent since 2008.

Although much of that decline can be attributed to a recession, changes in behavior also played a major role, experts say, noting that the country’s emissions dropped 6.7 percent in 2011 even as the economy grew slightly.

“We are not saints like those Scandinavians — we were lapping up fossil fuels, buying bigger cars and homes, very American,” said Eamon Ryan, who was Ireland’s energy minister from 2007 to 2011. “We just set up a price signal that raised significant revenue and changed behavior. Now, we’re smashing through the environmental targets we set for ourselves.”

Sunny uplands - Alternative energy will no longer be alternative
...  In 2013 ... “Renewable” power will start to be seen as normal.

Wind farms already provide 2% of the world’s electricity, and their capacity is doubling every three years. If that growth rate is maintained, wind power will overtake nuclear’s contribution to the world’s energy accounts in about a decade. Though it still has its opponents, wind is thus already a grown-up technology. But it is in the field of solar energy, currently only a quarter of a percent of the planet’s electricity supply, but which grew 86% last year, that the biggest shift of attitude will be seen, for sunlight has the potential to disrupt the electricity market completely.

The underlying cause of this disruption is a phenomenon that solar’s supporters call Swanson’s law, in imitation of Moore’s law of transistor cost. Moore’s law suggests that the size of transistors (and also their cost) halves every 18 months or so. Swanson’s law, named after Richard Swanson, the founder of SunPower, a big American solar-cell manufacturer, suggests that the cost of the photovoltaic cells needed to generate solar power falls by 20% with each doubling of global manufacturing capacity. The upshot (see chart showing a fall from $76.67 in 1967 to $0.74 in 2013) is that the modules used to make solar-power plants now cost less than a dollar per watt of capacity. Power-station construction costs can add $4 to that, but these, too, are falling as builders work out how to do the job better. And running a solar power station is cheap because the fuel is free.
Coal-fired plants ... cost about $3 a watt to build in the United States, and natural-gas plants cost $1. But that is before the fuel to run them is bought. In sunny regions such as California, then, photovoltaic power could already compete without subsidy with the more expensive parts of the traditional power market, such as the natural-gas-fired “peaker” plants kept on stand-by to meet surges in demand. Moreover, technological developments that have been proved in the laboratory but have not yet moved into the factory mean Swanson’s law still has many years to run.
Reliability of supply is a crucial factor [in overall costs]. Many organisations, both academic and commercial, are working on ways to store electricity when it is in surplus....

Progress is particularly likely during 2013 in the field of flow batteries -- ... hybrids between traditional batteries and fuel cells, that use liquid electrolytes, often made from cheap materials such as iron, to squirrel away huge amounts of energy in chemical form....

One consequence of all this progress is that subsidies for wind and solar power have fallen over recent years. In 2013, they will fall further though subsidies will not disappear entirely....

... Fracking, a technological breakthrough which enables natural gas to be extracted cheaply from shale, means that gas-fired power stations, which already produce a fifth of the world’s electricity, will keep the pressure on wind and solar to get better still. But even if natural gas were free, no Swanson’s law-like process applies to the plant required to turn it into electricity. Nuclear power is not a realistic alternative. It is too unpopular and the capital costs are huge. And coal’s days seem numbered. In America, the share of electricity generated from coal has fallen from almost 80% in the mid-1980s to less than a third in April 2012, and coal-fired power stations are closing in droves.

It may take longer to make the change in China and India, where demand for power is growing almost insatiably, and where the grids to take that power from windy and sunny places to the cities are less developed than in rich countries....

by Geoffrey Carr,  science editor, 
The Economist from The World In 2013
November 21, 2012

One Year With Solar Energy at Home: Mostly Sunny

Just over a year ago, Kevin Toefel covered the back roof of his house in southeastern Pennsylvania with 41 solar panels. After 12 months the system generated 13.8 megawatt hours of electricity while using only 7.59 megawatt hours. The energy surplus becomes a credit on his electric bill, and once per year the electric company issues a check for any unused credit....

They use CFL or LED bulbs throughout the house, and solar-powered chargers for mobile devices. (The most recent one is outstanding.) 
After coming into some money and conducting research on solar energy (this site helps estimate system sizing, pricing, and benefits—return on investment,...), the household decided to go with solar panels, moved in part because their rear roof faces south.
He requested a number of quotes for installation and the best was $5.50 per watt. They looked at their electricity usage for the prior year—they’re a family of four, with two full-time work-at-home people—and overspecified the system by 25 percent capacity.

The specified 9.43 kW (DC) system used 41 230 watt panels—which produced 12.05 megawatt hours of electricity from Nov. 1, 2011, to Oct. 31, 2012. It cost $51,865 up front, including installation, permits, inspections, parts, labor, and warranty.  The federal tax credit totaled $15,560.  Many states offer rebates on solar projects; Pennsylvania provided a check for around $7,100 once the system was up and running. The net cost then was $29,205.

... Companies in some states offer no-money-down solar panel systems: They install a system on your property and then you lease it. The company reaps the incentive benefits, but you may save money on your electricity bill.

He had thought the system would be complicated, but it was not. ... 

The system needs an inverter for AC power. They considered one single inverter but instead opted for individual microinverters attached to every panel. If one panel or inverter fails, it’s easier to locate and fix the issue. In addition, the microinverters feed real-time data from every panel via Ethernet ... to a small Web server included for monitoring purposes.... The microinverters, and Web server ... are made by Enphase

Because of the solar panels, two additional electrical meters were needed. They still have the original meter that measures electricity use from the grid, but they also needed a new meter to measure power output, and a third to measure the difference between electricity created and used. ... In this graph below—from Enlighten’s Web service that creates reports—you can see exactly how much energy they produced on a daily basis.

The graph gives a rough history of the weather where they live. The drops on the graph represent days with little or no sun, although even on a cloudy day they make a little energy. Here’s a look at the numbers for production and usage by month:

There’s no maintenance to the system....

One of the upfront decisions you’ll need to make when planning a solar panel system is, will you still be tied to the electric grid which costs less up front.  The off-grid system provides stored power during the evening hours or during an outage. Their on grid system means all the power the panels create is actually fed back into the grid; they still get all their power from the electric company. And in the case of an outage, grid-tie systems are automatically disabled, because it would be unsafe for the workers trying to fix the outage.  To go completely off grid and have batteries store excess power would have added approximately 20 percent to up-front costs. 
The biggest issue for most is likely the large up-front costs involved, although you could start small and build up the system over time.... The payback period—which will vary based on the system, location, and energy costs without solar—can be high. Their break-even point is around 7.3 years, but that includes the home appreciation expected due to the system.

They already gained an appreciation benefit from the panels. Taking advantage of the low rates, they refinanced their home last month, and the added value of the solar panels was around $30,000. They were paying around $2,500 per year for electricity before the system was built; now they build up a credit most months. Any price increase means they will get more for their excess energy production.

Thursday, December 27, 2012

Why Have Tobacco Control Policies Stalled? Using Genetic Moderation to Examine Policy Impacts

Research has shown that tobacco control policies have helped produce the dramatic decline in use over the decades following the 1964 surgeon general’s report. However, prevalence rates have stagnated during the past two decades in the US, even with large tobacco taxes and expansions of clean air laws. The observed differences in tobacco control policy effectiveness and why policies do not help all smokers are largely unexplained.

The aim of this study was to determine the importance of genetics in explaining response to tobacco taxation policy by testing the potential of gene-policy interaction in determining adult tobacco use.
A moderated regression analysis framework was used to test interactive effects between genotype and tobacco policy in predicting tobacco use. Cross sectional data of US adults from the National Health and Nutrition Examination Survey (NHANES) linked with genotype and geocodes were used to identify tobacco use phenotypes, state-level taxation rates, and variation in the nicotinic acetylcholine receptor (CHRNA6) genotype. Tobacco use phenotypes included current use, number of cigarettes smoked per day, and blood serum cotinine measurements.

Variation in the nicotinic acetylcholine receptor was found to moderate the influence of tobacco taxation on multiple measures of tobacco use. Individuals with the protective G/G polymorphism (51% of the sample) responded to taxation while others had no response. The estimated differences in response by genotype were C/C genotype: b = −0.016 se = 0.018; G/C genotype: b = 0.014 se = 0.017; G/G genotype: b = −0.071 se 0.029.
This study provides novel evidence of “gene-policy” interaction and suggests a genetic mechanism for the large differences in response to tobacco policies. The inability for these policies to reduce use for individuals with specific genotypes suggests alternative methods may be needed to further reduce use.
Tobacco use is among the most important causes of morbidity and the leading preventable cause of death in the US, with over 400,000 deaths per year [1]. This number accounts for more deaths than AIDS, alcohol use, cocaine use, heroin use, homicides, suicides, motor vehicle crashes, and fires combined [2], [3]. Although studies suggest that as much as 70% of the variance in nicotine dependence and other tobacco use phenotypes could be due to genetic factors [4], the principal policies to reduce tobacco use have been broad-based and non-targeted. Following economic theory, governments have sought to increase the price of tobacco in order to reduce consumption [5]. Indeed, one of the most successful policies to reduce tobacco use has been tobacco taxation [6], helping to reduce use by over 50% since the mid 1960 s, which has been suggested as one of the most successful public health interventions in the 20th century [3], [7]. Following recommendations from the IOM and other groups [3], recent large increases in tobacco taxes have been made. For example, in April 2009, the largest federal excise tax in history went into effect, bringing the average combined federal and state rates to over $2 per pack.
The state-level per-pack tobacco tax rate [was] ...on average ... nearly $0.25 and varied from $0.02 to $0.56 across states.
The full results are presented in the table below:

Friday, November 23, 2012

Call for Papers - The Fifth Annual Conference of the Society for Benefit-Cost Analysis: Increasing the Utility of Benefit-Cost Analysis

February 21–22, 2013 
at the
FHI360 Conference Center 
1825 Connecticut Ave., NW, 8th Floor 
Washington, DC 20009
(202) 884-8279
Abstracts due November 30, 2012

The Society for Benefit-Cost Analysis promotes the development and appropriate application of benefit-cost analysis to a broad range of public policy issues. In 2013, the fifth annual conference and meeting will continue to focus on the practical use of benefit-cost analysis (BCA) in a variety of institutional and national settings. The Society welcomes abstracts and panel proposals on any topic related to improving the use of benefit-cost analysis, cost-effectiveness analysis, risk-benefit analysis, applied welfare economics, and damage assessment in policy settings, from scholars, practitioners, and others interested in these areas who wish to present research at the conference. Submit your abstract online now at  Some examples of areas of interest including the following:
- Developing innovative analytic tools and testing their application in case studies
- Extending the use of BCA to new policy areas
- Improving the use BCA in decision making
- Interpreting research on happiness and life-satisfaction within the BCA framework
- Addressing the implications of behavioral economics for prediction and valuation
- Developing principles and standards for BCA
- Predicting costs and benefits and assessing distributional impacts
- Incorporating moral sentiments and equity considerations into BCA
- Considering the use of retrospective BCA in program evaluation and policy analysis
- Assessing the use of BCA in practice in the U.S. and other countries
- Communicating analytic results effectively
- Estimating shadow prices of potentially general use in BCA
Abstracts should be 200–300 words in length and provide adequate detail on the content of the research. Proposals for panels that include three to four speakers are also welcome, and should include a summary of the overall focus of the panel as well as a 200–300 word abstract for each presentation. Note that the program committee reserves the right to select the panel abstracts and to reorganize the panels as needed. Submission of a paper/panel is viewed as a firm commitment to participate in the conference if accepted.

Entries received after November 30, 2012, are not guaranteed consideration by the program committee.

For more information about the annual conference or the Society in general, please visit or contact

2013 Conference Program CommitteeDavid Weimer, Coordinator (University of Wisconsin), Joseph Cordes (The George Washington University), Lisa Robinson (Independent Consultant), Trudy Ann Cameron (University of Oregon), Clark Nardinelli (FDA), Kip Viscusi (Vanderbilt)
Society for Benefit Cost Analysis (SBCA)

The Valuation of Biodiversity Conservation by the South African Khomani San “Bushmen” Community

Abstract:The restitution of parkland to the Khomani San “bushmen” and Mier “agricultural” communities in May 2002 marked a significant shift in conservation in the Kgalagadi Transfrontier Park and environs in South Africa. Biodiversity conservation will benefit from this land restitution only if the Khomani San, who interact with nature more than do other groups, are good environmental stewards. To assess their attitude toward biodiversity conservation, this study used the contingent valuation method to investigate the values the communities assign to biodiversity conservation under three land tenure arrangements in the Kgalagadi area. For each community and land tenure arrangement, there are winners and losers, but the winners benefit by more than the cost that losers suffer. The net worth for biodiversity conservation under the various land tenure regimes ranged from R928 to R3,456 to R4,160 for municipal land, parkland, and communal land respectively for the Khomani San, compared to R25,600 to R57,600 to R64,000 for municipal land, parkland, and communal land respectively for the Mier. Both communities have the highest preference for the implementation of the biodiversity conservation programme on communal land. There are no significant differences in the WTP between the two communities when adjusted for annual median household income; hence, the Khomani San can be trusted to become good environmental stewards. However, in order for all members of the local communities to support biodiversity conservation unconditionally, mechanisms for fair distribution of the associated costs and benefits should be put in place.
by Johane Dikgang and Edwin Muchapondwa
Resources For the Future (RFF)
RFF Discussion Paper EfD 12-10; October, 2012
Keywords: Ecosystem Management, Land Use

The economics of carbon taxes: Full Free Webcast Available - Cosponsored by the American Enterprise Institute (AEI), the Brookings Institution, International Monetary Fund (IMF), and Resources for the Future (RFF)

Event Summary
With the growing need for reform in the US fiscal system, the idea of a tax on carbon has emerged as a possible solution. On November 13, 2012 at AEI, four panels explored the merits and challenges of implementing a tax on carbon, discussing topics ranging from its distributional effects to its potential impact on international trade.

Roberton Williams of Resources for the Future began by highlighting three advantages that a carbon tax has over outright regulation, while AEI's Aparna Mathur explained the economic reasoning behind a theoretical tax on carbon to correct for externalities of pollution. Panelists also discussed how carbon taxes would function in an international framework and their potential macroeconomic effects.

Karen Palmer of Resources for the Future emphasized the difficulties posed by the complex structure of American government for a carbon tax. Donald Marron of the Urban Institute argued that carbon tax revenues could be used to lower corporate tax rates to increase economic efficiency in the US. Panelists overwhelmingly agreed that more research on the effects of a carbon tax is needed, but that it raises important questions for academics and policymakers alike.

Event Materials

Event Description
The pros and cons of introducing a carbon tax in the US are the topic of many spirited debates, yet discussion of the consequences from alternative tax designs remains largely confined to academia. In an effort to shed more light on this topic and its budgetary impact, AEI, the Climate and Energy Economics Project at the Brookings Institution, the International Monetary Fund, and Resources for the Future cohosted a conference to discuss ideas for US carbon tax design and options for the potential use of carbon tax revenues. The conference featured four panels with presentations of policy briefs by leading experts, each of which tackled a particular design or implementation issue. Speakers took audience questions following their remarks.

American Enterprise Institute (AEI)
November 13, 2012 

Organic Dairy Farms Benefit Farmers and Local Economies, Report Finds

The organic dairy sector provides more economic opportunity and generates more jobs in rural communities than conventional dairies, according to a report released today by the Union of Concerned Scientists (UCS). The first-of-its-kind study, “Cream of the Crop: The Economic Benefits of Organic Dairy Farms,” calculated the economic value of organic milk production. 

“Over the past 30 years, dairy farmers have had a choice: either get big or get out. Dairy farmers either had to expand dramatically and become large industrial operations or they went out of business,” said Jeffrey O’Hara, agricultural economist for the Food and Environment Program at UCS and author of the report. “However, organic dairy production offers farmers another option – one that is better for the environment, produces a healthier product, and leads to greater levels of economic activity.”

Based on 2008 - 2011 financial data from two major milk-producing states—Vermont and Minnesota— the report evaluated the economic impact of organic dairy farms. Vermont’s 180 organic farms contribute $76 million annually to the state’s economy and support 1,009 jobs. In Minnesota, 114 organic farms add $78 million to Minnesota’s economy annually and have created 660 jobs.

The report also compared the economic value that would be generated by conventional and organic farms in the two states if both experienced the same hypothetical level of increased sales. In Vermont, organic dairy farms under that scenario would be expected to contribute 33 percent more to the state’s economy than conventional farms, and employ 83 percent more workers. Similarly, in Minnesota, organic dairies would increase the state’s economy by 11 percent more and employment by 14 percent more than conventional dairy farms.

Consumer demand for organic milk has jumped dramatically over the last decade, driven largely by ample evidence that it is more nutritious and less damaging to the environment than milk produced in crowded, polluting CAFOs (confined animal feeding operations). Organic dairy farming is now a $750 million industry, and annual U.S. organic milk sales increased 12 percent in 2010, 13 percent in 2011, and 5 percent in the first seven months of 2012. In some regions, consumer demand is so significant that retail grocery chains are having a hard time keeping organic milk in stock.
Despite organic dairy farms’ benefits and rising consumer demand, the U.S. Department of Agriculture’s (UDSA) farm programs and taxpayer subsidies favor big CAFOs. The Farm Bill, which reauthorizes USDA farm programs every five years, currently provides relatively little support for organic dairy farmers. Worse, Congress failed to act on the now-overdue 2012 Farm Bill before the election, putting programs that currently help dairy producers and organic farmers at risk. Now that the election is over, Congress has the opportunity to address this glaring discrepancy in its lame duck session. O’Hara’s report makes four primary policy recommendations for legislators:
  • The USDA should revise the federal milk marketing orders, which establish the minimum prices dairy processors must pay to farmers. The antiquated minimum-pricing order policies were written in the 1930’s and fail to account for the ways that organic milk production differs from conventional dairy farming. 
  • Congress and the USDA should offer a subsidized insurance program that is customized to the needs of organic dairy farmers. Insurance programs proposed in Farm Bill deliberations are only designed to support conventional dairies. 
  • Congress should increase funding for organic agriculture programs. 
  • Congress should fund and the USDA should implement programs that support regional food system development, such as rural development grants.
This modest federal support would help organic dairy farmers who are already contributing to and stabilizing regional economies, and support farmers who want to transition to organic farming.
“More and more consumers across the country are choosing organic milk, but Washington hasn’t gotten the message,” said O’Hara. “Investing in organic dairy production would pay off in multiple ways by keeping small farm businesses afloat, promoting local economic growth, reducing farm pollution, and meeting growing consumer demand.”