Saturday, June 25, 2011

Short-Run and Long-Run Implications of Environmental Regulation on Financial Performance 
Abstract: Opposing theoretical arguments exist regarding the effect of environmental regulation on financial performance. Some studies argue that environmental regulation constrains firms' abilities to exploit revenue-enhancing or cost-reducing opportunities. Other studies, representing the Porter hypothesis, argue that environmental regulation motivates firms to innovate, which ultimately improves financial performance. Although much of the debate focuses on long-run effects, there are also important short-run effects. This study provides empirical evidence regarding the short-run and long-run effects of Clean Water Act regulation on financial performance. To generate this evidence, we examine the effect of permitted wastewater discharge limits, on the return on sales, using panel data on publicly owned firms in the chemical manufacturing industries. We find that Clean Water Act regulation improves financial performance in both the short run and the long run with a stronger effect in the long run. These results suggest that some net benefits may be realized during a short-run transition to comply with a tighter permitted discharge limit, with additional benefits accruing to the firm in the long run because the firm has more time to innovate.

by Dylan G. Rassier 1 and Dietrich Earnhart 2

Friday, June 24, 2011

Long Overdue: EPA and Nitric Acid Plant Regulation - Harmful emissions continue to spew despite availability of cheap technology
Nitric acid plants emit dangerous air pollutants that cause illness and alter the climate. A new study, released today, finds EPA long overdue on a regulatory revision and at risk of allowing major costs to be imposed on the American public. 

Nitric acid factories—which mainly produce the ingredients for fertilizer—have escaped pollution control requirements based on contemporary science and technology. Despite a statutory requirement to review and revise related regulations every eight years, the rules governing these plants have not been updated in four decades.

During that time, the technology for cleaning up emissions has drastically changed, rendering the old rules outdated and insufficient. Life-saving technologies are now easier and cheaper but have not been put in place by most plants.

In the forty years since nitric acid plant regulations have been revised, new research has also shown greater harm from the pollutant than originally thought, which means greater benefits to cutting emissions. Savings like higher productivity, fewer sick days, and less risk for untimely death add up to significant benefits that are not currently being taken into account.
“EPA has had long enough to catch up with the technology. It must now give these facilities an incentive to reduce their pollution,” said Michael Livermore, Policy Integrity’s executive director.
Since 1971, the last time these rules were updated, scientific consensus on the danger of an additional pollutant has emerged: nitric acid plants also emit a powerful greenhouse gas. In 2009, nitric acid production accounted for the equivalent of the annual greenhouse gas emissions of 2.6 million cars. These nitrous oxide (N2O) emissions have never been regulated.
EPA has already found that the costs of reducing greenhouse gases from nitric acid plants may be as low as $2.32 per ton, while the benefits could be as high as $64.90 per ton.
“The risks of climate change are now well documented: EPA can no longer afford to ignore the greenhouse gas emissions from industrial sectors like nitric acid plants. That’s particularly true given the fact that cutting these pollutants will have major public health benefits and cost relatively little,” said Jason Schwartz, legal director for Policy Integrity.
Under President Barack Obama, EPA has promised to address issue, but since that announcement, there has been almost a year of inaction.
The NOX Budget Trading Program (or “NOX SIP Call”) could assist EPA in setting an emissions standard for nitric acid plants that is cost-benefit justified. Despite the fact that this program was superseded by the Clean Air Interstate Rule’s (“CAIR”) NOX ozone season program (which is likely to be replaced by the new Transport Rule), data from the NOX Budget Trading Program reports in 2008 could provide insight into the quantified benefits of NOX emissions reductions. As of the close of 2008, the cost of a NOX permit was $592 per ton. 
Utilizing technology “demonstrated in practice,” nitric acid plants can reduce over 80% of their nitrous oxide emissions at a cost of $2.32 - $6.49 for every ton of carbon-dioxide equivalent reduced according to Environmental Protection Agency, Available and Emerging Technologies for Reducing Greenhouse Gas Emissions From the Nitric Acid Production Industry a 2010 Environmental Protection Agency document available at ... This estimate could be further reduced if EPA adopts the flexibility mechanisms outlined in the report
The full report is available free of charge here.

The Institute for Policy Integrity at New York University School of Law, "a non-partisan think-tank using economics and law to protect the environment, public health, and consumers".
Press Release dated June 23, 2011

Manhattan Institute: Fracking Ban Costs New York Billions in Lost Economic Output and Tax Revenue

The natural gas boom that America is experiencing is due largely to advances in hydraulic fracturing and horizontal drilling techniques which free gas trapped in densely packed shale formations previously thought to be uneconomic. However, in many states, these techniques have become a major focus of environmental concern. This concern has led to a ban on the use of hydraulic fracturing in New York State—but is this moratorium on shale gas drilling beneficial for New Yorkers?

A new Manhattan Institute Center for Energy Policy and the Environment report, authored by University of Wyoming professor Timothy Considine, analyzes the economic and environmental impacts of shale gas drilling in the Marcellus Shale formation in Pennsylvania (the formation spans several states including, New York).

The report, “The Economic Opportunities of Shale Energy Development”, which was released at an event in New York City on Wednesday, June 7, 2011, finds that the net economic benefits of shale drilling in the Marcellus are considerably positive while the environmental impact of the typical Marcellus well is relatively low. Pennsylvania’s experience suggests that New York, through its ban, is needlessly stifling job growth, investment, and tax revenue in a part of the state that can scarcely afford it.
What ending the moratorium means for New York:
  • $11.4 billion in economic output and $1.4 billion in tax revenues.
  • $4 million in economic benefits from each well but only $14,000 in economic damages from environmental impacts.
  • Some 15,000 to 18,000 jobs could be created in the Southern Tier and Western New York, regions which lost a combined 48,000 payroll jobs between 2000 and 2010.
  • 75,000 to 90,000 jobs could be created if the area of exploration and drilling were expanded to include the Utica Shale and southeastern New York, including the New York City watershed.
Considine carefully reviewed the public records of environmental violations reported by the Pennsylvania Department of Environmental Protection for the period 2008–10 and found that the probability of an environmental event is small and that those that do occur are minor and localized in their effects.

The Report notes:
  • The typical Marcellus shale gas well generates about $4 million in economic benefits.
  • The economic damage resulting from the environmental impacts of a typical shale gas well comes to $14,000.
The expected environmental costs are so low because the probability of an environmental event is small, and those that do occur are minor and localized in their effects.

Those environmental problems that have arisen in connection with hydraulic fracturing in no way call into question the soundness of that procedure. In reality, they result from improper drilling and well-casing technique and defective formulation of cement. Such errors and flaws allow wells to penetrate shallow gas deposits, permitting the gas within them to escape and enter groundwater supplies. Marcellus gas resides far below these deposits and any aquifers. More stringent design standards should be adopted, and more active regulatory oversight should be exercised. These steps would reduce the incidence of such problems.

Considine’s report concludes that the potential economic benefits of shale gas exploration greatly exceed the potential environmental impacts in New York State. Developing the Marcellus Shale could drive commercial activity in the Empire State for decades, leading to long-term increases in personal income and tax revenue

The full report is available at

By Timothy J. Considine 1, Robert W. Watson 2 and Nicholas B. Considine 3
1. University of Wyoming,
2. The Pennsylvania State University
3. Natural Resources Economics
The Manhattan Institute
Press Release dated June 7, 2011

Land and Water Conservation Fund suffers 33% cut despite Trust for Public Land Study showing every $1 invested returned $4 in economic value 
Congress approved the Fiscal Year 2011 federal budget in April, significantly cutting funding for the Land and Water Conservation Fund, the country’s premiere federal program for protecting lands for all Americans. Supported by offshore oil and gas leasing revenues – not taxpayers’ dollars – the LWCF ensures all Americans have access to local community parks and playgrounds and the vast expanses of federal public lands.
In the final budget agreement, LWCF is funded at $301 million, a 33% cut from the FY10 enacted level. Programs that ensure protection of working forests and ranches, threatened and endangered species habitat, access for sportsmen and recreationists, and our national parks, wildlife refuges, forests and other public lands are all impacted by these cuts.

“This 33 percent reduction from FY 10 enacted levels is not only a disproportionate cut to a very successful program but means that LWCF funds have been diverted from their intended and authorized purposes,” said Will Rogers, President of The Trust for Public Land. “If we are serious about creating jobs and getting the economy back on track, conservation spending on LWCF is not only a wise, but an essential investment that reaps immediate and tangible benefits in our communities across the tourism, service and outdoor recreation sectors.”
The outdoor industry is one of America’s fastest growing sectors. In addition to contributing more than $730 billion to the American economy each year, it generates $88 billion in annual state and federal tax revenue. More than 6.5 million American jobs are supported by the active outdoor recreation economy.

The reduced funding levels for LWCF contained in this final budget agreement means that a host of willing-seller, critically needed and locally driven land conservation and outdoor recreation projects, will not get done this year. Some will be lost forever, as willing-seller landowners cannot be expected to wait for Congress to act.

Created by Congress in 1965, LWCF was a bipartisan commitment to safeguard natural areas, water resources and our cultural heritage, and to provide recreation opportunities to all Americans. National parks like Rocky Mountain and the Great Smoky Mountains, as well as national wildlife refuges, national forests, Civil War battlefields, cultural and historic sites, rivers and lakes, working ranches and forests, community parks, trails, and ball fields in every one of our 50 states are permanently protected for Americans to enjoy thanks to federal funds from LWCF.

The Land and Water Conservation Fund Coalition is an informal partnership working together to support full and dedicated funding for LWCF. The coalition includes hundreds of local, state and national business, recreation, private landowner and conservation organizations across the country.
On November 15, 2010 The Trust for Public Land released an analysis of the return on the investment of LWCF dollars for federal land acquisition by the Bureau of Land Management, Fish and Wildlife Service, Forest Service, and National Park Service for a sample of sixteen federal units that received LWCF funding between 1998 and 2009. TPL analyzed the past (i.e., 1998 to 2009) and likely future (i.e., over the next ten years) economic returns generated from LWCF spending on the sample federal units and found that every $1 invested returns $4 in economic value over this time period from natural resource goods and services alone. In addition to providing natural goods and services, these federal lands are key to local recreation and tourism industries. TPL found that approximately 10.6 million people visit these sixteen federal units each year and spend $511 million in the surrounding local communities. (See

Trust For Public Land
Press Releases dated April 15, 2011 and November 15, 2010

Bipartisan Efforts in 2005 Energy Bill Led to Significant Energy Efficiency Gains
Energy efficiency provisions in the Energy Policy Act of 2005 were largely successful in expanding markets for money-saving energy-efficient products, and in creating opportunities for continued bipartisan political action on energy efficiency in later legislation. These are the results of a new report, Assessing the Harvest: Implementation of the Energy Efficiency Provisions in the Energy Policy Act of 2005, by the American Council for an Energy-Efficient Economy (ACEEE). The report documents current knowledge about the implementation of the energy efficiency provisions in this legislation.

The Energy Policy Act of 2005, signed by President George W. Bush in August of that year, included manufacturer and consumer tax incentives for energy-saving technologies, minimum efficiency standards for appliances and equipment, and a variety of other provisions to encourage energy savings. It was the first major energy legislation since 1992, and began a period of bold energy efficiency legislation from 2005 to 2010.

“This bill dates to the last time Republicans had control of both sides of Congress and the White House,” said Steven Nadel, co-author of the report and Executive Director of ACEEE. “There is a clear precedent for bipartisan action on energy efficiency, because these are win-win policies.”

The report also looks at lessons learned from implementation of the 2005 bill. The most successful energy efficiency provisions had good timing, stakeholder engagement and education, and appropriate levels of funding. Other provisions, especially those with limited or nonexistent funding or where a loophole was built into the law did not fare as well.

“Most of the provisions have proved successful in helping save consumers and businesses energy, but there are some clear winners,” said Rachel Gold, lead report author and a researcher at ACEEE. “The new homes and appliance manufacturer tax incentives, and the appliance and equipment standards have succeeded the best at transforming markets.”

Overall, ACEEE estimates that in 2020, the bill will still be saving enough energy to power the state of Tennessee for a year at current energy use levels. These findings are close to ACEEE’s original estimate in 2005, showing that for the most part, implementation of the provisions over the past five years has gone well.

The full report is available free of charge at

American Council for an Energy-Efficient Economy (ACEEE), an independent, nonprofit organization dedicated to advancing energy efficiency as a means of promoting economic prosperity, energy security, and environmental protection.
March 16, 2011

GE Capital Fleet Services’ Environmental Performance Services Deliver Significant Operating and Environmental Improvements
GE Capital Fleet Services announced on April 27, 2011 that its Environmental Performance Services with Mobile Resource Intelligence were reapproved as a GE ecomagination product, confirming the significant operating and environmental performance improvements they deliver to customers. As part of the GE ecomagination portfolio, they are reviewed regularly to confirm their performance claims.

The Environmental Performance Services with Mobile Resource Intelligence help customers strengthen their environmental and operating performance by tailoring strategies for their service, sales, and delivery fleets. Through the Monitor/Manage Mobile Resource Intelligence solution, Strategic Consulting Services, and Truck Engineering Services, customers reduce operating costs and manage CO2 emissions through analysis and reporting, customized vehicle selection, and integrated vehicle efficiency tools.

For example, vehicle efficiency tools such as limiting after hours use, speeding and idling time can help reduce fuel consumption and CO2 emissions and can yield annual per-vehicle gasoline savings of approximately $265 at $2.76 per gallon, while avoiding the annual emission of 3 metric tons of CO2 on U.S. roads versus typical usage. In addition, optimizing vehicle selection, right-sizing vehicles within a vehicle class, and/or switching to smaller vehicle classes can help customers improve fuel efficiency from 17% to 59%. This can reduce annual per-vehicle fuel costs by $300 to $1,200 at $2.76 per gallon, and can avoid the annual emission of 1 to 4 metric tons of CO2 per vehicle.
GE Capital Fleet Services has published two guides on environmentally efficient fleet management and driver best practices. The complimentary guides are available for download at

GE Ecomagination is GE’s company-wide business initiative to help meet customers’ demands for more energy-efficient products and to drive reliable growth for GE. In 2009, GE invested $1.5 billion on ecomagination R&D, reaching the commitment to double our annual investment by 2010 one year ahead of schedule. GE is now committing to growing ecomagination revenue at twice the rate of total company revenue in the next five years, making ecomagination an even larger proportion of total company sales. GE Capital Fleet Services' Environmental Performance Services is currently available in the U.S., Canada and Europe. The ecomagination product review process provides a third-party review of claims, quantifying operating and environmental performance benefits that accrue to GE’s customers by using ecomagination products relative to baselines such as competitors' best products, the installed base of products and regulatory standards. These ecomagination claims can be found in GE's printed materials and advertisements and on the web at Ecomagination products are reviewed regularly to help ensure that claims remain both compelling and accurate GE Capital, Fleet Services, based in Eden Prairie, Minn., is a global fleet management company with operations in the United States, Canada, Europe, Japan, Australia and New Zealand. GE Capital offers consumers and businesses around the globe an array of financial products and services. For more information, visit GE (NYSE: GE) is an advanced technology, services and finance company taking on the world’s toughest challenges. GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company's Web site at
Press Release dated April 27, 2011

Thursday, June 23, 2011

Hidden value of nature revealed in UK study
The true value of nature can be shown for the very first time thanks to ... research by hundreds of UK scientists.

The research forms the basis of a major new independent report – the UK National Ecosystem Assessment (UK NEA) – which reveals that nature is worth billions of pounds to the UK economy. The report strengthens the arguments for protecting and enhancing the environment and will be used by the government to direct policy in future.

The UK NEA has used new approaches to estimate the value of the natural world by taking account of the economic, health and social benefits we get from nature.

While in the past people may have thought that caring for the environment meant extra financial burdens, the UK NEA shows that there are real economic reasons for looking after nature. The NEA also shows that the benefits we get to our health, well being and from the enjoyment of nature have not always been fully appreciated or valued.

The assessment provides values for a range of ecosystem services to help us fully understand the value of the natural environment and how the benefits to individuals and society as a whole can be better protected and preserved for future generations.

Examples include:
  • The benefits that inland wetlands bring to water quality are worth up to £1.5billion per year to the UK;
  • Pollinators are worth £430million per year to British agriculture;
  • The amenity benefits of living close to rivers, coasts and other wetlands is worth up to £1.3billion per year to the UK; and
  • The health benefits of living with a view of a green space are worth up to £300 per person per year.
The UK NEA shows that the tendency to focus only on the market value of resources we can use and sell, such as timber, crops and fisheries, has led to the decline of some ecosystems and habitats through pollution, over-exploitation, and land conversion.

It warns that continued population growth and climate change are likely to put additional pressure on ecosystems, and that actions taken now will have consequences far into the future. It stresses the need for a more collaborative approach to enhancing our environment, with everyone playing their part to capture more of nature’s benefits in a sustainable way. Six future scenarios have been developed showing how ecosystems could be affected over the next 50 years depending on what emphasis is given to environmental sustainability or economic growth.
The UK NEA examines the state of the full range of services provided across eight different habitats including marine, woodlands, wetlands and moorlands. It shows that while some ecosystems are getting better at delivering services, such as crop production from farmland and climate regulation by woodlands, over 30% of services assessed were found to be in decline, and others degraded, such as marine fisheries, wild species diversity and soil quality.

Copies of the synthesis report and the full technical findings are available to download:
United Kingdom Department of Environment Food and Rural Affairs (DEFRA)
Press Release dated June 2, 2011

Economic feasibility of converting cow manure to electricity: A case study of the CVPS Cow Power program in Vermont
Abstract: A case study of the Central Vermont Public Service Corporation (CVPS) Cow Power program examines the economic feasibility for dairy farms to convert cow manure into electricity via anaerobic methane digestion. The study confirms that it is technically feasible to convert cow manure to electricity on dairy farms but the economic returns highly depend on the base electricity price paid by CVPS, premium rate paid by CVPS customers, financial supports from government agencies and other organizations, and sales of the by-products of methane generation. Lessons learned from this program will be useful to other dairy farms and communities interested in converting cow manure into electricity.

Project viability is affected by the electricity price paid to the farm, the price paid for recovered fibers, which can be used as animal bedding, and the heating fuel savings garnered from captured combustion heat. CVPS customers opt to pay a $0.04 per kWh premium, amounting to over $470k annually, to support local farms participating in the Cow Power program. Grant funding historically covers approximately 1/3 of total project cost, contributing significantly to project viability.

By Ethan Thompson 1, Robert Parson 2, Glenn Rogers 3 and Qingbin Wang 4
1. University of Vermont, Burlington, VT 05405;
2. University of Vermont, Burlington, VT 05405;
3. University of Vermont, Burlington, VT 05405
4. Department of Community Development and Applied Economics, 205C Morrill Hall; University of Vermont, Burlington, VT 05405; Phone: 802 656-4564, Fax: 802 656-1423,
Agricultural and Applied Economics Association

2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania; 2 Pages
Keywords: anaerobic digestion, dairy farms, renewable energy, economic feasibility

Rocky Mountain Institute (RMI) Guides Ford Dealer in Energy-Frugal Retrofit
We get comments every day from customers about how much nicer the new dealership is—and saving money and saving the environment at the same time is pretty cool,” says Brian Jarrett.  Jarrett is co-owner of Jarrett-Gordon Ford Lincoln, Inc. in Winter Haven, Fla., the first Ford dealership to go through Ford’s Go Green energy efficiency retrofit program.
Soon after an initial meeting with RMI, Jarrett says, RMI sent engineers to conduct various modeling and testing procedures—“the roof structure, the energy consumption, the water, the walls, thermal energy coming into and out of the building.” Several months later, Jarrett received “a very detailed, very aggressive script to follow to become energy- and water-efficient.”
For a 40,000-square-foot commercial facility in the sunny and humid Florida climate, it’s not hard to guess the two biggest areas for energy improvements: cooling and lighting. RMI staff members suggested replacing the roof with a superinsulated roof and a white membrane to reflect the sun’s heat, and replacing all the heating and cooling units with very efficient but smaller ones. The roof was replaced last summer.

Jarrett recalls. “When we put the new roof on, it lowered the temperature inside by 10 degrees.” The retrofit also addressed thermal comfort in the service bay, which had no heating or cooling. The dealership replaced several relatively ineffective midsized ceiling fans with two high-air-volume but low-velocity fans (16 to 18 feet in diameter), saving more than $1,000 a year.

To address the huge lighting energy use (38 percent of the energy bill) RMI recommended Solatubes—internally reflective daylighting tubes—in every office and hallway, and even in the parts warehouse. (Because the service department doesn’t have a drop ceiling, it used skylights instead.)

“If there are no clouds in the sky, we don’t need any electric lights,” Jarrett says. “Around 10 in the morning, the lighting control panels will shut the lights off, and around 4:30 in the afternoon the control panel will start turning some of them back on again. Through the middle portion of the day, there’s not a single light on in the store.” According to RMI buildings analyst Mike Bendewald,“we suggested taking down some fixtures, replacing others, reducing the amount of electric light in some areas, and providing accents in certain places.”... “We also recommended adding controls like occupancy sensors and daylight sensors.”

Before the retrofit, the dealership had monthly electric bills of just over $5,000; now it pays just over $2,000. And the collaboration between Ford, the dealership, and RMI, says Jarrett, produced a very appealing building for both occupants and customers.
RMI is now hoping to collaborate with Ford on a second phase to address the rest of its dealerships.
by Cameron Burns
Rocky Mountain Institute (RMI) Solutions Journal
Volume 4, Issue 2; Spring, 2011