Friday, September 28, 2012

Tax Evasion and Optimal Environmental Taxes

Abstract:This paper introduces a new argument to the debate about the role of environmental taxes in modern tax systems. Some environmental taxes, particularly taxes on gasoline or electricity, are more dicult to evade than taxes on labor or income. When the tax base is shifted in a revenue-neutral manner toward these environmental taxes, the result is a net reduction in the amount of tax evasion. Using a carbon tax as a motivating example, the "tax evasion effect" is shown to sharply reduce the welfare cost of controlling emissions. A simple computable general equilibrium model suggests that the impact of considering tax evasion can be large: costs are lowered by 28% in the United States, by 89% in China, and by 97% in India. In countries with high levels of pre-existing tax evasion, a carbon tax will pay for itself through improvements in the efficiency of the tax system.

by Antung Anthony Liu
Resources For the Future (RFF)
RFF Discussion Paper 12-37; September, 2012
Research Topics: Climate Change, Development and Environment, Policy Instruments

Harvard's Ash Center Announces 111 Bright Ideas in Government

On September 25, 2012 the Ash Center for Democratic Governance and Innovation at the John F. Kennedy School of Government, Harvard University recognized 111 innovative government initiatives as Bright Ideas. This year’s cohort hails from all levels of government—including school districts, county, city, state, and federal agencies as well as public-private partnerships—and demonstrates a creative range of solutions to issues such as urban and rural degradation, environmental problems, and the academic achievement of students. Programs were evaluated and selected by a team of policy experts from academic and public sectors.

“Government innovation does not require endless resources and generous budgets,” said Stephen Goldsmith, director of the Innovations in Government Program at the Ash Center. “As exemplified by this year’s Bright Ideas, some of our country’s smartest innovations can in fact reduce government’s size while serving our citizens more efficiently and effectively.” 

This is the third cohort recognized through the Bright Ideas program, an initiative of the broader Innovations in American Government Awards program. Applications are accepted year round for consideration as a Bright Idea; programs must currently be in operation or in the process of launching and have sufficient operational resources. In addition, programs must be administered by one or more governmental entities; nonprofit, private sector, and union initiatives are eligible if operating in partnership with a governmental organization. Bright Ideas are showcased on the Ash Center’s Government Innovators Network, an online platform for practitioners and policymakers to share innovative public policy solutions. Read more about this cohort of Bright Ideas here
Environmental Protection & Conservation
Both Maryland and Lancaster, Pennsylvania, have created innovative programs to protect the Chesapeake Bay. Maryland’s BayStat identifies and tracks farming, public land filtering, and waste water goals to restore the Bay, while Lancaster’s Restoration with Green Infrastructure has found cost effective solutions for curbing storm water runoff from emptying into the Bay. Indianapolis’ Clean Water Initiative and Edmonston’s Green Street have also addressed storm water challenges: through innovative engineering solutions, Indianapolis will prevent 3.5 million gallons of sewage from polluting waterways, and Edmonston has employed natural water filters during storms and dramatically reduced localized flooding. Other Bright Ideas protect local resources: Massachusetts’ MassGrown & Fresher connects consumers to local agriculture, Hawaii’s Maui Nui Seabird Colony Champions engages community in the protection of endangered seabird colonies, and Arizona’s HabiMap and Wildlife Overpass uses GPS mapping technologies to prevent wildlife-vehicle collisions.
Clean Water Initiative
City of Indianapolis, IN
Indianapolis applied value-engineering techniques to its storm water systems in an effort to find cost savings while speeding up efforts to clean the city’s water. As a result, Indianapolis will prevent 3.5 million gallons of sewage from polluting local waterways, while saving residents upwards of $1 billion. Indianapolis also made significant upgrades to the city’s crumbling roads, bridges, and sidewalks while incorporating sustainable technologies. Full implementation will entail creating economic development opportunities along Indianapolis’ waterways.
Combined Sewer Overflow Control Technology
City of South Bend, IN
In order to meet federal environmental mandates on combined storm and sanitary sewer overflows, South Bend installed real-time monitoring and control “smart valves” technology. The program uses distributed sensing and control logic which optimizes performance of infrastructure already in place, saving the city an estimated $114 million over a conventional approach.
Clean Energy Works Portland
City of Portland, OR
Because a major barrier to retrofitting existing buildings is the up-front cost of improvements, Portland launched Clean Energy Works Portland, a pilot program that has created quality jobs through an integrated home energy remodeling process. The initiative provides a personal energy advisor, certified contractors, and simple financing that is repaid on the homeowner’s energy bill. 
Chesapeake Bay Restoration With Green Infrastructure
City of Lancaster, PA
Heavy wet weather events have overwhelmed Lancaster’s combined sewer system: untreated storm water has overflowed into rivers and over one billion gallons of polluted water have emptied into the Chesapeake Bay. The city’s Green Infrastructure Plan reduces storm water runoff and mitigates the negative impact of combined sewer overflows in a cost-effective way.

Sunday, September 23, 2012

On the electrification of road transport - Learning rates and price forecasts for hybrid-electric and battery-electric vehicles
Abstract: Hybrid-electric vehicles (HEVs) and battery-electric vehicles (BEVs) are currently more expensive than conventional passenger cars but may become cheaper due to technological learning. Here, we obtain insight into the prospects of future price decline by establishing ex-post learning rates for HEVs and ex-ante price forecasts for HEVs and BEVs. Since 1997, HEVs have shown a robust decline in their price and price differential at learning rates of 7±2% and 23±5%, respectively. By 2010, HEVs were only 31±22 €2010 kW−1 more expensive than conventional cars. Mass-produced BEVs are currently introduced into the market at prices of 479±171 €2010 kW−1, which is 285±213 €2010 kW−1 and 316±209 €2010 kW−1 more expensive than HEVs and conventional cars. Our forecast suggests that price breakeven with these vehicles may only be achieved by 2026 and 2032, when 50 and 80 million BEVs, respectively, would have been produced worldwide. We estimate that BEVs may require until then global learning investments of 100–150 billion € which is less than the global subsidies for fossil fuel consumption paid in 2009. These findings suggest that HEVs, including plug-in HEVs, could become the dominant vehicle technology in the next two decades, while BEVs may require long-term policy support.


► Learning rates for hybrid-electric and battery-electric vehicles.
► Prices and price differentials of hybrid-electric vehicles show a robust decline.
► Battery-electric vehicles may require policy support for decades
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Fig. 1. Global sales of HEVs (left vertical axis) and total global passenger car sales (right vertical axis;
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Fig. 2. Specific prices of the Toyota Prius (a) and of all HEVs offered on the market
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Fig. 3. Specific price differential of the Toyota Prius (a) and of all HEVs  
offered on the market (b) as compared to conventional ICE vehicles
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Fig. 4. The average specific price of BEVs, HEVs, and conventional ICE vehicles in 2010; numbers in parentheses indicate the sample size; 1 including price data for vehicles offered in Germany and the USA; 2 including price data for the Nissan Leaf, the Mitsubishi i-MiEV, and the Citroën C-Zero; 3representing the un-weighed price average of data for Germany and the USA; 4price data normalized to an absolute vehicle price of 20,000 €2010; 5including conventional spark-ignition ICE vehicles that are used to calculate the price differential of HEVs.

An analysis of costs of parabolic trough technology in India

Abstract: There is a global resurgence in solar thermal power across the world. This paper provides a transparent framework for calculating the cost of generated electricity from a concentrated solar power (CSP) plant and the internal rate of return on equity. The different factors contributing to the capital cost and generation cost of CSP technology have been discussed. The effect of variation of plant size, solar insolation and discount rate has been shown. India has launched the Jawaharlal Nehru National Solar Mission (JNNSM) and plans to install 20 GW of grid connected solar power by 2022. An analysis of the bids received in the National Thermal Power Corporation’s Vidyut Vyapar Nigam Ltd. (NVVN) bidding process, indicates that successful companies have access to low interest capital (effective discount rate ranging from 6.3–12.2%). With the current generation cost of 11–12 Rs/kW h (24–25 US Cents/kW h), an achievable target for CSP in the future is likely to be 6.5–7 Rs/kW h (14–15 US Cents/kW h). This may be possible through reductions in solar field and power block costs combined with increases in collector and overall plant efficiency.


► Framework for calculation of costs of parabolic trough technology.
► Parametric variation of factors affecting the economics of parabolic trough technology.
► Analysis of the NVVN reverse bidding process has been carried out
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Fig. 1. Cumulative solar thermal power plant installations across the world.
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Fig. 2. Factors for calculation of generation costs for solar thermal technology

Saturday, September 22, 2012

Disentangling preferences and expectations in stated preference analysis with respondent uncertainty: The case of invasive species prevention

Abstract: Contingent valuation typically involves presenting the respondent with a choice to pay for a program intended to improve future outcomes, such as a program to place parcels into conservation easement, or a program to manage an invasive species. Deducing from these data the value of the good (or bad) at the core of the program – the welfare gain generated by a parcel of conserved land, for instance, or the loss incurred by a species invasion – often is not possible because respondent preferences are conflated with their expectations about future environmental outcomes in the absence of the program. This paper formally demonstrates this conundrum in the context of a standard contingent valuation survey, and examines the use of additional survey data to resolve it. The application is to the prevention of lake invasions by Eurasian Watermilfoil (Myriophyllum spicatum), an invasive aquatic plant that is present in many lakes in the northern U.S. and Canada and a possible threat to many more. Respondents are shoreline property owners on lakes without Eurasian Watermilfoil. The estimated per-property welfare loss of a lake invasion is $30,550 for one model and $23,614 for another, both of which are in reasonable agreement with estimates obtained from a recent hedonic analysis of Eurasian Watermilfoil invasions in the study area [16], and from a companion contingent valuation survey of shoreline property owners on already-invaded lakes.
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Fig. 1. Histogram of respondent expectations of future Milfoil invasion.
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Fig. 2. Histograms of respondents' stated probability of answering “Yes” to a bid amount for the Milfoil prevention question. (2.1) Bid amounts less than $100, (2.2) Bid amounts between $100 and $250, (2.3) Bid amounts between $251 and $500 and (2.4) Bid amounts greater than $500.
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Fig. 3. Estimate of average welfare gain from Milfoil prevention/control as a function of the probability threshold at which responses are coded Yes vs. No. 
by Bill Provenchera, E-mail the corresponding author,David J. Lewisb, E-mail the corresponding author,Kathryn Andersonc, E-mail the corresponding author  
a Department of Agricultural and Applied Economics, University of Wisconsin, Madison, 427 Lorch St., Madison, WI 53706, USA  
b Department of Economics, University of Puget Sound, 1500 N. Warner St., Tacoma, WA 98416, USA  
c Department of Sociology, University of Wisconsin, Madison, 1710 University Ave., Room 287, Madison, WI 53706, USA 
Journal of Environmental Economics and Management 
Volume 64, Issue 2; September, 2012; Pages 169–182
Keywords: Stated preferences; Expectations; Respondent uncertainty; Contingent valuation; Species invasions

Policy options for the split incentive: Increasing energy efficiency for low-income renters

Abstract:The split incentive problem concerns the lack of appropriate incentives to implement energy efficiency measures. In particular, low income tenants face a phenomenon of energy poverty in which they allocate significantly more of their household income to energy expenditures than other renters. This problem is substantial, affecting 1.89% of all United States' energy use. If effectively addressed, it would create a range of savings between 4 and 11 billion dollars per year for many of the nation's poorest residents. We argue that a carefully designed program of incentives for participants (including landlords) in conjunction with a unique type of utility-managed on-bill financing mechanism has significant potential to solve many of the complications. We focus on three kinds of split incentives, five concerns inherent to addressing split incentive problems (scale, endurance, incentives, savings, political disfavor), and provide a detailed policy proposal designed to surpass those problems, with a particular focus on low-income tenants in a U.S. context.


► We demonstrate the significant impact of the split incentive on low-income tenants.
► We discuss split incentive characteristics, and policy failures.
► We described an on-bill financing model with unique features.
► This policy has protections and incentives for tenants and landlords.
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Fig. 1. Two examples of an on-bill financing scheme for low-income rental unit(s). 
by Stephen Birda, E-mail the corresponding author,and Diana Hernándezb, 1  
a Clarkson University, 8 Clarkson Avenue-5750, Potsdam, NY 13699, United States 
b Columbia University, 722 West 168th Street, #546, New York, NY 10032, United States 
Energy Policy via Elsevier Science Direct
Volume 48, September 2012, Pages 506–514
Keywords: Split incentive; Energy poverty; Energy efficiency

Beyond Happiness and Satisfaction: Toward Well-Being Indices Based on Stated Preference

Abstract: This paper helps provide foundations for survey-based tracking of well-being. First, we propose a theory in which utility depends on “fundamental aspects” of well-being, measurable with surveys. Second, drawing from psychologists, philosophers, and economists, we compile a comprehensive list of such aspects. Third, to estimate the aspects’ marginal utilities—a necessary input for constructing an individual-level well-being index—we conduct a survey in which ~4,600 U.S. respondents state their preference between pairs of aspect bundles. We estimate high relative marginal utilities not only for traditional happiness and life satisfaction measures, but even more for aspects related to family, health, security, values, and freedoms.

In policy scenarios, correlations between pairs of sets of the 131 coefficients are lower—although  still reasonably high—and range from 0.60 (liberals vs. conservatives) to 0.81 (more vs. less religious). Using the same method as above. Women rank higher: “people being good, moral people…” [women 1, men 35, cr = 0.50]. Men rank higher: “people getting the rewards and punishments they deserve” [men 5, women 75, cr = 0.58]. Liberals rank higher: the condition of animals, nature, and the environment [li. 1, co. 113, cr = 0.27]. Conservatives rank higher: “people’s ability to have and raise children” [co. 8, li. 111, cr = 0.33]. Older rank higher: being treated with dignity and respect [older 6, younger 76, cr = 0.53].

by Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball and Nichole Szembrot
National Bureau of Economic Research (NBER)
NBER Working Paper No. 18374; Issued in September 2012