Environmental Valuation & Cost-Benefit News

Abstract: The history of Daylight Saving Time (DST) has been long and controversial. Throughout its implementation during World Wars I and II, the oil embargo of the 1970s, and more regular practice today, the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s.

Focusing on residential electricity demand, Matthew J. Kotchen and Laura E. Grant conduct the first-ever study that uses micro-data on households. The dataset consists of more than 7 million observations on monthly billing data for nearly all households in southern Indiana for three years. Our main finding is that—contrary to the policy’s intent—DST increases residential electricity demand. Estimates of the overall increase range from 1 to 4 percent, but we find that the effect is not constant throughout the DST period. There is some evidence of electricity savings during the spring, but the effect lessens, changes sign, and appears to cause the greatest increase in consumption near the end of the DST period in the fall. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. Based on the dates of DST practice before the 2007 extensions, we estimate a cost of increased electricity bills to Indiana households of $8.6 million per year. We also estimate social costs of increased pollution emissions that range from $1.6 to $5.3 million per year.

See also
Of Canon Fire and Daylight Savings Time by Maura J. Casey The New York Times
http://www.nytimes.com/2008/03/08/opinion/08sat4.html

by Matthew J. Kotchen 1 and Laura E. Grant 2
1. University of California (UC) Santa Barbara and National Bureau of Economic Research (NBER); kotchen@bren.ucsb.edu
2. Graduate Student, UC Santa Barbara; lgrant@bren.ucsb.edu
This draft: February 5, 2008 (very preliminary and comments welcome)
Full Paper Available Free of Charge at:
http://www2.bren.ucsb.edu/~kotchen/links/DSTpaper.pdf

Abstract: Revealed preference methods like the hedonic model generally assume economic agents have access to publicly available information and use it effectively. In the housing market, the recent proliferation of seller disclosure laws suggests that policymakers perceive buyers to be less than “fully informed,” presumably since they face higher information acquisition costs than sellers. The introduction of an airport noise disclosure in the residential housing market surrounding the Raleigh–Durham International Airport is used as a quasi-random experiment to analyze the impact of this type of information asymmetry between buyers and sellers on housing prices. The results from a regression analysis that controls for potential spatial and temporal confounders, suggest that the airport noise disclosure reduced the value of houses most heavily impacted by airport noise by 2.9 percent. This represents approximately a 37 percentage point increase in the implicit price of airport noise. The results provide evidence that publicly available information, such as that available for airport noise, may not be adequately considered by all buyers. They also suggest that the information environment should be carefully considered when using housing data and the hedonic model to value urban amenities and disamenities.

Keywords: Hedonic; Asymmetric information; Noise; Amenities

by Jaren C. Pope; Department of Agricultural and Applied Economics (0401), Virginia Tech, Blacksburg, VA 24061, USA; Fax: +1 540 231 7417.

Journal of Urban Economics via Elsevier Science Direct www.ScienceDirect.com
Volume 63, Issue 2; March, 2008; Pages 498-516
http://dx.doi.org/10.1016/j.jue.2007.03.003

According to the New York Times:
The world appears to be on the verge of a boom in a little-known but promising type of solar power.

This type involves covering acres of desert with mirrors that focus intense sunlight on a fluid, heating it enough to make steam. The steam turns a turbine and generates electricity.

The technology is not new, but it is suddenly in high demand. [The viability was established in the 1980s, when developers in California built a series of plants in the Mojave Desert, eventually reaching 354 megawatts of capacity. The ... plants grew more sophisticated and costs shrank.... But then the price of a natural gas collapsed in the 1990s and building new solar plants became uneconomic.]
..
After a decade of no activity, two prototype solar thermal plants were recently opened in the United States, with a capacity that could power several big hotels, neon included, on the Las Vegas Strip, about 20 miles north of here. Another 10 power plants are in advanced planning in California, Arizona and Nevada.

On sunny afternoons, those 10 plants would produce as much electricity as three nuclear reactors, but they can be built in as little as two years, compared with a decade or longer for a nuclear plant. Some of the new plants will feature systems that allow them to store heat and generate electricity for hours after sunset.
...
Eight plants are under construction in Spain, Algeria and Morocco. Another nine projects are in various stages of planning in those countries as well as Israel, Mexico, China, South Africa and Egypt....

Experts say that solar thermal plants could meet most of the galloping growth in power demand in ...[the southwestern United States. Some say that such plants could] power the entire United States. But that is a far-off dream, since it would require big new transmission cables.
...
The power they produce is still relatively expensive at a cost per kilowatt- hour of 15 to 20 cents. With a little more experience and some economies of scale, that could fall to about 10 cents, according to a recent report by Emerging Energy Research, a consulting firm in Cambridge, Mass. Newly built coal-fired plants are expected to produce power at about 7 cents per kilowatt-hour or more if carbon is taxed.

The solar plants receive a federal tax subsidy...

Solar plants do tend to produce peak power during the hottest part of the day, when demand is highest and electricity is costly.
...
[Aside from cost, desert biodiversity and lack of power lines represent obstacles to proliferation.]

By Matthew L. Wald

The New York Times www.NYTimes.com
http://www.nytimes.com/2008/03/06/business/06solar.html?em&ex=1205038800&en=2d73a651a7216de1&ei=5087%0A
Marh 6, 2008

Abstract: The Clean Development Mechanism (CDM) is expected to stimulate the North–South transfer of climate-friendly technologies. This paper provides an assessment of the technology transfers that take place through the CDM using a data set of 644 registered projects. It provides a detailed description of the transfers (frequency, type, by sector, by host country, etc.). It also includes an econometric analysis of their drivers. We show that transfer likeliness increases with the size of the projects. The transfer probability is 50% higher in projects implemented in a subsidiary of Annex 1 companies while the presence of an official credit buyer has a lower—albeit positive—impact. The analysis also yields interesting results on how technological capabilities of the host country influence technology diffusion in the CDM.

Keywords: Kyoto Protocol; Clean Development Mechanism; International technology transfer

by Antoine Dechezleprêtre, Matthieu Glachant and Yann Ménière; CERNA, École des Mines de Paris, 60 Boulevard Saint Michel, 75272 Paris Cedex 06, France; Tel.: +33 1 40 51 92 29; fax: +33 1 40 51 91 45.

Energy Policy via Elsevier Science Direct www.ScienceDirect.com
Volume 36, Issue 4; April, 2008; Pages 1273-1283
http://dx.doi.org/10.1016/j.enpol.2007.12.009

Abstract: Korea's need for energy conservation and alternative energy is greater than for any other nation. Korea imports more than 97% of its total energy consumption and ranks 10th in the world in terms of energy consumption. Developing hydrogen energy technology has great potential to cope with Korea's energy security and to establish Korea's hydrogen economy. In this study, we analysed the potential of Korea to be competitive in development of hydrogen energy technology using the analytic hierarchy process (AHP) approach. In this paper, two scenario analyses are presented: in the first, the R&D budget is a criterion and in the second it is not. The results show that Korea is the sixth most competitive nation because of the low score for infrastructure required for hydrogen technology. In addition, compared with US results for both scenarios, patents, papers and proceedings, R&D budgets, and infrastructure for hydrogen technology are inferior to the US, which is ranked in first place for this sector. Korean policymakers have to concentrate on those sectors to strengthen Korea's competitiveness in the development of hydrogen energy technology.

Keywords: Hydrogen energy competitiveness; Technology assessment; AHP
Abbreviations: AHP, analytic hierarchy process; CI, consistency index; CR, consistency ratio; MOCIE, Ministry of Commerce, Industry and Energy; MOST, Ministry of Science and Technology; RI, random index; SCI, science citation index

by Seong Kon Lee 1, Gento Mogi 2 and Jong Wook Kim 1
1. Energy Technology Policy Research Center, Korea Institute of Energy Research, 71-2, Jang-dong, Yuseong-gu, Daejeon 305-343, Republic of Korea; Tel.: +82 42 860 3036; fax: +82 42 860 3097
2. Department of Technology Management for Innovation (TMI), School of Engineering, The University of Tokyo, 7-3-1, Hongo, Bunkyo-ku, Tokyo 113-8656, Japan

Energy Policy via Elsevier Science Direct www.ScienceDirect.com
Volume 36, Issue 4; April, 2008; Pages 1284-1291
http://dx.doi.org/10.1016/j.enpol.2007.12.003

Abstract: Excessive groundwater abstraction is a major problem in Oman, primarily in the Batinah coastal area where it results in seawater intrusion. The Government began to address the problem in the 1990s by encouraging the use of more efficient irrigation systems, replacing date palms with winter vegetable crops and using treated wastewater for municipal irrigation. However, 15 years later, seawater intrusion in the Batinah aquifers is still advancing at an alarming pace. This paper analyses the relative merits of strategies to control groundwater pumping based on water quotas, electricity quotas and electricity pricing. A cost benefit approach is used to evaluate the feasibility of three strategies over a period of 25 years and to compare them to the “business as usual” option. Results show that the net present loss to the community when no active policy is implemented amounts to (−$288) million. Imposing water quotas on tubewells would give a net present benefit of $153 million. However, such quotas would give the lowest present benefit and create inequity among farmers. Other possible approaches would be to control the pumping of groundwater from all wells – tubewells and dug wells – by enforcing energy quotas and by increasing the price of electricity used to pump water. The net present benefits would be greater and the costs to farmers would be more fairly spread. The results of cost–benefit analysis show that enforcing an electricity quota, coupled with removal of the subsidy on the electricity price, is the easiest and most equitable solution to implement.

Keywords: Groundwater management; Water quotas; Water metering; Energy quotas; Subsidy; Tax

by Slim Zekri; Department of Agricultural Economics and Rural Studies, College of Agricultural and Marine Sciences, Sultan Qaboos University, P.O. Box 34, PC 123, Al-Khod, Muscat, Oman; Tel.: +968 92 309 149; fax: +968 24413418.

Agricultural Water Management via Elsevier Science Direct www.ScienceDirect.com
Volume 95, Issue 3, March 2008, Pages 243-252
http://dx.doi.org/10.1016/j.agwat.2007.10.006

...
In making the case for expanding daylight saving time, Reps. Edward Markey, D-Mass., and Fred Upton, R-Mich. promised Americans it could reduce fossil-fuel consumption by the equivalent of 100,000 barrels of oil a day. It turns out, however, that the 100,000-barrel-a-day estimate was based on outdated data from 1974.

Economists typically value the opportunity cost of a person’s time at his or her wage rate. The U.S. Department of Labor’s Bureau of Labor Statistics reports that the average American’s hourly wage was $17.57 in September 2007. Assuming that it takes everyone 10 minutes to move all of their clocks and watches forward or backward by an hour, the opportunity cost of doing so works out to $2.93 per person. Multiplying that number by the total U.S. population (excluding Arizona) yields a one-time opportunity cost for the nation of just under $860 million—or, to be more precise, $858,274,802. Since clocks must be changed twice every year, this back-of-the-envelope calculation must be doubled, to approximately $1.7 billion annually.
...
[In addition], the time changes interrupt our circadian rhythms—that is, our daily biological patterns—and productivity inevitably falls in the days following the switch, as people report groggily to work.

by William F. Shughart II, Senior Fellow at The Independent Institute, F.A.P. Barnard Distinguished Professor of Economics, holder of the Robert M. Hearin Chair at the University of Mississippi and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.

FOR FULL ARTICLE GO TO:
http://www.independent.org/newsroom/article.asp?id=2144
The Independent Institute www.independent.org
March 7, 2008