Green eyeshades

Kevin Lewis

May 16, 2018

Bank Liquidity, Credit Supply, and the Environment
Ross Levine et al.
NBER Working Paper, March 2018


We evaluate the impact of the credit conditions facing corporations on their emissions of toxic air pollutants. Exploiting cross-county, cross-time shale discoveries that generated liquidity windfalls at local bank branches, we construct measures of (1) the degree to which banks in non-shale counties, i.e., counties where shale was not discovered, receive liquidity shocks through their branches in shale counties and (2) the degree to which a corporation in a non-shale county has a relationship lender that receives liquidity shocks through its branches. From both the county- and firm-level analyses, we discover that positive shocks to credit conditions reduce corporate pollution.

Firm-Level Financial Resources and Environmental Spills
Jonathan Cohn & Tatyana Deryugina
NBER Working Paper, April 2018


Using novel US environmental spill data, we document a robust negative relationship between the number of spills a firm experiences in a given year and its contemporaneous and lagged (but not future) cash flow. In addition, studying two natural experiments, we find an increase (decrease) in spills following negative (positive) shocks to a firm's financial resources, both in absolute terms and relative to control firms. Overall, our results suggest that firms' financial resources play an important role in their ability to mitigate environmental risk.

Unexpected slowdown of US pollutant emission reduction in the past decade
Zhe Jiang et al.
Proceedings of the National Academy of Sciences, 15 May 2018, Pages 5099-5104


Ground and satellite observations show that air pollution regulations in the United States (US) have resulted in substantial reductions in emissions and corresponding improvements in air quality over the last several decades. However, large uncertainties remain in evaluating how recent regulations affect different emission sectors and pollutant trends. Here we show a significant slowdown in decreasing US emissions of nitrogen oxides (NOx) and carbon monoxide (CO) for 2011-2015 using satellite and surface measurements. This observed slowdown in emission reductions is significantly different from the trend expected using US Environmental Protection Agency (EPA) bottom-up inventories and impedes compliance with local and federal agency air-quality goals. We find that the difference between observations and EPA’s NOx emission estimates could be explained by: (i) growing relative contributions of industrial, area, and off-road sources, (ii) decreasing relative contributions of on-road gasoline, and (iii) slower than expected decreases in on-road diesel emissions.

The Effect of Firm Size on Fracking Safety
Jonathan Eyer
Resource and Energy Economics, August 2018, Pages 101-113


Large firms are becoming increasingly dominant in the natural gas production industry. At the same time, regulators and environmental groups are concerned about potential environmental damage associated with hydraulic fracturing. However, small firms are protected from the full extent of their damages, while large firms must internalize a greater portion of their social costs. This paper examines the effect of firm size and liability on environmental safety in the context of hydraulic fracturing in Pennsylvania's Marcellus Shale across three dimensions of size. Impacts of firm size on safety are found across legal, regulatory, and brand dimensions of size with the largest effects being driven by changes in regulatory liability. These safety gains are sizable as violation rates would be approximately twice as high if firms had remained at 2008 sizes.

Corporate lobbying for environmental protection
Felix Grey
Journal of Environmental Economics and Management, forthcoming


Much of the time, polluting firms lobby against environmental protection, but there are major exceptions to this rule, for example in the regulation of both ozone and greenhouse gases. Political support from firms can be pivotal for governments trying to protect the environment. I offer an explanation for this phenomenon, suggesting firms behave as they do in order to steal market share from their rivals. I develop a model in which a polluting firm makes a clean technology investment and then lobbies successfully for strong environmental protection, since this will shift market share away from its rival who has not made the clean investment. The key result concerns the impact of lobbying on the equilibrium outcome: for a region of the parameter space, it is only because of firms' lobbying that environmental protection is achieved. This is because lobbying increases a firm's returns to going green, by increasing the market share it can steal. The net effect of this distortion is an increase in welfare.

High sensitivity of metal footprint to national GDP in part explained by capital formation
Xinzhu Zheng et al.
Nature Geoscience, April 2018, Pages 269-273


Global metal ore extraction tripled between 1970 and 2010 as metals are widely used in new infrastructure and advanced technology. Meanwhile, the energy and environmental costs of metal mining increase as lower ore grades are being exploited. The domestic use of metals has been found to reach a plateau when gross domestic product reaches US$15,000 per person. Here we present a quantification of the annual metal footprint (that is, the amount of metal ore extracted to satisfy the final demand of a country, including metals used abroad to produce goods that are then imported, and excluding metals used domestically to produce exports) for 43 large economies during 1995-2013. We use a panel analysis to assess short-term drivers of changes in metal footprint, and find that a 1% rise in gross domestic product raises the metal footprint by as much as 1.9% in the same year. Further, every percentage point increase in gross capital formation as a share of gross domestic product increased the metal footprint by 2% when controlling for gross domestic product. Other socioeconomic variables did not significantly influence the metal footprint. Finding ways to break the strong coupling of economic development and investment with metal ore extraction may be required to ensure resource access and a low-carbon future.

An incandescent truth: Disparities in energy-efficient lighting availability and prices in an urban U.S. county
Tony Reames, Michael Reiner & Ben Stacey
Applied Energy, 15 May 2018, Pages 95-103


In the U.S. lighting represents about 9% of the average household's primary energy consumption and 20% of the average household's energy bill. Lighting in U.S. homes is in a state of transition with steady growth in the adoption of more energy-efficient lighting technology, such as, compact florescent lamps (CFL) and light-emitting diodes (LEDs). However, the adoption of energy-efficient lighting is not equitably distributed across socioeconomic groups, with poorer households less likely to adopt than higher-income households. This case study in Wayne County, Michigan explores the lack of parity in energy-efficient lighting adoption from an energy justice perspective by evaluating distributional disparities in light bulb availability and price in 130 stores across four poverty strata and five store types for a more holistic understanding of potential barriers for poorer households. We found that (1) energy-efficient bulbs were less available in high-poverty areas and smaller stores; (2) energy-efficient bulbs were more expensive in high-poverty areas and smaller stores; (3) upgrade costs from incandescent and halogen lamps (IHLs) to CFLs or LEDs were higher in high poverty areas; and (4) both poverty and store type were significant predictors of LED availability, while store type was the most significant predictor of LED price variability. We suggest several ways that the development and implementation of energy efficiency policies and programs may consider these disparities that affect access and affordability, in order to achieve a more just energy-efficient transition.

Environmental Benefits of Internet-Enabled C2C Closed-Loop Supply Chains: A Quasi-Experimental Study of Craigslist
Suvrat Dhanorkar
Management Science, forthcoming


Recently, online matching platforms (e.g., Craigslist, FreeCycle, Gumtree) have enabled consumers to directly connect with each other to buy/sell used consumer goods (electronics, furniture, packaging, etc.) that would have otherwise ended up in the waste stream. Such matching platforms can facilitate the creation of consumer-to-consumer (C2C) closed-loop supply chains (CLSCs) for used goods, which can enhance product reuse and limit reliance on recycling and disposal alternatives. Yet, the true environmental benefits of these internet-enabled C2C CLSCs remain to be ascertained. In this study, I use a quasi-experimental setup to examine how Craigslist’s entry into various U.S. geographic markets impacts a key environmental outcome: municipal solid waste (MSW). I assemble a data set from various disparate sources to test my hypothesis. I find that, on average, Craigslist’s entry into a geographic market results in a 2%-6% annual reduction in MSW per capita generated. I conduct a variety of robustness checks, falsification tests, and validation checks to provide support to my findings. Overall, this study provides deeper insights into the potential of online reuse platforms for the creation and coordination of C2C CLSCs. To my knowledge, this is the first study of closed-loop supply chains in a C2C context.

Anticipation and environmental regulation
Katherine Rittenhouse & Matthew Zaragoza-Watkins
Journal of Environmental Economics and Management, May 2018, Pages 255-277


When agents expect a change in regulation to change the relative price of new durable goods they may shift purchases forward to avoid compliance costs. In the context of new-vehicle emission standards, prior analyses have not considered this adjustment margin. We model the effects of anticipation on sales and retirements of durable goods, and test our theory's predictions empirically using the 2007 implementation of heavy-duty emission standards. We find evidence that anticipation caused a sales spike just before the policy took effect and a symmetric sales slump after implementation, which resulted in 31,164 more freight-truck sales ahead of the new standard and as much as $118 million in environmental damages over the lifetimes of those vehicles.

Does eco-certification stem tropical deforestation? Forest Stewardship Council certification in Mexico
Allen Blackman, Leonard Goff & Marisol Rivera Planter
Journal of Environmental Economics and Management, May 2018, Pages 306-333


Since its creation more than two decades ago as a voluntary, market-based approach to improving forest management, forest certification has proliferated rapidly in developing countries. Yet we know little about whether and under what conditions it affects deforestation. We use rich forest management unit-level panel data - including information on deforestation, certification, regulatory permitting, and geophysical and socioeconomic land characteristics - along with matched difference-in-differences models to identify the effect of Forest Stewardship Council (FSC) certification on deforestation in Mexico, the country with the third-highest number of FSC certifications in the developing world. We test for a variety of different temporal and subgroup effects but are unable to reject the null hypothesis that certification does not affect deforestation.

Gasoline price uncertainty and the design of fuel economy standards
Ryan Kellogg
Journal of Public Economics, April 2018, Pages 14-32


What are the implications of gasoline price volatility for the design of fuel economy policies? I show that this problem has a strong parallel to Weitzman's (1974) classic model of using price or quantity controls to regulate an externality. Changes in fuel prices act as shocks to the marginal cost of complying with the standard. Assuming constant marginal damages from fuel consumption, an application of Weitzman (1974) implies that a fixed fuel economy standard reduces expected welfare relative to a “price” policy such as a feebate or, equivalently, a fuel economy standard that is indexed to the price of gasoline. When the regulator is constrained to use a fixed standard, I show that the usual approach to setting the standard - equate expected marginal compliance cost to marginal damage - is likely to be sub-optimal because the standard may not bind if the realized gasoline price is sufficiently high. Instead, the optimal fixed standard will be relatively relaxed and may be non-binding even at the expected gasoline price. Finally, I show that although an attribute-based standard allows vehicle choices to flexibly respond to gasoline price shocks, the resulting distortions imply that the optimal fuel economy standard is not attribute-based.

Surface Coal Mining and Human Health: Evidence from West Virginia
Luke Fitzpatrick
Southern Economic Journal, April 2018, Pages 1109-1128


This article presents the first panel‐data evidence of a human health externality from the air pollution generated by surface coal mining. In West Virginia, a standard deviation increase in a county's exposure to surface coal mining is associated with 9.85 more asthma hospitalizations per 100,000 residents in a given quarter. Interpreted causally, this suggests over $11 million in hospitalization costs over the 6‐year study period. The study builds on earlier cross‐sectional research by controlling for unobserved county‐level heterogeneity, and by defining more accurate measures of exposure. Both methods are shown to reduce the bias associated with earlier estimates of coal mining's effect on health. Young and elderly women demonstrate the largest sensitivities to surface mining. Falsification tests reveal that neither hernias nor bone fractures demonstrate any relationship with surface mining activity.

Ambient air pollution and human performance: Contemporaneous and acclimatization effects of ozone exposure on athletic performance
Jamie Mullins
Health Economics, forthcoming


This paper utilizes a unique dataset of competitive outcomes from intercollegiate track and field competition to identify the relationship between recent ambient pollution exposure histories and human performance among a young and fit population in a diverse range of physically demanding "tasks". I find that higher contemporaneous ozone levels are associated with poorer performances in events that heavily tax the respiratory system. This is the case despite the low exposure levels observed in the studied sample, which are similar to those regularly experienced across the developed world. Such negative performance effects imply that observed ozone exposures are leading to physiological harm, which can be expected to negatively impact economic outcomes through both health and productivity channels. Leveraging the unique structure of the data - which includes location information for competitions and home institutions - I also identify an acclimatization effect whereby recent exposure to higher ozone levels serves to reduce the negative effects of contemporaneous exposure. This finding underscores the importance of regulating peak ozone levels rather than only mean concentrations, as spikes in ambient ozone levels can be particularly damaging to exposed populations.

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