Arun S. Malik

Point/Nonpoint Source Trading of Pollution Abatement: Choosing the Right Trading Ratio

In programs for trading pollution abatement between point and nonpoint sources, the trading ratio specifies the rate at which nonpoint source abatement can be substituted for point source abatement. The appropriate value of this ratio is unclear because of qualitative differences between the two classes of sources. To identify the optimal trading ratio, we develop and analyze a model of point/nonpoint trading. We find the optimal trading ratio depends on the relative costs of enforcing point versus nonpoint reductions and on the uncertainty associated with nonpoint loadings. The uncertainty does not imply a lower bound for the optimal trading ratio.

Not Getting Burned: The Importance of Fire Prevention in Forest Management

We extend existing stand-level models of forest landowner behavior in the presence of fire risk to include the level and timing of fuel management activities. These activities reduce losses if a stand ignites. Based on simulations, we find the standard result that fire risk reduces the optimal rotation age does not hold when landowners use fuel management. Instead, the optimal rotation age rises as fire risk increases. The optimal planting density decreases. The level of intermediate fuel treatment, but not its timing, is sensitive to the magnitude of fire risk. Cost-sharing is shown to be an effective instrument for encouraging fuel treatment. (JEL Q23)

Feasibility of point-nonpoint source trading for managing agricultural pollutant loadings to coastal waters

A recent focus of water quality policy discussions has been the trading of pollution abatement between point and nonpoint sources. Point-nonpoint trading would allow point sources to sponsor nonpoint source controls rather than install further controls of their own. If nonpoint source loadings are significant and the marginal costs of their control are lower than for additional point source controls, water quality goals could be met at lower cost with trading. We isolate difficulties particular to incentive policies such as point-nonpoint trading and then screen coastal watersheds for those satisfying conditions that play a major role in determining whether trading can improve water quality. We follow the recent Coastal Zone Act Reauthorization Amendments in emphasizing agriculture, the single largest cause of nonpoint source pollution. Our screening analysis provides an initial, empirical assessment of the feasibility of trading for managing agricultural land use to protect coastal water quality. We also illustrate the additional analysis required to quantify the potential for successful trading in those watersheds which meet our screening criteria.

Reducing social losses from forest fires

We evaluate two financial incentives to encourage nonindustrial forest landowners to undertake activities that mitigate fire losses: sharing of fire suppression costs by the landowner and sharing of fuel reduction costs by the government. First and second best outcomes are identified and compared to assess the effectiveness of these incentives in reducing social losses and fire suppression costs, under various assumptions about landowner behavior and information. We find that while cost sharing of fire suppression by the landowner invariably reduces social losses, this is not always true for government cost sharing of landowner fuel reduction. However, cost sharing of fuel reduction can yield larger reductions in social losses when fire risk is high. Both policies tend to induce larger reductions in both social losses and fire suppression costs when landowners engage in fuel reduction. We find that improving a landowner’s information about fire risk and fuel reduction can yield substantial reductions in social losses. (JEL Q23, Q54)

Adjacency Externalities and Forest Fire Prevention

This paper models landowner behavior on timberland subject to damage by fire. We examine how management decisions by adjacent landowners yield outcomes that diverge from the social optimum, and consider how this divergence depends on landowner preferences and information. We conduct a numerical simulation in which landowners interact through the effects of their fire prevention activities on a common risk of fire. The results reveal significant social inefficiencies related to externalities associated with private fuel treatment decisions. We consider a policy for aligning social and private decisions by requiring landowners to share the government’s cost of fire suppression. (JEL Q23, Q28)

Pollution Taxes When Firms Choose Technologies

We consider the properties of a pollution tax when the regulated firm has a discrete choice of technologies with which to reduce pollution. The firms technology choice makes possible two sequences of play: the traditional one in which the regulator moves first, committing to a tax rate before the firm adopts a technology, and an alternative one in which the firm moves first by adopting a technology. We find that a range of pollution levels, including possibly the first-best one, are unattainable when the regulator moves first. The regulator may be better able to achieve the first-best outcome when the firm moves first.

ADAPTATION TO CLIMATE CHANGE IN LOW-INCOME COUNTRIES: LESSONS FROM CURRENT RESEARCH AND NEEDS FROM FUTURE RESEARCH

We put in perspective the papers in this special issue by characterizing different forms of adaptation to climate change and discussing the role of adaptation in a developing country context. We highlight adaptation decision-making under uncertainty, empirics of autonomous adaptation, and data and methodological challenges. We identify unresolved questions, emphasizing interactions between autonomous and planned adaptation, adaptation externalities, and the relationship between adaptation and conflict.

Point/Nonpoint Source Trading for Controlling Pollutant Loadings to Coastal Waters: a Feasibility Study

Since federal control of point source discharges began in 1972, nonpoint sources have surpassed point sources as contributors to surface water quality impairments. Nonpoint source-related impairments such as sedimentation, nutrient enrichment, runoff from farmlands, and toxic contamination of fish tissue and sediments have become increasingly evident (USEPA, 1990). Regulators accordingly have shifted emphasis. The 1990 amendments to the Coastal Zone Management Act for the first time authorize federal land-use regulations for nonpoint-source management. Incentive-based policies are also receiving special consideration, and USEPA has made a public commitment to making greater use of such policies (USEPA, 1991).

Driving Restrictions that Work? Quito's Pico y Placa Program

Programs to reduce traffic congestion and air pollution by restricting use of motor vehicles on working days have generally not met with success, given existing studies of such programs. We conduct the first study of Quito, Ecuadors four-year-old Pico y Placa program and find that it has reduced ambient concentrations of carbon monoxide (CO), a pollutant primarily emitted by vehicles, by 9% to 11% during peak traffic hours. Given that ambient concentrations of CO generally track the spatial and temporal distributions of traffic, these reductions in pollution suggest similar reductions in vehicle flows. We find no significant evidence that traffic has shifted to other times of the day or week, or to other locations.

The Desirability of forgiveness in regulatory enforcement

I present a model that explains two common features of regulatory enforcement: selective forgiveness of noncompliance, and the collection of information on a firm’s compliance activities and not just its compliance status. I show that forgiving noncompliance is optimal if the information on a firm’s compliance activities constitutes sufficiently strong evidence of the firm having exerted a high level of compliance effort. The key benefit of forgiving noncompliance is a reduction in the probability with which the firm needs to be monitored. Copyright Springer Science+Business Media New York 2014