Margaret Walls

Optimal policies for solid waste disposal Taxes, subsidies, and standards

Abstract Pricing trash collection and disposal services can be politically unpopular and may lead to increased illegal disposal of trash. Several studies have shown that deposit-refund systems can act like disposal charges without the illegal disposal problem and thus can generate an optimal amount of solid waste disposal. We assess the efficiency implications of an alternative policy currently in use in some states in the U.S. and considered at the federal level, recycled content standards. These are requirements that a certain fraction of total material use in production be comprised of secondary materials. We find that such standards by themselves cannot generate the optimal amount of disposal but must be combined with additional taxes on both the final product and other inputs to production. Moreover, the information requirements for setting the optimal standards and accompanying taxes are high. The deposit-refund approach would be preferred in most cases.

An economic agent-based model of coupled housing and land markets (CHALMS)

This paper describes a spatially disaggregated, economic agent-based model of urban land use, which is named for its innovative feature of coupled housing and land markets (CHALMS). The three types of agents—consumer, farmer and developer—all make decisions based on underlying economic principles, and heterogeneity of both individuals and the landscape is represented. CHALMS simulates the conversion of farmland to housing development over time, through the actions of the agents in the land and housing markets. Land and building structures in the housing bundle are treated explicitly, so the model can represent the effects of land and housing prices on housing density over time. We use CHALMS to simulate the dynamics of land-use changes as a representative suburban area grows. The presence of agent and landscape heterogeneity, stochastic processes, and path dependence require multiple model runs, and the expression of spatial dispersion of housing types, overall housing density, and land prices over time in terms of the most likely, or ‘average’, patterns. We find that CHALMS captures both the general tendency for diminishing population density at greater distances from the center city, and dispersed leapfrog patterns of development evident in most suburban areas of the US.

The Incidence of Pollution Control Policies

This paper reviews theoretical and empirical literature on the household distribution of the costs and benefits of pollution control policies, and ways of integrating distributional issues into environmental cost/benefit analysis. Most studies find that policy costs fall disproportionately on poorer groups, though this is less pronounced when lifetime income is used, and policies affect prices of inputs used pervasively across the economy. The policy instrument itself is also critical; freely allocated emission permits may hurt the poor the most, as they transfer income to shareholders via scarcity rents created by higher prices, while emissions taxes offer opportunities for progressive revenue recycling. And although low-income households appear to bear a disproportionate share of environmental risks, policies that reduce risks are not always progressive, for example, they may alter property values in ways that benefit the wealthy. The review concludes by noting a number of areas where future research is badly needed.

Policy Monitor: U.S. Experience with Transferable Development Rights

To address the externalities that arise from local land uses, some communities in the United States have turned to Transferable Development Rights (TDRs) as a promising policy tool. TDRs separate the right to develop from the land itself, and create a market that allows those rights to be transferred from one location to another. If the markets work well, targeted areas are protected from development, thereby maintaining them as open space, buffers for water pollution control, wildlife habitat, or scenic vistas, or for other uses; the transferred rights are used to develop other areas more densely than would otherwise be the case. While TDRs have been established in many communities in the last 30 years, only a handful have been successful in achieving local land use goals. The design of TDR markets is complex because they must be integrated with local zoning regulations and they depend critically on local economic conditions in the housing and land markets. This article summarizes the key elements in the design of TDR programs and reviews a number of existing markets to identify which have performed well and which have not. The evolution of the successful markets is described, and lessons learned for future TDR programs are presented.

Distributional Impacts of Carbon Pricing Policies in the Electricity Sector

The introduction of a price on carbon dioxide will have important effects on the U.S. economy, and especially important effects on the electricity sector, which currently accounts for about 40 percent of carbon dioxide emissions. This paper examines alternative approaches to the distribution of allowance value to the sector, including free allocation to consumers through electricity and natural gas local distribution companies (LDCs). Recent proposals in the U.S. Congress, including H.R. 2454, have suggested this option as a way to address impacts on consumers and potential regional inequities. We compare allocation to electricity LDCs with a system in which allowances are auctioned and revenues returned to households as a per capita dividend. We evaluate the outcomes under alternative assumptions about how LDCs, which are regulated entities, pass through the allowance value to final residential, commercial, and industrial customers. Our results show that the LDC approach raises the price of allowances and imposes greater costs on households than the per capita dividend option. We also evaluate a more complete characterization of H.R. 2454 and show that an incremental reform to that bill would greatly reduce costs and have more balanced impacts across households in different income groups and regions.

Is Energy Efficiency Capitalized into Home Prices? Evidence from Three US Cities

We look for evidence of capitalization of energy efficiency features in home prices using data from real estate multiple listing services (MLS) in three metropolitan areas: the Research Triangle region of North Carolina; Austin, Texas; and Portland, Oregon. These home listings include information on Energy Star certification and, in Portland and Austin, local green certifications. Our results suggest that Energy Star certification increases the sales prices of homes built between 1995 and 2006 but has no statistically significant effect on sales prices for newer homes. The local certifications appear to have larger effects on sales prices, and that effect holds for both newer and older homes. The estimated home price premiums from certification imply annual energy cost savings that are sizeable fractions of estimated annual energy costs for homes in our sample, in some cases even above 100 percent. This suggests that the certifications either embody other attributes beyond energy efficiency that are of value to homebuyers or that buyers are overpaying for the energy savings. Further research is needed to better understand how consumers interpret home certifications and how they value the combination of “green” characteristics that many of those certifications embody.

Using markets for land preservation: Results of a TDR program

Abstract This paper reviews different approaches to using transferable development rights (TDRs) as a way to preserve rural lands in the face of development pressure. One TDR program is examined in detail, that of Calvert County, Maryland, which has had an active TDR market since the mid-1980s. This program uses TDRs as a key policy tool for achieving a total amount of preserved acreage in the county, and for providing incentives for preservation in some areas and development in others. The paper examines both the early difficulties in developing participation in the program, and the events that lead eventually to an active TDR market. It assesses the workings of the market including factors that influence the demand and supply of TDRs, the movement of prices over time, and the location of preserved areas and of additional developed areas. The study found that the program is achieving many of the countys land preservation goals because of the high level of activity in the TDR market. However, most of the additional density is being channeled into rural areas with underlying low-density zoning.

Strategically Placing Green Infrastructure: Cost-Effective Land Conservation in the Floodplain

Green infrastructure approaches have attracted increased attention from local governments as a way to lower flood risk and provide an array of other environmental services. The peer-reviewed literature, however, offers few estimates of the economic impacts of such approaches at the watershed scale. We estimate the avoided flood damages and the costs of preventing development of floodplain parcels in the East River Watershed of Wisconsins Lower Fox River Basin. Results suggest that the costs of preventing conversion of all projected floodplain development would exceed the flood damage mitigation benefits by a substantial margin. However, targeting of investments to high-benefit, low-cost parcels can reverse this equation, generating net benefits. The analysis demonstrates how any flood-prone community can use a geographic-information-based model to estimate the flood damage reduction benefits of green infrastructure, compare them to the costs, and target investments to design cost-effective nonstructural flood damage mitigation policies.

Making Markets for Development Rights Work: What Determines Demand?

This paper estimates developers’ demand for Transferable Development Rights (TDRs) in one of the few long-standing active TDR programs in the country, Calvert County, Maryland. We find that baseline zoning is a critical determinant of TDR use—demand is lower in the relatively high-density residential areas than in the low-density rural areas. Changes in baseline density limits have a larger effect on TDR use in rural areas than in residential and town center areas. We identify subdivision characteristics that are significant in explaining TDR use and discuss implications for other jurisdictions considering revisions to, or adoption of, TDR programs. (JEL Q24, R11)

The Incidence of U.S. Climate Policy: Where You Stand Depends on Where You Sit

Federal policies aimed to slow global warming would impose potentially significant costs on households that vary depending on the policy approach that is used. This paper evaluates the effects of a carbon dioxide cap-and-trade program on households in each of 11 regions of the country and sorted into annual income deciles. We find tremendous variation in the incidence (the distribution of cost) of the policy. The most important feature that affects households is how the policy distributes the value created by placing a price on CO2 emissions. We evaluate 10 policy alternatives that yield results that range from moderately progressive (expansion of the Earned Income Tax Credit, investments in efficiency and capand- dividend) to severely regressive (reduce income taxes, free distribution to incumbent emitters and reduction of the payroll tax). To varying degrees the allocation of the value of emissions allowances amplifies or potentially resolves the tradeoff between equity and efficiency.