Virginia McConnell

The impact of environmental regulations on industry productivity: Direct and indirect effects

Abstract The paper develops an approach to measuring the impact of environmental regulations on total factor productivity growth which is less restrictive than a simple growth accounting approach. Environmental regulations have a direct impact on productivity growth due to the diversion of resources toward required abatement capital. There can be a further indirect effect, however, as conventional inputs and production processes are changed in response to requirements to purchase abatement capital. We estimate this indirect effect using a flexible functional form cost function. Total factor productivity and the direct and indirect productivity effects of environmental regulations are presented for five polluting industries. We find that the indirect effect can be either positive or negative, and in all industries is energy using. The net impact of environmental regulations on total factor productivity growth is fairly small, given that these are the most polluting industries. They account for about 10–30% of the productivity decline of the 1970s in these industries.

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.

Estimating an Emissions Supply Function from Accelerated Vehicle Retirement Programs

Local authorities and industries seeking to reduce emissions and improve air quality have shown interest in programs that offer to purchase and retire old, high-polluting vehicles. We analyze the results from an experimental vehicle retirement program in Delaware, during which selected pre-1980 vehicle owners were offered

Effects of Pollution Control on Industry Productivity: A Factor Demand Approach

500 for their vehicles and surveyed about vehicle characteristics, value and use. With this unique data set we estimate the relationship between the owners reservation price and the expected remaining life of the vehicle to derive a supply curve for emissions reductions, which predicts the emissions reductions as a function of the offer made to eligible vehicles in a scrappage program. Copyright 1996 by MIT Press.

Are vehicle emission inspection programs living up to expectations

Four major manufacturing industries are examined. The abatement effect on capital and labor productivity are determined from parameters of a system of factor demand equations which allow for disequilibrium in factor markets. The system is estimated for each industry with annual time series data from 1960 to 1980. Abatement requirements were found to retard both average capital productivity and average labor productivity in three of the four industries; paper, chemicals and primary metals. For several industries in which factor productivity was slower after 1973, environmental controls accounted for a significant proportion of that slow down.

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

Abstract To ensure that the advanced emission control systems installed on modern motor vehicles continue to work properly, motor vehicle inspection and maintenance (I/M) programs are now found in the major cities of many countries around the world. These programs are widely regarded as valuable and even essential to the achievement of air quality objectives, but there have been few ex post audits of these programs. In this paper, we examine the performance of one of the most sophisticated I/M programs, the USEPA’s Enhanced I/M Program. This program has now been implemented in five states. Using data from 1995 and 1996, we estimate the cost of the Arizona Enhanced I/M Program and the emission reductions achieved. We begin by enumerating briefly the components of I/M costs and discuss their size and incidence. Then we describe the empirical information from Arizona and how we use it to construct cost estimates for both vehicle inspection and repair of failing vehicles. Inspection costs include the costs of operating the test stations and the costs motorists incur in time and money to get to the station and go through the testing process. We find that the inspection costs account for over two-thirds of the full costs of I/M, while costs associated with actual vehicle repair account for only one-third. We conclude by comparing the empirical estimates of costs and program effectiveness in the Arizona program with the ex ante estimated Enhanced I/M program costs made by the EPA in the 1992 Regulatory Impact Analysis (RIA). The ex ante EPA analysis appears to have underestimated the costs of achieving the ambitious reductions in emissions hoped for under I/M.

The supply and demand for pollution control: Evidence from wastewater treatment

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.

Costs and benefits of vehicle inspection: a case study of the Maryland region

Abstract This paper analyzes the determination of pollution control from wastewater treatment plants as an economic decision facing local or regional regulators. Pollution control is measured by plant design effluent concentration levels and is fully endogenous in a supply- and-demand model of treatment choice. On the supply side, plant costs are a function of the design treatment level of the plant, and on the demand side, treatment level is a function of both the costs of control and the regional or regulatory preferences for control. We find evidence that the economic model of effluent choice by local regulators has a good deal of explanatory power. We find evidence that wastewater treatment plant removal of biological oxygen demand (BOD) is sensitive to many local factors including the size of the treatment plant, the flow rate of the receiving water, the population density of the surrounding area, regional growth, state sensitivity to environmental issues, state income, and the extent to which the damages from pollution fall on other states. We find strong evidence that regulators are sensitive to capital costs in determining the design level of BOD effluent reduction at a plant. Thus, proposed reductions in federal subsidies for wastewater treatment plant construction are likely to have significant adverse effects on water quality.

Using markets for land preservation: Results of a TDR program

Abstract Vehicle emission inspection programs, as required by the Clean Air Act amendments of 1977, are now in place in over 40 regions of the U.S. Their purpose is to reduce the in-use emissions of vehicles, and hence to improve air quality and provide health and other economic benefits. We examine the full social costs and benefits for a representative emission inspection program, the Maryland program in the Baltimore/Washington corridor. Using data from a survey of drivers, we are able to estimate the full social costs of the program. We also estimate the joint reduction of both carbon monoxide and hydrocarbon (HC) pollution and the resulting benefits. Both cost-effectiveness and cost-benefit analyses are performed. We find the costs to be many times higher than a reasonable measure of the benefits in the Maryland region. Also, the costs are high relative to the cost of reducing pollution from other sources. We simulate some modifications to the Maryland program to determine ways to make it more cost-effective. Extending the inspection to include older vehicles, and increasing the repair limit for the waiver policy would improve the efficiency of the program.

Auto pollution and congestion in an urban model: An analysis of alternative strategies

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.