Tuesday, January 31, 2006

China's Environment in Trouble?

This is an interesting article regarding China's economic growth and its possible negative effects to its environment, AEI - Short Publications. It seems that China's first hurdle with its enormous economic growth is how to deal with the public and international media reaction to environmental problems. The article begins with several stories of protests by the Chinese people, and the known cover-ups by the Chinese government relating to chemical spills, dangerous power plants, chemical and pharmaceutical plants in bad urban and residential areas.

However, the article goes on to show that China has become a "real-world test case" (AEI.org et. al., December 2005) for a theory known as the environmental Kuznets Curve (EKC). EKC refers to the relationship between the economic growth and the decreasing quality of the societies environment. Under the EKC theory, it is believed that the growth of the economy causes a deterioration of the environment. This deterioration continues until the societies median income increases, and can then support improvements to the environment.

If this theory is correct for China, there are examples of improvements: China "has the largest fleet of natural gas buses in the world"; they are currently more aggressive than the U.S. in adopting ambient air quality goals; and the amount of discharge of industrial petroleum-related pollutants have reduced by 50% over the past 10 years.

Bush Energy Vision

Yahoo! News:
"In Bush's vision, drivers will stop at hydrogen stations and fill their fuel-cell cars with the pollution-free fuel. Or they would power their engines with ethanol made from trash or corn. More Americans would run their lights at home on solar power.

Bush has been talking about these ideas since his first year in office. Proposals aimed at spreading the use of ethanol, hydrogen and renewable fuels all were part of the energy bill that he signed into law in August, but that hasn't eased Americans' worries about high fuel prices.

Americans were hit with the biggest jump in energy prices in 15 years in 2005, and worries about the cost of gas and heating oil have damped spirits about the economy despite other recent encouraging signs.

Add in the unrest in the Middle East, and energy becomes a major problem for the president to address Tuesday night.

'I agree with Americans who understand being hooked on foreign oil as an economic problem and a national security problem,' Bush said in a recent interview with CBS.

Eight in 10 Americans surveyed earlier this month by the Pew Research Center for the People & the Press said gasoline prices were a big problem."
How consistent do you think the President's vision is with the economic vision? Are there aspects of the President's vision that are likely to be associated with market failures?

Tuesday, January 24, 2006

I want clean air!

The above link is to a site that is a bit on the “far left” side of the coin, but does have a lot of useful info on air pollution. Again, not necessarily from an economist point of view, but water pollution may be more closely correlated to clean air than previously thought. The decline of plankton, a large O2 producer, in the ocean due to increasing temperature has effected global coastal air conditions.

U.S. 2006 Environmental Performance Index

Tyler Klocke points us, in the post just below, to a new environmental performance index. I took a quick look at the material on the website Tyler links to. I found the U.S. was ranked 28th worldwide. I looked through some of the country specific information, and I noted a few things of interest. I was going to ask what the information means and what it doesn't mean? Apparently, some reports have suggested the information means the U.S. has been underperforming. Of course, such an inference should make quite a splash on politics. My personal intuition would be that I would be skeptical that the U.S. is underperforming. John Whitehead did a quick regression analysis with the data used in constructing the index. Here is the inference he draws:
"The U.S. ranks 28th in the world in achieving certain environmental goals according to the Environmental Performance Index produced by Yale and Columbia. Yesterday Mark Thoma linked to a NYTimes article which could be interpreted as implying that the U.S. should be doing better.

The analysis conducted in the reports puts the U.S. under the line. In other words, the U.S. is doing worse than expected given its income level. I wondered if this were true. Using a slightly more complicated analysis it appears that the U.S. is doing about as well as it should be doing."
[ . . . . ]
"This model tells us that EPI increases with GDP but at a decreasing rate. In other words, the EPI is subject to diminishing returns. An country can improve its environmental performance with increasing gains in per capita GDP but these gains are smaller and smaller as GDP per capita increases.

One way of thinking about this model is as a production function. The input is income and the output is EPI. Plug in a country's GDP and region and the model will tell you how that country should be doing. Countries that have a positive difference between their EPI and the predicted EPI are doing better than expected. Countries that have a negative difference are doing worse than expected.

The U.S. ranks 28th in the world in EPI. The U.S. ranks 29th in the world. The U.S. EPI is 78.5 and the predicted EPI is 78.4514. The multiple regression model predicts the U.S. performance almost perfectly. The U.S. is achieving environmental goals about as well as expected given its GDP per capita. "

Monday, January 23, 2006


"Both the Environmental Sustainability Index (ESI) and the Pilot 2006 Environmental Performance Index contribute to data-driven environmental decisionmaking. However, there are important differences in the perspectives the ESI and EPI bring to environmental policymakers. The EPI does not seek to replace the ESI; instead, the two indices supplement each other."
- Pilot 2006 Environmental Performance Index

Just food for thought on some policy questions

Thursday, January 19, 2006

How Federal Subsidies Encourage Wasteful Local Transit Systems

Randall O'Toole has a policy analysis of public transit. Here is the executive summary:
"The nation's mass transit system is a classic example of how special interests prevail over the needs and interests of voters and taxpayers. Total inflation-adjusted subsidies to transit—buses and trains—have more than doubled since 1990, yet total ridership has increased by less than 10 percent. Train ridership has dropped dramatically while automobile use has skyrocketed.

Prior to 1964, when Congress began subsidizing transit, the industry was mostly private. Since then, the industry has been almost entirely taken over by state and local governments. Today more than three of every four dollars spent on transit come from taxpayers, not transit riders.

The effectiveness of local transit systems is undermined by federal subsidies, which encourage the construction of highly visible and expensive services such as light-rail trains to suburban areas despite the chronically low number of riders on those routes. Federal subsidies to transit advocacy groups and misguided environmental and labor regulations also encourage a large investment of taxpayer money in wasteful transit systems.

The ideal solution would be to devolve transit and other transportation funding entirely to state and local governments. Short of that, Congress should reform the federal transportation funding system to minimize the adverse incentives it creates."
Can it possibly make any economic sense that "more than three of every four dollars spent on transit come from taxpayers, not transit riders"?