Environmental Economics

NBER Reporter, Summer 2000 | Go to article overview
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Environmental Economics


The NBER's Project on Environmental Economics met in Cambridge on April 13. Project Director Don Fullerton of the University of Texas at Austin chose the following papers for discussion: Richard J. Arnott, NBER and Boston College, and An Yan, Boston College, "Road and Rail: Second-best Pricing and Capacity"

Discussant: Kenneth A. Small, University of California, Irvine

Ronald J. Shadbegian, University of Massachusetts, Dartmouth; Wayne B. Gray, NBER and Clark University; and Jonathan Levy, Harvard University, "Spatial Efficiency of Pollution Abatement Expenditures"

Discussant: Robert N. Stavins Harvard University

A. Lans Bovenberg, Tilburg University, and Lawrence H. Goulder, NBER and Stanford University, "Neutralizing the Adverse Industry Impacts of [CO.sub.2] Abatement Policies: What Does It Cost?" (NBER Working Paper No. 7654)

Discussant: Gilbert E. Metcalf, NBER and Tufts University

Suppose that there are two modes of travel from point A to point B -- road and rail -- which are not perfect substitutes. Road congestion from A to B is underpriced; this distortion is unalterable. To respond to congestion, should the transportation planner choose a wider or narrower road, raise or lower the rail fare, and expand or contract rail capacity? Arnott and Yan review the literature on this problem and present some new results. Almost all existing work employs local analysis, examining how the second-best policy variables respond to an incremental increase in the road toll. However, such an analysis demands too much information to be useful in practical, quantitative terms. Thus future theoretical research should be redirected towards global analysis: deriving policy rules whose implementation demands less information.

Different pulp and paper plants spend different amounts on pollution abatement and achieve different levels of pollution reduction. Shadbegian, Gray, and Levy ask whether the allocation of pollution abatement expenditures is spatially efficient. That is, do plants with higher benefits from abatement spend proportionately more on it than plants with lower benefits?

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Environmental Economics
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