EDF economists to evaluate costs and benefits, including environmental costs
Traditionally, environmental losses only measured qualitatively. Difficult to compare with quantified $ Benefits.
Stavins: “Rather than looking at it from a narrow financial perspective, we believed we could look at it from a broader social perspective by trying to internalize some of the environmental externalities”.
Differences in the CBA’s
Stavins’ CBA:
Used data from original project proposal
Included environmental externalities (mostly in lost rafting and fishing opportunities).
Took dynamic approach – evaluated costs and benefits over entire life of project (50 year “planning horizon”), r=10.72%
Clavey-Wards Ferry project dams were not built….partly due to formal CBA.
Intense lobbying forced the political decision to forbid project.
Pete Wilson was senator.
Stavins said: “[Wilson] couldn’t say ‘I did it because I love wild rivers and I don’t like electricity’, but he could do it by holding up the study and saying, ‘look, I changed my vote for solid economic reasons.’”
“Lead in drinking water”
Should the EPA control lead contamination of drinking water?
Should water utilities be responsible for the quality of water at the tap?
Would benefits of such a program outweigh costs?
Economic analysis at EPA formed basis for adoption of this rule.
Background
Lead in drinking water is byproduct of corrosion in public water systems
Water leaves treatment plant lead-free, lead leaches into water from pipes.
Tendency of lead to contaminate water in the house
Decreasing corrosivity of water, also reap extra economic benefits by reducing damage to plumbing.
Scientific & analytical problems
No baseline data on lead levels in tap water
High variability in lead levels in tap water
Corrosion control is system specific
Uncertainty over reliability of corrosion control treatment
Corrosion control treatment may change water quality and require further treatment.
Approach
Stakeholders: 44% of U.S. population.
2 regulatory approaches:
Define a single water quality standard at the tap or at the distribution center, OR
Establish corrosion treatment requirements.
Compare costs and benefits for each regulator approach
Estimating costs [1 of 2]
Source water treatment: for systems with high lead in water entering dist’n system. 880 water systems, $90 million/yr.
Corrosion control treatment: either (1) adjust pH, (2) water stabilization, or (3) chemical corrosion inhibitors [engineering judgment] $220 million/yr.
Lead pipe replacement: 26% of public water systems have lead pipes; usually best to increase corrosion treatment, $80-370 million/yr.
Estimating costs [2 of 2]
Public education: inform consumers about risks $30 million/yr.
Acquire smallest amount of land to provide protection
Why is this an interesting question?
Approach
Conduct analysis at county level in US
Use average ag land value for price of land
Use database of species location by county (endangered or proposed endangered)
Assume if land acquired in county where species lives species is protected
Results
Locations for 453 species
Blue: cost-min only
Yellow: site-min only
Green: both
Cost-minimizing Problem
Subject to
For all iεI
where J = {jj = 1, ... , n} is the index set of candidate reserve sites, I = {ii = 1, ... , m} is the index set of species to be covered, Ni is the subset of J that contain species i, cj is the loss associated with selecting site j, and xj = 1 if site j is selected and 0 otherwise.
min
Conclusions
For 453 species
Cost per site 1/6 under cost-minimizing
Result similar to
Santa Clara River Group Project
FWS had $8 million from NRDA settlement
Wanted to use to buy habitat
Chose species rich coastal land
Must more bang choosing interior low quality/low price land
