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- Volume 14, 2022
Annual Review of Resource Economics - Volume 14, 2022
Volume 14, 2022
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Environmental Policies Benefit Economic Development: Implications of Economic Geography
Vol. 14 (2022), pp. 427–446More LessFor over a century, starting with the work of Alfred Marshall (and also in resource economics), economic geography has emphasized the productivity of dense urban agglomerations. Yet little attention is paid to one key policy implication of economic geography's core mechanisms: Environmental policies can aid economic development, per se—not hurting the economy to help the environment but advancing both objectives. We review mechanisms from economic geography that imply that environmental policies can deliver such win-wins: influences upon agglomeration of long-standing natural conditions, like usable bays, which long were perceived as fixed yet now are being shifted by global environmental quality; agglomeration's effects on other influential conditions, like urban environmental quality; and the effects of rural environmental quality on the flows to cities of people and environmental quality. Finally, we consider a geographic policy typology in asking why society leaves money on the table by failing to promote environmental policies despite the potential win-wins that we highlight.
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When and How to Use Economy-Wide Models for Environmental Policy Analysis
Vol. 14 (2022), pp. 447–465More LessWe describe the factors researchers should consider in deciding when and how to use computational general equilibrium (CGE) models for environmental policy analysis instead of partial equilibrium or engineering models. Special attention is given to modeling the social costs and benefits of regulations and the role played by labor markets. CGE models excel at quantifying interactions across different sectors of the economy, factor-market outcomes, and the distributional consequences of policy, all using a comprehensive set of the resource constraints faced by agents. The ceteris paribus nature of these experiments allows a skilled modeler to develop a systematic understanding of the connection between model assumptions and policy outcomes. Using CGE models to address environmental policy questions involves challenges, including the representation of narrow and technology-specific regulatory designs, data and aggregation issues, and the development of methods to improve model transparency and validity.
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The Future, Now: A Review of Social Discounting
Vol. 14 (2022), pp. 467–491More LessGovernments across the world are coming under increasing pressure to invest heavily in projects that have maturities of decades or even centuries. Key areas of concern include climate change mitigation, environmental and biodiversity protection, nuclear decommissioning, enhancing infrastructure and coastal defenses, and long-term health care management. Whether such projects are evaluated as being economically justifiable depends on the social discount rate (SDR) that the government deploys. This variable converts the future costs and benefits of public policy into their value today, thereby facilitating the comparison of social investments with different maturities. Critically, the result of such analysis is extremely sensitive to small changes in the choice of the SDR, yet policy guidelines differ widely across countries and international institutions. In this article, we provide a review of the academic literature on long-term SDRs, with particular emphasis on how these insights have been integrated into governmental guidance.
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Introducing the Circular Economy to Economists
Vol. 14 (2022), pp. 493–514More LessA circular economy (CE) would reduce both extraction and disposal by encouraging green design and circular business models, as well as repair, reuse, remanufacturing, and recycling. The CE started among architects and engineers, with little interest among economists. This article introduces CE concepts to economists, introduces key insights about the CE from other disciplines, and describes how economists can use these insights for a more complete economic analysis of policies that can better improve human welfare. An economic model of CE behavior can benefit from understanding the environmental gains from green designs based on engineering,transaction-cost savings from information based on blockchain technology, life cycle assessments based on industrial ecology, and behavioral science concepts of cultural barriers and social decision making that affect how producers and consumers respond to incentives. With various disciplines brought to bear on the subject, the combined analysis can exceed the sum of its parts.
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Climate Impacts on Natural Capital: Consequences for the Social Cost of Carbon
Vol. 14 (2022), pp. 515–532More LessThe effects of climate change on natural systems will be substantial, widespread, and likely irreversible. Warmer temperatures and changing precipitation patterns have already contributed to forest dieback and pushed some species toward extinction. Natural systems contribute to human welfare both as an input to the production of consumption goods and through the provision of nonuse values (i.e., existence and bequest values). But because they are often unpriced, it can be difficult to constrain these benefits. Understanding how climate change effects on the natural capital stock affect human well-being, and therefore the social cost of carbon (SCC), requires understanding not just the biophysical effects of climate change but also the particular role they play in supporting human welfare. This article reviews a range of topics from natural capital accounting through climate change economics important for quantifying the ecological costs of climate change and integrating these costs into SCC calculations.
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Economics of Marine Protected Areas: Assessing the Literature for Marine Protected Area Network Expansions
Vol. 14 (2022), pp. 533–554More LessMarine protected areas (MPAs) provide both conservation and economic benefits. Recent international conservation actors have called for a dramatic increase in the area of MPAs from almost 8% to 30% of marine area by 2030 in a policy called 30X30. Both the economics and conservation science literatures consider MPA decisions and MPA impact, although the economics literature focuses on fishery economic outcomes. This review uses an optimization framework for MPA decisions as a lens through which to evaluate the economics literature on MPAs in the context of the 30X30 expansion decisions. We argue for more economic analysis of MPA policy questions, including those around siting, design, restrictions, and management choices; impact evaluation; responses of people; low-income country settings and incomplete enforcement; spatial settings without metapopulations; and conservation rather than harvest objectives.
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The Economics of Aquatic Plants: The Case of Algae and Duckweed
Vol. 14 (2022), pp. 555–577More LessThis review examines global microalgae, seaweeds, and duckweed (MSD) production status and trends. It focuses on cultivation, recognizing the sector's existing and potential contributions and benefits, highlighting a variety of constraints and barriers over the sector's sustainable development. It also discusses lessons learned and ways forward to unlock the sector's full potential. In contrast to conventional agriculture crops, MSD can rapidly generate large amounts of biomass and carbon sequestration yet does not compete for arable land and potable water, ensuring minimal environmental impacts. Moreover, MSD's applications are ubiquitous and reach almost every industrial sector, including ones essential to meeting the increasing needs of human society, such as foods, pharmaceuticals, and chemicals. To this end, the growing public awareness regarding climate change, sustainable food, and animal welfare yields a significant shift in consumer preference and propels the demand for MSD. In addition, once governments usher in durable and stable carbon policies, the markets for MSD are likely to increase severalfold.
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Economics of the US National Park System: Values, Funding, and Resource Management Challenges
Vol. 14 (2022), pp. 579–596More LessThe US national park system includes 423 sites covering more than 85 million acres of land and some of the most iconic landscapes in the country. The parks host approximately 320 million visitors a year. In this review, I survey the economics literature on national parks, focusing on four main topics: values and economic impacts of the parks, funding challenges, congestion and overcrowding, and resource management issues related mainly to climate change. In each area, I discuss gaps in the literature, new data and methods that could be applied to national parks, and important topics for future research. The most pressing needs are for more empirical research on use values, using new data sources and modern econometric methods, and relatedly, studies of the responsiveness of demand to pricing, which would be helpful for addressing both congestion and funding challenges.
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Group Incentives for Environmental Protection and Natural Resource Management
Vol. 14 (2022), pp. 597–619More LessGroup incentives can and have been used to address a range of environmental and resource problems. These schemes base individual penalties and/or rewards on the performance of a group of individuals or firms who contribute to the environmental or resource problem. The economics literature on team incentives and public goods, as well as the literature specifically on environmental and natural resource management, provides insights into the design of group incentives. This article reviews the literature on group incentives in the context of environmental protection and natural resource policy. This literature suggests that group incentives can be effective and even efficient as environmental policy tools. However, the outcomes under group incentives will likely depend on a combination of the policy design and the nature of the internal group interactions. Within-group interactions are likely to be particularly important when policies involve thresholds so that coordination is needed to reach a cooperative equilibrium.
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Sovereign Wealth Funds in Theory and Practice
Vol. 14 (2022), pp. 621–646More LessAre natural resources a curse or a blessing? The answer may depend on how natural wealth is managed. By transforming a temporary windfall into a permanent stock in the form of a sovereign wealth fund, resource-rich economies can avoid volatility and Dutch disease effects, save for future generations, and invest locally. We review the theory behind these resource funds and explore the empirical evidence for their success. Our review is complemented by case studies that highlight some of the more nuanced features, behavior, and effects of resource funds. While the theoretical research highlights the situational success of funds, empirical examinations are minimal. We discuss possible reasons for this gap in the literature and, in doing so, highlight some of the challenges associated with empirical research in this area and discuss possible paths forward.
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Energy Justice, Decarbonization, and the Clean Energy Transformation
Vol. 14 (2022), pp. 647–668More LessAddressing climate change will require significant reductions in carbon emissions. Decarbonization will likely lead to increases in energy prices, which are regressive. Poorer households spend a higher percentage of income on energy and also have less access to energy efficient options in housing, transportation (including electric vehicles), and household durables. This review summarizes the state of knowledge on the energy justice implications of the clean energy transformation along four dimensions—production of energy, energy insecurity/energy poverty, access to clean energy technologies, and impacts of policy instrument choices for achieving decarbonization. Along each dimension there is evidence of greater negative impacts on lower-income households and on Black, Indigenous, and people of color (BIPOC) households, even controlling for income. But there is also evidence that these impacts can be mitigated through policy choices. Together these findings highlight that centering justice concerns in policy debates is critical for a just and clean energy transformation.
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Evaluating Electric Vehicle Policy Effectiveness and Equity
Vol. 14 (2022), pp. 669–688More LessIn this article, I review the academic literature on the economics of plug-in electric vehicles (PEVs), with a focus on PEV policy, benefits, and equity. PEVs are one of the most promising technologies for decarbonizing the transportation sector. As such, many government policies exist to promote their adoption. Understanding the effectiveness and equity of existing policies, what the realized environmental benefits are, and how these benefits compare to costs is crucial to improving future PEV policy. This review suggests that consumer PEV subsidies are not cost-effective and are often expensive relative to estimated environmental benefits. Furthermore, higher-income households who make up a larger share of the PEV market receive both a disproportionate amount of government subsidies as well as PEV benefits. There is considerable room for policy improvement.
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A Systematic Review of Energy Efficiency Home Retrofit Evaluation Studies
Vol. 14 (2022), pp. 689–708More LessWe systematically review studies evaluating the energy savings and cost-effectiveness of residential energy efficiency retrofit programs. We review 39 evaluations of 23 residential retrofit programs that were evaluated between 1984 and 2021. Our sample is restricted to program evaluations that used postretrofit household energy billing or consumption data from 140,977 retrofitted households. We report four primary findings. First, none of the studies in our sample reported deep energy savings (e.g., 50% or greater) from retrofit programs. The mean reduction in measured electricity and/or fuel consumption due to energy efficiency retrofits for all programs included in our sample was roughly 7.2%. However, because many households use both fuel and electricity, total household energy savings from the retrofit programs evaluated in our sample are probably smaller. Second, reported program savings decreased as the internal validity of study design increased. Third, as measured by realized savings and cost-effectiveness, the most promising retrofits were insulation and programmable thermostats, whereas the least promising retrofits were storm windows and doors. Fourth, programs with high reported savings and low costs of conserved energy served low-income, fuel-heated households exclusively.
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