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    Chan, Gabriel, Robert Stavins, Robert Stowe, and Richard Sweeney. “The SO2 Allowance-Trading System and the Clean Air Act Amendments of 1990: Reflections on 20 Years of Policy Innovation.” National Tax Journal 65 (2012): 419–52. Publisher's VersionAbstract
    chan_et_al_so2_article_national_tax_journal_2012.pdf

    The introduction of the U.S. SO2 allowance-trading program to address the threat of acid rain as part of the Clean Air Act Amendments of 1990 is a landmark event in the history of environmental regulation. The program was a great success by almost all measures. This paper, which draws upon a research workshop and a policy roundtable held at Harvard in May 2011, investigates critically the design, enactment, implementation, performance, and implications of this path-breaking application of economic thinking to environmental regulation. Ironically, cap-and-trade seems especially well suited to addressing the problem of climate change, in that emitted greenhouse gases are evenly distributed throughout the world’s atmosphere. Recent hostility toward cap-and-trade in debates about U.S. climate legislation may reflect the broader political environment of the climate debate more than the substantive merits of market-based regulation.

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    Aldy, Joseph E, Scott Barrett, and Robert N Stavins. “Thirteen Plus One: A Comparison of Global Climate Policy Architectures.” Climate Policy 3 (2003): 373–397.Abstract
    thirteen_plus_one_article.pdf

    We critically review the Kyoto Protocol and thirteen alternative policy architectures for addressing the threat of global climate change. We employ six criteria to evaluate the policy proposals: environmental outcome, dynamic efficiency, cost-effectiveness, equity, flexibility in the presence of new information, and incentives for participation and compliance. The Kyoto Protocol does not fare well on a number of criteria, but none of the alternative proposals fare well along all six dimensions. We identify several major themes among the alternative proposals: Kyoto is “too little, too fast”; developing countries (DCs) should play a more substantial role and receive incentives to participate; implementation should focus on market-based approaches, especially those with price mechanisms; and participation and compliance incentives are inadequately addressed by most proposals. Our investigation reveals tensions among several of the evaluative criteria, such as between environmental outcome and efficiency, and between cost-effectiveness and incentives for participation and compliance.

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    Olmstead, Sheila M, and Robert N Stavins. “Three Key Elements of a Post-2012 International Climate Policy Architecture.” Review of Environmental Economics and Policy 6 (2012): 65 –85. Publisher's VersionAbstract
    olmstead_stavins_in_reep_symposium_published.pdf

    This article describes three essential elements of an effective post-2012 international climate policy architecture: a framework to ensure that key industrialized and developing nations are involved in differentiated but meaningful ways, an emphasis on an extended time path for emissions targets, and the inclusion of flexible market-based policy instruments to keep costs down and facilitate international equity. This overall architecture is consistent with fundamental aspects of the science, economics, and politics of global climate change; addresses specific shortcomings of the Kyoto Protocol; and builds on the foundation of the United Nations Framework Convention on Climate Change.

    A-68

    Stavins, Robert N. “Transaction Costs and Tradeable Permits.” Journal of Environmental Economics and Management 29 (1995): 133–148. Publisher's VersionAbstract
    transaction_costs_jeem.pdf

    Tradeable-permit systems are at the center of current interest and activity in market-based reforms of environmental policy, because these systems can offer significant advantages over conventional approaches to pollution control. Unfortunately, claims made for their relative cost-effectiveness have often been exaggerated. Transaction costs, which may be significant in these markets, reduce trading levels and increase abatement costs. In some cases, equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions, providing an efficiency justification for politicians′ typical focus on initial allocations.

    A-16

    Stavins, Robert N, and Adam B Jaffe. “Unintended Impacts of Public Investments on Private Decisions: The Depletion of Forested Wetlands.” The American Economic Review 80 (1990): 337–352. Publisher's VersionAbstract
    impacts_of_public_investments_aer1990.pdf

    By affecting relative economic returns, public infrastructure investments can induce major changes in private land use. We find that 30 percent of forested wetland depletion in the Mississippi Valley has resulted from private decisions induced by federal flood-control projects, despite explicit federal policy to preserve wetlands. Our model aggregates individual land-use decisions using a parametric distribution of unobserved land quality; dynamic simulations are used to quantify the impacts on wetlands of federal projects and other factors.

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    Bennear, Lori S, Robert N Stavins, and Alexander F Wagner. “Using Revealed Preferences to Infer Environmental Benefits:Evidence from Recreational Fishing Licenses.” Journal of Regulatory Economics 28 (2005): 157–179. Publisher's VersionAbstract
    jregecon_fishing_final.pdf

    We develop and apply a new method for estimating the economic benefits of an environmental amenity. The method is based upon the notion of estimating the derived demand for a privately traded option to utilize an open access good. In particular, the demand for state fishing licenses is used to infer the benefits of recreational fishing. Using panel data on state fishing license sales and prices for the continental United States over a 15-year period, combined with data on substitute prices and demographic variables, a license demand function is estimated with instrumental variable procedures to allow for the potential endogeneity of administered prices. The econometric results lead to estimates of the benefits of a fishing license, and subsequently to the expected benefits of a recreational fishing day. In contrast with previous studies, which have utilized travel cost or hypothetical market methods, our approach provides estimates that are directly comparable across geographic areas. Our findings show substantial variation in the value of a recreational fishing day across geographic areas in the United States. This suggests that current practice of using benefits estimates from one part of the country in national or regional analyses may lead to substantial bias in benefits estimates.

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    Aldy, Joseph E, and Robert N Stavins. “Using the Market to Address Climate Change: Insights from Theory & Experience.” Daedalus 141 (2012): 45–60. Publisher's VersionAbstract
    aldy_and_stavins_daedalus.pdf

    Emissions of greenhouse gases linked with global climate change are affected by diverse aspects of economic activity, including individual consumption, business investment, and government spending. An effective climate policy will have to modify the decision calculus for these activities in the direction of more efficient generation and use of energy, lower carbon-intensity of energy, and a more carbon-lean economy. The only technically feasible and cost-effective approach to achieving this goal on a meaningful scale is carbon pricing: that is, market-based climate policies that place a shadow-price on carbon dioxide emissions. We examine alternative designs of three such instruments: carbon taxes, cap and trade, and clean energy standards. We note that the U.S. political response to possible market-based approaches to climate policy has been, and will continue to be, largely a function of issues and structural factors that transcend the scope of environmental and climate policy.

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    Olmstead, Sheila M, W Michael Hanemann, and Robert N Stavins. “Water Demand Under Alternative Price Structures.” Journal of Environmental Economics and Management 54 (2007): 181–198. Publisher's VersionAbstract
    water_demand_jeem.pdf

    We estimate the price elasticity of water demand with household-level data, structurally modeling the piecewise-linear budget constraints imposed by increasing block pricing. We develop a mathematical expression for the unconditional price elasticity of demand under increasing block prices and compare conditional and unconditional elasticities analytically and empirically. We test the hypothesis that price elasticity may depend on price structure, beyond technical differences in elasticity concepts. Due to the possibility of endogenous utility price structure choice, observed differences in elasticity across price structures may be due either to a behavioral response to price structure, or to underlying heterogeneity among water utility service areas.

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