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    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.

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    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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