Using price incentives to allocate scarce resources is a core tenet of economics but may result in unpalatable distributional outcomes. This paper analyzes the efficacy of prices as a means of inducing water conservation during severe drought. We study the introduction of surcharges enacted within existing nonlinear rate structures. We embed machine learning counterfactual prediction methods within a demand framework to isolate exogenous price variation, finding that households exhibit significant demand response despite the temporary nature of surcharges. However, surcharges alone cannot explain a majority of the conservation observed despite steep price increases. Customer-specific pricing undercuts scarcity signals by shielding large users from binding price increases, and surcharges do little to reduce the regressivity of water rates. Simpler rate structures can achieve greater efficiency and equity, especially if enhanced by progressive lump-sum transfers.

Emissions trading programs have been promoted as efficient means to reduce nonpoint source water pollution and sequester carbon from agricultural land. While trading programs are often evaluated in isolation, they compete with longstanding agricultural conservation subsidy programs. Both programs target agroforestry practices that provide environmental benefits using different payment structures: Trading pays for performance while agricultural conservation programs pay for effort. We evaluate the performance of both programs in isolation and competition using an integrated assessment model that combines a stated preference survey of agricultural landowners for establishing forests with biophysical models of water quality and carbon sequestration benefits of forests. Our numerical policy simulation suggests that the water quality trading program in isolation can provide sufficient financial incentives for landowners to engage in afforestation activities on agricultural land. However, federal agricultural conservation subsidies largely crowd out the trading program when in competition. Stacking payments for carbon offsets with water quality trading payments does not enhance trading participation. Overall, the attractiveness and effectiveness of emissions trading programs for afforestation activities on agricultural land are heavily influenced by the presence and level of federal agricultural conservation subsidies.

Can automation complement economic incentives? We explore this question by randomly encouraging households to activate a feature on their existing smart thermostat that automates responsiveness to time-of-use electricity pricing. The feature reduces air-conditioning use during the highest-priced afternoon period, raising indoor temperatures above a household’s preferred temperature, primarily for customers who are typically home during the day. Customers infrequently override the feature when they experience discomfort, suggesting that they are willing to trade off monetary savings for small increases in discomfort. Automation thus enables low-cost changes in household energy use, with potentially large electricity supply-cost reductions at scale.

We examine long-run trends in surface water quality in Texas, USA, with a focus on nutrient pollution and its potential economic impacts. Using >2 million observations of total nitrogen, total phosphorous, dissolved oxygen, and chlorophyll a concentrations from water quality monitors in the state’s 23 river sub-basins, we find that nutrient pollution may be a growing problem that is essentially statewide in scope. In addition, because economic impacts of nutrient pollution depend not just on observed water quality, but also on the typical uses of surface water resources that people value, we quantify the share of the state’s surface water resources that does not meet common definitions of quality suitable for boating, fishing, swimming, and drinking, as well as the share that does not meet state regulatory standards for their designated uses. This analysis indicates that water quality improvements relative to human uses have stagnated over the last three decades and that nutrient pollution represents a much greater relative threat to attainment of designated uses than it did in the 1970s. We conclude that nutrient pollution is likely taking a toll on the economic value of Texas’ water resources.

Several federal agencies claim the existence of an energy paradox in competitive markets in their benefit-cost analyses - firms fail to use energy-saving equipment that on net would reduce their costs. Such findings appear incompatible with neoclassical views that private firms in competitive markets will seek to minimize costs. EPA and NHTSA (2016) justify their findings in part by claiming that owners of trailers pulled by others underinvest in energy-saving equipment because the trailer owners incur the costs of such investments while tractor owners get the benefits. We collected roadside data over three summers and model use of energy-saving equipment on trailers. We find associations consistent with cost-reducing behavior in the use of energy efficiency devices, such as skirts and automatic tire inflation devices, but no evidence that different ownership of tractors and trailers is associated with reduced use of energy-saving equipment on trailers. We recommend that EPA and NHTSA assess the in-use cost-effectiveness of such equipment and rigorously review the empirical basis for claims of market failures in competitive markets before claiming significant private economic gains in rulemakings.

A survey with an embedded experiment was conducted to test how residents would respond to a commitment by oil and natural gas producers to conduct nearby fracking operations in a manner that is more protective of health and the environment than existing state and federal regulations. The experiment specifically assessed how the use of independent third-party certification of operations coupled with “beyond compliance” practices would influence local public support for oil and gas development. The state of Colorado was chosen due to its long history of oil and gas development, its leadership amongst states in advancing fracking, and the current local-level conflicts surrounding oil and gas development. A public opinion survey (N = 390) of a representative sample of Colorado residents found that “green certification” of a production company’s activities led to substantially increased levels of support for a hypothetical nearby oil and natural gas project. Our findings suggest that oil and gas developers can obtain greater public support for their projects by voluntarily engaging in practices that are more protective than current state and federal regulations together with third-party certification of those practices. In effect, these coupled actions serve as a mechanism that promotes a firm’s “social license to operate”.

This paper estimates the effect of Endangered Species Act protections for the lesser prairie chicken (Tympanuchus pallidicinctus) on rural property values in Oklahoma. The political and legal controversy surrounding the listing of imperiled species raises questions about the development restrictions and opportunity costs the Endangered Species Act imposes on private landowners. Examining parcel-level sales data before and after the listing of the endemic lesser prairie chicken, we employ difference-in-differences (DD) regression to measure the welfare costs of these restrictions. While our basic DD regression provides evidence the listing was associated with a drop in property values, this finding does not hold up in models that control for latent county and year effects. The lack of a significant price effect is confirmed by several robustness checks. Thus, the local economic costs of listing the lesser prairie chicken under the Endangered Species Act appear to have been small.