Review of Environmental Economics and Policy

Policies to address environmental and natural resource management are often implemented at the group level. The defining feature of such policies is that penalties or rewards are based on group rather than individual performance, or rights are allocated to a group rather than to individuals. This article discusses how group-level policies have been applied and studied across a variety of contexts in the literature on environmental and natural resource management. The aim is to identify common theoretical and empirical insights and lessons learned about the design and implementation of these instruments. A general finding is that group-level policies are most likely to be effective when rewards and/or penalties are designed to provide strong incentives for groups to meet targets in a cost-effective way. Moreover, to the extent that this requires coordination within the group, the effectiveness of policies will depend on whether the group has or can create its own institutions or mechanisms to facilitate and enforce that coordination.

The health of many marine, coastal, freshwater, and other aquatic ecosystems is inextricably linked to decisions about the management of water quality and quantity. In this article we review the economic literature aimed at quantifying the impacts of water resource management on aquatic species in the United States and the potential welfare gains of managing water and aquatic species systems jointly. Existing studies consider multiple water uses, such as agricultural irrigation and hydropower generation, as well as different societal benefits from aquatic species, such as commercial and recreational fishing and endangered species preservation. These studies use a variety of methodologies, including stated and revealed preference techniques, bioeconomic modeling, and reduced-form econometrics. We conclude with a discussion of future directions for research that could increase understanding of the trade-offs between water and aquatic species management outcomes and identify gains from the joint management of water resources and aquatic species in the United States.

Farming accounts for approximately 70 percent of freshwater withdrawals worldwide, and it often constitutes the lowest value use of freshwater. Where water is scarce, advanced irrigation technologies such as drip and piped delivery systems have been promoted as “water conservation technologies” (WCTs) that reduce agricultural water consumption, thus releasing water to alternative uses (e.g., the environment). This article examines whether this is true, discussing how WCTs contribute, in theory and practice, to water conservation. Based on an extensive review of more than 230 theoretical and empirical papers, we argue that WCTs should not be viewed as a tool for achieving water conservation, but rather as a means for stabilizing and increasing agricultural water productivity and farmers’ income in places where water is scarce. We conclude that, if the ultimate objective is water conservation, it is essential to adopt water conservation policies—that is, governance instruments aimed at reallocating available resources among uses (e.g., from irrigation to the environment)

This article provides an introduction to the symposium on best practices for using revealed preference methods for nonmarket valuation. Nonmarket valuation is an essential tool in the benefit–cost analysis (BCA) of environmental goods and services. Here, we identify the role of BCA in several key U.S. Executive Orders, U.K. appraisals, and European Union Directives that inform decision-making concerning regulatory oversight. We describe the evolution of key mandates over the last three decades and discuss some examples of how the analyses performed under these mandates have impacted regulatory outcomes.

The hedonic property-value model has been refined over more than forty years to become one of the premier approaches to valuing environmental amenities. This article presents best practices for hedonic property-value modeling when the goal is to measure households’ willingness to pay (WTP) for a change in a spatially varying amenity. The starting point is a research design that identifies a source of exogenous variation in an amenity that is observable by prospective buyers (e.g., air quality). Data on the sales prices and physical attributes of houses, together with location-specific measures for amenities, are then used to estimate a housing-price function. Under ideal conditions, the derivative of this price function can be interpreted as indicating the amenity’s implicit price, which can then be used to calculate household marginal WTP for the amenity. In principle, this process is straightforward. In practice, modeling decisions must be made to define variables that measure sale prices and amenities and to select an econometric specification. Although the number of issues to address when developing a “best practices” study may seem daunting, the effort is both worthwhile and important for developing accurate measures of the WTP for environmental quality.

The hedonic wage model provides a key input into benefit–cost analyses of public policies that are aimed at reducing mortality risks: an estimate of the value of reduced mortality risk (VRMR), also known as the value of a statistical life. Because a large majority of the benefits associated with policies that improve air quality stem from mortality risk reductions, estimates of the VRMR play an exceptionally important role. The use of VRMR estimates from hedonic wage studies in benefit–cost analyses of environmental policies is not without controversy. This article reviews the use and importance of the VRMR in environmental regulation and policy and summarizes the major shortcomings of existing VRMR estimates derived from hedonic wage models. We propose a set of best practices for estimating and reporting VRMR estimates using the hedonic wage framework

This article discusses best practices for implementing recreation demand models. We focus on insights that research and experience provide for the typical recreation application, where the analyst uses individual-level data to measure the value of changes in recreation site access or quality at one or more destinations. We examine issues related to data collection, pre-analysis tasks, modeling, and assessing quality, in addition to a discussion of future research needs. Our focus is on understanding best practices when the analyst’s goal is to present accurate estimates of economic value of recreation site access or quality, and so we prioritize practical steps rather than describing the frontiers of methodological research in recreation demand modeling.

For the last four decades, benefit–cost analysis has been a mainstay of the U.S. federal regulatory process and, under Executive Orders in effect since 1981, such analysis must generally be used to justify significant federal regulations. While administrations of different parties have occasionally differed on the methodologies used to assess costs or benefits, these disagreements operated within the bounds of approaches that are supported by the economic and scientific literatures. In contrast, the Trump administration has been operating outside such bounds. In particular, as I discuss in this article, it has sought to justify important deregulatory measures by focusing on cost savings, but ignoring the resulting foregone benefits; placing substantial roadblocks in the way of regulatory agencies’ ability to rely on epidemiological studies; promoting discredited threshold models, under which significant air pollutants are assumed to have no adverse effects below a certain level; calling co-benefits into question; downplaying climate change damages; and counting transfer payments in inappropriate ways. I argue that these moves significantly threaten the health and safety of Americans.

Nutrient pollution is one of the leading causes of declines in surface water quality both in the United States and globally. This article discusses three important issues that influence the effectiveness of recent U.S. policies that ban the use of phosphates in household and commercial products and, ultimately, these policies’ ability to improve water quality. First, the U.S. production of phosphates for household and commercial products and other industrial uses has fallen to less than 5 percent of total phosphate production in recent decades, with agricultural use accounting for the remaining 95 percent. Thus, current policies that target household and industrial uses over agriculture have limited ability to address the larger nutrient pollution problem. Second, the behavioral responses of consumers to variations in the spatial and temporal characteristics of these policies reduce their effectiveness because households can purchase products containing phosphates at different locations or at different times of the year. Third, the interactions of these policies with regulations at wastewater treatment facilities will determine the extent to which reductions in phosphate at the household and commercial levels will result in reductions in the amount of phosphates that are emitted into waterways.

Environmental and resource economists pride themselves on the credibility of their empirical research. In other disciplines, however, the credibility of empirical research is increasingly being debated by scholars. At the core of these debates are critiques of widespread practices, such as selectively reporting results or using designs with low statistical power, and critiques of the professional incentives that encourage these practices. These critiques have led to claims of a “replicability crisis” in science. We show that questionable research practices are also prevalent in the environmental and resource economics literature. We argue that the discipline needs to take the potential harm from these practices more seriously. To mitigate this harm, we recommend changes in the norms and practices of funders, editors, peer reviewers, and authors. (JEL: Q0, C0)

Public lands can provide a wide range of environmental benefits. Granting protective status to these lands generally imposes restrictions on resource development and extraction activities and thus often generates conflict and debate among public and private stakeholders. In the United States, this is especially the case for national monuments, which are areas that contain significant historic, prehistoric, cultural, and/or geologic resources. In this article, I describe the controversy surrounding national monument designations, particularly in the western United States. I describe the history and status of national monuments, discuss the evidence concerning the benefits and costs of national monuments and other protected lands, and examine public land conflicts in the U.S. west in the context of economic trends in rural communities. I conclude with a discussion of the future outlook for national monuments and public lands in the United States.