Essays in Energy and Environmental Economics.

This dissertation consists of three essays in energy and environmental economics that all have a bearing on various concepts from public economics. The first essay uses fiscal data on 2,468 oil extraction agreements in 38 countries to study tax contracts between resource-rich countries and independent oil companies. We analyze why expropriations occur and what determines the degree of oil price exposure of host countries. We show theoretically and verify empirically that oil price insurance provided by tax contracts is increasing in a country's cost of expropriation, and decreasing in its production expertise. The second essay reveals significant unintended consequences from recent 14-state efforts to reduce greenhouse gas emissions through emissions limits per mile from new cars. While such efforts significantly reduce emissions from new cars sold in the adopting states, they cause substantial emissions increases from new cars sold in other (non-adopting) states and from used cars. Such offsets (or "leakage") reflect interactions between the state-level and federal fuel-economy standards: the state-level efforts loosen the national standard, so that automakers can profitably increase sales of high-emissions vehicles in non-adopting states. Our simulation model estimates that leakage associated with recent legislation is 65-74%. In the third essay, I analyze speed limits. When choosing his speed, a driver faces a trade-off between private benefits (time savings) and private costs (fuel cost and own damage and injury). Driving faster also has external costs (pollution, adverse health impacts and injury to other drivers). I use large-scale speed limit increases in the western United States in 1987 and 1996 to address three related questions. First, do the social benefits of raising speed limits exceed the social (private plus external) costs? Second, do the private benefits of driving faster as a result of higher speed limits exceed the private costs? Third, could completely eliminating speed limits improve efficiency? I find that a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents, and elevated pollutant concentrations of 14-25% (carbon monoxide), 9-16% (nitrogen oxides), 1-11% (ozone) and 9% higher fetal death rates around the affected freeways. I use these estimates to calculate private and external benefits and costs, and find that the social costs of speed limit increases are three to ten times larger than the social benefits. In contrast, many individual drivers would enjoy a net private benefit from driving faster. The substantial difference between private and social optimal speed choices provides a strong rationale for having speed limits.

This dissertation represents an effort to advance interdisciplinary research in issues relevant for energy and environmental policy, combining economics with applied engineering and ecology. It includes work that is informed by theoretical and empirical studies, and is conceptually centered in the notion that competitive markets lead to inefficient combinations of risk and yield. In the first two chapters of the dissertation, I study this in the context of wind energy capacity investments, where profit-maximizing developers choose the location and timing of the construction of wind farms. The final chapter of the dissertation is an empirical study on the effects of intensive aquaculture on water pollution.

This dissertation explores topics in energy and environmental economics, and in particular regulations intended to address market failures in the purchase and utilization of energy-consuming durable goods. The market failures in question include environmental externalities as well as information frictions in durable goods purchase. The durable goods studied range from household appliances to homes themselves. Although market-based approaches to these challenges are becoming more common, subsidies and standards are still much more widely practiced public policy tools. Given the pervasiveness of the regulatory approach over the market-based approach, evaluating the success of these energy-consuming durable goods subsidies and standards allows policy makers to use society's scarce resources where they are most effective.