Environmental Economics.

• Position: Bureau News

The NBER's Working Group on Environmental Economics met at the Bureau's California office on April 9 and 10. This NBER Working Group undertakes theoretical or empirical studies of the economic effects of environmental policies around the world, including their effects on pollution, research and development, physical investment, labor supply, economic efficiency, and the distribution of real income. Particular issues under study include the costs and benefits of alternative policies to deal with air pollution, water quality, toxic substances, solid waste, and global warming. Working Group Director Don Fullerton, University of Texas, Austin, organized this program:

Richard Newell, Jhih-Shyang Shih, and William Pizer, Resources for the Future, "Estimating the Gains to Emission Trading"

Joshua Graft Zivin, NBER and Columbia University; Richard Just, University of Maryland; and David Zilberman, University of California, Berkeley, "Risk Aversion, Liability Rules, and Safety" (NBER Working Paper No. 9678)

Discussant: Donald Wittman, University of California, Santa Cruz

Trudy Ann Cameron and Graham D. Crawford, University of Oregon, "Superfund Taint and Neighborhood Change: Ethnicity, Age Distributions, and Household Structure"

Discussant: Randall Walsh, University of Colorado

Charles D. Kolstad, University of California, Santa Barbara, "Uncertainty in Self-Enforcing International Environmental Agreements"

Discussant: Brian Copeland, University of British Columbia

Over the past twenty years there has been a remarkable trend towards the use of market-based policies to control pollution. That trend has been fueled, in part, by economic arguments that these policies save a lot of money. Yet, most analyses of the gains to trade have been based on prospective engineering data rather than retrospective cost data, sparking a concern that they ignore actual command-and-control implementation, as well as the practical realities of pollution abatement efforts. Newell, Pizer, and Shih address such concerns with data collected from 1979-85 by the Census Bureau on pollution abatement costs and abatement levels. The authors estimate control cost functions and the potential gains from emissions trading. Their initial results, focusing on sulfur dioxide controls in the steel industry, find average annual savings of $300,000-$800,000 (in 1982 dollars) per plant associated with a prospective shift to sulfur dioxide emissions trading, or 5-14 percent as a share of...