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Conceptual

Can Environmental Insurance Succeed Where Other Strategies Fail? The case of underground storage tanks.

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Haitao Yin, Alexander Pfaff, Howard Kunreuther
Risk Analysis 2011 volume 31 number 1: 12-24 (doi 10.1111/j.1539-6924.2010.01479.x)

PDF link iconPrivate risk reduction will be socially efficient only when firms are liable for all the damage that they cause. We find that environmental insurance can achieve social efficiency even when two traditional policy instruments—ex post fines and risk management mandates with ex ante fines—do not. Inefficiency occurs with ex post fines, when small firms declare bankruptcy and escape their liabilities, limiting the incentives from this policy tool. Firms ignore mandates to implement efficient risk management because regulatory agencies do not have sufficient resources to monitor every firm. The evolution of the U.S. Environmental Protection Agency’s and states’ underground storage tank programs suggests that mandating environmental insurance can address inefficiency due to small firms declaring bankruptcy. Comparing insurance mandates to risk management mandates, the burden on a regulator is lower if all it has to do is to confirm that the firm has insurance rather than that the firm has actually, and effectively, implemented required management practices. For underground storage tanks, we show that insurance lowered toxic releases.

 

Policy Impacts on Deforestation: Lessons Learned from Past Experiences to Inform New Initiatives

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Alexander Pfaff, Erin O. Sills, Gregory S. Amacher, Michael J. Coren, Kathleen Lawlor, Charlotte Streck
Report from the Nicholas Institute for Environmental Policy Solutions, Duke University (with the support of the Packard Foundation)

PDF link iconNational and international efforts within the last few decades to reduce forest loss, while having some impact, have failed to substantially slow the loss of the world’s forests. Forest loss, i.e., deforestation and forest degradation, is widespread and accounts for 12%–17% of the world’s greenhouse gas (GHG) emissions. Global concern about climate change and the realization that reduced emissions from deforestation and degradation (REDD) can play a role in climate change mitigation make it critical to learn from our past experiences with policies to reduce forest loss. Within the UN Framework Convention on Climate Change (UNFCCC), negotiators are actively considering ways to include incentives for REDD and other forest carbon activities in any post-2012 treaty. In parallel, the U.S. Congress is developing proposals for a long-term climate policy that includes incentives for REDD, and possibly other international forest carbon activities. Such policies may mobilize new funds for forest conservation, including for addressing drivers of deforestation and forest degradation in developing countries. Climate-related incentives for REDD are likely to be performance-based, i.e., to emphasize the measurement, reporting, and verification of all results. The implementation of this emphasis, alongside the introduction of new financial incentives, could increase such policies’ impacts on forest loss relative to the past. Policy effectiveness, efficiency, and equity can increase if we learn lessons from the past about what drives and what inhibits deforestation and degradation. It is in the interest of any REDD program to understand what has worked in reducing deforestation and degradation and what has not, as well as the reasons for observed differences in outcomes. Investments and policies can then more effectively embrace and extend success while reducing risks of further failures. This report aims to provide lessons to inform U.S. and international policymakers by analyzing dominant influences on deforestation and degradation. We study not only forest-focused policies, but also other policies that directly or indirectly influence forest loss, all in light of relevant nonpolicy factors such as trends in commodity prices. We provide examples of previous policies to draw lessons from successes and failures, then link those observations about the past to the decisions current policymakers must soon make within ongoing climate policy deliberations.

 

Regional Interdependence and Forest “Transitions”: substitute deforestation limits the relevance of local reversals

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Alexander Pfaff, Robert Walker
Land Use Policy 2010 27:119–129

PDF link iconUsing case studies and concepts we suggest that constraints upon aggregate or global forest transition are significantly more severe than those upon local forest reversals. The basic reason is that one region’s reversal can be facilitated by other regions that supply resources and goods, reducing the demands upon the region where forests rise. Many past forest reversals involve such interdependence. For ‘facilitating regions’ also to rise in forest requires other changes, since they will not be receiving such help. We start by discussing forest-transitions analysis within the context of Environmental Kuznets Curves (EKCs), for a useful typology of possible shifts underlying transitions. We then consider the historical Northeast US where a regional reversal was dramatic and impressive. Yet this depended upon agricultural price shocks, due to the Midwest US supplying food, and also upon the availability of timber from other US regions. Next we consider deforestation in Amazônia, whose history (like the Northeast US) suggests a potential local role for urbanization, i.e. spatial concentration of population. Yet inter-regional issues again are crucial. For cattle and soy, expansion of global demands may give to Amazonia a role more like the Midwest than the Northeast US. In addition, across-region interdependencies will help determine where reversal and facilitation occur. Finally we discuss the constraints upon very broad forest transition.

Behavior, Environment, and Health in Developing Countries: evaluation and valuation

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Subhrendu Pattanayak, Alexander Pfaff
Annual Review of Resource Economics (2009) 1:183–217

PDF link iconWe consider health and environmental quality in developing countries, where limited resources constrain behaviors that combat enormously burdensome health challenges. We focus on four huge challenges that are preventable (i.e., are resolved in rich countries). We distinguish them as special cases in a general model of household behavior, which is critical and depends on risk information. Simply informing households may achieve a lot in the simplest challenge (groundwater arsenic); yet, for the three infectious situations discussed (respiratory, diarrhea, and malaria), community coordination and public provision may also be necessary. More generally, social interactions may justify additional policies. For each situation, we discuss the valuation of private spillovers (i.e., externalities) and evaluation of public policies to reduce environmental risks and spillovers. Finally, we reflect on open questions in our model and knowledge gaps in the empirical literature including the challenges of scaling up and climate change.

 

Climate, Stream Flow Prediction and Water Management in Northeast Brazil: societal trends and forecast value

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Kenneth Broad, Alexander Pfaff, Renzo Taddei, Sankar Arumugam, Upmanu Lall, Francisco Assis de Souza Filho
Climatic Change (2007) 84:217–239

PDF link iconWe assess the potential benefits from innovative forecasts of the stream flows that replenish reservoirs in the semi-arid state of Ceará, Brazil. Such forecasts have many potential applications. In Ceará, they matter for both water-allocation and participatory-governance issues that echo global debates. Our qualitative analysis, based upon extensive fieldwork with farmers, agencies, politicians and other key actors in the water sector, stresses that forecast value changes as a society shifts. In the case of Ceará, current constraints on the use of these forecasts are likely to be reduced by shifts in water demand, water allocation in the agricultural Jaguaribe Valley, participatory processes for water allocation between this valley and the capital city of Fortaleza, and risk perception. Such changes in the water sector can also have major distributional impacts.

 

Payments for Ecosystem Services: why precision and targeting matter

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Francisco Alpizar, Allen Blackman, Alexander Pfaff
Resources 2007 volume 165:20-22

PDF link iconEven a perfect measure of the ecosystem services provided by each parcel enrolled in a PES program would be insufficient to measure the overall effectiveness of the program. The simple reason is that if a PES program does not lead to an increase in the provision of ecosystem services compared to what would have happened in the absence of the program—that is, the baseline or “counterfactual”—then it has not accomplished anything. Imagine a PES program focused on forest conservation that makes payments to managers of ecologically rich forest land, who have no incentive to clear the land because it is illsuited for logging, agriculture, or urbanization. Payments to these managers would have little impact on deforestation because the risk of clearing was minimal to begin with. In contrast, payments to managers who have incentives to clear their land would be much more likely to have an impact.