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Are We Getting What We Paid For? The Need for Randomized Environmental Policy Experiments in Georgia

June 1, 2005

In the field of environmental policy, the decision to choose one policy over another should be evidence-based. Randomized policy experiments are important tools for generating evidence on the effectiveness of policies. They are an important component of policy design in fields such as poverty assistance, criminal rehabilitation, public education, and public health. In contrast, the use of randomized experiments in the field of environmental policy is nonexistent. In this short paper, I argue that randomized experiments are needed to improve environmental policy in Georgia. They can take place in the context of planned pilot initiatives and thus require little additional money to implement. Because they can be incorporated into the implementation of a field initiative, policy experiments also mitigate concerns that research and program implementation are mutually exclusive. However, the difference between what one can learn from a pilot initiative that uses a randomized design and from one that does not is enormous. We illustrate how one can use a randomized policy experiment in the context of an existing water conservation initiative in Georgia. Working Paper Number 2005-0022

Can Encouraging Voluntary Development of Environmental Management Systems Augment Existing Regulations?

June 1, 2005

Encouraging firms to voluntarily develop environmental management systems (EMSs) has been described as a potential policy tool for achieving environmental objectives in Georgia. We survey current thinking on the subject and note several shortcomings in current methods used to evaluate what motivates private firms to adopt comprehensive EMSs. Using a unique dataset of environmental management practices of Japanese manufacturers, we find that consumer pressures, regulatory pressures, and market power are major factors that motivate firms to develop comprehensive EMSs. We also find that after controlling for self-selection bias in survey response, the effects of regulatory pressures become more significant and larger in magnitude. These results suggest that although encouraging development of EMSs has the potential to augment existing regulations, the regulatory tools are fundamental to the success of such voluntary approaches. Working Paper Number 2005-0015

Can Public Goods Experiments Inform Environmental Policies?

June 1, 2005

Understanding behavior in experimental public goods games is fundamental to the work of environmental, behavioral, institutional and policy-oriented economists. Although much research has been devoted to explaining the dynamics of such experiments, the conclusions drawn to date are contradictory. Through the use of a novel experimental design, a theoretical model of behavior, and appropriate econometric methods, we address weaknesses in the current literature and resolve much of the conflicting claims about motives in public goods experiments. Our analysis demonstrates that herders and strong reciprocators are the main contributors to the public good, whereas the role of interdependent utility and warm-glow altruism is weak at best. Further, the oft-observed decay in contributions over rounds is driven by the revocation of cooperation by disappointed strong reciprocators coupled with the herding behavior of confused subjects. We find no evidence that confused subjects learn the dominant strategy over time. The data instead imply that a substantial proportion of subjects do not recognize the tension between the privately optimal strategy and the socially optimal strategy. These results offer insights into improving environmental policy, but also suggest that public goods experiments cannot achieve their full potential as long as the way in which they are implemented in the laboratory leaves most subjects unaware of the social dilemma that experimentalists are trying to induce. Working Paper Number 2005-0017

Experimental Approaches to Understanding Conflict over Natural Resources

June 1, 2005

Throughout the world, ethnic, racial and religious conflicts over limited resources persist in the face of potential settlements that plainly serve the interests of all sides. When analyzing such conflict, economists tend to ignore "non-material" aspects of decision-making such as inter- and intra-cultural relationships. Such aspects are typically analyzed by sociologists, anthropologists, and political scientists. Using an experimental approach, we demonstrate that economists can indeed make a contribution to understanding the way in which cultural relationships affect economic behavior. Specifically, we examine how the ethnic mix of experimental bargaining sessions affects economic outcomes. Using subjects from two ethnicities that co-exist in an industrialized society, the Hispanic and Navajo cultures in the southwestern United States, we present clear evidence that subjects of different cultures behave differently and that their behavior is affected by interactions with individuals from another culture. Our experimental framework offers the potential to gain insights into the allocation of natural resources in societies of mixed ethnicity, race and religion. Working Paper Number 2005-0016

A Feasibility Analysis of Applying Water Quality Trading

June 1, 2005

Water quality trading is a policy tool that could improve the cost-effectiveness of achieving environmental goals, but it is not currently used in the state of Georgia. This paper evaluates the feasibility of applying water quality trading in Georgia watersheds. The criteria used for this evaluation include environmental suitability, regulatory incentive, economic incentive, availability of participants, and stakeholder response. The evaluation concludes that the Georgia watersheds where WQT appears to be most feasible include the Chattahoochee, Coosa, Savannah, and Ocmulgee basins. Feasibility is also likely to be high in the Flint and Oconee basins. However, it is important to note that WQT could develop in any watershed where a pollution source has an economic interest in trading. The evaluation concludes that the opportunity for WQT in Georgia is somewhat limited by present regulatory conditions, but offers alterative WQT models that should be considered. Working Paper Number 2005-0020

Irrigated Acreage in Georgia's Altamaha River Basin During the Drought Year 2000

June 1, 2005

Using a "mixed media" approach, which tracts changes in pixel (color) values over the summer indicating changes from dry land to wet land, we have developed estimates for irrigated acreage in the Altamaha River Basin that draws water from ground water or perennial surface water sources. The latter condition is assured given that our estimates come from identified irrigation during the summer of 2000, which was one of Georgia's worst drought years of record. It is improbable that irrigators reliant on non-perennial sources could have successfully irrigated a crop during this drought year. Data provided here should be useful to the state in a number of ways. The state is moving forward with its plans to develop Basin Water Plans, and basic to such plans is information as to the agricultural sectors use of water under worst-case conditions -- conditions of drought. Further, such data can play important roles in efforts by the state to work out solutions to issues related to the use of interstate waters -- ground or surface waters. Working Paper Number 2005-0018

User-friendly Software That Allows Farmers To Use Agricultural Metering Data For Management Purposes

June 1, 2005

House Bill 579 was adopted by the Georgia legislature in 2003. The Bill included the following language: "The State Soil and Water Conservation Commission shall have the duty of implementing a program of measuring farm uses of water to obtain clear and accurate information on the patterns and amounts of such use, which information is essential to proper management of water resources by the state and useful to farmers for improving the efficiency and effectiveness of their use of water, ..." The Commission is required to read and report water use, but farmers need a way to use their meters as measurement and conservation tools. Working Paper Number 2005-0019

Water Quality Trading: Legal Analysis for Georgia Watersheds

June 1, 2005

Water quality trading is a policy tool that could improve the cost effectiveness of achieving environmental goals, but it is not currently used in the state of Georgia. This paper seeks to evaluate the applicability of water quality trading in Georgia watersheds with a specific focus on legal issues. This paper reviews Georgia law and regulations to evaluate barriers to and support for water quality trading. It also reviews water quality trading policies from other states and explores the value of adopting a state water quality trading policy in Georgia. The paper concludes that while existing law provides implicit authority to implement water quality trading in Georgia, inadequate regulatory pressure in most Georgia watersheds and possible legal challenges could be significant impediments to implementing water quality trading in the state at this time. The paper also suggests that successful pilot trades should precede the development of statewide water quality trading policy. Working Paper Number 2005-0021

Investor Reactions to Information Disclosure: Can Providing Public Information About Firms' Pollution Improve Environmental Performance?

May 1, 2005

Information disclosure has been touted as a powerful tool to effect change in environmental quality. Nascent efforts to augment federal information disclosure have begun in Georgia. We conduct the first empirical analysis of investor reactions to a Pollutant Release and Transfer Register (PRTR) outside of the United States. In contrast to the U.S. studies, we find no evidence of negative investor reactions to firms listed on Japan's PRTR. We identify several institutional reasons for these contradictory results. Our results suggest that PRTRs may not have the same effect in all locations and thus further empirical studies of the burgeoning number of PRTRs being implemented globally are warranted. Working Paper Number 2005-0014

Accounting for Georgia's Public Water Supply

February 1, 2005

Abstract not available. Working Paper Number 2005-009

Conservation Pricing Of Household Water Use In Public Water Systems In Georgia's Coastal Communities: A Preliminary Exploration

February 1, 2005

The purpose of this study is to explore the effect of price on residential water use in public water supply systems in Georgia's Coastal region. Particular attention is focused on measures for the elasticity of demand for residential water use inasmuch as a showing of price inelasticity may make the wider adoption of conservation pricing more palatable to small communities with concerns that raising water prices will reduce much-needed revenues.To clarify the nature and importance of the elasticity measure, consider the following simplified example. A community sells 100 units of water for $1.00 per unit. Its' total revenues are $100. Suppose price is increased by 20% to $1.20, and that the units purchased falls by 30% to 70. Total revenues are now only $84.00. In this case, we say that demand is "elastic;" the quantity of water used by folks "stretches" relative to the change in price. With elastic demand, rising prices mean lower total revenues. Suppose, however, that with the 20% price increase, demand fell to only 90 units -- a 10% decrease. Total revenues are now $108. In this case we say demand is inelastic -- quantity doesn't really "stretch" much when prices rise. If demand is inelastic, rising prices means higher revenues.From our limited, phase one efforts in these regards, we use aggregate water pricing data from 50 public water supply systems in 28 coastal counties that participated in a survey conducted during late the period 2003-2005. We find strong evidence that, at the margin, residential water use is indeed affected by prices charged for water in this region. We also find what we regard to be reasonably compelling evidence suggesting that residential water demand is inelastic over the range of marginal prices observed in our sample. This latter finding suggests that the use of conservation pricing as a tool for water conservation may not have an adverse effect on community revenues. Indeed, it may well be the case that increasing water prices will increase, not decrease, the community's revenues from the sale of water.In moving to phase two of this work, a great more will be accomplished in terms of refinements in the nature and quality of data used; greater efforts will be placed on attempts to identify functional forms that will yield best estimates for residential water demand in the state. Our ultimate goal is to be capable of responding to the needs of Georgia communities in the coastal region for information related to how one might improve the design of a community's water rate structure, and to conservation pricing policies that will best serve their interests and the interests of the state. Working Paper Number 2005-007

Decentralized Sewer Unit Packages as an Alternative for Bulloch County to Manage Fast Growth

February 1, 2005

Throughout the state of Georgia, rural areas rely on septic tanks to dispose of bodily waste for small commercial, industrial, and residential construction. Septic tanks act as the most conventional system when properties fall outside the service areas of municipal and private wastewater treatment facilities. Bulloch County has a vast number of rural dwellings within its boundaries. Moreover, the County experienced a steady 3 to 5% annual growth over the last several years. Therefore, an examination of alternatives to the traditional septic systems is warranted if the County wishes to maintain continued sustainable growth. This study focuses on the factors driving growth in Bulloch county including: population, housing, commercial and industrial development, subdivision development, assessed property values, and future development projections. Next, we compare two waste disposal systems that could substitute for traditional septic systems: a Small Diameter Gravity System (SDGS) and the Bioclere Onsite Wastewater Treatment System. Working Paper Number 2005-0012