Monday, September 25, 2006

Big Questions in Environmental Economics

I have just returned from a great environmental economics conference in Vail, Colorado. A foot of snow was dumped on me but that couldn't stop me. At this conference, we discussed many environmental issues. One researcher pointed out the puzzle that there has been a sharp membership decline in the Association of Environmental and Resource Economists (see Is that surprising and what does this trend mean? A pessimist might state that as a sub-field that environmental economics is a "fashionable" field that goes through booms and busts and right now the field is in a rut. An optimist might counter that one can infer little about the state of academic environmental economics from macro trends in membership.

In this posting, I would like to make the case that there are many exciting research questions in environmental econ. These are not in any particular order.

1. The economics of climate change --- in particular how large are the economic costs caused by climate change? Which industries bear these costs? Which geographical areas around the world will bear them? How costly is it given current technologies to self protect to minimize climate change's impact on our quality of life? Under what circumstances are governments forward looking and making investments to pre-empt significant costs from taking place?

2. The induced innovation hypothesis --- as prices for resources rise -- how much "green" R&D is triggered and how quickly do new ideas diffuse from rich nations who develop these ideas to LDCs?

3. valuation of non-market goods --- given improvements in health care and improvements in many indicators of urban environmental quality -- has diminishing returns kicked in --- in the United States? Do we in 2006 value a marginal improvement in the environment less than in the past?

4. In rapidly growing nations such as India and China, what are "good" public policies? Which U.S policies such as catalytic converters for cars are too expensive to be adopted there?