FUEL CHOICE FOR MULTI-FUEL VEHICLES

Consequences of consuming petroleum in transportation—e.g., air pollution, global warming, energy insecurity—have stimulated interest in alternative automotive fuels and in vehicles that can use multiple fuels and combinations of fuels. Consumer behavior in choosing motor fuels for flexible- or dual-fuel vehicles will likely be a key factor in creating and maintaining stable markets for new fuels. This paper explores the implications of recent studies on the sensitivity of choice of gasoline grade to price. It analyzes natural gas vehicle owners' refueling behavior, based on a survey of natural gas vehicles in Canada. The paper uses statistical models to estimate the importance of performance, range, refueling convenience, and other factors in the fuel choice decision. Choice of gasoline grade is highly sensitive to fuel prices. The cost advantage of natural gas also is of paramount importance for natural gas users. However, refueling convenience is essential for overall satisfaction and is a major factor in the frequency of natural gas use. Alternative fuels not only must be cost competitive with gasoline but initially will require a cost advantage so as to overcome range limitations and refueling inconvenience.     

USING OXYGENATED FUELS TO MITIGATE CARBON MONOXIDE AIR POLLUTION: THE CASE OF DENVER

Using alternative fuels to reduce air pollution has received considerable interest lately. Recently, the Denver metropolitan area initiated a program requiring the use of oxygenated fuels so as to reduce carbon monoxide air pollution. This paper documents the environmental and economic impacts of the first year of the Denver program. In addition, it compares the costs of using oxygenated fuels with those of other policies that could be implemented so as to reduce carbon monoxide air pollution.     

SOLAR POWER

This paper describes categories of solar technologies and identijies those that are economic. It compares the private costs of power from solar, wind, nuclear, coal, oil, and gas generators. In the southern United States, the private costs of building and generating electricity from new solar and wind power plants are less than the private cost of electricity from a new nuclear power plant. Solar power is more valuable than nuclear power since all solar power is available during peak and mid-peak periods. Half of the power from nuclear generators is off-peak power and therefore is less valuable. Reliability is important in determining the value of wind and nuclear power. Damage from air pollution, when factored into the cost of power from fossil fuels, alters the cost comparison in favor of solar and wind power. Some policies are more effective at encouraging alternative energy technologies that pollute less and improve national security.     

洛杉矶的雾霾治理及其启示

1943年美国发生了著名的"洛杉矶雾霾"事件,直到20世纪70年代,该市区还被称为"美国烟雾城"。洛杉矶雾霾夏天主要起因于臭氧,冬天主要是源于细微颗粒物等。洛杉矶在治理雾霾方面的主要做法包括立法、排污许可证制度、推广先进环保技术、建立排污交易机制和成立跨部门专门机构等,其治理工作取得了明显成效:2012年,加州达到"不健康空气"水平的日子比2000年减少了约74%。我国治理雾霾,应更加重视空气污染的长期性预测分析,引入市场机制,成立跨地区的空气污染治理机构,同时,加强中美间环保科技的国际合作。     

Why energy transitions matter: A case study of methanol

The 1990 Clean Air Act Amendments (CAAA) contain several new provisions governing emissions from motor vehicles. These provisions of the 1990 CAAA will have a dramatic impact on the type of cars people drive over the coming decades. Given the high cost of achieving further reductions from automobiles, there has been increasing interest in exploring alternative fuels that improve environmental quality. One important contribution of this study is to highlight the importance of considering transition issues in assessing the cost of alternative fuels. A second contribution of this paper is to demonstrate how the cost-effectiveness of methanol and M85 depends on how a methanol-based strategy is implemented. The analysis of the costs and effectiveness of methanol and gasoline leads to the following conclusions: (1) transition issues are critical in evaluating the cost and cost-effectiveness of methanol-based fuels; (2) M85 and M100 are likely to be expensive relative to conventional gasoline, particularly in the near term and short term; (3) cost-effectiveness varies dramatically by region, with Los Angeles and New York substantially better than Houston; and (4) widespread introduction of methanol is not likely to be a cost-effective approach for improving urban air quality.Mr. Hahn is a Resident Scholar at the American Enterprise Institute and an Adjunct Professor of Economics at Carnegie Mellon University. Mr. Borick was a Research Assistant at the American Enterprise Institute at the time this paper was written. Several people contributed to this paper. First and foremost, we would like to thank Armistead Russell for help in characterizing vehicle emissions. In addition, we would like to thank Jeff Alson, Vann Bussman, Alex Cristofaro, Mark DeLuchi, Carmen Difiglio, Alan Dunker, Art Fraas, John Heller, Bruce Henning, Russell Jones, Walt Kreucher, Alan Krupnick, Tom Lareau, William Leney, Ben Massell, Alan Mawdsley, Al McGartland, Greg McRae, Bob Oglesby, Dan Sperling, Brian Sullivan, Dan Townsend, Margaret Walls, Douglas Youngblood, Marty Zimmerman, and Don Zinger. This paper represents the views of the authors and does not necessarily reflect the views of any individuals or institutions with which the authors are affiliated.     

Policy Forum: Designing a Carbon Price Policy: Reducing Greenhouse Gas Emissions at the Lowest Cost

Arguments for using a tax or an emission‐trading scheme on a comprehensive base of greenhouse gas emissions as a lower‐cost way of reducing pollution than regulations or subsidies are explained. While the Australian Government's ‘Clean Energy Future’ scheme, with its proposal for a price on carbon, moves in the low‐cost direction, the base is less than comprehensive and the scheme persists with, and in important ways increases the roles of, cost‐ineffective regulations and subsidies.     

城市循环经济建设中的污水热能资源开发与水资源再生一体化研究

发展循环经济,建设资源节约型和环境友好型城市是构建和谐社会、建设全面小康的必然选择,是转变我国经济增长方式的重要保证。采用适宜的技术和工艺,推广使用符合标准的再生水,使污水资源化,将城市污水处理的战略目标由传统意义上的污水处理、达标排放转变为以提高水资源综合利用率为核心的水循环再用,是城市水资源再生利用的重要思路。本文重点介绍了从城市污水中提取冷热量向建筑物供热、供冷,在确保没有污染的情况下变废为宝,再开发利用城市污水中蕴涵的可利用能源,为城市污水的资源化开辟新途径的创新思路。     

TARGETING METHANOL OR OTHER ALTERNATIVE FUELS: HOW INTRUSIVE SHOULD PUBLIC POLICY BE?

Continuing concerns over air quality have prompted calls for governmental targeting of alternative fuels. This paper uses methanol targeting as an example to address the role for public policy in terms of underlying theory and policy options. The paper shows that mandates promoting a transition to alternative fuels are inferior to other policy alternatives. It proposes market-based alternatives instead.     

Does clean air matter in developing countries' megacities? A hedonic price analysis of the Jakarta housing market, Indonesia

Despite numerous hedonic studies on the value of clean air in developed countries, the lack of similar studies in less developed countries has raised the question as to whether clean air also matters in developing countries' megacities. As an attempt to fill this gap, we apply a hedonic property value analysis, the method commonly used to infer the value of clean air in developed countries, using the combination of data on housing rental prices and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result indicates that, in the cases of lead, total hydro carbon (THC), and SO₂, air pollutants have a negative association with property value; i.e., housing rental price. The relationship is at 5% level of significance for lead and 10% level for THC and SO₂. This paper estimates that per family value of clean air in Jakarta ranges from US$28 to US$85 per μg/m³.     

Designing environmental policy: lessons from the regulation of mercury emissions

In its waning days, the Clinton administration decided that it was appropriate to regulate mercury emissions from power plants. The incoming Bush administration had to decide how best to regulate these emissions. The Bush administration offered two approaches for regulating mercury emissions from power plants. The first was to establish uniform emission rates across utilities, as mandated by the 1990 Amendments. The second was to establish a cap on mercury emissions while allowing emissions trading in order to reduce the cost of achieving the goal. This paper presents the first cost-benefit analysis of this issue that takes account of IQ benefits. We find that the benefits of the mercury regulation are likely to fall short of the cost. This assessment is based on a number of assumptions that are highly uncertain. The finding of negative net benefits is robust to many, though not all, reasonable variations in the model assumptions. We also find that the emissions trading proposal is roughly $15 billion less expensive than the command-and-control proposal. Mr. Gayer is associate professor of public policy at Georgetown University and a visiting scholar at the American Enterprise Institute. Mr. Hahn is co-founder and executive director of the American Enterprise Institute-Brookings Joint Center for Regulatory Studies and a scholar at AEI. We would like to thank Mary Jo Krolewski, Leonard Levin, Joel Schwartz, Anne Smith, Nik Wada, and Chris Whipple for helpful comments and Jordan Connors, Laura Goodman and Molly Wells for valuable research assistance. The views expressed in this paper represent those of the authors and do not necessarily represent the views of the institutions with which they are affiliated.     

Are green products over-priced?

This article investigates conditions under which high prices, in conjunction with low levels of pollution, signal environmentally clean products. It is shown that, when consumers cannot ascertain the environmental performance of products, the price must be distorted upward to signal a clean product. A clean producer saves less from emitting pollution and so raises price and restricts output with less reluctance than does a dirty producer. The theoretical result of over-pricing is consistent with the evidence that “green” products receive higher prices than conventional products. However, optimistic prior beliefs of high-environmental performance may cause signaling to fail.      

Air pollution and the housing market: A neural network approach

Using the neural network method, this research explores the impact of total suspended particulate (TSP) and sulfur dioxide (SO₂), two major air pollutants, and of air pollution controls on the median real price of housing in Jacksonville, Florida. The results of this case study confirm the adverse effect of air pollution on the price of housing. The simulation of the model further suggests that pollution control measures improve property values. The findings imply that, in addition to other measures influencing the price of housing, property owners and buyers take air pollution and pollution controls into account.     

Hazardous waste sites and property values in the state of New Jersey

The polluter pays principal is justified as a deterrent to future pollution. However, the US experience suggests that it has considerably reduced the clean up rate of existing hazardous waste sites. Coaseapos;s theorem is used as basis to propose that a partnership between the polluters and property owners near these sites will not only ease financial burden but will also speed up the pace of cleanup. A hedonic price model is used to empirically estimate the impact of siting of hazardous waste sites on property values and determine the economic feasibility of the proposed partnership. The empirical estimates are based on municipality level data from the state of New Jersey. The benefis from speedy clean up of hazardous waste sites to New Jersey property owners are observed to exceed the cleanup cost of these sites.     

市场和政府共同作用下的城市地价——中国城市的实证研究

本文根据单中心城市模型和中国城市土地市场若干特点建立了城市地价检验模型,并对中国地级以及以上城市地价进行了截面分析.计量估计表明,城市人口和收入是地价的重要决定因素,郊区土地价值和城市交通条件也影响城市地价;估计还表明政府通过控制城市土地供给和选择不同交易方式对城市地价有直接和间接的影响,而特定交易方式的影响犹为显著.分析结果还显示地价上涨最大的推动力是旺盛的需求.Robust回归方程估计表明上述统计检验结果是稳健的.     

THE IMPACT OF CLEAN FUEL SPECIFICATIONS ON ADELAIDE RETAIL PETROL PRICES*

In March 2001, the South Australian Government introduced a clean fuel policy which it claimed was designed to protect air quality. This paper quantifies the policy's impact on relative Adelaide retail prices for unleaded petrol through Box‐Jenkins autoregressive integrated moving average methodology coupled with Box and Tiao intervention analysis. The analysis uses weekly price data spanning from January 2000 until the beginning of June 2002. It finds the clean fuel policy had a statistically significant impact on relative retail petrol prices, resulting in an increase of almost 1.9 cents per litre and, therefore, costing Adelaide motorists around an extra $15.8 million per annum. Based on claims that the quality of fuel produced by the local Adelaide refiner did not change in response to the implementation of the clean fuel policy, the paper concludes that the increase in relative retail petrol prices was most likely associated with the exercise of market power rather than an increase in refinery production costs.     

冯·杜能模型与城市商品房价格上涨机理

借鉴冯·杜能模型分析城市商品房价格上涨机理,可得出以下结论:当购买城市周边区商品房相比购买中心区商品房少支付的房价大于等于居住周边区所需多支付的居住成本时,理性购买者会作出购买周边区商品房的决策;随着周边区相比居住周边区居住成本的降低,周边商品房价格水平会趋近于中心区商品房价格水平;当周边区居住成本相对稳定时,周边区商品房价格水平受制于中心区商品房价格水平.随着城市的发展,商品房价格水平呈长期上涨趋势.控制城市中心区商品房价格与加速卫星城建设是平抑城市商品房价格的有效途径.     

Using food prices and consumption to examine Chinese cost of living

This paper considers two approaches to examining potential bias in China's consumer price index: (i) inferring true changes in cost of living from consumer behaviour; and (ii) creating alternative price indices to compare with official indices. For (i), our semi‐parametric estimates agree with the recent finding of a large understatement in increases to the true cost of living. For (ii), we focus on food prices and explore potential causes of bias. We find some evidence of a new‐good bias. China's large‐scale migration also causes changes in the cost of living that are not reflected in the consumer price index.     

Sequential selling mechanisms

Summary In this paper we attempt to formalize the idea that a mechanism that involves multilateral communication between buyers and sellers may be dominated by one that involves simple bilateral communication. To do this we consider the well known problem in which a seller tries to sell a single unit of output to a group ofN buyers who have independently distributed private valuations. Our arguments hinge on two considerations. First, buyers communicate their willingness to negotiate with the seller sequentially, and second, buyers have the option of purchasing the good from some alternative supplier. It is shown that the seller cannot improve upon a procedure in which she offers the good to each buyer in turn at a fixed price. The seller reverts to multilateral communication if possible, only when no buyer is willing to pay the fixed price. In reasonable environments buyers will be too impatient to wait for the outcome of a multilateral negotiation and all communications will be bilateral.In many problems in mechanism design, informed traders have no alternative to participation in the mechanism that is offered by its designer. The best mechanism from the designer's point of view is then the one that is most efficient at extracting informational rents, that is, a simple auction. In a competitive environment it is likely to be costly for buyers to participate in an auction or any other multilateral selling scheme in which the seller must process information from many different buyers because alternative trading opportunities will be disappearing during the time that the seller is collecting this information. Buyers might be willing to participate in an auction, but only if they could be guaranteed that the competition that they face will not eliminate too much of their surplus.At the other extreme to the auction is a simple fixed price selling scheme 1. The seller simply waits until he meets a buyer whose valuation is high enough, given the opportunities that exist in the rest of the market, for him to be willing to pay this price. The seller extracts the minimum of the buyer's informational rents since the price that a buyer pays is independent of his valuation. Yet the seller might like this scheme if adding a second bidder to the process makes it very difficult for him to find a buyer with a valuation high enough to want to participate.In the presence of opportunity costs, the seller faces a trade-off between his ability to extract buyers informational rents and his ability to find buyers who are willing to participate in any competitive process. In practice this trade-off will impose structure on the method that is used to determine a price. In markets where there are auctions, limits are put on buyer participation. In tobacco auctions bids are submitted at a distinct point in time from buyers who are present at that time. In real estate auctions time limits are put on the amount of time the seller will wait before making a decision. These restrictions on participation are presumably endogenously selected by the seller (possibly in competition with other mechanism designers) with this trade-off in mind.On the other hand, markets in which objects appear to trade at a fixed price are rarely so simple. A baker with a fixed supply of fresh bagels is unlikely to collect bids from buyers and award the bagels to the high bidder at the end of the day. Buyers are unlikely to be willing to participate in such a scheme since they can buy fresh bagels from a competitor down the street. Yet despite the fact that bagels sell at a fixed price throughout the day, most bakers are more than willing to let it be known that they will discount price at the end of the day on any bagels that they have not yet sold. Selling used cars presents a similar problem. Each potential buyer for the used car is likely to have inspected a number of alternatives, and is likely to know the prices at which these alternative can be obtained. A seller who suggests that buyers submit a bid, then wait until the seller is sure that no higher offer will be submitted is asking buyers to forgo these alternative opportunities with no gain to themselves. To avoid the rigidity of the pure fixed price scheme most used cars are sold for a fixed price or best offer. These examples suggest that the best selling mechanism may involve a complex interplay between participation and surplus extraction considerations.The purpose of this paper is to provide a simple formalism within which the factors that determine the best contract can be evaluated. We consider the best known environment from the point of view of auction design in which there are a large number of buyers with independent private valuations for a unit of an indivisible commodity that is being sold by a single supplier who acts as the mechanism designer. We modify this standard problem in two critical ways. First, we assume that the seller meets the potential buyers sequentially rather than all at once. Secondly we assume that buyers have a valuable alternative that yields them a sure surplus. This creates a simple bidding cost that is effectively the expected loss in surplus (created by the disappearance of outside alternatives) that the buyer faces during the time that he spends negotiating with the seller.These simple assumptions allow us to calculate the impact of competition and communication costs using completely standard arguments from the mechanism design literature. We are able to show that with these assumptions the seller's expected surplus will be highest if the object is sold according to the following modified fixed price scheme: the seller contacts each of the potential buyers in turn and either offers to negotiate or announces that he no longer wishes to trade. If he offers to negotiate and the buyer agrees, the buyer immediately has the option of trading for sure with the seller at a fixed price set ex ante. If the buyer does not wish to pay this fixed price, he may submit an alternative bid. The seller will then continue to contact new buyers, returning to trade with the buyer only if no buyer wishes to pay the fixed price and no higher bid is submitted.It will be clear that in our environment, both the simple fixed price scheme and the simple auction are feasible. The simple auction prevails when the fixed price is set equal to the maximum possible valuation, while the simple fixed price scheme occurs when the fixed price is set so that buyers are willing to participate if and only if they are willing to pay the fixed price. Our results will show that a simple auction in never optimal for the seller. The seller can always strictly improve his payoff by moving to a scheme in which there is some strictly positive probability that trade will occur at the fixed price. On the other hand, there are reasonable circumstances in which the seller cannot achieve a higher payoff than the one she gets by selling at a fixed price. It is shown that for any positive participation cost, there is a large, but finite, number of potential buyers so that the seller cannot achieve a higher payoff than what she gets by selling at a fixed price. Two simple, but important continuity results are also illustrated. As the cost of participation in the mechanism increases (decreases), the probability with which the seller's unit of output is sold at a fixed price goes to one (zero) in the best modified fixed price mechanism for the seller.Our paper is not the first to generate such a modified fixed price scheme. Both McAfee and McMillan (1988) and Riley and Zeckhauser (1983) come up with similar schemes for the case in which the seller must bear a fixed cost for each new buyer that she contacts. There are two essential differences between our model and theirs. First, as the cost is interpreted as the opportunity cost of participation in the mechanism, it is reasonable to imagine that the seller advertises the mechanism ex ante. Another way of putting this is that the seller pays a fixed rather than a variable cost to communicate the mechanism to buyers. This makes it possible to assume that the mechanism is common knowledge to the seller and all the buyers at the beginning of the communication process. For this reason we can make our case using completely standard arguments. Secondly, the mechanism in the opportunity cost case plays a different allocative role than it does in the case when the seller bears a cost. The mechanism must decide whether buyers should communicate with the seller or pursue their alternative activities, as well as who should trade and at what price. It is this allocative role that makes bilateral communication superior to multilateral communication in a competitive environment. These differences allow us to show, for example, that a simple fixed price scheme is undominated for the seller when the number of buyers is finite. As shown by McAfee and McMillan, this is only possible when the number of potential buyers is infinite when the seller bears the cost of communication.Remarkably, the existence of opportunity costs to buyer participation is not, by itself, sufficient to explain why sellers might prefer bilateral communications mechanisms. Samuelson (1983) and McAfee and McMillan (1987) show that when buyers must pay a fixed cost to submit a bid, which is equivalent to giving up a valuable alternative, a seller cannot expect to earn more than she does in a second price auction (though Samuelson shows that the reserve price may depend on the number of potential buyers). One of the contributions of this paper is to show that the assumption that buyers make their participation decisions simultaneously is critical to this result. Simultaneous entry decisions means that whether or not any particular buyer is assigned to the alternative activity is independent of any other buyer's valuation. With sequential communication the seller is able to relax this constraint. It is precisely the enlargement of the class of feasible mechanism that breaks down the optimality of the simple auction.The second author acknowledges the support of the Social Sciences and Humanities Research Council of Canada and the CRDE at the Université de Montreal.     

Unbalanced growth and health care expenditure

Baumol's model of unbalanced growth implies that health care expenditure (HCE) is driven by wage increases in excess of productivity growth. However, it remains unclear whether the HCE in developing countries is affected by the same factor. This paper tests this hypothesis by using China provincial panel data. We show that HCE grows more rapidly if economy‐wide wage growth exceeds productivity growth in China. The results are robust to the use of housing price as an instrumental variable for the economy‐wide nominal wage and the inclusion of real GDP growth, demographic structure, government deficit, pollution emissions and health sector quality as control variables. Furthermore, our findings show that Baumol's cost disease plays a more important role in the less economically developed western regions in which the rural–urban migration is less pronounced.