The Financial and Operational Impacts of FERC Order 636 on the Interstate Natural Gas Pipeline Industry

The Federal Energy Regulatory Commission's Order 636 fundamentally altered the regulatory and operational environment of the natural gas industry in 1992, as the culmination of several directives aimed at relaxing regulation and fostering competition. We hypothesize that gas pipeline firms subsequently changed their operational and financial behavior in ways consistent with reduced balkanization, increased competition, and reduced expense preference behavior. Our results indicate that these firms have become more homogeneous financially but less so operationally. We find evidence that the marginal profitability of various pipeline activities has responded more to financial market conditions than to the regulatory environment.     

Take a risk: Preferring prevention over control of biological invaders

Scientists have argued that invasive species can be managed most cost effectively with greater investments in prevention. Further, under ideas like the precautionary principle it is reasonable to expect that a cautious manager would use more prevention relative to control because it keeps more invaders out. Yet, this is not typically done. In many cases, private and public resources are invested primarily to control existing invaders rather than to prevent new invasions. Managers frequently wait until after invaders have arrived and then scramble to limit the damages. We believe these paradoxical decisions can be understood by recognizing the link between typical human preferences for risk bearing and the technology of risk reduction. We demonstrate quantitatively how managers perceived to be cautious or averse to risk tend to shy away from prevention relative to control. This counterintuitive result arises because control is a safer choice than prevention because its productivity is relatively less risky: it works to remove existing invaders from the system. In contrast, the productivity of prevention is more uncertain because prevention only reduces the chance of invasion, it does not eliminate it, and invasion may not occur even in the absence of prevention. Managers' averse to risk will inherently avoid as much uncertainty as possible, whether the source of uncertainty regards ecological outcomes or economic productivity. Implications for environmental decision making are clear. In invasive species management, if managers act as though they are risk averse, their caution can backfire when it leads to more control rather than prevention. The social consequences of this choice are a greater probability of future invasions and lower social welfare. Our results suggest that social welfare is highest when managers were willing to “take a risk” with prevention.     

Linking dynamic economic and ecological general equilibrium models

Although ecosystems provide myriad services to economies, only one service is considered in most renewable-resource models. The general equilibrium bioeconomic model introduced here admits a second service, and more importantly it accounts for how the two services are impacted by interactions within an eight-species ecosystem and interactions within a regional economy. Endangered Steller sea lion recovery measures via alternative pollock quotas change all ecosystem populations and all economic variables. While non-use values associated with the ecosystem (e.g., existence values) are not considered, all species matter for the economy because they are all used indirectly as support for ecosystem services. Regional welfare changes from reduced quotas show the tradeoff between consumptive and non-consumptive uses of the ecosystem.     

Stepping Stones for Biological Invasion: A Bioeconomic Model of Transferable Risk

We investigate three sources of bias in valuation methods for ecosystem risk: failure to consider substitution possibilities between goods, failure to consider nonseparability of ecosystem services with market goods, and failure to consider substitution possibilities between ecosystems. The first two biases are known in the literature, and we offer insight on the size of the bias for a specific example. Our work on spatially transferable risk is novel. We develop the concept and show how it may undermine typical invasion prevention strategies. We find three key results. First, partial equilibrium estimates of welfare loss are significantly overestimated relative to general equilibrium estimates. If ecosystem services and market goods are substitutes the partial equilibrium bias is greater than if they are compliments. Second, well-intended policies do not necessarily reduce overall risk; risk reduction actions can transfer risk to another time or location, or both, which may increase total risk. Third, policies of quotas and inspections have to be extreme to improve welfare, with inspections having advantages over quotas.     

The role of spatial scale in the timing of uncertain environmental policy

The spatial scale of an environmental problem is dictated by boundaries. Physical boundaries limit the extent of impacts while the scale of decision making creates perceived boundaries beyond which impacts are ignored by decision makers. While it is well understood that uncertainty and irreversibility will alter policy decisions aimed at alleviating environmental impacts, the effect of spatial scales, both physical and perceived, is less understood. When spatial scale is included in a real options model of environmental policy adoption results indicate that the importance and influence of spatial considerations depends on the level of uncertainty, stringency of the proposed policy and flexibility of the policy decision. Recognizing spatial scale may force policy adoption to take place within a window of current damage. When spatial scale is small or uncertainty high, this window for policy adoption can close precluding policy adoption entirely. This undermines well-known results demonstrating that changes in uncertainty will only alter the timing of policy adoption. In other instances, the policy adoption window remains open but the option value increases faster than the benefits of the policy creating a scenario where it is always preferable to delay. Here the inclusion of an option value can prevent adoption of policies that would be adopted according to traditional cost-benefit analysis. In general policy decisions will be most affected by spatial considerations when the spatial scale is small, damage is spreading fast, and the uncertainty in damage spread is high.     

Gender Disparity in Access to the Rwandan Mutual Health Insurance Scheme

While there is a body of research on the gendered penalties of user fees within health systems in low-income countries, what is less well understood is the gendered experience of community-based health insurance (CBI) programs, which have replaced user fees for basic healthcare. This study examines the uptake of a Rwandan CBI scheme five years after the program was scaled up nationwide. Using the Enquete Intégrale sur les Conditions de Vie des ménages de Rwanda (EICV2) for 2005–6, the study finds evidence that members of female-headed households are less likely than those of male-headed households to be enrolled in the CBI program. Additionally, it finds strikingly different patterns of equity effects of CBI by gender of household head by examining consumption income and wealth. These findings suggest the need for greater attention to equity, particularly gender equity, concerning the way in which voluntary CBI programs are initially implemented and evaluated.     

Pipeline congestion and basis differentials

In the U.S., natural gas pipeline transport has undergone a wave of deregulatory actions over the past several decades. The underlying motive has been the presumption that removing regulatory frictions would facilitate spot price arbitrage, helping to integrate prices across geographic locations and improve efficiency. Yet certain frictions, specifically the effect of congestion on transportation costs, inhibit positive deregulatory impacts on efficiency. With the increase in domestic production and consumption of natural gas over the coming decades, upward pressure on the demand for transport will likely result in an increased occurrence of persistently congested pipeline routes. In this paper we explore the relationship between congestion and spot prices using a simple network model, paying particular attention to the influence of storage. We find that as congestion between two hubs increases, the scarcity value of transmission capacity rises, driving a wedge between spot prices. We empirically quantify this effect over a specific pipeline route in the Rocky Mountain region that closely resembles our structural design. Although our results paint a stark picture of the impact that congestion can have on efficiency, we also find evidence that the availability of storage mitigates the price effects of congestion through the intertemporal substitution of transmission services.     

Control and the management of a spreading invader

We consider the problem of management of an aquatic invader spreading in a lake system. We assume that each year the invader can be removed from a certain proportion of invaded lakes, which depends on the selected intensity of control. Control decisions are generated and compared for an optimally controlled system and for a static optimization across asymptotic steady states. Control close to eradication of the invasive species is always optimal for invasions with relatively high damages, low rates of density dependent spread and/or low chance of additional random introductions. Control to a highly invaded steady state is optimal for those invasions with low relative damages, high chances of random introduction and high levels of uncertainty in species location. In all other cases the optimal outcome depends upon initial conditions. Comparing the relative performance of the optimally controlled system and the static optimization demonstrates situations when the differences are small and when not. When invasions are acted upon in their later stages and across certain parameter combinations a static optimization provides a reasonable approximation of an optimally controlled system. The flip-side is that optimal policies directed at an invasion in its early stages tend to provide significantly savings. The savings vary across parameter combinations, yet in these situations little useful insight will be generated without consideration of a dynamically optimized system.     

Restricted capacity and rent dissipation in a regulated open access fishery

A common strategy for limiting the total annual catch in a fishery is to restrict entry and season length. We examine the results of this strategy when entry limitation amounts to a limit on capital, but fishing firms can vary an unrestricted input, and thereby use the restricted input more intensively. Under these regulatory constraints, fishing firms will earn rents that depend on the elasticity of substitution between restricted and unrestricted inputs. Using simulations with data from the Alaskan pollock fishery, rents and season length are shown to depend on fish and variable input prices, sometimes in surprisingly non-monotonic ways.     

Decomposing inequality and poverty in post-war Rwanda: The roles of gender,education, wealth and location

This paper provides an overview of poverty and inequality in post-war Rwanda. Rwanda is one of the poorest countries in the world, and has recently become one of the most unequal. High levels of poverty and inequality have important implications not only in terms of evaluations of social welfare, but also for management of social tensions and the propensity for violent conflict in the future. This paper uses the first two available and nationally representative rounds of household surveys –EICV1 2000 and EICV2 2005 – to decompose and identify the major ‘sources' of poverty and inequality in the country. I find stark differences in vulnerability to poverty by region, gender and widow status of the head of household. I additionally find important changes in the ‘income generating functions' of Rwandan households, and that distribution of land and financial assets are increasingly important in determining the inter-household distribution of income.