Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology

Federal, state, and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. We study the relative efficacy of state sales tax waivers, income tax credits, and non-tax incentives and find that the type of tax incentive offered is as important as the generosity of the incentive. Conditional on value, sales tax waivers are associated with more than a ten-fold increase in hybrid sales relative to income tax credits. In addition, we examine how adoption varies with fuel prices. Rising gasoline prices are associated with greater hybrid vehicle sales, but this effect operates almost entirely through high fuel-economy vehicles. By comparing consumer response to sales tax waivers and estimated future fuel savings, we estimate an implicit discount rate of 14.6% on future fuel savings.     

On reducing the windfall profits in environmental subsidy programs

Investment subsidies are widely used to induce adoption of new technologies that can lower the (marginal) cost of reducing emissions. To economize on these subsidies, governments would like to distinguish between firms that need to receive a subsidy to adopt a new technology, and firms that would adopt that technology even without subsidies. We show that policies consisting of a menu of emission taxes and investment subsidies can potentially induce firms to self-select.     

Does localized imitation drive technology adoption? A case study on rooftop photovoltaic systems in Germany

The purpose of this paper is to illuminate the spatio-temporal diffusion of rooftop household photovoltaic installations in Germany and to test whether localized imitation drives their adoption. Our study is based on a unique data set of some 576,000 household photovoltaic systems installed in Germany through 2009. We employ an epidemic diffusion model which includes a spatial dimension, and control for temporal and spatial heterogeneity. According to our results, imitative adoption behavior is highly localized and an important factor for the diffusion of household photovoltaic systems.     

Incentives for wetland creation

When information about soil quality is complete, wetland creation with a take-it-or-leave-it contract, which specifies wetland size and transfer, yields higher social benefits than if a uniform contract, which offers a payment proportional to the wetland size, had been used. This result points to a paradox because uniform contracts have been used a lot in practice.This article concentrates on the presence of asymmetric information about soil quality as a possible explanation for this paradox. It shows that the choice of instrument for wetland creation has welfare implications. Different contracts typically yield quite different social welfare surpluses and distribution between interest groups. It is not obvious, which of four contracts studied dominates when a farm characteristic affecting costs is unknown to the social planner. The probability distribution of the characteristic, the size of the excess burden, the elasticity of costs and benefits to wetland size and the cost of acquiring missing information influence the outcome.     

Firms' and states’ responses to laxer environmental standards

On June 1, 2017, President Trump announced the United States' withdrawal from the Paris agreement on climate change. Despite this decision, American firms continued investing in low-carbon technologies and some states committed to tougher environmental standards. To understand this apparent paradox, this paper studies how a weakening of environmental standards affects the behavior of profit-maximizing firms. It finds that a relaxation of emission standards (i) may increase firms’ incentives to adopt clean technologies, but not to pollute less; (ii) may negatively affect industry profitability if it is perceived as temporary; and, when this is the case, (iii) the unilateral adoption of stricter standards by large states may increase the expected profitability of every firm.     

Status of Species Conservation Banking in the United States

Abstract:  Receiving financial gains for protecting habitat may be necessary to proactively protect endangered species in the United States. Species conservation banking, the creation and trading of "credits" that represent biodiversity values on private land, is nearly a decade old. We detail the biological, financial, and political experience of conservation banking in the United States. We contacted agencies, nongovernmental organizations, and bank owners and compiled comprehensive accounts of the experiences of current banks. There are 76 properties identified as conservation banks in the United States, but only 35 of these are established under a conservation banking agreement approved by the U.S. Fish and Wildlife Service (USFWS). The 35 official conservation banks cumulatively cover 15,987 ha and shelter a range of biodiversity, including more than 22 species listed under the U.S. Endangered Species Act. Financial motives drove the establishment of 91% of conservation banks, and the majority of for-profit banks are breaking even or making money. With credit prices ranging from $3,000 to $125,000/0.41 ha (1 acre), banking agreements offer financial incentives that compete with development and provide a business-based argument for conserving habitat. Although the bureaucracy of establishing an agreement with the USFWS was burdensome, 63% of bank owners reported they would set up another agreement given the appropriate opportunity. Increasing information sharing, decreasing the time to establish agreements (currently averaging 2.18 years), and reducing bureaucratic challenges can further increase the amount of private property voluntarily committed to banking. Although many ecological uncertainties remain, conservation banking offers at least a partial solution to the conservation versus development conflict over biodiversity.     

Using Economic and Regulatory Incentives to Restore Endangered Species: Lessons Learned from Three New Programs

Abstract:  We studied three new incentive-based programs for restoring endangered species on private lands in the United States: safe harbor, Environmental Defense's Landowner Conservation Assistance Program, and conservation banking. For each program, we gathered data on the number of participating landowners, the number of species targeted for assistance, and the cumulative acreage of enrolled land. Measured in this way, both safe harbor and the Landowner Conservation Assistance Program have been remarkably successful. Landowners are drawn to three aspects of these programs: (1) the removal of regulatory burdens associated with attracting endangered species to their property; (2) technical guidance on how to restore habitats for endangered species; and (3) cost-share assistance for habitat restoration. Technical guidance appears to be more important than either regulatory relief or financial assistance in securing the cooperation of some landowners. Assessing the success or failure of conservation banking proved more difficult, given the relatively small number of banks created to date and the lack of any centralized database on them. However, nearly half of the 47 endangered-species conservation banks we surveyed have sold credits, indicating some success in either acquiring or restoring essential habitats.