Posts in Urban planning

by Shawn Regan

This week, EPA director Lisa Jackson announced new plans for her agency to incorporate environmental justice into its decision making processes. Outlined in a guidance document released this week, the EPA will begin considering the disproportionate impact pollution has on low-income and minority communities when drafting new rules.

Several factors have led to a federal fight against environmental injustices.  First, a 1983 government study found that hazardous waste landfills in the Southeast were almost entirely located in low-income, minority communities. In 1994, President Clinton signed an executive order promoting nondiscrimination in environmental policies. The EPA’s latest announcement is an extension of this broader effort at improving environmental inequalities.

But as H. Spencer Banzhaf writes in a recent PERC Policy Series, this type of well-intentioned effort may be misguided. Banzhaf's analysis suggests that the result of this top-down attempt to improve environmental quality in lower-income neighborhoods amounts to “environmental gentrification” and can harm the very people it seeks to help:

Residents who moved into dirtier communities tend to place a higher priority on low-cost housing than on the environment. Cleaning up the environment may increase those costs by more than their willingness to pay, as wealthier households bid up property values. As poor residents are more likely to rent their housing, they stand to lose from these increased housing costs.

Other households that had been avoiding the pollution may move back in, driving up housing prices…The original residents have to move out or pay the new premiums. Although they enjoy the environmental improvement, the higher rental payments more than offset that gain, making them worse off. The biggest gainers are the absentee landlords and some of the new gentrifying residents.

Banzhaf’s solution? Reduce transactions costs between communities and polluters. If transactions costs are low enough and property rights are defined, “markets in pollution” will emerge.

Specifying the right to pollute—or to be free from pollution—allows pollution to be traded. [Ronald] Coase suggested, for example, that negotiations could arise over factory smoke. If factories have a right to pollute, local residents may pay them to not pollute. If local residents have a right to be free from pollution, factories might compensate them to accept some pollution.

If the current EPA scheme reduces transactions costs for lower-income communities, it will help facilitate Coase-like solutions that compensate nearby landowners. But if it simply attempts to eliminate environment injustices, Banzhaf’s research indicates it will likely have perverse results.

Click here to read H. Spencer Banzhaf’s PERC Policy Series “Environmental Justice: Opportunities Through Markets.”

Shawn Regan is a public affairs fellow at PERC.

by Shawn Regan

The Washington Post reports this week that the EPA is ramping up its efforts to address environmental justice—a concern that director Lisa Jackson calls "the biggest chunk of unfinished business when you think of the environmental landscape."

As the WaPo writes, the EPA has "forced emitters, including container-glass plants, cement plants and oil refineries, to install pollution controls in poor areas struggling with bad air quality."

But will such measures achieve their ends of improving environmental quality in poor communities? Likely not, as H. Spencer Banzhaf explained in PERC Reports:

If pollution lowers land prices, and if poorer households systematically locate in lower-priced communities, any policy designed to break the correlation by targeting firms’ behavior eventually will be reversed by households’ behavior. As long as pollution crops up somewhere, the cycle is likely to repeat itself: land values will fall, the rich will move out, and the poor will move in.

Moreover, cleaning up pollution in disadvantaged communities may actually harm incumbent residents. The cleanup is likely to trigger gentrification and increase housing costs. These increased housing costs may more than offset the benefit of a cleaner environment. Of course, for those who own their homes, this appreciation represents an appreciation in their housing assets. But most poor households are renters. For them, gentrification represents an increase in rents, which benefits only absentee landlords.

This market process, borne out of the important work of Ronald Coase, is already happening with many solid waste landfills, and should be the focus of efforts to promote environmental justice. For more on this topic from H. Spencer Banzhaf, see PERC's Policy Series "Environmental Justice: Opportunities Through Markets."

Yesterday afternoon I attended a lecture by Michael Greenstone, the 3M Professor of Environmental Economics and former chief economist of the Council of Economic Advisers during the first year of the Obama Administration, addressing the question, “Will Adaptation Save Us from Climate Change?” This lecture was the keynote address at a PERC workshop on “Human Adaptation to Climate Change” I’ve been attending this week.

Greenstone set the stage by observing that there are three possible approaches to the threat of climate change: 1) mitigation — reducing emissions of greenhouse gases; 2) adaptation — responding to climate change by seeking to ameliorate its negative effects, and 3) geoengineering — attempting to modify the climate in some way to offset the effects of increased greenhouse gas concentrations. The first of these is unlikely to happen in the near term, as the United States and other nations have shown themselves to be quite resistant to adopting meaningful mitigation measures. The third, whether or not it is viable or desirable, is generally not considered an acceptable approach geo-politically. As a consequence, he suggested, in all likelihood we will have to engage in some degree of adaptation to climate change.

In Greenstone’s view, the question is not whether or not human civilization will survive. It almost certainly will. Nonetheless, climate change could have substantial negative conseuqences. Rather, the relevant questions are how adaptation will occur over various time frames, the cost of such adaptation, and how effective adaptive responses will be. There is some research that has investigated the costs and potential of near-term response to some degree of climate change, but not nearly enough on longer term responses to climate change and its consequent environmental effects. Insights can be drawn, however, from other research that documents individual responses to changes in environmental conditions. For example, Greenstone co-authored a paper showing that some individuals respond to local air pollution levels by, among other things, purchasing medications that relieve some of the respiratory effects of higher pollution levels. Such adaptation may reduce the negative effects of pollution, but it still comes at a cost.

Adaptation takes many forms. Some adaptation to climate change would involve changes in infrastructure and the like, but much adaptation is likely to occur at the individual level. To take a simple example Greenstone used in his talk (based on this paper): on hotter days, people use more air conditioning. This matters because high temperatures tend to correlate with increased mortality. Therefore, were it not for air conditioning (and other means of adaptation), an increase in temperature would cause a greater increase in mortality. With air conditioning, the mortality increase is less, though energy use is greater.  This illustrates how individuals can alter their behavior to compensate for some of the consequences of higher temperatures, albeit at some cost.

In poorer, less-developed nations, such as India, on the other hand, the results are somewhat different. As Greenstone explained, compared to the United States, India has less adaptive capacity, so the mortality effects of warming would be greater – far greater. There is a lot of adaptive capacity in wealthy, industrialized nations, but not so much in poorer, less-developed nations. Moreover, the United States’ adaptive capacity has improved dramatically over the course of the past century. That is, the relationship between high temperatures and increased mortality in the United States has weakened over time as the nation has become wealthier and more technologically advanced, making it easier for individuals to adapt to temperature changes.

One possible response to Greenstone’s analysis is that if wealthier nations can adapt to climatic changes more readily than poorer nations, as much attention should be paid to making poorer nations wealthier – and improving their adaptive capacity – as to figuring out how to reduce global greenhouse gas emissions so as to mitigate the threat of climate change. From an economic standpoint, the costs of mitigation could be compared to the costs of adaptation, and if the costs of mitigation are greater, this would provide an economic justification for focusing on adaptation instead of mitigation – and some would certainly endorse this view. Indeed, many in developing nations embrace this view. In any event, even if mitigation policies are eventually adopted, there will need to be some degree of adaptation, some of which will be undertaken at the individual level.

Originally posted at the Volokh Conspiracy.