By affecting relative economic returns, public infrastructure investments can induce major changes in private land use. We find that 30 percent of forested wetland depletion in the Mississippi Valley has resulted from private decisions induced by federal flood-control projects, despite explicit federal policy to preserve wetlands. Our model aggregates individual land-use decisions using a parametric distribution of unobserved land quality; dynamic simulations are used to quantify the impacts on wetlands of federal projects and other factors.

The problem of the commons is more important to our lives and thus more central to economics than a century ago when Katharine Coman led off the first issue of the American Economic Review. As the US and other economies have grown, the carrying capacity of the planet—in regard to natural resources and environmental quality—has become a greater concern, particularly for common-property and open-access resources. The focus of this article is on some important, unsettled problems of the commons. Within the realm of natural resources, there are special challenges associated with renewable resources, which are frequently characterized by open-access. An important example is the degradation of open-access fisheries. Critical commons problems are also associated with environmental quality. A key contribution of economics has been the development of market-based approaches to environmental protection. These instruments are key to addressing the ultimate commons problem of the twenty-first century—global climate change.

Increased concem by policy makers with the threat of global climate change has brought with it considerable attention to the possibility of encouraging the growth of forests as a means of sequestering carbon dioxide (National Academy of Sciences [NAS], 1992; James P. Bruce et al., 1996).1 The Kyoto Protocol to the United Nations Framework Convention on Climate Change (1997), which establishes emission reduction targets for the United States and other industrialized nations, states that carbon sequestration can be used by participating nations to achieve their targets. Moreover, even before the Kyoto agreement, this approach had become an explicit element of both U.S. and intemational climate policies (U.S. Department of Energy, 1991; United Nations General Assembly, 1992; William J. Clinton and Albert Gore, 1993). This high level of interest has been due, in part, to: suggestions that sufficient lands are available to use the approach to mitigate a substantial share of annual carbon dioxide (C02) emissions (Greg Marland, 1988; Daniel A. Lashof and Dennis A. Tirpak, 1989; Mark C. Trexler, 1991); and claims that growing trees to sequester carbon is a relatively inexpensive means of combating climate change (Roger A. Sedjo and Allen M. Solomon, 1989; Daniel J. Dudek and Alice LeBlanc, 1990; NAS, 1992). In other words, the serious attention given by policy makers to carbon sequestration can partly be explained by (implicit) assertions about respective marginal cost functions. I develop and demonstrate a method by which the costs of carbon sequestration can be estimated on the basis of evidence from landowners' behavior when confronted with the opportunity costs of alternative land uses. The simplest of previous economic analyses derived single point estimates of average costs associated with particular sequestration levels (Marland, 1988; Sedjo and Solomon, 1989; Dudek and LeBlanc, 1990; Edwin S. Rubin et al., 1992; Omar Masera et al., 1995). Often it has been assumed that land (opportunity) costs are zero (G. van Kooten et al., 1992; J. K. Winjum et al., 1992; New York State Energy Office, 1993; Robert K. Dixon et al, 1994). Another set of studies-essentially engineering/costing has constructed marginal cost schedules by using information on revenues and costs of production for altemative uses on representative types or locations of land, and then sorting these in ascending order of cost (Robert J. Moulton and Kenneth R. Richards, 1990; Richards et al., 1993). Simulation models include a model of the lost profits due to removing land from agricultural production (Peter J. Parks and Ian W. Hardie, 1995), a mathematical programming model of the agricultural sector and the timber market (Richard M. Adams et al, 1993), a related model incorporating the effects of agricultural price support programs (J. M. Callaway and Bruce McCarl, 1996), and a dynamic simulation model of forestry (Susan Swinehart, 1996). Lastly, an analysis by Andrew J. Plantinga (1995) adopts land-use elasticities from an econometric study to estimate sequestration costs. We draw on some of the best features of the previous studies, including the carbon levelization method of Moulton and Richards * John F. Kennedy School of Government, Harvard University, 79 John F. Kennedy Street, Cambridge, MA 02138, and Resources for the Future. Richard Newell supplied excellent research assistance; and valuable comments on a previous version were provided by Lawrence Goulder, William Nordhaus, Andrew Plantinga, Kenneth Richards, two anonymous referees, participants in seminars at the Universities of California at Los Angeles and Santa Barbara, the University of Maryland, the University of Michigan, the University of Texas, Harvard University, Stanford University, Yale University, Resources for the Future, and the National Bureau of Economic Research. The author alone is resDonsible for any errors. 1 After fossil-fuel combustion, deforestation is the second largest source of carbon dioxide emissions. Estimates of annual global emissions from deforestation range from 0.6 to 2.8 billion tons, compared with slightly less than 6.0 billion tons annually from fossil-fuel combustion, cement manufacturing, and natural gas flaring, combined (R. A. Houghton, 1991; T. M. Smith et al., 1993).

With a focus on two sorts of regulation—renewable electricity and clean energy standards, and automobile fuel-economy standards—we analyze problematic interactions that arise when state policies are nested within the domain of Federal policy. Here state efforts may fail to reduce greenhouse gas emissions nationally, and may compromise cost-effectiveness. Difficulties from overlapping regulations are avoidable through price- (as opposed to quantity-) based Federal policy. We identify some potentially positive interactions between state and Federal policies, and identify rationales for state action when Federal and state policies do not overlap.

The Effects of Environmental Regulation on Technology Diffusion: The Case of Chlorine Manufacturing by Lori D. Snyder, Nolan H. Miller and Robert N. Stavins. Published in volume 93, issue 2, pages 431-435 of American Economic Review, May 2003

In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change came into force, but without participation by the United States. Its impacts on emissions of greenhouse gases—including carbon dioxide (CO2), the primary anthropogenic driver of climate change—will be trivial; but scientific (Robert T. Watson, 2001) and economic (Charles D. Kolstad and Michael A. Toman, 2001) analyses point to the need for a credible international approach. Because the Kyoto Protocol’s ambitious targets apply only to the short term (2008–2012) and only to industrialized nations, the agreement will impose relatively high costs and generate only modest short-term benefits, while failing to provide a real solution (Joseph E. Aldy et al., 2003). For these reasons, most economists see the agreement as deeply flawed (Richard N. Cooper, 1998; David G. Victor, 2001; Warwick J. McKibbin and Peter J. Wilcoxen, 2002), although some see it as an acceptable first step (Axel Michaelowa, 2003). Virtually all agree, however, that the Protocol is not sufficient to the overall challenge. We describe the basic features of a postKyoto international global climate agreement, which addresses three crucial questions: who, when, and how. The respective elements are: first, a means to ensure that key nations—industrialized and developing—are involved; second, an emphasis on an extended time path of action (employing a cost-effective pattern over time); and third, inclusion of market-based policy instruments. I. Who—Expand Participation to Include All Key Countries

We examine the value of terroir—the set of special characteristics of a location that impart unique qualities to the wine produced. We conduct a hedonic analysis of vineyard sales in the Willamette Valley of Oregon to ascertain whether site attributes—such as slope, aspect, elevation, and soil types—or designated appellations are more important determinants of price. We find that prices are strongly determined by appellation designations, but not by specific site attributes. These results indicate that the concept of terroir matters economically, but that the reality of terroir—as proxied by locational attributes—is not significant.

Energy-efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use, but it has long been observed that these technologies may not be adopted by individuals and firms to the degree that might be justified, even on a purely financial basis. We survey the relevant literature on this “energy-efficiency gap” by presenting two complementary frameworks. First, we divide potential explanations for the energy-efficiency gap into three categories: market failures, behavioral explanations, and model and measurement errors. Second, we organize previous research in terms of the fundamental elements of cost-minimizing energy-efficiency decisions. This provides a decomposition that organizes thinking around four questions. First, are product offerings and pricing economically efficient? Second, are energy operating costs inefficiently priced and/or understood? Third, are product choices cost minimizing in present value terms? Fourth, do other costs inhibit more energy-efficient decisions? We synthesize academic research on these questions, with an emphasis on recent empirical findings, and offer suggestions for future research.

Energy-efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use, but these technologies appear not to be adopted to the degree that appears justified, even on a purely private basis. We present two complementary frameworks for understanding this so-called “energy paradox” or “energy efficiency gap.” First, we build upon previous literature by dividing potential explanations for the energy efficiency gap into three categories: market failures, behavioral anomalies, and model and measurement errors. Second, we examine the elements of cost-minimizing energy efficiency decisions, the typical benchmark used in assessing the gap's magnitude.