I am an Professor in Environmental and Resource Economics at the University of British Columbia, studying the economics of urban transportation. Alongwith my co-authors I ask: at their modest values, do carbon taxes reduce gasoline consumption? Do they encourage people to buy fuel efficient vehicles? Do older consumers, especially women, perform better or worse while negotiating a price for a new car? What are the economics of car sharing—like Car2Go, and Evo? And what explains the autonomous emergence of electric rickshaws in India?
Years ago, before I discovered the world of urban mobility, I also studied the impact of international trade on the environment, and the cost-effectiveness of programs designed to improve energy–efficiency (for example, rebates to energy efficient appliances and hybrid vehicles).
- Ph.D. Agricultural and Resource Economics (2003), University of Maryland
- MA, Delhi School of Economics, (1995), University of Delhi
- BA, Economics (1993), Jaihind College, University of Mumbai
- The Economics of Urban Transportation.
- The Effectiveness of Carbon Taxes.
- The Effectiveness of Environmental Policy.
- The Economics of Human Wildlife Conflict.
- The Political Economy of Environmental and Trade Policy
- International Trade and its Effect on the Environment.
Working Papers (drafts available on request)
Abstract: British Columbia’s carbon tax was introduced in 2008 and reached its current level of $30 per tonne of carbon dioxide in 2012. Per-capita gasoline demand in B.C. Has decreased by about 15% between 2007 and 2014. Is this decline attributable to BC’s carbon tax and other fuel taxes? This paper assesses the empirical evidence and finds that higher taxes reduce gasoline consumption over time. We also find evidence of carbon leakage, particularly during the 2010-14 period of high cross-border travel due to the strong Canadian Dollar. While the intensive margin of adjustment (car use) may be subject to highly volatile gasoline prices and exchange rates, the extensive margin of adjustment (car purchases) is also influenced by increasing taxes. We find conclusive evidence that higher fuel taxes and BC’s carbon tax are shifting car purchases towards higher fuel efficiency. A counterfactual simulation suggests that without BC’s carbon tax fuel demand per capita would be 7% higher, and the average vehicle’s fuel efficiency would be 4% lower.
SSRN Paper Download
Abstract: Endogenous quality and bargaining are important features of many markets but are typically omitted from studies of incidence. We develop a model with product upgrades and costly bargaining and find that tax rate pass-through only partially characterizes the welfare impact of taxation; consumers may respond to a tax or subsidy by changing product quality or by changing their bargaining effort. We apply the insights of our theory to the study of subsidies for green goods, specifically hybrid electric vehicles in Canada. We utilize highly detailed transaction data and leverage panel variation in subsidies across provinces for identification. Our baseline estimate finds that prices rises by $570 for every $1,000 increase in the subsidy. But, this pass-through estimate substantially underestimates consumer gains because a majority of this price increase ($459— 80%) is due to increased product quality in the form of additional options and features.
Abstract: In this paper we establish that there are large and persistent differences in final transaction prices for identical new cars, and that demographic characteristics explain at least 20% of this variation. Controlling for all observable aspects of the transaction, older consumers perform progressively worse, and this age premium is greater for women than for men. Our results suggest that the complex nature of vehicle transactions leads to price dispersion in this market. We also find that the worst performing groups older women have the lowest rates of market participation. It is likely that the sharp increases in women's education and labor force participation in recent decades allow younger cohorts of women to negotiate as well as men of their age.
Abstract: We provide an estimate of the expected direct greenhouse gas emissions for an average Canadian household in 17 Census Metropolitan Areas. We include emissions from the consumption of gasoline, natural gas, and electricity. Higher density is associated with lower gasoline consumption in personal vehicles, cold weather is associated with higher energy consumption for heating, and higher income and family size are associated with overall greater energy use. The average Canadian household produces the lowest greenhouse gas emissions in Montréal, Québec, followed by Vancouver, British Columbia. Highest emissions are in Edmonton, followed by Calgary. The source of energy used matters more than we expected. Despite its inclement weather, Montréal has the lowest emissions because hydropower supplies much of its household energy use (including home heating). Edmonton and Calgary have the highest associated emissions, due to their extreme weather, low density, and coal based electricity supply. The average household across all cities (weighted by population share) experienced a decline in its predicted CO2 emissions from 11.49 tonnes per year in 1997 to 9.7 tonnes in 2009 (16% over 12 years). One of the reasons for this decline is that population growth was higher in cities where emissions fell faster.
Abstract: This paper attempts to provide a starting point for discussion how smartphone-based taxi applications have changed the market for taxi journeys and the resulting implications for taxi market regulation. The paper focuses on the taxi app, Uber, and its impact on taxi markets. It provides a brief history of taxi regulation before outlining the underlying economic rationales of its current form, characterized as the “QQE” framework (quantity, quality and economic controls on operators). It argues that current regulation assumes that taxi markets are subject to three sets of problems that require correction by regulatory intervention, namely: those associated with credence goods, open access and transactions occurring in a thin market. It is then proposed that “taxi apps” solve both the credence good and thin market problems whilst largely mitigating the problems associated with open access. The paper then presents some potential problems for taxi apps, namely the potential for instability on supply and demand sides, collusion and monopoly. It also discusses concerns about driver background checks and safety. It concludes by arguing that instead of restricting the growth of the taxi market, regulators should focus on reducing the likelihood of monopoly and collusion in a taxi market led by apps.
Abstract: British Columbia's innovative accelerated vehicle retirement program (BC SCRAP-IT) offers a unique set of incentives which are aimed at achieving a high level of emissions reductions. The program supports alternative forms of transportation: public transit, membership in ride-share or car-share programs, and/or the purchase of a bicycle. However, it is not known whether the program constitutes an efficient allocation of government funding, or how the scheme compares to more basic programs offering only cash subsidies. Using a novel dataset combining data fromBC SCRAP-IT with British Columbia's AirCare emissions testing program, we find that BC SCRAP-IT results in substantial emissions reductions and that this type of incentives scheme compares favourably with previous subsidy-only schemes. On average, emissions reductions per vehicle are equivalent to a benefit of C$ 566, whereas the average program payout is C$ 886 per participant. We discuss policy implications and suggest a number of options to improve the efficiency of AVRP programs.
Abstract: In this paper we present an example where a domestic import-competing industry can benefit from a pollution tax borne by its consumers. We show that this pollution tax can be similar to a traditional trade barrier (such as a tariff) and can raise the price received by the domestic industry. Given an open economy, we highlight conditions under which domestic producers prefer a higher consumption-based pollution tax than is socially optimal. In contrast, when the economy is closed, we find that producers prefer a pollution tax that is lower than socially optimal. Domestic producers turn ‘green’ only when faced with import competition.
Abstract: We estimate the impact of utility cash rebates on the market share of ENERGY STAR appliances by exploiting the variation in timing and size of rebates across US states. We find that a dollar increase in the population-weighted utility rebate raises the share of ENERGY STAR qualified clothes washers by 0.4%, but does not affect dishwasher and refrigerator shares. Using information on energy saved by an ENERGY STAR appliance and assuming a redemption rate of 40%, the cost per tonne of carbon saved is about $140 for the clothes washers rebate program. The corresponding cost of a megawatt hour saved, about $28, is lower than the estimated cost of building and operating an additional power plant and the average on-peak spot price. We conclude that the ENERGY STAR clothes washers rebate program is, on average, a cost-effective way for utilities to reduce electricity demand.
Abstract: The most effective policy to address environmental externalities from vehicular fuel use is an appropriate fuel tax. Instead of raising fuel taxes, Canada's provincial and federal governments prefer to subsidize the purchase of fuel-efficient vehicles and the accelerated retirement of old vehicles. Are these programs effective? Can they be improved? We argue that subsidies for hybrids and electric vehicles are not cost-effective and instead recommend building on Canada's brief and modest experience with ”feebates." While British Columbia's pioneering accelerated vehicle retirement program is cost-effective, its success rests significantly on inducing participants to switch from personal vehicles to alternative transportation modes. Policy refinements will be needed to adapt the lessons learnt from this program to less favourable conditions elsewhere in Canada.
Abstract: British Columbia has numerous initiatives aimed at reducing the environmental impact of transportation. It has a comprehensive and pioneering carbon tax, the highest fuel tax rates in Canada, and some of the most stringent vehicle emission requirements in the country. BC residents can access incentives to retire their older vehicles, encouraging the choice of cleaner transportation. Consumers of hybrid vehicles previously received a rebate of their provincial sales taxes, and currently those purchasing electric or alternative fuel vehicles receive cash incentives. Do British Columbia’s policies work? What can we learn about them from the economic literature? How can they be improved?
Abstract: The literature of the second-best demonstrated the difference between exogenous price and quantity distortions. However, it is not always realistic to assume that distortions are beyond the policy makers control. Are price and quantity distortions different even if they are endogenized using a political economy setting? In this paper, I postulate a government that uses trade and pollution policy to maximize a weighted welfare function where domestic producers get a higher weight than consumers. International trade is regulated by either a tariff or a quota, and pollution is regulated using a pollution tax. I find that if the government has full control on both trade and pollution policy, endogenously created quantitative distortions (quantitative restrictions) have the same effect as price distortions (tariffs).
Abstract: We estimate the effect of tax rebates offered by Canadian Provinces on the sales of hybrid electric vehicles. We find that these rebates led to a large increase in the market share of hybrid vehicles. In particular, we estimate that 26% of the hybrid vehicles sold during the rebate programs can be attributed to the rebate, and that intermediate cars, intermediate SUVs and some high performance compact cars were crowded out as a result. However, this implies that the rebate programs also subsidized many consumers who would have bought either hybrid vehicles or other fuel-efficient vehicles in any case. Consequently, the average cost of reducing carbon emissions from these programs is estimated to be $195 per tonne.
Abstract: In this article, we analyze whether the Softwood Lumber Agreement between the United States and Canada imposed significant economic costs on industries that use softwood lumber in the United States. To ascertain this impact, we use an event study. Our event study analyzes variations in the stock prices of lumber-using firms listed at the major stock markets in the United States. We find that the news of events leading to the Softwood Lumber Agreement had significant negative impacts on the stock prices of industries using softwood lumber. The average reduction of stock prices for our sample of firms was approximately 5.42% over all the events considered. (JEL F13, F23)
Abstract: We analyze the role of National Treatment in the regulation of environmental product standards for an open economy. A social planner uses product standards to control emissions from the consumption of a traded good. We show that whether National Treatment of standards interferes with welfare-maximizing policy depends on the instruments available to the policy maker (consumption or emissions tax) and differences in the cost of complying with the standard. We also highlight the asymmetric incidence of the domestic and import product standard when taxes are suboptimal. This asymmetric incidence can also cause welfare-maximizing policy to violate National Treatment.
Abstract: Consider a small economy facing accession to a exogenously defined trade agreement. Before accession, the government controls trade and pollution policy. After accession, it retains control over pollution policy, but must allow free trade in all goods. This is a choice many governments face while joining trade agreements today. They decide whether greater market access to other members is more valuable than control over trade policy. I ask two questions. All else being equal what happens to environmental policy after accession? Second, what affects the choice of accession and how does this choice impact aggregate welfare? I show that a loss in control over trade policy alters the political incentives determining environmental policy. Before accession, producers can transfer a portion of their burden of environmental regulation to consumers through price increases. After accession the same regulation is borne entirely by producers. Owing to the change in burden, there exist plausible conditions under which the adoption of free trade can lead to more stringent environmental regulation, a reduction in the preferential treatment of special interest groups, and an increase in aggregate welfare.
Abstract: In this paper, we show that the commonly observed decline in primary (natural resource using) sector output and employment shares, often termed structural change, can be explained as an endogenous response to the presence of nature's constraint. Structural change takes place even if consumer preferences are homothetic, and technological progress does not discriminate against the primary sector. Under certain conditions, structural change allows an open economy to grow with natural resource sustainability. Sustained and environmentally sustainable economic growth is possible even if the natural resource is exploited under open access. Well-defined property rights are neither necessary, nor sufficient for sustainable growth. We show that there is no unique relationship between natural resource endowment and the rate of economic growth over the long run. Resource-rich economies may grow faster or slower than resource-poor ones.
Abstract: To control tailpipe pollution, governments often use environmental product standards and consumption taxes in conjunction (for example, the use of fuel economy standards and gasoline taxes to restrict automobile pollution in the US). Further, the choice of standards and consumption taxes is often independently influenced by special interests. For example, domestic producers have the incentive to influence environmental product standards, and likewise, domestic consumers have the incentive to influence the choice of the consumption tax. In this paper we explore the political link between environmental standards and consumption taxes in the presence of independent special interests. We find that despite the independence of special interests, the political outcome is inextricably linked. This political link is different from the welfare maximizing second-best link usually expected between two related policies, and is crucial in correctly anticipating policy outcomes. Specifically, we find that the government's choice of an environmental standard influences political incentives in the choice of the consumption tax. As the environmental standard falls, a higher demand for the environmentally damaging product develops. This higher demand increases the incentives for consumers to lobby for lower consumption tax. Under certain conditions, this political link is large enough to result in a complementary relationship between the two policies in equilibrium. The complementary relationship implies that a lower standard results in a lower consumption tax and vice versa when the standard is higher.
Abstract: Are certain types of commonly observed resource conservation contracts inefficient? In this paper we construct a model embodying realistic characteristics of resource contracts. We find that resource contracts that share these characteristics are economically inefficient. This inefficiency stems from a time-inconsistency inherent in the contracts. There are two possible ways to overcome this time-inconsistency. The first is to employ a sufficiently large penalty for early termination of the contract. The second and possibly easier method is to offer an upward sloping conservation payment schedule so far overlooked by policy makers. Under this payment schedule, the agent's ex ante and ex post contract choices coincide, social externalities are fully internalized, and the contractual outcome is economically efficient even in the absence of a penalty for early termination.
Abstract: We estimate the degree of trade diversion from provinces named under the Softwood Lumber Agreement (SLA) to provinces not named. Our regression results indicate that the SLA had a significant impact on the exports of non-named SLA provinces. Controlling for other factors, the SLA by itself would have increased exports from these provinces four times. The corresponding effect for the provinces named in the SLA is estimated at minus 5 percent. This decrease is not, however, statistically significant.
Abstract: In this paper, we present the economic determinants of the optimal length of a carbon offset contract. We find that because of a declining capacity of the soil to sequester carbon, the optimal length of the carbon contract is finite (the marginal benefit of remaining in the contract is declining over time, whereas marginal opportunity cost is rising). We also explore the effect of varying key parameter values on the optimal length in the contract. If the contract requires the farmer to sequester at a higher rate, the farmer chooses the contract for a shorter length of time, and this may decrease rather than increase social welfare. If society places a higher value on carbon accumulation, the contract is chosen for a longer length of time. Finally, if both the farmer and society have a higher discount rate, the model provides a somewhat surprising result. The overall time in the contract, and benefits from carbon accumulation are higher when the common discount rate is higher.
ECON/FRE 374: Land and Resource Economics
Do you wonder why, our fish are severely over-exploited? Record numbers of known wildlife species are going extinct? We seem to care little about the long-run well being of our forests? Some cities sprawl, while others have high density? Or do you care about other similar questions? If you do, this course is for you.
Offered in Winter I
FRE 420: The Economics of International Trade and the Environment
What is the impact of international trade on our natural environment? Will international trade speed up the degradation of our natural resources? Will it encourage higher levels of pollution? Will it shift polluting industries to poor countries with weak environmental policies? Or will international trade provide newer technology, and increase incomes and encourage a cleaner environment? Are international agreements around the environment effective? If you care about these questions this course is for you.
Offered in Winter II
FRE 526: Environmental Economics and Policy: Theory.
We will construct a framework to evaluate society’s optimal pollution and preservation/exploitation of natural resources. Recognizing that the market often does not get us to this optimal, what are the available policies to correct market failure? What are the realities of government intervention and government failure. We will illustrate this using the context of climate change, and marine resources.
Offered in Winter II.
FRE 527: Environmental Economics and Policy: Empirical Analysis.
We study the economics of urban environmental problems: topics such as urban development, transportation, and energy. We will learn how researchers typically find data, establish causality and draw inference in analyzing government policies. To aid your active learning of such policies, you will write three blog posts about policies related to the course. To aid your active learning of data analysis and inference you will write a research report. For this research report you will answer a pre-selected question using an accompanying dataset. These data are from papers published in leading journals of economics. The research questions are variations of the questions answered in those papers.
Offered in Winter II.
- The Transit Referendum and Congestion
- Regulating E-autos in India
- Why climate change is not on India’s radar
- Environmentally Friendly and Unaffordable Electric Vehicles
- The Misperception of Safety in an SUV