The Return of an Old and Battle-Tested FriendThe Clean Air Act

24 30 38

Can a Stew of Power Generation Regulations Clear the Air?New EPA Rules to Reduce Pollutants

Is a Carbon Tax the Only Good Climate Policy?The Reasons Why

Michael Porter at RFF:Looking for the “Win-Win” Solution

7 30 44

Incentives for a Stronger Safety Culture

The Next Battle:Containing Future Major Oil Spills

Conservation in Latin America and the Caribbean

28 34 40

What Homeowners Say about Energy Audits

Green Growth for China?

Resources

Wood Energy: An Overlooked Renewable 20

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OfficersPhil Sharp, President Edward F. Hand, Vice President for Finance and Administration Lea Harvey, Vice President for Development and Corporate Secretary Molly K. Macauley, Vice President for Research and Senior Fellow

Board of DirectorsRichard Schmalensee, Chair

Board MembersJames Asselstine, Vicky A. Bailey, Paul F. Balser, Anthony Bernhardt, Trudy Ann Cameron, Red Cavaney, John M. Deutch, Elaine Dorward King, Daniel C. Esty, Linda J. Fisher, C. Boyden Gray, David Hawkins, Rick R. Holley, Peter R. Kagan, Sally Katzen, Rubén Kraiem, Robert B. Litterman, Richard G. Newell, Henry Schacht, Robert N. Stavins, Joseph L. Stiglitz, Mark R. Tercek, Sue Tierney

Chair EmeritiW. Bowman Cutter, Darius W. Gaskins, Jr., Robert E. Grady,Lawrence H. Linden, and Frank E. Loy

Published since 1959, Resources (ISSN 0048-7376) contains news of research and policy analysis regarding environmental, energy, and natural resource issues. The views offered are those of the contributors and should not be attributed toResources for the Future, its directors, or its officers. ©2015 Resources for the Future. All rights reserved. No part of this publication may be reproduced by any means, either electronic or mechanical, without permission from the pub-lisher. Contact Pete Nelson at nelson@rff.org.Printed with soy-based inks on 50% recycled (and recyclable) paper containing 25% postconsumer fiber, processed chlorine free, in an FSC-certified plant.

Resources

EditorialPete Nelson, Director of Communications Sarah Aldy, Editor Lauren Caserta, Outreach Coordinator Shannon Wulf Tregar, Deputy Director for Government and Public Affairs Adrienne Young, Managing Editor Design and production by Amanda Nelson Design

Resources for the Future 1616 P St. NW Washington, DC 20036–1400 202.328.5000 • www.rff.org

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Cover photo: From 2005 to 2012, all nine states in the New England and Mid-Atlantic census divisions saw at least a 50 percent jump in the number of households that rely on wood as their main heating source, mainly in the form of split wood.© Adam Woolfitt/Corbis

Give a gift that

GROWS

1

Contents

features

16 Remembering Robert W. Fri(1935–2014) Colleagues from the US Environmental Protection Agency, the Smithsonian, the American Academy of Arts and Sciences, and RFF pay tribute to Robert W. Fri, an expert on energy and the environment who devoted himself to public service. Pete Nelson

18 Renewable Energyfrom LandfillsUS state and local governments provide incentives for important—but potentially expensive—projects that capture themethane emitted from landfills and convert it to energy. The question is, do they work?Shanjun Li, Han Kyul Yoo, andJhih-Shyang Shih

departments

03 Contributors

05 Welcome

06 Infographic

Federal Disaster Aid: Reflections fromSuperstorm Sandy

08 Goings On

Highlights from EPA Administrator Gina McCarthy’s Remarks at RFF

10 Commentary

Praying for Wind: Pollution Solution? Phil Sharp

13 Q & A

Targeting Forest Conservation Investments An Interview with Allen Blackman

45 Inside RFF

No. 188 • 2015

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20 Wood Energy in DevelopedEconomies: An OverlookedRenewableWood energy is often ignored in nationalconversations about renewable energy, yetit dominates renewable energy portfolios inmany developed nations—and is poised foreven more growth.Francisco Aguilar

28 Mapping the Value ofEcosystem Services in LatinAmerica and the CaribbeanWhen making decisions about conservationpriorities, examining the services providedby the diverse ecosystems in Latin Americaand the Caribbean helps to ensure thatpeople living in the region reap the benefits.Juha Siikamäki, Peter Vail,Rebecca Epanchin-Niell, andFrancisco Santiago-Ávila

Contents No. 188 • 2015

features cont.

34 What Homeowners Say aboutHome Energy AuditsLess than five percent of Americanhomeowners have had a home energyaudit, and many have not followed throughwith recommended changes. A householdsurvey helps explain why homeownersare not taking advantage of theseopportunities to save money.Karen L. Palmer and Margaret A. Walls

40 Green Growth for China?For China’s leaders, achieving a sustainablepath that balances economic growth andenvironmental protection is now a politicalnecessity. Reforms to the country’s uniqueinstitutional reward system and governancestructures are critical to this effort.Mun S. Ho and Zhongmin Wang

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In This Issue

Epanchin-Niell

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AguilarFranciso Aguilar is a 2014–2015 Gilbert White Fellow at RFF and an associate professor in the Department of Forestry at the University of Missouri. His research interests include the study of spatial phenomena occurring in the forest industry. Given the current potential for the development of biomass energy sources, he also is studying the economic impact of renewable energy initiatives on forest resources.

RFF Fellow Rebecca Epanchin-Niell’s research focuses on ecosystem management, particularly understanding how human behavior affects ecological resources and identifying strategies to improve management. Her work often draws on econometric and bioeconomic modeling approaches and incorporates spatial aspects of resource movement and use.

RFF Visiting Fellow Mun S. Ho centers his research on economic growth, productivity, taxation, and environmental economics. He is a senior economist at Dale Jorgenson Associates and contributes to the firm’s analysis of energy and environmental policies for the US Department of Energy and Environmental Protection Agency.

Shanjun Li is an assistant professor at the Cornell University Charles H. Dyson School of Applied Economics and Manage-ment. His research focuses on understanding consumer and firm behavior in the transportation and electricity sectors, the impacts of environmental and energy policies, and efficient policy design.

Pete Nelson is the director of communications at RFF. He joined RFF in 1997 as a research associate, focusing on environmental and transportation policy issues. In 2010–2011, he directed the communications operation of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. In 1991–1992, Nelson was a founder and editor-in-chief of Greenwire, a major online environmental news service.

Karen L. Palmer is a research director and senior fellow at RFF. She specializes in the economics of environmental and public utility regulation, particularly on issues at the intersection of air quality regulation and the electricity sector. Her work seeks to improve the design of incentive-based environmental regulations that influence the electric utility sector.

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Francisco Santiago-Ávila is a research assistant at RFF.

Phil Sharp became president of RFF on September 1, 2005.His career includes 10 terms as a member of the US House ofRepresentatives from Indiana and a lengthy appointment on thefaculty of the John F. Kennedy School of Government and theInstitute of Politics at Harvard University.

RFF Fellow Jhih-Shyang Shih’s research interests lie in quantita-tive analysis of environmental and resource policy and decision-making. He has extensive experience with modeling to study airquality, risk, surface water, and solid waste management. Recentresearch has focused on ozone and particulate matter control,recycling, small water systems, and space solar power.

Juha Siikamäki is an associate research director and seniorfellow at RFF. His research focuses on evaluating the benefits,costs, and cost-effectiveness of different environmental policyoptions. His work concentrates on natural ecosystems, such asforests, agricultural landscapes, and coastal ecosystems, and theempirical evaluation of different options for their managementand conservation.

Peter Vail is a research assistant at RFF.

Margaret A. Walls is a research director and senior fellow atRFF. Her current research focuses on issues related to urbanland use, ecosystem services, parks, and energy efficiency. Shehas analyzed transferable development rights programs formanaging land use in urban fringe areas, assessed the value ofdifferent types of parks and open space, and investigated energyefficiency issues in buildings.

RFF Fellow Zhongmin Wang’s research focuses primarily onenergy-related economic issues. He has studied pricing, compe-tition, regulatory, and environmental issues related to oil, gaso line, natural gas, and alternative transport fuels. He has started to research China’s energy and environmental issues and is alsointerested in the economics of online markets.

Han Kyul Yoo is a research intern at RFF.

Siikamäki

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In China’s case, the motivation formoving quickly to reduce its reliance oncoal is obvious and hit me immediatelyupon my arrival to Beijing on a recenttrip. The terrible air pollution that plaguesBeijing is not isolated and threatens thequality of life and economic future ofChina. I discuss my experience there in thisissue (“Praying for Wind: Pollution Solu-tion?” on pages 10–12), and my colleaguesMun Ho and Zhongmin Wang offer theiranalysis of the institutional reforms neededfor China to successfully pursue a moresustainable path in “Green Growth forChina?” (pages 40–44).

The climate challenge is not the onlyenvironmental and resource issue facingthe world, and this issue of Resourceshighlights other important work going onat RFF, including two exciting projects thatmap priority areas for land conservationusing an economic framework.

On a more personal note, we recentlylost some dear members of the RFF family,including former president Bob Fri, who ledthe institution for 10 years. All of us at RFFremain in his debt, and he continues to bean inspiration for us as we move forward.We have collected some remembrances ofhim on pages 16–17 of this issue.

In Pursuit of a Greener Path

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Phil Sharp, President sharp@rff.org

With the issuance ofthe US EnvironmentalProtection Agency’s(EPA) proposed CleanPower Plan, climatepolicy has taken centerstage in the UnitedStates. At RFF, we werepleased to host EPA

Administrator Gina McCarthy for a discus-sion, where she presented the economiccase for the new proposal. While regulationof greenhouse gases under the Clean AirAct may not be as economically efficientas a national carbon tax, cap-and-tradesystem, or similar market-based approach,the agency has made a strong attempt toallow and encourage states to use flexibil-ity and incentive approaches as they crafttheir compliance plans.

Climate change is a global challenge,and any progress will require internationalcooperation. As I write this, representativesare meeting in Lima, Peru, for the 20thmeeting of the Conference of the Parties tothe United Nations Framework Conventionon Climate Change, the last one beforethe much-anticipated summit scheduledfor Paris in 2015. The recently announcedagreement between China and the UnitedStates to lower their greenhouse gas emis-sions over the next 20 years has raisedhopes for a successful outcome in Paris. Itis imperative to this effort that these twonations take a leadership role. The fact thatthey are moving together is auspiciousand undercuts the arguments of factionsin both countries who cite lack of actionby the other as a reason to delay pursuingemissions reductions.

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Superstorm Sandy’s total losses have been estimated at $65 billion. The president issued a disaster declaration and Congress approved more than $50 billion in supple-mental funding for post-storm recovery.More than two years later, the northeastern coastal regions of the United States are still rebuilding, and much of that aid has yet to be allocated.

RFF’s Carolyn Kousky and Leonard Shabman have been investigating federal

disaster aid. They compared the Sandy supplemental to the 2012 outlays for federal agencies and found that it was greater than the amount spent by the US Environmental Protection Agency, National Aeronautics and Space Administration, State Department, Department of Justice, Department of Energy, and many others (Figure 1). As the costs of these disasters to the taxpayers have been rising, the number of presidential disaster declarations

$50.8

Federal Disaster Aid: Reflectionsfrom Superstorm Sandy

Figure 1. Sandy Supplemental Compared with 2012 Agency Expenditures

Sandy appropriationsExecutive Office of the PresidentGeneral Services Administration

Small Business AdministrationLegislative branch

Judicial branchNational Science Foundation

Corps of Engineers—Civil worksDepartment of Commerce

Environmental Protection AgencyDepartment of the Interior

NASAInternational assistance programs

Department of StateDepartment of JusticeDepartment of Energy

Other independent agenciesDepartment of Homeland Security

Department of Housing and Urban DevelopmentDepartment of Education

Department of TransportationOther Defense civil programs

Office of Personnel ManagementDepartment of Labor

Department of Veterans AffairsDepartment of Agriculture

Department of the TreasuryDepartment of Defense—Military

Social Security AdministrationDepartment of Health and Human Services

Source: US Office of Management and Budget. 2013. Fiscal Year 2014 Historical Tables: Budget of the US Office of Management andBudget. Washington, DC: US Government Printing Office. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/hist.pdf.

0 250 500 750 1000

Billions of US dollars

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has been growing significantly over time(Figure 2).

Most of the Sandy supplemental fundswere designated as “emergency” spend- ing for immediate recovery and thus areexempt from the normal appropriationsprocess and budget caps. But affectedindividuals and households will onlyreceive a fraction of the funds. Fundsprimarily were used to cover the costs tolocal governments, provide assistance tobusinesses, and rebuild infrastructure. Inaddition, the supplemental is funding manyprojects to reduce the damage from futurestorms. Though future-oriented projectsmay be worthwhile investments, many

had not been considered justified beforethe storm. According to Kousky and Shab-man, “If Congress is going to spend billionsof dollars on future risk reduction, a moredeliberate approach would evaluate risksaround the country, assess the risk reduc-tion investments, and then allocate fundingto maximize the benefits.”

FURTHER READINGKousky, Carolyn, and Len Shabman. 2012. The Realities

of Federal Disaster Aid: The Case of Floods. Issue brief 12-02. Washington, DC: Resources for the Future.

Kousky, Carolyn, and Leonard Shabman. 2013. A New Era of Disaster Aid? Reflections on the Sandy Supplemental. Issue brief 13-05. Washington, DC: Resources for the Future.

Figure 2. Major Disaster Declarations, 1935-2013

Source: Available from FEMA online at http://www.fema.gov/disasters/grid/year.

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On September 25, RFF welcomed GinaMcCarthy, administrator of the USEnvironmental Protection Agency (EPA),for a special Policy Leadership Forum.In her remarks, McCarthy discussed theeconomic benefits of halting climatechange. In a discussion with RFF PresidentPhil Sharp, she touched on topics rangingfrom the role EPA plays internationally toits proposed Clean Power Plan. A selectionof McCarthy’s comments from the eventfollows.

On the Worldwide Shift in PublicDialogue about Climate Change“The dynamics around climate seem tobe changing, not just here in the UnitedStates, but internationally. [Climate Weekin New York City] was an incredibly positiveexperience. I think the march was a clearsignal that people are getting restless,not about the actions we might take, butthey’re getting restless in that they need tosee leadership here and a response on anissue that they consider to be closed. Weneed action.”

On EPA’s Role as an International Leaderon Climate Change“We spend considerable amounts of timeworking with other countries to try to buildup their structure to address environmental protection at many levels. And then we try to share technical assistance andinformation on new technologies and howto do things in ways that allow them, whenthey begin to embrace the environmental

Highlights from EPAAdministrator Gina McCarthy’sRemarks at RFF

challenge, to learn from our lessons inadvance—and at a much quicker pacethan we were able to do while we weredeveloping these technologies and thisunderstanding.”

On the Climate Summit 2014“It was an incredibly positive moment, Ithink, and one where [participants] weretalking about the tipping point in anentirely different context. Originally, wehad been talking about, ‘How quickly dowe need to act before the climate is out ofcontrol?’ And this was more, ‘I think we’redone talking. The tipping point is that wehave solutions today. We need to put thesolutions into action at this point.’”

On the Ability of EPA’s Clean Power Planto Support US Climate Commitments“Judging from the tone of the discussion atthe United Nations, [the Clean Power Plan]is seen as a very big deal, not only for us interms of having an aggressive goal, but alsothe opportunity for our goal to influencehow other countries are going to cometo the table. I think it’s an important stepforward, and it’s recognized as such.”

On the Use of “Building Blocks” in EPA’sClean Power Plan“We’re allowing every state to do whatthey want in terms of developing their ownplans that they can send to EPA and say,‘I can get here this way the best.’ We’renot prescribing. We’re just opening upopportunities and, frankly, it’s a result of

both knowing that every state is differentand also knowing that climate change hasthe uniqueness of really being able to betackled in many, many different ways.”

On the Importance of ContinuingDialogue about EPA’s Clean Power Plan“We’re not slowing down on theseconversations because we’re learning a lot.And they continue to be incredibly positive,especially when we have meetings wherethe energy and environmental folks are atthe table. It’s when they go back to theirrespective corners that we have a lessrobust conversation.”

On Public Interest in Climate Change andEPA’s Clean Power Plan“I think people are worried and, frankly,I think people really want leadership on

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these issues. They want to know that we’renot all in our separate corners duking itout. And so I think that many of the statessee enormous value in approaching [theClean Power Plan] with this broad range ofopportunities.”

On the Market Influence of theClean Air Act“One of the things that’s good about [theClean Air Act], from a business perspective,is that it does provide a certain pathforward. The business industry and marketsare always looking for long-term signals.We just gave a very big long-term signalthat I believe, and from what I’m hearing, isreally opening the door to investments inthe United States.”

Visit www.rff.org/ginamccarthy for a video and complete transcript of the event.

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Before the wheels touched down lastMarch at Beijing’s spectacular airport, wecould smell the pollution. Burning eyes,raspy throats, and persistent coughing gotour attention faster than smart phone appswhich registered particulate levels (PM2.5) off the charts—15 times worse thanthe World Health Organization’s accept-able standard. We were lucky. The levelshad been far worse the previous week,and fortunately, that night gusting windsbrought major relief—lowering harm- ful levels to just three times the healththreshold.

Beijingers told us their ancestors prayedfor rain; they pray for wind.

The next day Premier Li Keqiang “declaredwar on pollution,” unveiling plans torestructure the economy and promote cleanenergy development to advance growthwhile cutting conventional pollutants and

greenhouse gas emissions. More recently,the government announced that it will notallow coal burning in the capital city by theend of 2020.

If laissez-faire environmentalism aidedChina’s incredible growth—which haslifted hundreds of millions out of extremepoverty—the lack of strong constraints nowundermines that growth. China confrontsserious competitive drag: major healthcosts on the horizon, social unrest, the lossof international markets for contaminatedproducts, and even the increasing reluc-

tance of business leaders to let their familieslive in heavily polluted cities.

Facing massive environmental deficits—extensive poisoning of the land, air, andwater—China will require years of aggres-sive policies and massive investment tocorrect the course. In the meantime, toget a few days of relief, Beijing is ready totrigger emergency measures: temporar- ily shutting down industrial plants andrestricting driving of the ever-expandingauto fleet. Other cities are experiment- ing with geoengineering: seeding cloudsto wash out some of the particulates—inshort, creating acid rain, trading one pollu-tion problem for another.

Landing back at Dulles Airport a weeklater, the air was breathable. But theairwaves in Washington carried loud voicesdenouncing the US Environmental Protec-tion Agency (EPA) as a threat to American

prosperity and to our global economiccompetitiveness.

While many factors enhance or inhibit anation’s economic growth, it should now beclear that 40 years of attention to the envi-ronment by federal and state governmentshas been accompanied by major economicgrowth and has created a major Americanasset. For most people, prosperity is morethan GDP growth.

It should also be clear that citizen activ-ism has been essential to the politicaladoption and enforcement of strong envi-

Beijingers told us their ancestors prayed for rain;they pray for wind..

Praying for Wind: Pollution Solution?

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ronmental policies. Indeed, in China, wherecitizen organizing is highly restricted, thegovernment has had to deal with extensiveenvironmental riots and, in a new environ-mental law, has decided to allow certainregistered groups to sue polluters in court.It can no longer fully control such activismin the era of social media.

In the United States, citizens have accessto government through elections, regulatory processes, and the courts. Citizen groupshave been highly organized and periodicallyrecharged when government and industryhave failed to protect citizen health.

Many loud critics of US environmen- tal constraints are fundamentally wrongin their claims that economic growth isimpaired. They call for stripping EPA of itslong-standing authorities and blocking theavenues enabling citizens to be heard. Suchproposals should be, and almost certainlywill be, rejected. China should be a lessonfor us.

In rejecting such extreme views, however,we must recognize that policy choices canhave economic consequences and activistsdo not always have the right answers ora strong case for government action. Thefuture of our economy is not clear, andpolicymakers must take care not to squan-der public or private resources.

We must be smart about how weproceed. First and foremost, we shouldbe guided by solid science as it continuesto advance, whether dealing with smallparticulates, carbon dioxide, or radia- tion. In general, this is a requirement EPAmust follow under the Clean Air Act, whichhistorically has had strong bipartisansupport. The abuse of science is not limitedto those who deny the impact of pollutants;deliberately or inadvertently it arises amongsome activists.

Second, policymakers should set prioritiesbased on the assessment of risks so that wefocus our resources on serious threats. Third,

Air pollution obscures the view of Guangzhou and the Pearl River.

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they should rely where possible on compli-ance strategies that are most cost-effective and likely to spur innovation. Finally, they should be willing to discard outdated or ineffective policies.

China and the United States are in far different places, but the desire for prosperity by both requires continual attention to the intersection of the economy and the envi- ronment. Neither nation has a guaranteed way to sustain economic growth with a healthy environment—but, to date, the Unit-ed States has forged the more viable path.

The winds of prosperity do not blow steadily and will turn against both countries if the two biggest emitters of greenhouse gases neglect their obligation to collectively

lead the global drive to mitigate climate disruption.

The recent agreement between Presi-dent Xi and President Obama represents an important pathway for partially addressing

this global challenge. Certainly the recent agreement undercuts the political factions in each country that have been justifying inaction by pointing to the failures in the other country—and it should help advance action by other nations as well.

We have much to learn from each other. We have much to do together if we are to provide posterity with options beyond pray-ing for wind. —Phil Sharp

This article orginally appeared on the Huffington Post’s The Blog, August 26, 2014.

China and the United States are in far different places, but the desire for prosperity by both requires continual attention to the intersection of the economy and the environment.

Tai Chi practitioners assemble against the backdrop of a polluted Shanghai skyline.

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Targeting Forest ConservationInvestmentsAn Interview with Allen Blackman

Researchers at RFFare developing a free,Web-based interactivedecision tool to helppolicymakers in Mexico,Central America, andthe Dominican Republicdecide where to investscarce forest conserva-

tion resources. The tool uses rich spatialdata on deforestation risk, forest ecosystemservices, and the cost of conservation tomap trade-offs in conservation investments.

During the past two years, a prototypehas been used by The Nature Conservancyto help target conservation investmentsfor the US Agency for International Devel-opment’s $29 million program, MexicoReducing Emissions from Deforestation andDegradation (MREDD). RFF Thomas KlutznickSenior Fellow and project director AllenBlackman recently talked with Resourcesabout how the tool empowers conservationdecisionmakers.

RESOURCES: What was the impetus fordeveloping the Forest Conservation Target-ing Tool?

ALLEN BLACKMAN: Deforestation anddegradation continue to be severe prob-lems in developing countries. They causeall kinds of local and global environmentalproblems, from soil erosion and flooding tobiodiversity loss and climate change. Butresources available to address those prob-lems are scarce. That means it is critically

important that the resources we devote toforest conservation have the biggest bangfor the buck possible.

Juha Siikamäki [RFF associate researchdirector and senior fellow] and I conceivedof the Forest Conservation Targeting Toolto do that. The goal is to help decisionmak-ers choose locations where conservationhas the greatest payoff. Building the toolhas been a team effort, and I think Juhaand I have put together a really good one.RFF Research Assistant Len Goff is respon-sible for programming the model, and itlooks good and works well because of him.Jessica Chu is our geographical informationsystems expert. We’ve just hired a post-docnamed Joe Maher who will play a big roleover the next couple of years. And MattHansen and Peter Potopov at the Universityof Maryland are creating our forest loss datausing satellite images.

The targeting tool is actually one of twoforest conservation decision tools we’redeveloping as part of a larger projectfunded by the National Aeronautics andSpace Administration’s SERVIR program andthe Moore Foundation. While the targetingtool can be used to plan future conservationinvestment, the other tool is for evaluatingthe effectiveness of specific policies, such asprotected areas and payments for ecosys-tems, that already are in use.

Looking ahead, we hope to combinethese two approaches. We want to enablepolicymakers to get answers to questionssuch as, “Where are payments for ecosys-tem services likely to be particularly effec-

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tive?” and “Where are protected areas likelyto work best?”

RESOURCES: An important feature of theForest Conservation Targeting Tool is thatit allows users to choose which conserva-tion goals are most important to them andgauge the consequences of those judg-ments. What factors come into play whenestimating the return on investment for agiven conservation investment, and howdoes the tool account for these?

BLACKMAN: The model works by dividingup forested land into parcels. The user candefine these parcels in a number of ways.Where we have data on property boundar-ies, they can be used. In other places, fine-scale administrative boundaries or simple one-kilometer cells can be used.

For each of these parcels, the modelestimates the conservation return on invest-ment, which depends on three factors.The first is the risk of deforestation in theparcel. If you have very low risk, investmentin conservation is not going to buy youanything additional.

The second factor is how much it costs toconserve forests in the parcel.

The third factor is the level of ecosystemservices the forests in the parcel produce.We look at three forest ecosystem servic-es—carbon storage; hydrological services,such as flood prevention and replenishingof aquifers; and the provision of biodiversityhabitat.

All users of the tool will not place thesame weights on these factors. For example,managers of REDD programs may care moreabout carbon than biodiversity. And manag-

ers of well-funded projects may care lessabout conservation costs than benefits. Sothe tool allows users to weight these factorsas they please, with an easy-to-use slidergraphic. In general, we have tried to makethe tool as flexible as possible so that userscan adapt it to their specific needs.

RESOURCES: So this rich dataset is the firstcontribution, and the second is that youhave developed a user-friendly, Web-basedinterface that allows a non-technical person

to use these data. When a user sits down atthis application, what does that person see?

BLACKMAN: The main way that data isconveyed is through a map. At the simplestlevel, the model does two things. First, itmaps deforestation risk, conservation costs,and ecological services. And second, it tellsyou where the greatest conservation bangfor the buck is.

A variety of pull-down menus and selec-tion tools allow the user to define the studyarea and parcels and to control how bangfor the buck is calculated, what the con-servation budget is, what information is dis- played, and what information is outputted.The maps are designed to be intuitive; thedata are displayed in a color-coded format,where red areas typically are high valuesand blue areas are low ones. The modelallows the user to take advantage of richonboard data and to download results inmap or tabular form.

RESOURCES: Where are you in the processof developing the Forest ConservationTargeting Tool?

It is critically important that the resources we devoteto forest conservation have the biggest bang for thebuck possible.

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BLACKMAN: We are two years into a four-year project. The goal, at the end of the project, is to launch both the targeting tool and the evaluation tool, make them publicly available on the Web, and train an initial set of users.

We are on track to meet that goal. The tool is basically ready to be used for Mexico.We are close to being at that stage for Central America and the Dominican Repub-lic. We’ve been taking trips to the region to lay the groundwork for training and dissemination in the last year of the project.

The software architecture is more or less where we need it to be except for one thing: creating the ability for users to upload and use their own data. We think that

the onboard data we have now is prettygood given the challenge of covering all ofMesoamerica. But users may be interestedin conservation efforts targeting just a smallpart of that region, and they may be inter-ested in a very specific question for whichthey have better data.

For example, let’s say they’re interestedin conserving habitat for jaguars in north- ern Guatemala. While our data on speciesrichness are reasonably good given ourlarge geographic scope, they are not the most accurate data if you are interested in one particular place or species. If users have better data on jaguars, or some other species, we want to enable them to upload and use those data.

The Forest Conservation Targeting Tool maps areas that will have the highest (red) to lowest (blue) return on conservation investment, as defined by the user’s particular budget and goals.

16

Remembering

RobertW. Fri

(1935–2014)

by Pete Nelson

The first time I met Bob Fri, hewas in uniform, as was I. He hadvolunteered for the unenviabletask of guiding a pack of 10-year-

old Cub Scouts, a job he was spectacularlywell suited for. He was clear, supportive,and always had a twinkle in his eye. WhenI joined RFF some decades later and foundmyself lucky enough to call him a colleague,it was obvious that those qualities werefundamental to him and I think explain hismarvelous career.

I arrived at RFF after Bob had steppeddown as president, so I have less ofa window on that career than othercolleagues do. My memories are morepersonal—of a man who from the first timeI met him to the last time I saw him wasalways generous to me in his support andadvice. His observations were often veryfunny and invariably wise.

We have assembled here tributes to Bobbased on some of the major institutionswhere he invested his considerable talents.The arc of his career spans service at RFF,

the Environmental Protection Agency, theEnergy Research and Development Admin-istration, and the Smithsonian’s NationalMuseum of Natural History, as well as majorengagement with the National Academyof Sciences and the Academy of Arts andSciences. His memory will live on in theresearch field and through support to RFFas a member of the Legacy Society.

Whatever the venue, Bob broughtto bear his considerable talent forleadership, his remarkable intellect, hisinsights into institutional behavior, hisstrong focus on the public good, andhis humor. Certainly Bob is a sterlingmodel for those who wish to advancepublic well-being.

At RFF, he continued his efforts tosupport our mission long after his timeas president—indeed, even in the lastweeks of his life. We are deeply grate- ful for his service. He will be missed byhis many professional friends here.

—Phil Sharp, president, RFF

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When the EPA was created in Decem- ber 1970, we clearly needed someone with deep managerial experience. Fortunately for the country, EPA, and me, Bob Fri was available. He was nominated deputy administrator by the president and confirmed by the Senate. He performed in superior fashion in the agency’s formative years.

Bob was quiet, self-effacing, and extremely talented. His contributions to our country’s well-being are incalcu- lable. People like Bob, whose enormous talent he consistently dedicated to the public interest, don’t come along very often. He will be sorely missed.—Bill Ruckelhaus, the first administrator of

the US Environmental Protection Agency

I am honored to share some highlights of my friend Bob Fri’s time at the Smithsonian Institution. Bob served as director of the National Museum of Natural History from 1996 to 2001, opening significant exhibitions, strengthening research, expanding collections storage, and building the Advisory Board. Under his leadership, the museum opened to the public Geology, Gems, and Minerals; African Voices; Vikings–The North Atlantic Saga; and a renovated rotunda. Bob commissioned a review of the muse- um’s scientific activities and laid the groundwork for a 125,000-square-foot expansion of the Museum Support Center, for collections and laboratories. He remained a steadfast supporter of the museum, serving as a trusted mentor to subsequent directors, staff, and board members.

—Roger Sant, regent emeritus of the Smithsonian Institution and vice

chairman of the Board of the Smithsonian National Museum of Natural History

Elected as a Fellow of the American Academy of Arts and Sciences in 2010, Bob Fri was deeply appreciated there for his extensive knowledge of energy policy and his astute leadership. As co-chair of the Alternative Energy Future project, Bob was an effective champion of the value of the social and behavioral sciences in understanding the social and regulatory barriers to the adoption of new energy technologies. We and all his collaborators will miss profoundly the wisdom, wit, vision, and generosity he brought to this and many other projects throughout his extraor- dinary career.

—Jonathan F. Fanton, president, American Academy of Arts and Sciences; and

Maxine L. Savitz, co-chair, Alternative Energy Future project

Bob Fri made presiding over a think tank look easy. It isn't. He made hiring the right people seem routine. It never is. He knew instinctively which of his subordinates’ mistakes to overlook and which to rectify. That's a rare quality.

Bob was very smart and skilled but always self-effacing. He seemed serious but laughed easily and had a great sense of humor. When everyone around him was flapping wildly, Bob was abso-lutely unflappable. Most importantly, Bob Fri encouraged service—to one's family, church, community, employer, and country. We could use many, many more just like him.

—Paul R. Portney, former president, RFF

At the time of printing, we were saddened to learn of the deaths of two other members of the RFF family, Kenneth D. Frederick and Robert A. Young. We will offer tributes to these RFF legends in the next issue of Resources.

18

Renewable Energy from

LANDFILLSShanjun Li, Han Kyul Yoo, and Jhih-Shyang Shih

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Americans produce about 4.4 poundsof waste per capita every day,according to the latest information

from the US Environmental ProtectionAgency (EPA). About 65 percent of thatwaste—a total of about 164 million tonseach year—is disposed in landfills. But isburial in a landfill the end of the story?Not at all. The organic matter in landfillsis eventually broken down by bacteria.This process produces an abundance ofgases, including methane. In fact, landfillsrepresent the third-largest source ofmethane emissions in the United States.Methane is a potent greenhouse gas andthus a concern—but it increasingly is beingcaptured and used to power homes andother establishments.

The first landfill gas energy projectsstarted operation in Wilmington and SunValley, California, in 1979. Today, more than630 US landfill gas energy projects generate16.5 billion kilowatt hours of electricity peryear—equivalent to the electricity consump-

tion of 1.5 million homes—and deliver 317million cubic feet per day of landfill gas todirect-use applications. EPA has identified an additional 450 landfill sites for the potentialdevelopment of energy projects.

However, these projects come at a price.Between 1991 and 2010, the average costfor a landfill gas energy project to generate a kilowatt hour of electricity was 4 to 5 cents.The wholesale electricity price was 2.5 to 3cents during that same period.

Given the important energy and environ-mental benefits of these projects—and thepotentially prohibitive price tag—state andlocal governments use various policy toolsto encourage municipal landfills to adoptthem. But do these incentives work?

To answer this question, we conductedthe first in-depth analysis of the factors thataffect project adoption, primarily using twodatasets: a database of potential landfillsites for landfill gas energy project develop-ment from EPA’s Landfill Methane OutreachProgram and a database of state tax incen-

19

tives and renewable portfolio standardsfrom the Database on State Incentives onRenewable Energy and Efficiency, main-tained by North Carolina State University.We looked at policy variables, the physicalcharacteristics of landfills, and energy prices.Our focus was on four types of governmentpolicies that offer incentives to landfill gasenergy projects: renewable portfolio stan-dards, production tax credits, investment taxcredits, and state grants.

Of the four policies, our analysis showsthat only two—renewable portfolio stan-dards and investment tax credits—havepositive and statistically significant effectson the development of landfill gas energyprojects.

Renewable portfolio standards—adoptedin 30 states—require utility companies tosupply a designated portion of their electric-ity from eligible renewable energy sources.Most states also allow utilities to use renew-able energy credits to satisfy their require-ments. When a landfill gas energy facilityis included as an eligible technology, it canobtain revenue from the electricity it sellsand the sale of renewable energy credits.

Investment tax credits are granted forinstallation of a renewable energy facil- ity, usually as a percentage of the cost toconstruct the system. In the seven statesthat have adopted such a policy, the rateranges from 10 percent (in Kansas) to 100percent (in Kentucky), with an average of35 percent.

These two policies account for the devel-opment of 13 of the 277 landfill gas energyprojects built during our data period (1991to 2010). In turn, those 13 projects have ledto an estimated 10.4 million metric tons ofcarbon dioxide–equivalent reductions ingreenhouse gas emissions. If these emissionsreductions are valued at the official US socialcost of carbon, they represent a net benefitof $41.8 million.

How Do Landfills GenerateEnergy?Landfill gas is generated from a chain of

microbial decomposition, volatilization,

and chemical reaction processes. The

most important of these is the anaerobic

decomposition of organic waste, which

takes place over the course of 10 to 50

or more years. This process emits gases

composed of 40 to 45 percent carbon

dioxide and 50 to 55 percent methane,

which is a primary constituent of natu-

ral gas and an important energy source.

To generate energy, landfill gas energy

projects first collect gas from the waste

in extraction wells distributed through-

out the landfill. A gas collection pipe

connects the wells and directs the gas to

a central point for processing and treat-

ment tailored to the ultimate use of the

gas—for example, electricity generation,

cogeneration, or direct use as a replace-

ment for natural gas.

What factors have spurred developmentof the remaining projects? Not surprisingly,high natural gas prices help. Other factorsinclude landfill age, weather, amount ofwaste, proximity to the electricity grid,and public versus private ownership. Inparticular, privately owned landfills are morelikely than publicly owned ones to adoptlandfill gas energy projects. This may reflectstronger incentives among private propri-etors to pursue additional sources of income compared to public officials operating local landfills for waste management only.

FURTHER READINGLi, Shanjun, Han Kyul Yoo, Jhih-Shyang Shih, Karen Palmer,

and Molly Macauley. 2014. Assessing the Role of Renew-able Energy Policies in Landfill Gas Energy Projects. Discussion paper 14-17. Washington, DC: RFF.

2020

21

WOOD ENERGYWOOD ENERGY IN DEVELOPED ECONOMIES

An Overlooked Renewable

Though it is often ignored in national conversations

about renewables, wood energy dominates renewable

energy portfolios in many developed countries—and is

poised for exponential growth. Francisco Aguilar sets

the record straight about this salient energy source.

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Considered to be the first form ofenergy harnessed by humans, woodwas long the primary source of heat

and illumination for people in every cornerof the globe. Today, it is estimated thatmore than 2 billion people in developingcountries rely primarily on wood and otherforest products for their daily cooking andheating needs, causing the public to asso-ciate the use of such resources with tropi-cal deforestation and poverty. Meanwhile,energy headlines in developed economieshave been dominated by stories aboutcoal and oil since the mid-1800s, makingit easy to forget that the exploitation ofthose fossil sources by humans has been arelatively recent development.

Both ideas—that energy derived fromforests is used primarily in developingnations and that its importance in theenergy portfolios of developed economiesis negligible—fail to capture the realityof current energy markets. Wood energyrepresents the leading source of renewableenergy in many developed countries acrossNorth America and Europe. And in theUnited States, wood energy accounts for25 percent of renewable energy consump-tion, second only to hydropower and moreprominent than wind and solar energy.This high level of generation has beenachieved thanks to healthy forest resourc-es supported by a combination of recentmarket and policy developments.

Wood Energy in the Twenty-FirstCenturyThe term “wood energy” refers to energyderived from solid, liquid, and gaseouswood fuels, including raw firewood,processed charcoals, pellets, briquettes,residual fibers, and black pulping liquors.Some of these fuels can be sourceddirectly from forests or indirectly asby-products from the wood processing

and pulp industries, whereas others canbe created from processed wood productsthat are recovered and repurposed at theend of their consumer life cycles. About 58percent of wood fuels across the UnitedNations Economic Commission for Europe(UNECE) region—a group of 56 countriesthat includes the United States, Canada,European nations, the Russian Federation,and the Commonwealth of IndependentStates—come from indirect sources. Therest are attributed to direct sources (32.9percent), recovered wood (3.8 percent),and unspecified supplies (5.4 percent).

Wood fuels are ultimately convertedto energy through combustion using oneof three main processes. Direct firing orco-firing with other fuels—such as coal—is likely the method most familiar toconsumers and requires the least amountof pre-processing in order to renderfuels usable. Woody feedstock can alsobe biochemically transformed (usingchemicals or enzymes) into sugars for theproduction of biofuels, or thermochemi- cally transformed (using heat, pressure,and catalysts) into biofuels and otherco-products.

The wide range of feedstocks andconversion processes available todayallows for a diversity of sectors that manu-facture and use wood energy. Forest-basedindustrial producers, such as pulp andpaper manufacturers, burn wood-basedfuel to generate electricity or heat usedinternally to support production. So doplants designed to generate electricity orcombined heat and power to sell to thirdparties. And residential consumers usewood-burning fireplaces or pellet stovesfor home heating. Technological progresshas allowed an increase in energy outputwhile reducing the amount of associatedpollution, including particulate matter, thatlimited wider adoption in the past.

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Modern Wood Energy MarketsOne of the most comprehensive sources ofinformation about wood energy markets indeveloped countries comes from the JointWood Energy Enquiry, a survey of woodenergy consumption in the UNECE region.The most recent results, from a 2011 JointWood Energy Enquiry answered by 27UNECE member countries, revealed thatwood energy accounted for 3.3 percent ofthe region’s total primary energy supply(Figure 1). Although absolute wood energyconsumption tends to fluctuate in theUnited States and Canada, the EuropeanUnion has experienced an increase inconsumption of more than 104 percent inthe last two decades. Notably, the share ofwood used for energy jumped during therecent recession, suggesting that energyproduction may have provided an alterna-tive market for wood fibers while demandfor more traditional products, such as paperand cardboard, declined.

Overall, the industrial sector consumesthe largest amount of wood energy at47 percent—representing about 282.8million cubic meters of wood—followedby residential consumers (33 percent),the power and heat sector (18 percent),and other undesignated uses (2 percent).These statistics are significant in highlight-ing the relationship between output andwood fuels, but they don’t reveal the largevariations among the ways that individualcountries consume wood energy. Figure 2on page 24 provides a fuller picture. Notethat Canada’s industrial sector is the largestconsumer of wood energy at 83 percent,whereas the power and heat sector is domi nant in Denmark (81 percent) and the Neth-erlands (76 percent). Additionally, half of allwood energy in Germany was shown to beconsumed by the residential sector, whileAustria has a near-equal balance amongpower and heat, industry, and residentialwood energy usage.

Figure 1. Share of Wood Energy in Total Energy Supply in Select United Nations Economic Commission-for Europe (UNECE) Member Countries

Source: Joint Wood Energy Enquiry 2011, a survey of wood energy consumption answered by 27 UNECE countries.http://www.unece.org/forests/jwee.html.

2424

Figure 2. Wood Energy Uses in Select United Nations Economic Commission for Europe (UNECE)Member Countries

Source: Joint Wood Energy Enquiry 2011, a survey of wood energy consumption answered by 27 UNECE countries.http://www.unece.org/forests/jwee.html.

Historically, the amount of wood energyproduced and consumed in an economyhas been heavily dependent on the localavailability of forest resources. In recentyears, markets have become regional andreached almost global scale, thanks torenewable energy mandates and techno-logical advances. The pelletization of wood,for example, allows producers to condensethe energy content found in wood fuels.By making the transportation of woodfuels more cost-effective, these advanceshave helped to encourage the creation ofa dynamic international market for woodenergy that may further diminish proxim- ity limitations. In the United States, forexample, where forested area has remainedstable over the last century and annualforest growth rates exceed removals andmortality, some of the excess biomass andby-products from the industry are pellet-ized and traded regionally and abroad. In2013, US wood pellet exports to Europereached nearly 3 million metric tons.

Despite technical advances, the growingwood energy market is still very much influ-enced by transportation costs and the loca-tion of nearby wood resources, explainingthe vast differences in wood market involve-ment among UNECE members. Nordic and Baltic nations are by far the most invested consumers of wood energy; in Finland andSweden, wood fuels generate more than 20percent of total primary energy supplies—the largest of any developed countries.Conversely, countries such as the UnitedKingdom and Ireland, which lack the vastforests of their Scandinavian counterparts,reported the lowest levels of wood energyconsumption in the survey. Still, somecountries have already circumvented thislink through imports; the Netherlands andDenmark both support higher-than-averageper capita wood energy consumption bysourcing wood from a number of othercountries. Their import of wood highlightsthe growing capacity of the internationalwood energy market.

25

Renewable Energy and MandatesWood energy’s role in modern energyusage is often understated. Its renewableenergy designation has made wood fuela popular choice for countries seeking tomeet specific renewable energy targets.The near-doubling of EU wood energyconsumption since 1990, for example, isoften attributed to the “20-20-20 by 2020”directive set by the European Parlia- ment and the Council of the EuropeanCommission. Officially known as Directive20009/28/EC, this policy requires that 20percent of the total primary energy supplyof participating countries comes fromrenewable sources, alongside a 20 percentincrease energy efficiency and a 20 percentreduction in greenhouse gas emissions bythe year 2020.

This increasing demand for renewablesalso has affected countries on the otherside of the Atlantic; Canada’s own woodenergy use is declining, but its exportof wood pellets—as well as that of the

United States and Russia—has dramaticallyincreased as a result of European importneeds (Figure 3). And the European Unionis expected to double its demand for woodfor energy from 435 million cubic meters in2010 to reach 860 million cubic meters in2030, which will likely require even greaterreliance on imports.

Wood energy commonly qualifies underrenewable portfolio standards adoptedby many states across the United States.Recently instituted state-level mandatescoupled with federal incentives under thePublic Utility Regulatory Policies Act of1978, and others, have resulted in greateruse of wood in coal-fired power plants anddedicated boilers. According to data fromthe US Environmental Protection Agency, 89coal-fired power plants use some quantityof biomass for the generation of power. Forsome power plants, incorporating woodas an energy feedstock can be fairly easy,requiring relatively modest investmentsin new infrastructure. Some estimates©

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This residential biofuel boiler burns wood pellets to supply the home with heat and hot water.

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Figure 3. EU Imports of Wood Pellets from Canada, Russia, and United States

Source: EuroStat.

suggest that about 10 percent of coal usedby power plants in the northeastern UnitedStates could be replaced with available andcost-competitive woody materials.

Although wood is widely recognized as arenewable source of energy, its designationas a carbon-neutral alternative dependson many factors. Trees can be replanted toreplenish stocks of harvested timber, and asignificant number of regional and nationalforest management programs have beenestablished worldwide to responsibly main-tain the number of trees available for futureharvests. Trees also absorb varying levels ofcarbon dioxide for use in photosynthesis.And although this does reduce the impactof wood fuel combustion on the environ-ment, it takes time to fix carbon back intogrowing trees. Unquestionably, the betteropportunities to reduce carbon emissionsusing wood energy arise from an integratedapproach that maximizes forest productivityand energy conversion, minimizesgreenhouse gas emissions along the supplychain, optimizes manufacturing by usingby-products for energy, and promotes thereplacement of non-renewable materialswith wood products.

The Future of Wood EnergyThe use of wood energy among manyUNECE countries, and possibly evennon-UNECE countries in Asia, is expectedto continue climbing through 2020. Butwood fuel’s long-term usage in futureenergy portfolios will likely be decided bya number of uncertain factors that differdepending on the sector. The use of woodenergy by the industrial sector is largely afunction of wood product output. Over- all economic growth and consumption of other wood products will have a largeinfluence on future wood energy used byindustry.

In the residential sector, any changes incompeting energy prices might pose a riskto—or present an opportunity for—theexpansion of wood energy consumption.The advent of inexpensive natural gassupplies in large areas of North Americawill likely cause a decline in its overallresidential wood energy demand. But insome particular areas, such as the north-eastern United States, wood energy is likelyto remain price competitive and become amore prominent source of household heat-ing. Whether natural gas becomes cheaply

27

Pelletization allows producers to condense the energy content found in wood.

available in Europe will affect residentialwood energy use.

Natural gas will likely play an importantrole in how much wood energy is used inthe power and heat sector, too, althoughrenewable energy mandates will likelysustain or increase wood energy use unlessthere is a significant paradigm change inpublic policy.

Wood energy use is highly dependent onpolicy interventions and timber markets,and significant questions remain aboutthe economic availability and feasibilityof obtaining more wood fuels than arecurrently being generated. Additionally,any expansion in the use of wood resourc-e for energy will need to be evaluatedand justified on the basis of its impacton the environment, including potentialforest depletion and net greenhouse gasgeneration. If the demand for wood energycontinues to grow, materials that wouldotherwise go into the manufacturing ofother wood products might be pulledinto the wood energy market, requiringlandowners to assess how much morewood they should allow to be removedfrom their forests. All these questions are

further dependent on whether timber andwood energy markets are able to producecompetitive prices and, ultimately, profit-able economic and environmental returns.

Wood energy is unique in that it requiresthe alignment of a diverse group of issues,including land management, energyproduction, socially acceptable environ-mental objectives, and varying meth- ods of fuel production and combustion.This alignment involves participants atevery stage of energy production, withforest owners, power generators, andindustry members working to supply theenergy requirements of policymakers andconsumers. Studying the elements thatmake up this network—from managementand economics to ownership and trade—can help foster a better understanding ofhow public policy influences the develop-mentof wood energy.

FURTHER READINGAguilar, Francisco X., ed. 2014. Wood Energy in Developed

Economies: Resource Management, Economics, and Policy New York: Routledge.

Goerndt, Michael E., Francisco X. Aguilar, and Kenneth Skog. 2013. Resource Potential for Renewable Energy Genera-tion from Co-firing of Woody Biomass with Coal in the Northern US. Biomass and Bioenergy 59: 348–361.©

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Mapping the Value ofEcosystem Services

in Latin America andthe Caribbean

Targeting ecosystems services for

conservation reveals broader gains than a

traditional focus on biodiversity might, according

to work by RFF’s Juha Siikamäki, Peter Vail,Rebecca Epanchin-Niell, and

Francisco Santiago-Ávila.

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In Latin America and the Caribbean,biodiversity and ecosystems are amongthe region’s most valuable assets and

of strategic importance for attaininglong-term sustainable development. Buttraditional conservation approaches thatfocus only on biodiversity may miss oppor-tunities to provide benefits in the form ofecosystem services to the people living inthe region.

Latin America and the Caribbean covervast areas on both sides of the equator,including a wide range of tropical, subtropi-cal, and temperate ecosystems, and eventhe icy waters off Antarctica. The regioncontains close to 800 million hectares offorested areas, 570 million hectares of wildsavannas, 700 million hectares of produc-tive lands, and 27 percent of the planet’savailable drinking water.

The region is known for its exceptionalbiodiversity. South America alone accountsfor half of the global terrestrial biodiver-sity. Some of the world’s most biologicallydiverse countries are situated in the region,including Brazil, Colombia, Ecuador, Mexico,Peru, and Venezuela. More than half theCaribbean flora cannot be found anywhereelse on the globe.

At the same time, the region is rapidlychanging in ways that put pressure onbiodiversity. Between 1950 and 2010, thepopulation in Latin America and the Carib-bean grew by more than 250 percent, andthe last 20 years have seen a near doublingof the GDP. As the countries in this regionbecome wealthier, the urban and middleclass populations grow. So, too, does thedemand for energy, water, food, forestproducts, land, and minerals. Now at acrossroads, the region faces an enormousopportunity and challenge to ensure thatecosystems are managed sustainably toprovide the services needed to meetthis demand.

Traditionally, conservation efforts tendto focus on areas unique in biodiversity,such as those with the greatest numberof species. But a more comprehensiveapproach is becoming popular that consid-ers broader ecosystem benefits in additionto biodiversity. Conservation funding canbe seen as an investment with measur- able returns—often in biophysical quanti-ties, such as the number of species, butsometimes also in dollars. At its core is theconcept of ecosystem services (see the boxon page 30).

Despite the fact that many ecosystemservices are not readily transacted andvalued by the market, they are stilleconomically valuable. Over the last severaldecades, economists have developed differ-ent approaches to determine the value ofnon-market benefits so that they can beconsidered alongside market values in themanagement and protection of ecosystems.Estimates of the value of ecosystem servicesin various parts of Latin America and theCaribbean are sparse, but what informationwe do have offers cues about the drivers ofthe value of ecosystem services.

We compiled these estimates from theeconomics literature and were able todevelop models to predict localized ecosys-tem values as a product of the ecologicaland socioeconomic factors of each area. Wefound considerable geographic variation inthe value of ecosystem services. And whenthese values are combined with the rate ofhabitat destruction—which drives the lossof ecosystem services—a clearer pictureemerges of areas where potential conserva-tion investments would have the highestreturns in protecting the value of ecosystemservices.

These areas are not necessarily wherebiodiversity is richest or ecosystem valuesare highest. Instead, they may be locatedin places where ecosystem services values©

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The Economic Benefits of Healthy EcosystemsEcosystems in Latin America and the Caribbean support a wide range of human activi-

ties—such as agriculture, fishing, forestry, and tourism—that produce market goods and

services. These activities play important roles in supporting income and employment

in the region; in particular, the four sectors just mentioned employ 17 percent of the

region’s workforce and account for 15 percent of its GDP.

The same ecosystems also contribute many services that are not bought and sold

in markets. For instance, ecosystems provide habitats for various species, help control

floods and water runoff, and purify and store water for drinking and other uses. They

maintain soil productivity and support the pollination of crops and other vegetation.

And they maintain and improve air quality, provide climate control, contribute to the

carbon cycle, and support a wide range of amenities to people.

Consider the following examples of the importance of ecosystems to economic

activities:

» In Latin America and the Caribbean, 73 percent of freshwater use, critically

supported by the availability of wetlands, is for irrigated agriculture, which contributes

10 percent to the region's GDP.

» Supported by rich natural resources that range from the Amazonian jungles to the

sandy beaches of the Caribbean, regional tourism revenue in 2011 was US$364.3 billion.

» Fish consumption is extremely important throughout the region and is often

supported by artisanal fishing; in Brazil, it represents over half of production.

are mid-range but threaten to plummetbecause of high rates of habitat loss. Theseinclude parts of the Amazon, southeasternAtlantic Coast, Gulf of Mexico, and parts ofthe Caribbean and Mesoamerica.

Estimating Ecosystem ValuesTo determine the magnitude of ecosys- tem values in the region, we turned tothe studies that have collected evidenceof economic benefits from ecosystemsin Latin America and the Caribbean. Welooked for estimates that are tied directlyto an ecological endpoint and expressed ina clear and consistent ecological unit, likedollars per hectare. The resulting 88 valueestimates covered a wide range of ecosys-tem services and analytical approaches, andthe estimates themselves vary significantly.The estimates vary by ecosystem serviceaddressed but are less distinguished by

ecosystem type (see Figure 1 on page 31).To understand the drivers of the value ofecosystem services, we developed modelsthat predict the value of local ecosystems(in dollars per hectare) as a product of theseecological and socioeconomic factors:

» ecosystem characteristics (coral reef,wetland, tropical forest, other forest, other);

» ecosystem service (protective services,recreation, biodiversity, genetic resources,food, nursery);

» provisioning services (raw materials,soil maintenance, water); and

» study area characteristics (GDP percapita, population density, protected areastatus).

Our analysis reveals systematic asso-ciations between the value of ecosystemservices and the ecological and socioeco-nomic characteristics of the ecosystem. Forexample, we found that the value of ecosys-

31

tem services increases with the income level and population density of the study area. We also find that the estimated value of coastal protective services (for example, storm and flood protection) tends to be highest on a per hectare basis, on average.

Mapping the Value of Ecosystem ServicesUsing these associations, we projected the local value of ecosystem services through-out Latin America and the Caribbean. We developed these values by “ecoregions,”

which denote biogeographic delineations of the region based on distinct collections of natural communities and species.

Our predictions (Figure 2a on page 32) show considerable geographic variation in the estimated value of ecosystem services, which ranges from near zero to several thousand per hectare. We find the highest values for much of southern South Amer-ica, parts of the Caribbean, and parts of Mexico. On the other hand, parts of Meso-america, much of the rest of the Caribbean, and interior South America have relatively low values.

Where Are the Greatest Potential Gains from Conservation?When thinking about where the most potential exists to generate benefits from increased conservation efforts, the story doesn’t end here. Another important element to consider is which ecosystems are under the biggest threat. In other words, where are ecosystem values expected to decline the most, given ecosys-tem degradation? When overlaid with a map of predicted habitat loss, the picture changes dramatically.

Habitat loss is one of the key concerns in the protection of ecosystem services. The value of these services often depends on the quality and extent of ecosystems, which are reduced by the conversion of land for uses such as agriculture, forestry, or urban development.

A comparison of the value of ecosystem services (Figure 2a) and their past losses triggered by habitat loss during the first decade of the century (Figure 2b) shows a discrepancy between the two. What emerges is that losses in value are larg- est in ecoregions concentrated in parts of the Amazon, southeastern Atlantic coast of South America, and parts of the Carib-bean and Mesoamerica. Ecosystem service

Wetland

Coral reef

Other forest

Tropical forest

Figure 1. Estimated Values of Ecosystems by Studies Included in the Analysis

US$ per hectare per year

Soil mainte-nance

Biodiversity

Bio- prospecting

Raw minerals

Water

Food

Nursery

Recreation

Coastal protection

0 .01 1 10 100 1k 10k 100k

0 .01 1 10 100 1k 10k 100k

Value by ecosystem type

Value by ecosystem service type

US$ per hectare per year

Note: Median values are indicated by the white lines within the boxes.

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values there are midrange, but the rate of habitat loss is high. In these places, we see losses in value on the scale of roughly a few hundred dollars per hectare per decade. On the other hand, in parts of southwest-ern South America, where the estimated baseline value of ecosystem services is exceedingly high (Figure 2a), losses have been relative small.

These findings highlight the potential for developing conservation interventions and policy in light of the geographic varia-tion in the value of ecosystem services at stake. Consider a hypothetical conservation program to prevent the loss of ecosystem services in Latin America and the Carib-bean. As the maps indicate, the greatest returns under such a program may not come from regions where the current value of ecosystem services is the high-est. Instead, the greatest losses of ecosys-tem services may be prevented where the current value of ecosystem services

is somewhat lower but where the loss of habitat is relatively high.

The maps also indicate that the value of ecosystem services in Latin America and the Caribbean are much broader than the value of biodiversity alone. Whereas biodiversity in the region is particularly high in areas such as the western Amazon, Colombia, Ecuador, and northern and central Andes (the eastern slope of the Andes is considered the world’s most biodiverse area), the areas of espe-cially high value of ecosystem services are more broadly distributed and include even areas of relatively low biodiversity, such as several of the southernmost ecoregions. This discrepancy underscores that a focus on species does not necessarily account for the full range of services ecosystems have to offer. But conservation agencies may be interested in both biodiversity and ecosys-tem services, so the task of priority setting may ultimately be to find target regions that best support both objectives.

Figure 2. Predicted Value (per hectare) of Ecosystem Services and Loss in Ecosystem Services due to Habitat Loss, 2000–2010

a. Value of ecosystem services b. Value of ecosystem service loss due to habitat loss

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34

What Homeowners Say about

HOME ENERGYAUDITS

Only a small percentage of American homeowners

have had an energy audit, and many have not

followed through with recommended changes.

Karen L. Palmer and Margaret A. Walls conducted

a household survey to better understand why.

Building scientists and energy effi- ciency experts have a message forhomeowners: plenty of cost-effective

improvements exist to lower your energybills, from simple weather stripping and airsealing to appliance upgrades. But manyhomeowners don’t know where to begin.They might know they have an old furnace,but they have no idea how effective theattic insulation is, where the air leaks in thehouse are, and which improvements arelikely to pay off.

This is where home energy audits comein. A professional can determine where ahouse is losing energy and how to correctthe problem. Yet only about 4 percentof the homeowners surveyed in the USDepartment of Energy’s 2009 Residential

Energy Consumption Survey reportedhaving an audit recently. Even amongpeople who have had audits, the follow-upwith improvements is usually incomplete.If energy efficiency investments pay forthemselves in energy savings, why aren’tmore homeowners taking advantage ofthese opportunities?

We recently surveyed 1,784 homeown- ers across 24 states to help answer thisquestion. A total of 566 respondents saidthey had an audit in the past four years.(This percentage differs from the nationalaverage because our survey techniqueinvolved a stratified sampling approach toensure we got a large enough number ofpeople with audits to be able to statisticallyanalyze the data.) ©

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Of those who hadn’t had an audit, 29 percent said they had “never heard of them,” and 16 percent said that they “had heard of them but didn’t know anything about them.” This finding alone suggests that consumers are lacking the information they need to make wise energy efficiency decisions

The Costs and Quality of HomeEnergy AuditsDuring a typical home energy assessment,auditors look for air leaks all around thehome; evaluate air ducts for leaks; assessinsulation in the attic, crawlspace, walls,and around pipes; and evaluate heating, airconditioning, and water heating equipment.They may use special techniques, such as ablower door test to manipulate air pressurein the house and draw air through unsealedcracks and openings, and infrared imagingto show where heat is escaping. These andother services are listed in Figure 1.

To assess the quality of the audits theyreceived, we asked the respondents whohad audits which of these services theauditors’ assessments included. As seenin Figure 1, almost 80 percent of respon-dents reported that their auditor “person-

ally showed them trouble spots,” but only26 percent were provided photos of thetrouble spots.

Only 64 percent of homeowners reportedthat their audit involved a blower doortest, which is standard practice for a qualityhome energy audit and required bythe Building Performance Institute (BPI),a national standards development andcredentialing organization for residentialenergy-efficiency retrofit work. In fact,in our previous survey of home energyauditors (see Further Reading), 91 percentreported that they use blower door testsfairly often or always. Similarly, 80 percentof auditors in that survey said that theyanalyze past energy bills fairly often oralways, and 63 percent said they use infra-red imaging fairly often or always. In thissurvey of homeowners, the correspondingnumbers are 64 percent and 56 percent.What explains the discrepancy? All theauditors in the earlier survey were BPI certi-fied and many were members of EfficiencyFirst, a trade association that developsbest practices and advocates for the homeenergy efficiency workforce. Our currentsurvey seems to suggest that many home-

Figure 1. Percentage of Survey Respondents Whose Audits Included Particular Services

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A home energy auditor conducts a blower door test to locate any unsealed cracks and openings.

owners may be using auditors who are notBPI certified. Certainly it shows that not allauditors are using the same techniques andperforming the same services. People in ourtwo pre-survey focus groups also reportedquite different audit experiences.

We also asked homeowners in our surveyhow much they paid for their audits andgot some unexpected responses. Almost70 percent received their audits for free.However, in our survey of auditors, theaverage price was $349. Thus, most home-owners in our sample received heavilysubsidized audits. These subsidies couldcome from utilities or from local govern-ment programs to promote energy effi-ciency. It’s also possible that some survey respondents could be part of the federalWeatherization Assistance Program, whichprovides free audits and free or heavilydiscounted energy improvements and retro-fits to income-eligible households. However,the income levels of the respondents in our

survey who reported paying zero are mostlytoo high to qualify for this program.

Are these free audits different from thepaid ones? We looked into this, and theanswer is yes. Among respondents whopaid for their audits, 83 percent had a blow-er door test compared to only 55 percentof those who got the audit for free. And71 percent of paid audits included infraredimaging, while only 51 percent of free audits incorporated this test. Similar results show up for analyzing bills, showing pictures, and other such techniques.

Taking Advice: Do Homeowners FollowUp on Home Energy Audits?Given these differences, subsidies might notbe serving their intended purpose to induceenergy-efficient changes: our survey revealsthat audit quality, as measured by the tech-niques and services included in Figure 1, has a considerable effect on whether home-owners follow auditors’ recommendations.

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Other factors, such as procrastination andcost, also play a large role.

The two most common recommenda-tions from home energy audits are toseal air gaps and add insulation. Air gapsare often identified during an audit usinga blower door test and can be aroundwindows and doors, in attics, and in manynooks and crannies of the home. The mostcommon area for insulation is the attic, butideally crawlspaces, walls, and pipes arealso insulated.

In our survey of home energy auditors,more than 90 percent said they recommendair sealing and insulation improvementsfairly often or always, and in our homeown-er survey, 67 percent said that their auditorrecommended air sealing. However, only 41percent of homeowners did all the air seal-ing that was recommended in their audit.Another 38 percent said they did some, and21 percent said they did none.

Auditors recommended attic and crawl-space insulation somewhat less frequently;in our case, only 56 percent of homeownersreported receiving such a recommendationfrom their audits. Of these, about 41 percent

said they did all the insulation improve-ments that were recommended, and 36percent said they did none.

Audit follow-up appears to vary with thequality of the audit. Figure 2 shows thatfollow-up on insulation recommendationsis higher when the audit includes specialtests and services that are indicators ofhigher quality; the results are similar for airsealing. A few of these features are associ-ated with a difference that is statisticallysignificant: a blower door test, personallyshowing the homeowner where changesneed to be made, and providing estimatesof energy savings.

What are the main reasons peoplereport for not taking their auditors’ advice?Procrastination seems to be the mostimportant reason: nearly 50 percent ofhomeowners said the main reason for theirfailure to seal air gaps was that they “hadnot gotten around to it,” with a slightlysmaller percentage saying the same forrecommendations about insulation. Insuf-ficient energy savings is the second most cited reason for failure to do air sealing,while insufficient savings and high cost of

Figure 2. Extent of Follow-up on Insulation Recommendations by Whether Audit IncludedParticular Services

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improvements are equally cited as reasons for not adding insulation.

Do homeowners find that audits areuseful? We asked homeowners to rate thequality of the information in their homeenergy audit on a scale of 1 to 10, wherehigher numbers mean greater satisfaction.The mean and median rating across respon-dents was 7. This seems pretty high to us.However, the responses varied widely: while12 percent gave a rating of 10, 4 percentgave a 1 or a 2, and about 11 percent ratedtheir audit below 5.

Perhaps a better indication of the levelof satisfaction is whether a homeownerhas recommended getting an audit toothers. Though homeowners claim to thinkhighly of their audits, at least based on thenumerical rating, only 45 percent reportedthat they had recommended home energyaudits to others, and only about one-thirdrecommended the actual auditor they used.

The Importance of Salience andAttentiveness in Energy DecisionsAs economists, we like to think that, by andlarge, people make decisions based on arational accounting of costs and benefits.In the case of home energy audits, home-owners are paying for information that

should allow them to make better energyinvestment decisions. If the benefits of thatinformation outweigh the costs of acquir-ing it, we would expect them to spend themoney for an audit.

But recent research on behavior andenergy efficiency suggests that manyother factors come into play in people’sdecisions about energy use and relatedinvestments in appliances, equipment,and buildings. The salience of energy costsand attentiveness to energy usage aretwo important factors identified by manyresearchers. In our survey, we asked somequestions related to energy attentivenessand salience, and the data hint that someof these factors may influence the decisionprocess.

One class of variables associated with thedecision to get an audit pertains to home-owners’ awareness of the energy-relatedfeatures of their houses. Homeowners inour survey who had audits were more likelyto know the age of their heating systems(at the time of the audit) than homeown-ers who had not had audits. They were alsomore likely to have a general idea of theirannual total energy expenditures and espe-cially more likely to know how much atticinsulation they had.

An infrared thermal imaging system shows a distinct cold (blue) area within the home’s insulation.

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Figure 3. Number of Friends or Neighbors Who Had Audits, by Respondents Who Had Auditsand Those Who Did Not

People who had audits were also morelikely to service their heating and AC equip- ment regularly and set their monthly elec-tricity bill to be paid based on an annualaverage level of monthly use (to avoidmonth-to-month fluctuations). They werealso more likely to have received a homeenergy report—a letter, usually from thelocal utility, comparing their home’s energyuse to that of other, similar houses.

Between homeowners in our surveywho had audits and those who hadn’t, wesaw the sharpest contrast in the numberof friends or neighbors that each groupsaid they knew had had audits. Among thenon-audit respondents, only 7 percent saidthat they knew someone whose home hadbeen audited. In contrast, almost 50 percent of the respondents who had an audit saidthey knew one or more persons whosehome had been audited prior to havingtheirs (Figure 3). Among those who had hadaudits, 21 percent knew one other personwho had an audit, 21 percent knew two orthree people, and nearly 6 percent knewmore than three.

We cannot conclude from this preliminarylook at the survey data that attentiveness toone’s house and energy use or cues, such

as receiving a home energy report, spurspeople to get an audit. But the associationswe are seeing, especially in light of previousresearch, reinforce the need to dig into thispossibility more deeply.

If our planned in-depth analysis revealsthat attentiveness and cues do indeedaffect audit uptake, there could be impor-tant policy implications. Subsidies and otherfinancial incentives for audits may havelimited effects in the absence of comple-mentary information programs that makeenergy use more salient to homeowners. Orit might be important to combine financialincentives with deadlines. Another optionmay be a series of cues to jog people’smemories. Conducting careful field experi-ments around some of these options couldprovide useful information as to whatworks. Our survey should provide guidancefor such experiments.

This article originally appeared as a three-part series on RFF’s blog, Common Resources.

FURTHER READINGPalmer, Karen, Margaret Walls, Hal Gordon, and Todd

Gerarden. 2013. Assessing the Energy Efficiency Informa-tion Gap: Results from a Survey of Home Energy Audi- tors. Energy Efficiency 6(2): 271–292.

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Green Growth for

CHINA?

Mun S. Ho and Zhongmin Wang trace

China’s rapid economic growth and the associated

environmental problems to its unique and

fundamental institutions—and discuss

the implications for a more sustainable path.

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T he recent history of China has beenone of spectacular economic growth.The country’s GDP soared from 3.43

percent of global GDP in 2000 to 11.35percent in 2012. Its per capita income ofUS$6,100 in 2012 puts China in the categoryof middle-income countries such as SouthAfrica, Egypt, and Thailand.

At the same time, China has experiencedvery serious environmental degradation. Itsenergy consumption has increased rapidly,and it overtook the United States as the

world’s largest energy consumer in 2010.Coal has been China’s dominant source ofenergy, accounting for 66.6 percent of thecountry’s total primary energy consumptionin 2012. Given this heavy reliance on coal,China became the world’s largest carbondioxide (CO2) emitter in 2006, and in 2012it accounted for 29 percent of global CO2 emissions.

In addition, China’s air, water, and soilhave been polluted to alarming degrees.Extreme air pollution in China, for example,is making international headlines, andthis is not just anecdotal: In March 2014,China’s Ministry of Environmental Protec-tion announced that only 3 of the 74 largeChinese cities it monitors met official stan-dards for air quality in 2013.

The environmental situation is so direthat the country’s prior consensus of focus-ing on economic growth over environmen-tal protection has broken down, spawning interest in the potential for green growthstrategies for China. “Green growth” is apolitically attractive term because it speakssimultaneously to two key challenges

currently faced around the world: econom-ic growth needed to improve the livingstandards of the world’s growing popula-tion, and measures needed to address theissues of environmental sustainability andclimate change.

Sweeping energy and environmentalpolicies—such as China’s enormous effortto decarbonize its energy system throughincreased reliance on wind and nucleargeneration—are one crucial step towarda green growth path. But they will not

succeed without the support of changes tothe country’s institutional rewards systemand governance structures, which until nowhave prioritized GDP growth over environ-mental protection.

The Relationship between GDP Growthand the EnvironmentGreen growth is generally used to meaneconomic growth that is environmentallysustainable. Thus it carries with it the claimthat environmental protection is, at a mini-mum, compatible with economic growth.When economists think about the relation-ship between GDP growth and the environ-ment, they often point to the environmentalKuznets curve.

As income rises over time, environmentalpollution first becomes more serious butthen eases after the GDP per capita in thecountry or region reaches certain levels.This stylized fact is known as the environ-mental Kuznets curve, where the verticalaxis is environmental degradation insteadof environmental quality (Figure 1 on page42). The environmental Kuznets curve is the

The environmental situation in China is so dire that the country’s prior consensus of focusing on economic growth over environmental protection has broken down.

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Figure 1. An Environmental Kuznets Curve

On the other hand, environmental poli-cies can be costly and thus can have anegative economic effect if not designedoptimally—leading to layoffs, for example,or forced early retirement of existing physi-cal capital.

While the idea that there are no trade-offs between growth and the environmentmay be controversial, it is well acceptedthat specific projects can be win–winand that certain types of policies, such asremoving energy subsidies, can be win–winwith a proper set of supplementary redis-tributive policies.

What Led to China’s Rapid EconomicGrowth and Environmental Degradation?To understand China’s spectaculareconomic growth and its environmentalfailures, and to determine how the countrycan begin to grow more sustainably, it isnecessary to understand China’s institu-tional reward system. China’s governancestructure can be characterized by economicdecentralization and political centralization.Regional governments are directly respon-sible for, and deeply involved in, developingthe economies within their jurisdiction, andthese subnational governments carry out

subject of vigorous debate in the economicsliterature. Many observers have noted thatthis curve does not fit many indicators ofenvironmental quality, such as soil fertilityand the health of fisheries, as well as levelsof greenhouse gas emissions. While thericher countries today are indeed reducingthe levels of some pollutants—such assulfur dioxide, ozone, and DDT—most arestill raising their levels of CO2 emissionsper capita. Still, it is useful to invoke thisphenomenon to think about the drivingforce behind the decoupling of most pollut-ants and GDP growth in developed coun-tries and the meaning of green growth.

Just as GDP growth effects the environ-ment, environmental policies can affect GDPgrowth and social welfare through a varietyof channels. One positive outcome is thatthey may increase natural capital, such ascleaner air. Cleaner air, in turn, increaseslabor supply and reduces damages to build-ings and equipment. They also may changetechnology. Energy efficiency policies, forinstance, may trigger innovations that lowerboth energy use and costs. And they canreduce production inefficiencies, such as inthe case of a policy that organizes a fishingcommunity to avoid overfishing.

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most government functions. However, inthe political domain, the national govern-ment controls not only ideology and themedia but also the personnel matters ofsubnational governments through its cadreevaluation system.

This system provides government offi-cials, who are motivated by career concerns,with powerful incentives to perform bypromoting those with better performance.It also promotes regional competition ineconomic development and regional experi-ments in economic reforms. Some arguethat this is a major reason China experi-enced rapid economic growth.

In this system, performance targets areseparated into three categories: targetswith veto power, hard/binding targets, andsoft/guidance targets. Social stability andthe one-child policy had long been targetswith veto power, understood to be themost important type of targets. Failure tomeet these veto targets results automati-cally in punishment, and poor performanceon these targets cannot be compensatedby good performance on other targets.Economic growth has long been a hardtarget, while environmental goals have beensoft targets in the past.

As one would expect, government offi-cials respond to this evaluation system byfocusing more on economic growth thanon environmental protection. Empiricalevidence suggests that provincial leaders’economic performance—measured by GDPgrowth rate—relative to the national aver-age had a significant impact on the proba-bility of their promotions. There is also someevidence that spending on environmentalamenities negatively affects city-level offi-cials’ odds of promotion.

Other institutions than just the cadreevaluation system push governmentofficials to focus on the growth of GDP—especially the growth of energy-intensive

and high-emissions industries—instead ofenvironmental protection. One exampleis China’s fiscal system. About half the taxrevenue in China comes from value-addedtax, which is directly related to the growthof industry and shared with local govern-ments. In addition, subnational governmentrevenue is not commensurate withthe expenditure responsibilities of thoseregional jurisdictions. According to a 2012World Bank study, subnational governmentsare responsible for 80 percent ofgovernment expenditure responsibilities butreceive only slightly more than 40 percentof tax revenue. Local governments thushave a strong incentive to find additionalrevenue to finance their expenditures anda very weak incentive to invest in environ-mental protection.

Another such policy is the below-marketprices of natural resources, including ener- gy, land, and water, as well as those of inter-est rates. The low prices of natural resourcesand capital lead to economic growth that isresource and capital intensive.

Implications for China’s Green GrowthStrategiesFor China to be on a green growth path, it isnot sufficient to simply introduce environ-mental and resource policies at the nationallevel; environmental protection has to beemphasized more in the cadre evaluationsystem. Indeed, as China’s economy hascontinued to grow and many indicators ofits environmental health worsen, envi-ronmental protection has become moreimportant in cadre evaluation.

In the 11th Five-Year Plan (2006–2010),several environmental targets became bind-ing for the first time, including a 10 percentreduction in sulfur dioxide emissions andchemical oxygen demand releases, and a20 percent reduction in energy intensity.Subnational governments took substan

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tial action to meet these hard targets. Forexample, by the end of 2010, subnationalgovernments had shut down about 70 giga-watts of small, “backward” thermal powerplant capacity. The 12th Five-Year Plan(2011–2015) contains more binding envi-ronmental targets, including a 17 percentreduction in carbon intensity.

In December 2013, the OrganizationDepartment of the Communist Party ofChina announced that it would modify

the cadre evaluation system. GDP growthshould not be the only main criterionin evaluating government officials, theannouncement stated, and more weightshould be given to environmental protec-tion, resource efficiency, and other socialand economic considerations.

A more nuanced cadre evaluation systemwould certainly help protect the environ-ment, but as with other multitask principal-agent problems, it still has weaknesses. Forexample, the binding environmental targetsin the 11th Five-Year Plan were met—atleast on paper—but they led some localgovernment officials to fake data and takehighly inefficient measures.

Since the cadre evaluation system hasinherent weaknesses, it will be importantto strengthen environmental laws andlaw enforcement. Chinese legislators havemade some progress in this endeavor. InApril 2014, the Standing Committee of theNational People’s Congress approved majoramendments to its Environmental Protec-tion Law, the first since the law was enactedin December 1989. One critical revisionreplaces the previous one-off limited finesystem for pollution violations with a new

penalty system, in which the amount ofthe fine continues to accumulate for eachday the violation continues. Another is thatnongovernmental organizations can takelegal actions against polluters on behalf ofthe public interest.

Although current efforts have beensubstantial, they have not matched thescale and complexity of the pollutionproblem generated by rapid economicgrowth in China. Many proposals have been

put forward to address particular aspectsof the air, water, and solid waste pollutionproblems, including “technology-push” poli-cies and fuel taxes based on environmentaldamages.

For China’s leaders, green growth is nowa necessity. They have started down thispath of reform, but the scale of the prob-lems requires greater efforts and some freshthinking and experimentation. Internationalgroups, such as the World Bank and theUnited Nations, recognize the need fora global network that can address majorknowledge gaps in green growth theoryand practice. Policy advisers in China andthe global environmental community havemuch to do.

FURTHER READINGHo, Mun S., and Zhongmin Wang. 2014. Green Growth (for

China): A Literature Review. Discussion paper 14-22. Washington, DC: RFF.

World Bank. 2012. Inclusive Green Growth: The Pathway to Sustainable Development. Washington, DC: World Bank.

Xu, Chenggang. 2011. The Fundamental Institutions of China’s Reforms and Development. Journal of Economic Literature 49(4): 1076–2151.

For China to be on a green growth path,environmental protection has to be emphasizedmore in the cadre evaluation system.

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RFF named the following academic fellow-ship recipients to conduct environmental and energy research during the 2014–2015academic year.

Gilbert F. White Postdoctoral Fellowships » Francisco Aguilar, associate professor

in the Department of Forestry at the Univer-sity of Missouri, is at RFF studying a range offorestry-related topics.

» James Salzman, Samuel F. MordecaiProfessor of Law and professor of environ-mental policy at Duke University, is visitingRFF to further his research on the develop-ment of payments for ecosystem services.

Joseph L. Fisher Dissertation Fellowships » Stephie Fried, a PhD candidate in

economics at the University of California,San Diego, is studying the macroeconomiceffects of climate policy, with a particular

focus on the links among energy pricevolatility, energy technology, and carbonmitigation policy.

» Evan Herrnstadt, a PhD candidate ineconomics at the University of Michigan, isconducting research on bridging the fieldsof natural resource and environmentaleconomics and industrial organization byexamining firm behavior in the presence ofenvironmental regulation.

» Eric Lewis, a PhD candidate ineconomics at the University of Michigan, isfocusing on the economics of the onshoreoil and gas industry.

Walter O. Spofford Memorial Internship » Kuangyuan Zhang, a PhD candidate in

energy management and policy at Pennsyl-vania State University, spent the summer of2014 studying carbon trading in China and Chinese housing and transportation issues.

A Look at What’s HappeningInside RFF

Richard Schmalensee ChairsRFF Board of Directors

In October, RichardSchmalensee assumedleadership of RFF's Board of Directors, after serving as a member since April 2009. Schmalensee isthe Howard W. JohnsonProfessor of Econom- ics and Management

and dean, emeritus, at the MassachusettsInstitute of Technology’s (MIT’s) Sloan Schoolof Management. From 1998 through 2007,

he was the John C. Head III Dean of the Sloan School. He was a member of the President’sCouncil of Economic Advisers from 1989through 1991. Schmalensee was formerlydirector of the MIT Center for Energy andEnvironmental Policy Research and a member of the MIT Energy Council. He also has served on the executive committee of the AmericanEconomic Association and as a director of the International Securities Exchange, MFS Invest- ment Management, and the InternationalData Group.

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RFF Welcomes New Board MembersRFF is pleased to announce the appointment of three new members to its Board ofDirectors. In addition, Vicky A. Bailey, DanielC. Esty, and Robert N. Stavins have returned for an additional term.

James AsselstineTyler Hill, PA

Before his retirement,James Asselstine servedas managing director and senior credit researchanalyst at Lehman Broth-ers and Barclays, where

he focused on the electric utility and powerindustry. He also has previously served as thesenior vice president of Donaldson, Lufkin,& Jenrette. He has held numerous govern-ment positions, including commissionerfor the US Nuclear Regulatory Commission,associate counsel for the US Senate Commit-tee on Environment and Public Works, andstaff attorney in the US Nuclear RegulatoryCommission’s Office of the Executive LegalDirector.

Paul F. BalserFounding Partner,Ironwood Partners andGeneration Partners

Paul Balser has beena founding partner ofthe private equity firmsIronwood Partners and

Ironwood Manufacturing Fund since 2001and of Ironwood Management Partners FundII, LP, since 2007. In 1996, Balser cofoundedGeneration Partners, a $325 million privateequity firm with offices in Greenwich,Connecticut, and San Francisco, California.

Prior to Generation Partners, Mr. Balser wasa founding partner of Centre Partners, LP, the managing general partner of Centre CapitalInvestors, LP, a $150 million investment fundfor the partners and affiliates of Lazard Frères& Co., LLC. He is chairman of the board ofthe Hudson Guild and also currently serveson the boards of Tweedy Browne Funds, Inc.;United Neighborhood Houses; MetropolitanWaterfront Alliance; Hale Foundation; and anumber of private companies. He is also aclass agent for the Lawrenceville School andYale University, and a member of BusinessExecutives for National Security.

Sue TierneySenior Advisor, AnalysisGroup Inc.

Sue Tierney is anexpert on energy policyand economics, special-izing in the electric andgas industries. In hercurrent role, she has consulted to companies,governments, nonprofits, and other organi-zations on energy markets, and economicand environmental regulation and strategy.She previously spent over a dozen years instate and federal government, most recentlyas assistant secretary for policy at the USDepartment of Energy. She also served as astate cabinet officer for environmental affairs,state public utility commissioner, and chairof the Water Resources Authority in Massa-chusetts. She currently chairs the ExternalAdvisory Board of the National RenewableEnergy Laboratory; chairs the ClimateWorksFoundation Board; and is a director of WorldResources Institute, the Alliance to SaveEnergy, and the Energy Foundation.

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Goals for Society, RevisitedChuck Howe Remembers Kenneth Boulding

One of the most rewarding experiences ofsome 40 years as a professor of economics atthe University of Colorado, Boulder, was that,during half that period, I was a close colleagueof Kenneth Boulding (1910–1993)—in boththe Department of Economics and the Insti-tute of Behavioral Science, which I directed.(RFF’s former board chair Gilbert White wasanother member of that body.) Boulding wasan outstanding economist, educator, andpoet; a prescient environmentalist; and theoriginator of general systems theory for thesocial sciences. His peace activism—rooted

in Quaker teachings—was part of his deeplyfelt commitment to social justice. He alwaysspoke passionately, white hair flailing andhis trademark stammer coming back whenneeded for emphasis. While he could becontentious, he was always a peacemaker inthe Department of Economics.

The untitled poem below opened “NewGoals for Society?”—Boulding’s chapter inthe 1972 RFF Press book Energy, EconomicGrowth, and the Environment. Far from inci-dental to his interests, poetry was an impor-tant element in his breadth of expression.

The thing in pollution we most need to knowIs, where does it come from and where does it go?

One major idea in the pot must be tossed,That things may be missing, but never are lost.Most chemical elements cannot be changed.

They can’t be destroyed, they are just rearranged.So clean water and air, and, indeed, your clean shirt,

Are obtained by the wise segregation of dirt.So if our research is to bear healthy fruit,The critical question is what to pollute.One policy matter is clear; the polluter

Should not be allowed to become a commuter.And as long as industrial systems have bowelsThe boss should reside in the nest that he fouls.

Economists argue that all the world lacks isA suitable system of effluent taxes.

They forget that if people pollute with impunityThis must be a symptom of lack of community.

But this means producing a mild kind of loveSo let’s hope the eagle gives birth to a dove.

—Kenneth E. BouldingEnergy, Economic Growth, and the Environment by Routledge. Reproduced with permission of Routledge in the

format “Republish in a journal/magazine” via Copyright Clearance Center.

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Highlights from Recent Journal Articles by RFF Researchers

Cost-Share Program Participation andFamily Forest Owners’ Past and IntendedFuture Management PracticesNianfu Song, Francisco X. Aguilar, andBrett J. ButlerForest Policy and Economics | September2014 | Vol. 46 | 39–46Cost-share programs are commonly usedfor agricultural lands, but their associationwith landowner behavior on forested landshas not been as thoroughly studied. Using adataset of over 3,500 observations, this study finds that family forest owners in the north-ern United States who engaged in cost-share programs participated in more silvicultural and conservation management activities than those who did not.

Designing Efficient Surveys: SpatialArrangement of Sample Points forDetection of Invasive SpeciesLuděk Berec, John M. Kean, RebeccaEpanchin-Niell, Andrew M. Liebhold, andRobert G. HaightBiological Invasions | July 2014| doi: 10.1007/s10530-014-0742-xThe efficiency of surveillance systems tomanage biological invasions can be affectedby the pattern of sample locations, whichrange from random to fixed-grid arrange-ments. This paper explores how they affectthe probability of detecting a target popula-tion and the overall cost of eradicating popu-lations. For single-period surveys, regularsampling patterns performed better thandid random samples at intermediate sampledensities, but only when sample sensitivity ishigh. Otherwise, the sample point arrange-ment has little effect on survey sensitivity.

The Costs and Consequences of Clean AirAct Regulation of CO2 from Power PlantsDallas Burtraw, Josh Linn, Karen Palmer, andAnthony PaulAmerican Economic Review | May 2014 | Vol.104, No. 5 | 557–562Under the Clean Air Act, the US Environmen-tal Protection Agency and states will deter-mine the form and stringency of the carbondioxide regulations for power plants. Variousapproaches would create an implicit price onemissions and assets that would be distrib-uted differently among electricity producers,consumers, and the government. The authorscompare a tradable performance standardwith several cap-and-trade policies. Distrib-uting asset values to fossil-fueled producersand consumers has small effects on averageelectricity prices but imposes greater socialcost than a revenue-raising policy.

Two World Views on Carbon RevenuesDallas Burtraw and Samantha SekarJournal of Environmental Studies and Sciences |March 2014 | Vol. 4, No. 1 | 110–120The introduction of a price on carbon diox-ide is expected to be more efficient thanprescriptive regulation. It also representssubstantial economic value. This paper askswho should receive this revenue and summa-rizes six trends among existing carbon-pric-ing programs. Deciding how to categorize theatmosphere—either as government propertyor as a common resource—has efficiencyand distributional consequences that affectthe political economy and the likelihood anddurability of climate policy.

At RFF, we believeTHE BEST IS YET TO COME.

Support RFF and invest in the power of ideas to build a better world.

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NEW TITLES from RFF PRESS

Determining the Economic Valueof WaterConcepts and Methods, 2nd EditionBy Robert A. Young and John B. Loomis

July 2014Paperback: 978-0-415-83850-4http://www.routledge.com/9780415838504

Forest Tenure Reform in Asiaand AfricaLocal Control for ImprovedLivelihoods, Forest Management, andCarbon SequestrationEdited by Randall Bluffstone andElizabeth J.Z. Robinson

November 2014Hardback: 978-1-13-881964-1www.routledge.com/9781138819641

The Measurement of Environ-mental and Resource ValuesTheories and Methods, 3rd EditionBy A. Myrick Freeman III, Joseph A. Herriges,and Catherine L. Kling

June 2014Paperback: 978-0-415-50158-3http://www.routledge.com/9780415501583

Biodiversity Conservation inLatin America and the CaribbeanPrioritizing PoliciesBy Allen Blackman, Rebecca Epanchin-Niell, Juha Siikamäki, and Daniel Velez-Lopez

May 2014Hardback: 978-0-415-73096-9www.routledge.com/9780415730969

The 2014 RFF Press Catalog is now available online. Please browse all our latest books here: www.routledge.com/u/RFFCatalog.RFF Press is an imprint of Routledge/Taylor & Francis, a global publisher of quality academic books, journals, and online reference.