Environmental Economics addresses pollution externalities--external costs that consumers and producers impose on the environment. One branch of environmental economics deals with the instruments--taxes, permits, standards--that are used to regulate pollution. Economists main contribution in the regulatory arena has been to identify methods of achieving desired levels of pollution at the lowest cost. Another branch of the field addresses the issue of how environmental standards should optimally be set. Here economists have developed tools, including methods for measuring non-market benefits, that are used in benefit-cost analyses of pollution standards. In the past twenty years women have contributed importantly to both branches of environmental economics.

The Theory of Pollution Regulation
According to neoclassical theory, pollution externalities can be internalized by placing a tax on pollution. Effluent fees, however, are seldom used in practice. This is due in part to the unwillingness of firms and consumers to pay taxes, and in part to difficulties in monitoring pollution. Run-off from farms, for example, is an important source of water pollution that cannot easily be metered. Kathy Segerson (JEEM 1988) has used the insights of principal- agent theory to suggest methods of controlling pollution when monitoring effluents is either impossible or very costly. She has shown that imposing a tax on firms when ambient pollution exceeds some threshold and subsidizing them when pollution falls below the threshold will achieve the first-best outcome.

Segerson has also studied the incentive properties of various liability schemes to control pollution (JEEM 1989, 1990). For pollution that occurs infrequently, e.g., toxic releases, Segerson has demonstrated that strict liability can be an efficient mechanism for inducing pollution abatement. It can also be successfully combined with other incentives to induce efficient behavior.

In cases where pollution occurs regularly and can be monitored, the most commonly used instrument for regulating pollution is a performance standard--a regulation that limits the amount of pollution emitted per unit of input or output. Economists have traditionally labeled uniform standards the command-and-control approach to regulation and have criticized them because they do not, in general, achieve reductions in pollution at least cost. Gloria Helfand (AER 1991), however, has pointed out that specific types of standards differ greatly in their incentive properties. Pollution-per-unit-of-input standards will, in general, have greater incentive effects than pollution- per-unit-of-output standards, which may actually result in increased pollution levels.

It is nonetheless true that there will usually be efficiency gains if the pollution quotas implied by a system of standards can be traded among firms. Cathy Kling and Jonathan Rubin (J. Pub. Econ. 1997) have studied the efficiency gains that can be realized when firms are allowed to bank permits for future use. They identify conditions under which firms will suboptimally bank too many permits in the early years of a trading program and suggest modifications to the permit market to correct this problem.

According to theory, permits should achieve a given level of emissions at least cost by equalizing the marginal cost of abatement across firms. This result is independent of how permits are initially distributed among firms, as long the market operates competitively. Graciela Chichilnisky and Geoffrey Heal (Econ. Letters 1994) show, however, that when nations produce a public bad such as carbon dioxide, the efficiency of marketable permits is tied to their initial distribution. In order to equalize the marginal cost of abatement measured in terms of marginal utility, more permits must be given to countries with a high marginal utility of consumption (lower standard of living).

Evaluation of Programs to Regulate Solid/Hazardous Waste
In addition to advancing the theory of pollution regulation, women have helped to improve the efficiency of environmental policy by evaluating specific regulatory programs. Hilary Sigman (JEEM 1996) has studied the impact of hazardous waste taxes on the volume of waste generated, and has also investigated the determinants of illegal disposal of hazardous waste (RAND J. 1998). She finds that increasing opportunities for recycling of wastes, together with stricter enforcement of waste management regulations can effectively reduce illegal dumping.

Taxes can also be used to reduce the amount municipal solid waste generated. In The Economics of Solid Waste Reduction: The Impact of User Fees(published by Edward Elgar Publishing Limited 1993) Robin Jenkins examined households response to per bag charges for garbage collection. Terry Dinan (JEEM 1993) has demonstrated that a combined disposal tax (imposed on producers of the good) and reuse subsidy (provided to end users of the recycled material) is theoretically equivalent to unit charges for household waste reduction.

Recycling is another tool that can be used to reduce the amount of hazardous or solid waste generated; however, it is important to consider the efficiency of different schemes to encourage recycling. Karen Palmer, Hilary Sigman and Margaret Walls (JEEM 1997) compare the efficiency of advance disposal fees, recycling subsidies and deposit refunds for the recycling of municipal solid waste. They find that a deposit-refund scheme is the most cost-effective of the three, a result echoed by Sigman s study (RAND J. 1998) of lead recycling policies.

A popular alternative to incentive-based approaches to recycling is to require that a certain fraction of output (e.g., newsprint) be produced from recycled materials. Terry Dinan (J. Reg. Econ. 1992) has examined ways to reduce the cost of such a standard by allowing permit trading among producers. Karen Palmer and Margaret Walls (J. Pub. Econ. 1997) point out the difficulties in setting an optimal recycled content standard, showing that additional input and output taxes are, in general, required to yield a socially efficient outcome.

Performance standards, together with hazardous waste taxes and recycling, are the most common methods of dealing with currently generated hazardous waste. In their 1992 book, Molly Macauley, Michael Bowes and Karen Palmer provide an excellent treatment of the appropriate combination of economic incentives to regulate toxic substances. The problem of cleaning up hazardous waste generated prior to current legislation falls under the jurisdiction of the Superfund program. Under this program the USEPA is responsible for identifying sites that pose a serious threat to human health or the environment and for choosing the nature of the cleanup at these sites. Shreekant Gupta, George Van Houtven and Maureen Cropper (RAND J. 1996) have studied the nature of the cleanups chosen, showing that EPA has a distinct preference for more permanent cleanups, regardless of the size of the population surrounding the Superfund site. Hilary Sigman (JEEM 1998) has shown that the cost of the cleanup chosen depends on whether there are polluters present who can be sued for the cost of the cleanup.

Evaluation of Air Pollution Control Programs
In the area of air pollution control, the problem of controlling emissions from vehicles is particularly difficult. Tailpipe emission standards were mandated in the 1970 Clean Air Act, with little attention paid to continuing incentives for automobile maintenance. Vehicle inspection and maintenance programs are a now common method of enforcing tailpipe emission standards; however, the way in which most such programs are designed makes them very costly per ton of emissions reduced, as Virginia McConnell (JEM 1990) has shown. Anna Alberini, Virginia McConnell and Winston Harrington (REStat 1996) have also examined the cost-effectiveness of vehicle buy-back programs designed to get the most polluting vehicles off the road. By surveying people who did and did not elect to participate in the program they are able to more accurately estimate how long participating vehicles would have remained on the road. In general, vehicles entered in the program have shorter lives than vehicles who do not; nonetheless, a vehicle buy-back program can be a cost- effective way of reducing emissions if it targets highly-polluting vehicles.

Marketable pollution permits have been suggested as a more efficient method for reducing vehicle emissions than either buy-back programs or inspection and maintenance programs. Cathy Kling (Land Econ. 1994) and Kling and Jonathan Rubin (JEEM 1993) have examined the possible cost savings from a program of emission trading among motor vehicles. They conclude, however, that the cost savings from such a program are likely to be small. Allowing emissions trading among vehicles is only 8-12% cheaper than current vehicle standards, which required stricter emission standards for small cars, which can achieve them more cheaply.

The most celebrated examples of permit markets to date are the market for rights to emit SO2 by electric utilities and the market for lead additives in gasoline. Curtis Carlson, Dallas Burtraw, Maureen Cropper and Karen Palmer (RFF 1998) have evaluated the potential trading gains from the SO2 allowance market, as well the performance of the market in its first two years of operation. They conclude that the market could possibly reduce abatement cost by 40% compared to a uniform performance standard, but present evidence that the market did not achieve the least cost solution during its first two years of operation. Suzi Kerr and David Mar‚ (U. Md. 1996) s study of the permit market for lead in gasoline finds evidence that transactions costs affected the volume of trading. The efficiency losses from transactions costs are, however, estimated to be low.

Benefit-Cost Analyses of Environmental Standards
If environmental standards are to be set efficiently, it must be possible to measure the benefits as well as the costs of various standards. Many of the evaluations of regulatory programs cited above provide information about the costs of pollution control. Estimating the benefits of pollution control--the resulting improvements in human health, visibility, recreation services and ecosystems--has generally proven much harder.

Contributions to the Methodology of Benefit Estimation
Methods for measuring environmental benefits generally fall into two categories indirect approaches, which infer values from observed behavior, and direct questioning approaches, which ask people to value environmental improvements (or related outcomes) directly. Women have made contributions to the methodology of both indirect and direct valuation.

Nancy Bockstael and Ted McConnell have derived conditions under which environmental quality can be valued in the context of the household production model, both when the environmental good is a quality characteristic of a privately consumed good (Econ. J. 1993) and when there exists an essential input into the production of a commodity that is complementary to the environmental good (AER 1983). Nancy Bockstael, Ivar Strand, and Michael Hanemann (AJAE 1987) applied labor supply models to value time in the household production framework, a problem explored earlier by another woman economist Elizabeth Wilman (JEEM 1980).

In the area of direct questioning methods, women have contributed importantly to the field of contingent valuation. Contingent valuation asks people what they would pay for a hypothetical improvement in an environmental good, after specifying the terms and conditions under which it would be purchased. Usually people are asked whether they would pay a stated amount for the good. Anna Alberini (JEEM 1995) and Barbara Kanninen (JEEM 1995) have analyzed how the bids for a contingent valuation question should be set in order to efficiently estimate the mean and variance of the distribution of willingness to pay responses. Michael Hanemann, John Loomis and Barbara Kanninen (AJAE 1991) have analyzed the efficiency gains from following a single yes-no question ( Would you pay at least $x for the following improvement in visibility? ) with a second question that tries more closely to bracket the respondent's Willingness-to-pay WTP.

Women have also contributed to the literature on methods for analyzing responses to CV data. Trudy Cameron and Michelle James (REStat 1987) suggested that responses to dichotomous choice questions could be analyzed using a simple variant of the standard probit model. In subsequent work, Cameron has explored methods for analyzing payment card data (Cameron and Daniel Huppert, JEEM 1989) and dichotomous choice data with follow-up responses (Cameron and John Quiggin, JEEM 1994).

Because of the hypothetical nature of contingent valuation, the method has generated considerable controversy among economists. In particular, it has been alleged that people s stated willingness to pay (WTP) in contingent valuation surveys may not represent their actual WTP for the commodity in question. Mark Dickie, Ann Fisher and Shelby Gerking (JASA 1987) concluded that stated demand for a private good (strawberries) was close to actual demand, when contingent valuation data were compared to actual purchasing behavior. By contrast, comparison of stated v. actual WTP for public goods have generally found that the former exceeds the latter (Mary Jo Kealy, Jack Dovidio and Mark Rockel, Reg. Sci. Rev. 1987).

Laura Osborne Taylor and Ronald Cummings (AER 1998) have developed verbal protocols ( cheap talk ) to try to reduce hypothetical bias in contingent valuation surveys. Taylor, Cummings and David Bjornstad (Env. & Res. Econ. 1997) have also found repeated trials (learning designs) to be successful in reducing hypothetical bias. Another approach, suggested by Carol Mansfield (SEJ 1998) is to calibrate responses to contingent valuation surveys in order to separate hypothetical bias from underlying WTP.

Estimating Health Benefits
Perhaps the most important category of benefits to humans from pollution control programs is reductions in illness and premature mortality. Maureen Cropper and Fran Sussman (JEEM 1990) have examined the value of changes in the conditional probability of dying in the context of a life-cycle consumption-savings model. They show that an individual s WTP at age 40 for a change in his conditional probability of dying at age 60 is what the individual would pay at age 60 for a change in his probability of dying over the next year, discounted back to age 40. This suggests that reducing exposures to carcinogens with latency periods or pollutants whose main effects are not likely to be felt until later in life will yield substantially smaller benefits than reducing exposure to substances with immediate effects.

Women have also made advances in estimating the value of health improvements. Edna Loehman and co-authors (JEEM 1978) and Loehman and De (REStat 1982) were among the first researchers to use direct questioning to estimate the value of reductions in time spent ill. Their estimates of the value of avoiding respiratory illness are still used in benefit-cost analyses. Lauraine Chestnut and Robert Rowe have also contributed importantly to the health valuation literature, estimating the value of reduced symptoms for asthma sufferers (EPA 1985). Lauraine Chestnut and Jane Hall are among the pioneers in inter-disciplinary studies of the health impacts of air pollution. Hall and co-authors (Science 1992) in their study of the benefits of ozone control in the Los Angeles basin found larger benefits from meeting federal ozone standards than other studies due to their careful method of measuring ozone exposure.

Valuing Environmental Amenities
Cleaner air has aesthetic as well as health benefits. Lauraine Chestnut and Robert Rowe (NAPAP 1989) have provided careful estimates of the value of visibility improvements using contingent valuation methods. The value of improvements in air quality in a residential setting has, however, usually been estimated using hedonic property value studies for a single metropolitan area (Maureen Cropper, Leland Deck and K. E. McConnell, REStat 1988), or hedonic wage and property value studies using national data. In a world of mobile households, inter-urban variation in air quality should be captured in labor and housing markets, as demonstrated by Jennifer Roback JPE 1982. Maureen Cropper and Amalia Arriaga-Salinas (J. Urban Econ. 1980) provided early estimates of the value of urban amenities using hedonic wage data.

Hedonic property value studies have also been used to value the disamenities associated with hazardous waste sites and other unwanted facilities. Katherine McClain and Katherine Kiel (J. Urban Econ. 1995, JEEM 1995) have found that the siting of an incinerator affected both the level of housing prices, as a function of their distance from the incinerator and the rate of appreciation in those prices. These impacts began well before the incinerator was operating. Janet Kohlhase (J. Urban Econ. 1991) has documented similar distance premiums for the impact of hazardous waste sites on housing prices.

Valuing Outdoor Recreation
The benefits from improved water quality often come in the form of improved recreation benefits: increased beach use, larger fish populations, improved recreational fishing. Nancy Bockstael and Ted McConnell (JEEM 1981, Econ. J. 1993) are pioneers in the development of econometric models for estimating the value of water quality improvements in a recreation framework. These models often rely on the cost of traveling to a recreation site to measure the price of recreation. Several practical problems arise in this framework, including varying length trips, a topic treated in a repackaging framework by Elizabeth Wilman (AJAE 1987). Another problem arising in the travel cost framework is that costs will naturally vary across persons living different distances from the site, but environmental quality at the site will not. This has lead to the use of discrete choice models in which variation in environmental quality across sites is used to explain the choice of which sites people visit. Cathy Kling (AJAE 1988, JEEM 1988) has compared the performance of discrete choice versus traditional recreation demand models using simulated data to see which perform better in estimating the welfare effects of changes in environmental quality. Trudy Cameron (Land Econ. 1992) has examined the benefits of combining travel cost data with contingent valuation data to solve this same problem of lack of variation in site quality.

Valuing Ecological and Non-Use Benefits
Perhaps the most difficult category of benefits to value in the context of environmental programs are ecological benefits reduced damages to natural resources--which may or may not provide direct human services. Valuing such damages is especially important in cases (such as the Exxon Valdez oil spill) where polluters can be sued for damages. Carol Jones and Katherine Pease (Contemp. Econ. Policy 1997) have attempted to bring economic logic to the suggested the use of in-kind compensation ( compensatory restoration ) as an alternative to the direct measurement of the lost value in natural resource damage cases.

Further Contributions
Environmental Economics encompasses far more than pollution regulation and benefit-cost analysis. It includes work on environmentally sustainable development (Graciela Chichilnisky, Geoffrey Heal and Andrea Beltratti, Econ. Letters 1995) and studies of the political economy of environmental regulation (Maureen Cropper, Maria Ducla Soares and co- authors, JPE 1992; Amy Ando, RFF 1997, 1998). Women have examined firms responses to environmental regulation (Seema Arora and Tim Cason, JEEM 1995; Virginia McConnell and Robert Schwab, Land Econ. 1990) and have studied the impact of community pressure on environmental quality (Sheoli Pargal and David Wheeler, JPE 1996). Finally, women have made significant contributions to the related fields of Energy Economics and the Economics of Natural Resources.

As the previous discussion implies, much of the work done by women in Environmental Economics has been empirical in nature and has been directed at improving environmental policy. Women have made progress in this regard, especially women in federal and state governments who deal with regulatory issues on a daily basis. (Elizabeth David of the Wisconsin Department of Natural Resources especially deserves to be mentioned.) These women have both used the research described on these pages and have inspired it by drawing

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