Reports & Papers

BCSIA Annual Report, 1999-2000: ENRP

BCSIA: 1999-2000 ANNUAL REPORT
3. Environment and Natural Resources Program (ENRP)



Members

Core Faculty and Staff

Robert Stavins, Faculty Chair, ENRP; Albert Pratt Professor of Business and Government

Henry Lee, Jaidah Family Director of the Environment and Natural Resources Program; Lecturer in Public Policy
William Clark, Harvey Brooks Professor of International Science, Public Policy and Human Development; Director, Global Environmental Assessment Project
Cary Coglianese, Associate Professor of Public Policy
Nancy Dickson, Associate Director, Global Environmental Assessment Project
Karen Filipovich, Associate Research Director, ENRP
Charles H.W. Foster, Adjunct Lecturer in Public Policy
Robert Frosch, Director, Industrial Ecology Project, Kennedy School of Government
William Hogan, Lucius N. Littauer Professor of International Political Economy
John Holdren, Teresa and John Heinz Professor of Environmental Policy; Program Director and Faculty Chair, Science, Technology, and Public Policy Program
Paul Holloway, Assistant to Professor Clark and Program Assistant, GEA Project
Sheila Jasanoff, Professor of Science and Public Policy
Marelu Justus, Assistant to the Faculty Chair, ENRP
Joseph Kalt, Ford Foundation Professor of International Political Economy
Kate Kennedy, Assistant to the Director, ENRP
Jo-Ann Mahoney, Coordinator, Events and Publications, ENRP
Theodore Panayotou, Fellow, Harvard Institute for International Development
Edward Parson, Associate Professor of Public Policy
Philip Sharp, Lecturer in Public Policy
Michelle Von Euw, Assistant to Professor Edward Parson

Steering Committee
Carter Bales, Director and Senior Partner, McKinsey and Company
Stanley Charren, former Chairman, Kennetech, Inc.
Charles Curtis, Partner, Hogan & Hartson
Mitchell Dong, President, Chronos Asset Management
Mary Gade, Attorney, Sonnenschein, Nath & Rosenthal and former Chair, Illinois Environmental Protection Agency
William Haney, ENRP Senior Fellow, BCSIA, and former Chair, Molten Metal
Teresa Heinz, Chair, Heinz Family Endowments
Harold Hestnes, Senior Partner, Hale and Dorr
Frederic Krupp, Executive Director, Environmental Defense Fund
William Reilly, former Administrator, U.S. Environmental Protection Agency
Ellen Roy, Managing Director, I-Group Hotbank NE
Andrew Savitz, Director, Environmental Advisory Services, PriceWaterhouse,Coopers
Donald Smith, President, Smith Cogeneration
Mason Willrich, Principal, Nth Power Technologies
Timothy Wirth, President, the United Nations Foundation

Associates And Fellows
ENRP Fellows
Christiane Breznik, Research Fellow, ENRP
Sheila Cavanagh, Ph.D. candidate, Kennedy School of Government
Robert Corell, Research Fellow, ENRP
Therese Feng, Post-doctoral Fellow, ENRP and STPP
Alexander Golub, Research Fellow, ENRP
Mary Graham, Research Fellow, ENRP and STPP
William Haney, Fellow, ENRP
Cheryl Holdren, Research Fellow, ENRP
Alastair Iles, Ph.D. candidate, Harvard Law School
Nathaniel Keohane, Ph.D. candidate, Kennedy School of Government
Ruben Lubowksi, Ph.D. candidate, Kennedy School of Government
Carlos Rufin, Crump Fellow 1998-99, Ph.D. candidate, Kennedy School of Government
Noune Sekhpossian, Research Fellow, ENRP
Shashi Verma, Ph.D. candidate, Kennedy School of Government

ENRP Associates
William F. Dietrich, EIP Associates
Peter Haas, Professor, Department of Political Science, University of Massachusetts at Amherst
Daniel M. Kammen, Associate Professor of Energy and Society and Director of the Renewable and Appropriate Energy Laboratory, University of California at Berkeley
Robert Kates, Professor Emeritus, Brown University
William B. Meyer, Research Assistant Professor, George Perkins Marsh Institute, Clark University
Robin O''Malley, Program Manager, H. John Heinz III Center for Science, Economics and the Environment
Global Environmental Assessment Project
Fellows
Predoctoral Fellows
Silke Beck, University of Beilefeld, Germany
David Cash, Kennedy School of Government, 1999-2000 ENRP Crump Fellow
Noelle Eckley, Master''s candidate, Harvard University
Cathleen Fogel, University of California, Santa Cruz
Aarti Gupta, School of Forestry and Environmental Studies, Yale University
Mojdeh Keykhah, Oxford University
David Lund, Practitioner Fellow, National Oceanic and Atmospheric Administration
Anthony Patt, Kennedy School of Government

Postdoctoral Fellows
Michelle Betsill, University of Colorado
Timothy Forsyth, Institute of Development Studies, United Kingdom
Jonathan Krueger, London School of Economics

Faculty Fellows
Chunglin Kwa, University of Amsterdam
Oladele Ogunseitan, University of California, Irvine

Associates

Shardul Agrawala, Post-Doctoral Research Scientist, Climate Applications Division, International Research Institute, Lamont-Doherty Earth Observatory of Columbia University
Kent Cavendar-Bares, Research Associate, H. John Heinz III Center for Science, Economics and the Environment
Barbara Connolly, Associate Professor, Department of Political Science, Tufts University
Elisabeth Corell, Wallenberg Fellow in Environment and Sustainability, Department of Urban Studies and Planning, Massachusetts Institute of Technology
Alex Farrell, Research Faculty, Department of Engineering and Public Policy, Carnegie Mellon University
David H. Guston, Associate Professor, Bloustein School of Planning and Public Policy, Rutgers University
Jill Jager, Executive Director, International Human Dimensions Programme on Global Environmental Change, Germany
Robert O. Keohane, Professor, Department of Political Science, Duke University
Maria Carmen Lemos, Assistant Professor, Latin American Area Center, University of Arizona
Marc Levy, Associate Director for Science Applications, Center for International Earth Science Information Network (CIESIN), Columbia University
Ronald Mitchell, Associate Professor, Dept of Political Science, University of Oregon
Susanne Moser, Staff Scientist, Global Resources Program, Union of Concerned Scientists
Craig Runyan, Chair, Environmental Protection Technology, Kwantlen University College, Canada
Eileen L. Shea, Climate Project Coordinator, East-West Center, Hawaii
Martin Storksdieck , Doctoral Candidate, School of Education, Tufts University

Background
The Environment and Natural Resources Program (ENRP) and its earlier iterations have conducted research at the Kennedy School of Government and influenced U.S. and international environmental, natural resource, and energy policy decisions for over 20 years. A major goal of the program is to contribute to the public policy debate and through these contributions enhance environmental and natural resource policy. The 1999-2000 academic year was very successful in this regard. While there are many examples of ENRP''s contribution, four stand out.

Professor William Clark co-chaired the National Academy of Sciences study, which resulted in the publication of "Our Common Journey: A Transition Towards Sustainability." This study is reshaping how experts inside and outside government think about enhancing the contribution of science and technology to sustainability issues. Second, under John Holdren''s leadership, the President''s Committee on Science and Technology (PCAST) produced "Powerful Partnerships: The Federal Role in International Cooperation on Energy Innovation." This report has significantly altered U.S. energy R&D policy, both domestically and internationally. Most of the research was conducted at BCSIA. In the spring, John Holdren was awarded the Tyler Prize for Environmental Achievement, one of the most prestigious awards in the field. Third, ENRP faculty chair Rob Stavins contributed to the policy debate on three levels. He is one of the primary U.S. contributors to the Intergovernmental Panel on Climate Change, and he chairs the U.S. EPA''s Environmental Economics Advisory Committee, which reports directly to the EPA Administrator. Stavins'' work on market incentives continues to shape the policies on how to regulate pollution and natural resources use. Finally, Bill Clark chaired the Design Committee for the first report on the State of the Nation''s ecosystems, released in fall 1999, designed to provide an objective assessment of the health of our national resources.

While 1999-2000 was a very successful year for the ENRP, it was also a year of sadness as we lost three close colleagues. Professors Abram Chayes and Raymond Vernon died within the year. For over four decades, Abe Chayes was one of the nation''s leading experts on international environmental law. He had been a major participant in the ENRP''s climate change initiatives and his creativity and unparalleled energy level cannot be replicated. He will be sorely missed. Raymond Vernon was the intellectual leader in the field of multinational corporations, trade and infrastructure policy. Every faculty member over the last half of the past century who worked in any of these three areas was influenced by Ray''s work. Whether one focused on energy policy, privatization of public infrastructure, or the environment and trade, one''s research and writing was shaped by Ray''s presence. Finally, in May, John Sawhill passed away. John had been a member of our steering committee since its inception and had been actively involved with the Kennedy School since 1982. His leadership, both in government and as President of the Nature Conservancy, was an inspiration to students and faculty alike. All of us who had the privilege of working closely with him will miss him dearly.

Research

ENRP remains a hub where faculty, students, and visiting scholars engage in inter-disciplinary research on environmental policy issues. The program''s research agenda focuses on many of the relevant policy questions confronting our society: market-based approaches to reducing pollution; global climate change; energy research and development; sustainable development; and natural resource management in the United States and abroad. In 1999-2000, our climate change research expanded to address greenhouse gas reduction schemes for the major developing countries of China, Russia and India, as well as carbon reduction for Midwest coal plants and the technical and economic feasibility of schemes to capture and sequester carbon. On the domestic front, new ENRP research projects began to examine how communities can manage resources and how information technology might impact the environment. Through ongoing research efforts, ENRP has built links to key decision-makers in the U.S. and international government, as well as the nongovernmental organization (NGO) and business communities.

Within the ENRP umbrella, the Global Environmental Assessment Project (GEA) is a major international research initiative, comprising more than 30 scholars. GEA is dedicated to improving the linkages between science and policy in society''s efforts to deal with global environmental change. Entering its fifth year, the project has actively engaged scientists and policymakers in both the United States and Europe and has significantly influenced the intellectual debate on designing effective environmental assessments and policy responses.

ENRP''s mandate is to conduct cutting-edge research and to ensure that the results of its inquiry contribute to the public policy debate. To achieve this mission, ENRP has devised a three-pillared approach with equal emphasis on (1) research, (2) teaching and training, and (3) outreach. Faculty connected with ENRP teach a range of courses on topics including sustainable development, natural resource economics, environmental management and politics, international environmental law, and negotiations and natural resource policy. This year the Kennedy School Spring Exercise for MPP students was led by ENRP faculty and focused on the topic of global climate change. Topping off a very successful academic year for ENRP, Bill Clark was awarded the Teaching Award from the Class of 2000. This is the highest honor that the students bestow on a member of the teaching faculty.

Case material drawn from ongoing empirical and theoretical research has been used to enhance the curriculum of both graduate and executive training programs. In the past two years, ENRP faculty have developed two ongoing executive training programs that have become a regular part of the Kennedy School''s offering. In 1999-2000, the Infrastructure in a Market Economy executive program, led by Henry Lee and Jose Gomez-Ibanez, expanded to global proportions, training government officials from five continents. The January 2000 session was held in Singapore. The executive training session on Economics and the Environment: A Course for the Non-Economist was offered for the second time in the spring and doubled its number of participants.

Papers produced by ENRP researchers are distributed widely to government officials, and leaders from business, academia, and NGOs. In 1999-2000, ENRP disseminated more than 20 new research papers.Outreach
The Roy Family Summer Internship was initiated this year, which funds two Kennedy School students working on projects at the client of their choice over the course of the summer. The first recipients of the award worked in Washington, DC with the Environment Division of the White House Office of Science and Technology Policy and in Tanzania on an analysis for mercury pollution abatement for the African mining sector.

ENRP convenes workshops and executive sessions that bring together senior officials from government, industry, and key interest groups to discuss major policy issues in a neutral setting. ENRP, jointly with the Taubman Center, organized a two-day conference in June 2000 on the "Conservation in the Internet Age," which brought together land trust officials, conservationists, and leading scholars specializing in land use and biodiversity to discuss the impacts of the Internet on use and misuse of our natural resources.

In 1999-2000, various environment and natural resources events included: a BCSIA director''s lunch with John Sawhill, President, The Nature Conservancy on "Protecting Nature: The Challenges and Opportunities in the Next Decade;" a Forum address by Carol Browner, Administrator, U.S. EPA; a lecture by Kathryn Fuller, President, World Wildlife Fund; a seminar with Bruce Babbitt, U.S. Secretary of the Interior; and talks by Michael Grubb, Royal Institute of International Affairs, London on climate change, Andrew Rosenberg, Deputy Assistant Administrator for the National Marine Fisheries Services on sustainable fishery management, and Claudine Schneider, former RI Congresswoman on the role of Congress in planetary issues; and a forum dinner address by Thomas Vilsack, Governor of Iowa, calling for a national environmental ethic. The University Committee on the Environment hosted its annual dinner at the Kennedy School where featured speaker Maurice Strong spoke on the international community''s role in financing sustainable development.

ENRP''s work in 1999-2000 was sponsored by the following organizations: the U.S. Environmental Protection Agency (U.S. EPA); the U.S. Department of Energy; the National Science Foundation; the National Institute for Global Environmental Change; the Jaidah Family Endowment; the Roy Family Fund; the Shell Corporation; AMOCO; the Inter-American Development Bank; the Ford Motor Company; the Energy Foundation; and the Heinz Foundation. Endowment support was received from the Roy Family Fund, which made a most generous gift to support the creation of an annual lectureship on public and private partnerships for the environment, a visiting fellow, and a special fund to support new research initiatives, and a student intern program.

Research Agenda And Policy Outreach

Research in 1999-2000 focused on the following main issue areas:

I. Climate Change Research, a multifaceted effort sponsored by the U.S. EPA to analyze means to reduce greenhouse gas emissions, nationally and globally, through market incentives and international research and development implementation.
II. Global Environmental Assessment Project, a five-year international collaborative program of interdisciplinary research and training. The project explores how assessment activities can better link scientific understanding with the progressive design, implementation, and evaluation of effective policy responses to global environmental change.III. Market-Based Systems for Achieving Environmental Goals, which examines innovative, market-based instruments for implementing cost-effective means to meet environmental standards.

IV. Executive Training Initiatives, two training programs designed by ENRP to introduce economics to the non-economist and to teach government officials and business leaders from developing countries how to privatize and manage infrastructure effectively.In addition, ENRP researchers have been integrally involved in two STPP research areas: the Managing the Atom Project and the Energy Innovations Project, which focuses on ameliorating the greenhouse gas-induced risks of current energy systems through the promotion of new energy technology.

A description of specific initiatives for 1999-2000 within each research area follows.

I. Climate Change Research

Faculty in the Environment and Natural Resources Program at the Kennedy School have been actively involved in the climate change debate - one of the Kennedy School''s research foci over the past decade. Bill Clark, our former faculty chair, was one of the primary participants in the Villach Conference in the mid-80s - the findings from which had a major influence on both the policy and the science of this topic. In 1989, the School initiated a major program, the Harvard Global Environmental Policy Project, to explore policy responses and negotiation strategies for reducing carbon emissions. This work was linked to preparatory discussions at both the domestic and international levels leading up to the Rio Summit in 1992. A compendium of a portion of this work was published in 1994 - Shaping National Responses to Climate Change: A Post-Rio Guide.

In 1996-97, the School once again dramatically increased its research on the topic of climate change, driven in part by the Kyoto conference held in December 1997. Approximately eight faculty members and 12 doctoral level researchers became involved in a number of major research projects, some within Harvard and others - such as John Holdren''s report on Energy RD&D in a Greenhouse Constrained World done for the President''s Committee of Advisors on Science and Technology (PCAST) - outside Harvard. In November 97, President Clinton and Vice President Gore convened the White House Symposium on Climate Change. The Kennedy School was the only organization represented by two of its leaders - John Holdren and Robert Stavins, both of whom were actively involved in advising the Administration.

Most of ENRP''s present and proposed climate change research has focused on policy responses to meet international targets to reduce greenhouse gas emissions. In years past, faculty members have looked at issues ranging from carbon taxes to joint implementation. In 1999-2000, efforts focused on international permit trading, the economics of carbon sequestration in the United States and Russia, the Clean Development Mechanism and Energy Research and Development with a focus on India and China.

International Permit Trading
Virtually all design studies and many projections of the costs of meeting the Kyoto targets have assumed that an international greenhouse gas trading program can be established that will minimize the costs of meeting the treaty''s goals. Professor Robert Stavins and Research Associate Robert Hahn have completed an important monograph raising serious doubts that such a trading regime will be easy to implement.

They point out that costs can be minimized if all countries use domestic tradable permit systems to meet their national targets and allow for international trades. But this is an unlikely outcome. Instead, some countries will use non-trading approaches, such as carbon or greenhouse gas taxes or fixed quantity standards. Establishing an international trading regime will require some form of project-by-project credit program, and such a program will significantly raise transaction costs.

Finally, the authors'' point out that there is an important trade-off between the degree of foreign sovereignty and the degree of cost effectiveness. If individual nations are allowed to choose their own domestic reduction options then those choices may limit the cost-saving potential of an international trading regime.

This study has been quite influential, with invited presentations having been made by Stavins at a number of important international forums, including the Conference of the Parties of the Framework Convention on Climate Change in Bonn, Germany, in the summer of 1999.Domestic Responses
Henry Lee, along with Shashi Verma, a doctoral student at the KSG, explored the economic incentives needed to switch most of the Midwest electric generating plants from coal to natural gas. This project built a simple model of the cost of operating the existing array of coal-fired generating stations. It added the cost of meeting existing sulfur, nitrogen dioxide and airborne particle standards and posed the question of how large a carbon tax is needed for a majority of the coal fleet to voluntarily switch to gas.

The authors explored several different combinations of future gas prices and conventional pollution abatement and concluded that more than two thirds of these Midwestern plants would have an economic incentive to switch from coal to gas if carbon costs were $70 per ton or greater. However, the study goes on to warn that the present abatement process separates the timeframe in which generators must reduce SO2 and NOx emissions from that in which they may have to reduce particle and carbon dioxide. This separation may be as large as 14 years and will increase the aggregate cost of reducing all four pollutants, while increasing the resistance to carbon and particle reduction.Energy R&DUnder the leadership of Professor John Holdren, BCSIA''s Science and Technology Policy Program (STPP) and its Environment and Natural Resources program have established a multi-year program to assess energy R&D strategies for a greenhouse constrained world.

At the request of President Clinton, Holdren and his researchers have prepared a second PCAST report, "Powerful Partnerships: The Federal Role in International Cooperation on Energy Innovation."

Energy R&D research has also focused on a detailed review of energy policies in India and China. The ongoing project on India includes extensive field interviews, work with the Indian government on the country''s approach to climate change, participation in U.S.- India Academies of Science exchanges in energy policy and issues. The Kennedy School''s Energy R&D Project is also participating in the U.S.-China Academies'' joint study on energy policy issues, including environmental concerns. Finally, we have initiated discussion with Chinese officials to identify opportunities for more open and mutually beneficial partnerships and cooperative initiatives between the two countries.Carbon Sequestration in the United States
Increased attention by policy makers to the threat of global climate change has brought with it considerable interest in the possibility of encouraging the expansion of forest area as a means of sequestering carbon dioxide. The marginal costs of carbon sequestration or, equivalently, the carbon sequestration supply function, will determine the ultimate effects and desirability of policies aimed at enhancing carbon uptake. In particular, marginal sequestration costs are the critical statistic for identifying a cost-effective policy mix to mitigate net carbon dioxide emissions. Building upon previous econometric analysis and simulation modeling, Professor Stavins is currently engaged in a new econometric/simulation research project, in collaboration with Andrew Plantinga of the University of Maine, and Ruben Lubowski, a Ph.D. student in Political Economy and Government at Harvard. This work is supported by a three-year grant from the U.S. Department of Energy. In addition, Stavins is engaged in a related two-year project for the Pew Center on Global Climate Change, which frames the carbon sequestration analysis within the larger subject of global climate change policy, describes the analysis and its results, and highlights the implications of this work for public policy and for ongoing research by economists and others.

In the new project, an econometric analysis of land use in the forty-eight contiguous United States will be carried out and the results employed to estimate the carbon sequestration supply function. By estimating the opportunity costs of land on the basis of econometric evidence of landowners'' actual behavior, this approach circumvents many of the shortcomings of previous sequestration cost assessments. By conducting the first nationwide econometric estimation of sequestration costs, endogenizing prices for land-based commodities, and estimating land-use transition probabilities in a framework that explicitly considers the range of land-use alternatives, this study will provide the best available estimates of the true costs of large-scale carbon sequestration efforts. In this way, it will add significantly to public understanding of the costs and potential of this important strategy for addressing the threat of global climate change. Results will be presented at the annual meeting of the Allied Social Sciences Associations in New Orleans in January, 2001.

In 1999, a one-day workshop was held at the Kennedy School and sponsored by ENRP of researchers from across the United States who are currently engaged in projects that are analyzing the costs of biological carbon sequestration. EPA has recently indicated interest in sponsoring a similar research workshop in the fall of 2000. Developing Countries
ENRP fellow Alexander Golub has completed an assessment of the carbon sequestration potential in Russia. His conclusion is that the potential is significant, but the costs will be higher than those estimated in previous studies. Further, sequestration efforts in the Asian portions of Russia are more costly than those in European Russian.

Finally, the Environment and Natural Resources and the Science, Technology and Public Policy Programs held a workshop on scientific and economic research priorities in both biological and technical carbon sequestration. A summary of the workshop is available.

Last year, researchers at the ENRP looked at six projects in China, India and Brazil that have the potential to provide tangible benefits to the host country and measurable carbon reduction credits to the investing country. These projects could be categorized as win-win opportunities. The results of the research indicated that the potential for significant carbon reductions under the CDM was likely to be more limited than government officials have claimed. Large transaction costs, difficulties in attributing reductions to specific investments, sovereignty concerns, preferences for domestic technology, lack of information and labyrinthine government processes may make CDM investments less attractive to potential investors. Further, a CDM regime that calls for strict proof that the carbon reductions would not otherwise occur and a monitoring and compliance regime that is guaranteed to work will be limited, while one that is more flexible will have less net carbon reductions than anticipated.

This year much of ENRP''s work has focused on Russia. The U.S. and its allies have looked at Russia as a major potential source of carbon reduction credits that could be tapped if and when an international trading regime was established. Much of the research work to date has focused on characterizing the Russian forestry and electricity sectors, examining the potential for carbon reduction in each sector and how each is regulated. In the second phase of the project, researchers will explore how a carbon emission reduction program might work in the electricity sector. How could compliance be measured and assured and what are the remaining obstacles? We will also assess possible designs of a carbon sequestration program and identify the major institutional obstacles.Government Policy Effects on Energy Efficient Technology
Ongoing climate change policy discussions and recent Clinton Administration initiatives for improving energy efficiency through tax credits and research funding suggest that the importance of the relationship between public policy and technological change is of more than academic interest alone. The ability to estimate the likely effects of these and other potential climate change policies on energy use and greenhouse gas emissions requires an improved understanding of the relationship between different policy alternatives and energy-saving changes in technology. This is the subject of a new research project in which Rob Stavins is engaged with co-principal investigators, Adam Jaffe of Brandeis University, and Richard Newell of Resources for the Future. The dissertation work of Nathaniel Keohane, a Ph.D. student in Political Economy and Government, is partly supported by the project.

Technological changes may be decomposed into three interrelated and somewhat overlapping processes: invention, innovation, and diffusion. In previous research, Stavins'' team focused separately on the innovation and diffusion stages-namely the extent to which energy prices, technology costs, and the regulatory environment affect the energy-efficiency of the menu of available products and the particular models people select when choosing from this menu. The proposed new work will undertake the important and essential integrating steps of jointly analyzing the innovation and diffusion of energy-saving technologies, as well as the inventions that underlie these technology changes. Researchers will investigate how the economic and regulatory environment influenced the full path of technological change.

The research team is focusing on a set of energy-consuming durables for which they can obtain empirical data and analyze the three stages of technological change - invention, innovation, and diffusion. These durables include residential thermal insulation, central air conditioning units, farm tractors, and jet aircraft engines. Preliminary results will be presented at the annual meeting of the Allied Social Sciences Associations in New Orleans in January, 2001.

II. Global Environmental Assessment Project

The Global Environmental Assessment (GEA) project seeks to promote better understanding of the relationships among science, assessment, policy and management in societies'' efforts to grapple with global environmental change. The Team is based in the Harvard University Committee on the Environment, drawing on faculty and students from the natural sciences, social sciences and professional schools. In 1999-2000, the Project has included substantial contributions from the International Human Dimensions Programme on Global Environmental Change, Duke University, University of Oregon, the East-West Center, and the Center for the Integrated Study of the Human Dimensions of Global Change at Carnegie Mellon University. The Project also has substantial participation from scholars and practitioners of global environmental assessment around the world.

The GEA project has two principal objectives. The first is to develop a more realistic and synoptic model of the actual relationships among science, assessment, and management in social responses to global change, and to use that model to understand, critique, and improve current practice of assessment as a bridge between science and policy making. The second is to elucidate a strategy of adaptive assessment and policy for global environmental problems, along with the methods and institutions to implement such a strategy in the real world.

The Project is explicitly global in scope, seeking to understand the special problems, challenges and opportunities that arise in efforts to develop common scientific assessments that are relevant and credible across multiple national circumstances and political cultures. Global environmental change is viewed broadly, as it is conceived by efforts such as the International Geophysical Biosphere Program and Agenda 21. The project has focused on assessment experience in global climate change, ozone depletion, transboundary air pollution, and biosafety with special attention to North America, Europe, India and Africa. A long-term perspective focused on the interactions of science, assessment and management over periods of a decade or more rather than concentrating on specific studies or negotiating sessions has been adopted.

The GEA Executive Committee includes Professors William Clark (director), Sheila Jasanoff, James McCarthy and Nancy Dickson (associate director) at Harvard; Prof. Robert Keohane of Duke University; and Dr. Jill Jaeger at the International Human Dimensions Programme on Global Environmental Change, based in Germany. The team includes a core group of 20 faculty and senior researchers from a dozen institutions who have a wide range of experience in research on the natural- and social-science dimensions of global environmental change, and in the related fields of policy and decision analysis.

A unique aspect of the GEA Project is its commitment to bringing together a critical mass of young scholars from different disciplines and nationalities in order that they can learn from and collaborate with one another at a formative stage in their careers. The GEA Project recruited 14 fellows to join the project this year. Recruitment takes place through an international competition open to natural and social scientists as well as professional school students. A network of alumni fellows is maintained by the project to encourage continuing collaboration. Each fellow produces one or more research papers. In the first four years, the project graduated 31 fellows from 11 disciplines and from seven nationalities. There are 14 pre-doctoral, 12 post-doctoral, 1 practitioner and 4 faculty fellows.

Project participants collaborate through a strategy designed to leverage shared interests and harness them in a common, interdisciplinary effort: fellows recruitment, project seminars, fellows research projects, international field research, workshops, outreach activities and archives.

The Project focused on four thematic areas during 1999-2000: 1) the design and management of effective assessments of global environmental issues; 2) the credibility of information provided by international institutions; 3) the linking of global assessment to local decision-making through information systems; and 4) the social construction of scientific assessments.

2000-2001 will be the final year of the project. Plans include the production of a small number of volumes (books or special issues), each drawing together particular thematic aspects of the overall project. Each volume will be assembled by one or more lead faculty members assisted by fellows recruited with the production of the volume in mind. Each volume will consist, at the editors'' discretion, of one or more synthetic thematic essays and of (substantially) revised versions of a small number of selected research papers prepared by past or present fellows. Topics include: an institutional perspective on GEAs, addressing both trans-national and trans-scale institutional studies; a design perspective on the running of GEAs; and a local/ global knowledge perspective on GEAs.

III. Market-Based Systems For Achieving Environmental Goals

Robert Stavins, appointed ENRP Faculty Chair in 1997, has been a major force in the Center''s work devising and analyzing market-based instruments to tackle environmental goals. Ten years ago, at the request of U.S. Senators Timothy Wirth (D-Colo.) and John Heinz (R-Penn.), Stavins assembled and directed a team of 50 persons from academia, government, private industry, and the environmental community in a bipartisan effort - "Project 88" - which produced the report "Harnessing Market Forces to Protect Our Environment: Initiatives for the New President." The tradable permit system for acid-rain reduction, recommended by Project 88, was included in the Clean Air Act amendments of 1990.

Over the past decade, increasing attention has been paid to market-based instruments-principally pollution taxes, fees and tradable permits-as a supplement to or substitute for conventional command-and-control instruments. Market-based instruments can be cost effective, minimizing the aggregate cost of achieving an environmental target, and can provide dynamic incentives for the adoption and diffusion of better technologies.

The American political process has gradually become more receptive to market-based instruments. Tradable permit systems were used in the 1980s to accomplish the phasedown of lead in gasoline and to facilitate the phase out of ozone-depleting chloroflourocarbons. In the 1990s, tradable permit systems were used to implement stricter air pollution controls in the Los Angeles metropolitan region, and-most important-to control acid rain under the Clean Air Act amendments of 1990.

In 1998, researchers led by Robert Stavins completed a multi-year study of economic lessons learned from the SO2 allowance trading program, examining the most extensive application ever attempted of a market-based approach to environmental protection. The results of this research appeared in an article in the summer edition of the Journal of Economic Perspectives. Stavins has also developed a revealed-preference method for econometrically estimating the supply (marginal cost) function for carbon sequestration. In 1999, Robert Hahn and Robert Stavins completed research, sponsored by the U.S. EPA, on the implementation of tradable permit regimes for global climate change. In a co-authored monograph, "What Has Kyoto Wrought? The Real Architecture of International Tradable Permits," these researchers investigated likely performance of international greenhouse gas trading mechanisms in the presence of a heterogeneous set of domestic greenhouse policy instruments.

ENRP''s market-based research has also focused on environmental technology innovation in the energy field. For three years, a Stavins-led team, funded by the U.S. Department of Energy, has been studying econometrically the factors affecting the nature, rate, and direction of innovation in energy-efficiency technology. An article appeared in the summer edition of Quarterly Journal of Economics by Richard Newell, Adam Jaffee, and Robert Stavins, titled "The Induced Innovation Hypothesis and Energy-Saving Technological Change." In 1998, the team received a new $500,000 grant from the U.S. Department of Energy to expand its research to the invention and diffusion of energy-efficient technology.

ENRP researchers have also investigated why there has been a great divergence between the recommendations of normative economic theory and positive political reality in regard to market-based and alternative forms of environmental policy instruments. Drawing upon intellectual traditions from economics, political science, and law, a set of researchers - Nathaniel Keohane, Richard Revesz and Robert Stavins - identified theoretical explanations in an article published in the fall of 1999 in the Harvard Environmental Law Review, "The Choice of Regulatory Instruments in Environmental Policy." Robert Stavins and Richard Newell, an economist at Resources for the Future in Washington, are developing a method for using limited information available during the early stages of policy development to estimate the potential gains from using economic incentives relative to other approaches to achieving environmental performance. The work is supported by the U.S. Environmental Protection Agency. The degree of heterogeneity among sources in their marginal costs of pollution abatement may be the single most important factor affecting the relative cost of market-based versus conventional environmental regulations. The researchers seek to develop practical guidance for policy makers about the potential cost savings from using tradable permits or corrective taxes, rather than conventional policy instruments.

The analysis will provide a set of relatively parsimonious and intuitive "rules-of-thumb" for organizing and understanding the importance of cost heterogeneity and estimating its implications in particular policy situations. Features of a cost distribution (its degree of dispersion, asymmetry, and peakedness) may affect the gains from trade in different ways. Higher variance should lead to greater gains; cost distributions that are skewed left (right) should generally exhibit greater (lesser) gains relative to a symmetric distribution with the same range of costs. The more peaked is the distribution of costs, the lower should be the potential cost-savings from incentive-based approaches.

Decision-makers need to know when to pursue the development of market-based instruments, since these instruments are not appropriate for all problems in all circumstances, and significant political costs may be involved in their pursuit. The project''s rules-of-thumb will help decision-makers with minimal data at their disposal.Research, training, and outreach at the Kennedy School have long emphasized the role of market-based instruments, and we continue to expand our research in this area. Courses offered focusing exclusively on the economic dimensions of environmental policy included a course on Environmental and Resource Economics and Policy (ENR-201), another on Natural Resource Economics in Developing Countries (PED-267), and a seminar in Environmental Economics and Policy (ENR-551Y). In terms of outreach, the Kennedy School has been a major participant in national and international deliberations on the design and implementation of market-based strategies for environmental protection, including climate change, land protection, and air and water pollution.

IV. Executive Training Initiatives

Managing Public Infrastructure
In January 1998, faculty at the Kennedy School, under the leadership of Professor Jose Gomez-Ibanez and Henry Lee, inaugurated a new training program entitled Infrastructure in a Market Economy. Over the course of 12 days, senior officials receive training in the broad issues and strategic choices associated with the private provision and public regulation of infrastructure. The need to develop and finance large-scale public projects, such as roads, power supply, water, ports and telecommunications, often means that government officials in both industrialized and newly-industrialized countries must look to private investors for capital. The challenge for these officials is to find means of private provision that are technically defensible, economically feasible and politically acceptable. The program teaches participants to: analyze the economic and political implications of relying on private firms; manage the technical issues that shape privatization strategies, such as concession agreements; develop an effective privatization plan that maximizes short and long-term public benefits; and to determine whether to rely on market discipline or if there is a need for regulation and how to design effective regulatory agencies.

The original sessions focused primarily on privatization in Latin America. One hundred and twenty senior officials from throughout that region participated in these sessions. In 1999-2000, the program was expanded to include officials from all five continents; the January session was held in Singapore, and abridged programs have been presented in the Middle East, the Balkans and South Africa. Thus, today the program is truly global in focus. Much of the training relies heavily on case studies, and the KSG team has written over sixteen new cases on issues relating to privatization, regulation and finance. These include cases in the areas of electricity reform focusing on the privatization of the distribution company in Rio de Janeiro, the development of ENRON''s Dabhol plant in India, and the reorganization of the Philippines electricity sector, financing toll roads and power plants in Mexico, Australia and Great Britain, and the privatization of water and sewerage systems in Columbia, Mexico, El Salvador, Slovakia, and Chile.

Economics and the Environment

In Spring 1999, the Kennedy School launched its first environmental economics executive training session, entitled "Economics and the Environment: A Course for the Non-Economist," which was led by Robert Stavins. Participants were taught to recognize the advantages and limitations of basic economic analytical tools such as benefit-cost and cost-effectiveness analysis, became familiar with a variety of environmental benefit estimation techniques, and learned to ascertain when it is appropriate to use alternate policy instruments. Course and case materials were designed to help students understand how economic principles apply to a wide range of environmental issues, including water quality protection, acid rain control, abandoned hazardous waste sites and global climate change.

A diverse group of approximately 35 participants from the public, private and non-profit sectors from throughout the world including Alaska, New Zealand, and Singapore attended the spring 2000 session. The group included attorneys, engineers (agricultural, civil, environmental and mechanical), general managers, grassroots organizers, policy analysts, and scientists (including microbiologists and marine scientists). These individuals face a broad range of environmental and resource economic issues. For example, they are dealing with: air quality; sustainability of grazing and cropping enterprises; quality of ground and surface waters; production and use of fossil energy; management of living marine resources; environmental, safety and occupational health policies; financial planning services for transportation development projects; environmental education initiatives. What they all have in common is little or no prior economic training. As a result they are eager to understand how economists think about these environmental and resource issues, so that they can better participate in policy analysis, formulation, and implementation.

Other Initiatives

I. Environmental Regionalism

Environmental regionalism was the primary focus of Dr. Charles Foster''s work in 1999-2000. American regionalism has roots extending back to the beginnings of European settlement. Sectional allegiances and divisions, far from evaporating with modernization, remain strong today as witnessed by such issues as Snowbelt-Sunbelt antagonisms, federal water development politics, the "Sagebrush Rebellion," acid rain, and the regionally uneven effects of energy policy. Besides such informal, spontaneously-arising regional divisions, formally imposed regions began to emerge in the 1930s through such New Deal initiatives as the National Resources Planning Board, the Tennessee Valley Authority, and other natural resources planning and development programs. More recent national administrations have been exploring regional initiatives built around ecosystem management, endangered species/biodiversity conservation and sustainable development.

Environmental regionalism takes a number of different though overlapping forms. It includes arrangements for governance that are transboundary in structure and transjurisdictional in nature. Regional institutions of this sort are created to address a frequent challenge: the fact that many environmental problems do not match the existing framework of political units and cannot adequately be managed within them.

In May 1999, the Kennedy School launched a special inquiry into environmental regionalism. The first initiative was a current issues replication of the national survey of regionalists conducted by the National Resources Board/Committee in 1934/35. A graduate seminar on environmental regionalism was organized and offered during the fall term. A mini-colloquium was held on November 22, bringing several respondents before an audience of 25 practicing regionalists. A new working paper series presented the results of these inquiries, beginning with the historic context of the New Deal and concluding with an analysis of where and how regional approaches can be most usefully undertaken in the area of environment.

In Spring 2000, Dr. Foster, along with Dr. Stephen Tomblin of Memorial University of Newfoundland, held a conference at the Kennedy School for American and Canadian scholars who have committed to writing a multi-authored analysis of regional integration in New England and Atlantic Canada. The overall intent of the book is to assess the prospects and impediments facing Atlantic regionalism now and in the foreseeable future.

II. Information Technology And The Environment

How will information technology affect - a) land use patterns; b) energy consumption; c) environmental regulation; and d) governance itself - are questions that are being posed at almost every level of society. The answers are illusive and the data both inconclusive and confusing. In a new research effort begun in 1999-2000, faculty and research scholars have been sorting through the reports and policy statements trying to identify how the Kennedy School should best contribute to this debate.

ENRP Research Fellow Mary Graham is looking at the successes and failures of efforts to use information to regulate. Given th

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