Theses and Dissertations from UMD
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Item ESSAYS ON THE DESIGN AND EVALUATION OF PAYMENTS FOR ECOSYSTEM SERVICES PROGRAMS(2024) Kim, Youngho; Lichtenberg, Erik; Newburn, David; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Nature-based solutions for climate change mitigation and adaptation emphasize the restoration of natural infrastructure and the adoption of conservation practices in agriculture. Payment for ecosystem services (PES) programs play a key role in these efforts by offering financial incentives to farmers and landowners who adopt land use or management activities that provide environmental amenities and services for society. This dissertation consists of three chapters that examine the optimal design of PES programs and evaluate their performance in the context of climate change and environmental protection. The first chapter investigates whether PES programs contribute to climate change adaptation by reducing economic losses from extreme weather events. I evaluate the cost-effectiveness of the Conservation Reserve Enhancement Program (CREP) in the United States in mitigating flooded crop losses through the restoration of riparian buffers and wetlands. By leveraging variation in the timing of program introduction across counties in the Mississippi River Basin, I find that the introduction of CREP reduced both the number of flooded acres and the extent of damage on those acres. CREP also generated financial spillover effects on the federal crop insurance program, reducing indemnity payouts that would have otherwise been allocated to insured farmers. This study enhances our understanding of how PES programs promote sustainable agriculture and facilitate nature-based solutions for climate change adaptation. The second chapter examines the cost-effective structure of payments and penalties in PES programs, in collaboration with Erik Lichtenberg and David Newburn. The sustainability of ecosystem services programs is contingent on landowners’ compliance with the signed contracts after their initial participation. However, premature contract terminations are not uncommon, particularly when unexpected increases in crop prices lead to the removal of established conservation cover on agricultural land. In such cases, PES programs typically require participants to repay all payments received up to the date of contract termination (e.g., those in the US, the EU, Costa Rica, Mexico, Australia, and many other countries). This standard penalty structure is inefficient because it directly couples penalties with payments, increasing monotonically during the contract period. This study is the first to derive the optimal penalty structure that equals net environmental benefits for the remaining contract period, which decouples penalties from payments. A numerical policy simulation using integrated assessment models shows that the U.S. federal PES programs can substantially increase the environmental benefits by restructuring the current standard penalty. Importantly, the optimal penalty tends to decrease gradually during the contract period, providing credit to farmers for the ecosystem services generated prior to the contract termination. This finding has broad implications for restructuring PES programs in the U.S. and globally, and the study has been published in the Journal of Environmental Economics and Management. The third chapter examines the influence of U.S. federal agricultural conservation programs on the performance of emissions trading programs in promoting afforestation activities on agricultural land, in collaboration with Erik Lichtenberg, David Newburn, Haoluan Wang, and Derek Wietelman. Emissions trading programs, which pay for performance, have been advocated as flexible and efficient tools for achieving pollution reduction goals when evaluated in isolation. However, these programs often operate within a policy landscape dominated by conservation subsidy programs that pay for effort. We find that current federal conservation subsidies are so generous that they significantly crowd out water trading programs when both are in competition, although water trading programs would be effective in isolation. In addition, current carbon market payments for offsets are insufficient to make emissions trading programs more attractive compared to longstanding agricultural conservation subsidy programs. While prior studies have attributed low farmer participation in emissions trading programs to transaction costs and market uncertainty, our analysis suggests that even if these impediments are removed, competition with existing pay-for-effort programs would remain a significant barrier to expansion of emissions trading among agricultural producers. Therefore, the attractiveness and effectiveness of emissions trading programs for afforestation depend heavily on the presence and generosity of longstanding federal agricultural conservation subsidies.Item The Economics of Spruce Budworm Monitoring and Management in Eastern Canada(2024) Holm Perrault, Alexandre Ismaël Eliot; Olson, Lars J; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation uses techniques that were developed for renewable natural resource and invasive pest management to describe the two principal challenges of eastern spruce budworm (SBW) monitoring and management in Eastern Canada, with a specific focus on the province of Quebec. The primary empirical components of this dissertation can be found in Chapters 2 and 3. Chapter 1 provides the necessary historic, entomological, ecological and policy context to understand Chapters 2 and 3. Chapter 4 provides a conclusion to this dissertation by proposing extensions that would make the models presented in Chapters 2 and 3 more readily applicable to real-world spruce budworm management. These extensions involve making the models spatially explicit, as the models presented in Chapters 2 and 3 are spatially crude for the sake of tractability. Chapter 2 describes the management of an endemic irruptive forest pest and, using the spruce budworm-balsam fir forest interaction, proposes an optimization model that determines optimal pest treatment and forest harvest levels for a single, dimensionless forest stand that is currently undergoing an active budworm outbreak. Budworms cause both growth reductions and mortality on the forest biomass stock, and increasing forest biomass will provide budworms with more prey, causing their growth rate to increase. Treatment decisions are limited to three discrete possibilities (0, 1 or 2 on the landscape) that impose mortality on budworms, while harvests remove a proportion of the forest biomass. Using a numerical solution algorithm, we find that the optimal policy is generally to apply treatments over budworms and to harvest the forest at a sustainable rate, which confirms that the current management programs used in Eastern Canada are welfare-improving relative to letting an outbreak run its course. The time path for our baseline scenario indicates that budworms can be treated down to endemic levels quickly. Sensitivity analysis describes scenarios where budworm levels will rebound every year as well as scenarios where the optimal policy is to clearcut the forest as quickly as possible. Chapter 3 considers the pre-outbreak monitoring phase for spruce budworm management. This context is informed by the Early Intervention Strategy, a management practice that is currently being successfully employed in New Brunswick and other Maritime provinces. EIS requires extensive monitoring and proactive treatment. As such, we adapt a model known as CESAT to determine the locations for which EIS would yield positive net benefits in eastern Quebec. Under our baseline scenario, we find that EIS is optimal in some zones bordering New Brunswick, which indicates that EIS is unlikely to be welfare-improving over current management practices used in Quebec. Under different assumptions, however, we find that EIS is optimal across a much larger landscape, yielding millions of CAD net benefits over a thirty year horizon.Item SUBSIDIES FOR DOMESTIC TECHNOLOGY ADOPTION UNDER HETEROGENEOUS TREATMENT EFFECTS(2024) Lopez Aguilar, Javier Alejandro; Battistin, Erich; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Governments and NGOs in developing countries offer subsidies to encourage the adoption of beneficial domestic technologies to generate positive externalities and improve access for poorer households. However, these subsidies may be mistargeted if the benefits come from the continued use of the technology, which is not guaranteed by its initial take-up. This dissertation examines the impact of a subsidy to promote the adoption of a rainwater harvesting (RWH) technology on the water restrictions residents of poor neighborhoods in Mexico City face. I explore this topic theoretically and empirically in three main chapters. In the first chapter, I outline a simple economic model of technology adoption and treatment effects. The model shows how exogenous changes to the subsidy can identify the treatment effects for different types of households, characterized by their willingness to pay (WTP) for the technology. To overcome the challenge of rare exogenous variation in subsidy rates and unobservable WTP, I propose the use of contingent valuation (CV) methods. These methods can exogenously generate variation in hypothetical subsidies and provide insights into the distribution of WTP in the relevant sample. The model is then completed by incorporating the CV information for empirical analysis. This approach may be valuable when randomized interventions are unfeasible due to institutional or budget constraints. In the second chapter, I empirically estimate the effects of the RWH Program in Mexico City on the time households spend obtaining water and the likelihood of postponing daily activities due to the lack of water. I employ the framework developed in the first chapter and local instrumental variable methods for the estimation. The data for this analysis was collected among all program participants in 2021 in partnership with the implementing agency. I find that the usage and causal effects of the RWH technology improve with the households' WTP. High-WTP households save 5 hours per week in water procurement time and reduce postponement of daily activities due to water scarcity by 25 percentage points. Conversely, low-WTP households are less likely to use the technology, yielding negligible benefits. The empirical analysis has significant policy implications. In the third chapter, I simulate counterfactual policies and show that adjusting the subsidy structure could enhance the average benefits of the RWH Program. Specifically, introducing enrollment fees that are a fraction of the total cost of the technology could consistently improve the average impact on recipients. These fees do not seem to disproportionately affect poorer households or those facing more stringent water restrictions, suggesting a potential avenue for policy refinement.Item Econometric Evaluation of Transportation Policies: Decarbonization and Electrification(2024) Burra, Lavan Teja; Cirillo, Cinzia; Civil Engineering; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The transportation sector, one of the largest contributors to global energy-related emissions, is undergoing a major transition. Governments worldwide are implementing stringent fuel economy and emissions standards, promoting the adoption of electric vehicles--a key technology for decarbonizing the transport sector--through various policy measures. This dissertation contains four chapters, studying the effects of such policies implemented across major vehicle markets and evaluating their effectiveness, with a particular focus on the electrification of light-duty passenger vehicle fleet. The first chapter explores whether multi-car households shift mileage to the most fuel-efficient car in response to increasing driving costs, which carries implications for designing effective fuel economy standards. The second chapter investigates the potential interaction between purchase subsidies given to consumers in buying electric vehicles (EVs) and expanding the public charging network. The third chapter focuses on the effectiveness of purchase subsidies for EV buyers and quantifies the free-rider share, given that this is a commonly employed policy measure worldwide. The final chapter explores the differential effects of level 2 and level 3 chargers, as well as the distributional impacts of public charging network on driving EV uptake across various demographic groups and built environment characteristics. Overall, the chapters in this dissertation employ travel survey data, longitudinal and big data analysis, causal identification, optimal policy design, counterfactual simulations, and a combination of data and economic reasoning to glean insights on the effectiveness and equitable aspects of policies aiming to decarbonize and electrify the transportation sector.Item THE ECONOMIC EFFECTS OF STORMWATER BEST MANAGEMENT PRACTICES (BMPS) ON HOUSING SALE PRICES IN WASHINGTON, D.C.(2024) Park, Boyoung; Kweon, Byoung-Suk; Plant Science and Landscape Architecture (PSLA); Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The aim of this dissertation seeks to investigate the economic effects of stormwater best management practices (BMPs) on housing sale prices in Washington, D.C. Stormwater best management practices (BMPs) were designed to address flooding and water quality issues that impact environmental, social, and economic effects. As awareness of the BMPs increased, municipalities and local governments developed regulations to require developers and property owners to implement BMPs. Effective stormwater management was not merely a matter of environmental responsibility but may create significant economic incentives. To study the economic effects of BMPs on housing prices, this study reviewed 32 years of research articles answering following questions: 1) How do BMPs affect housing prices? 2) What kinds of stormwater BMPs have been studied that affect housing prices? This review study used the PRISMA approach to conduct an in-depth systematic review. The search parameters included articles written in English and published between January 1990 and September 2022 using Google Scholar, ProQuest, and EBSCO host search engines. Initially, more than 20,000 studies were identified. Ultimately, 23 Studies were selected for inclusion with specific search terms. The results of this study show that many BMPs (trees, detention basins, retention basins, parks, etc.) use various measurements (e.g., percent coverages, proximity) to estimate the economic impacts on housing prices. Our robust findings address that BMPs have more substantially positive (82.6%) than negative effects (52.2%) on housing prices. Trees and parks had an impact that is more positive on housing prices than detention and retention basins. While studies on the economic value of BMPs were limited, literature found that the capitalization of real estate can be affected by nearby stormwater BMPs using the hedonic pricing method. To extend the economic effects of BMPs on housing sale prices in Washington, D.C., this study addresses research questions: Do stormwater BMPs positively impact housing sale prices? How do proximity and number or structural BMPs affect the housing sale prices? This study used the hedonic pricing method by applying hierarchical regression models to determine whether a set of independent variables significantly improved the models. The primary findings indicate that BMPs have positive, negative, or no effects on housing sale prices. Proximity to BMPs inside of parks increased housing sale prices in all buffers. In contrast, proximity to BMPs outside of parks and impervious roads decreased housing sale prices in all buffers. Percent tree canopy coverage negatively linked to a 50 m buffer and no relationship with other buffers on housing sale prices. This study implies that BMPs impact housing prices and can be improved by landscape architects, policy makers, and stakeholders. To compare the economic effects of BMPs on housing sale prices in high-income and low-income wards in Washington, D.C., this study addresses how environmental, structural, neighborhood and locational variables hierarchically affect housing sale prices in high-income and low-income wards. The robust findings of this study conclude that environmental variables (e.g., proximity of houses to parks with BMPs, house to BMPs inside of parks, and house to BMPs outside of parks, impervious surfaces, and impervious roads) can be attractive factors for purchasing homes, according to model 1 and model 3 in high-income ward. In contrast, there was no evidence of the economic effects of environmental variables on housing sale prices in low-income ward. All structural variables in the high-income ward were statistically significant on housing sale prices. In contrast, limited structural variables in low-income ward were statistically significant on housing sale prices. Several locational and neighborhood variables (e.g., population density, unemployment rate, and poverty rate) in the high-income ward were statistically significant on housing sale prices. These results contribute to property owners considering how environmental, structural and neighborhood and locational variables could be beneficial between high-income and low-income communities. However, such disproportionate economic effects of factors concern remain. The intervention of green gentrification should be considered between local government and disparate community groups by supporting financial incentives for homeownership or having an equity project for existing residents to improve their communities. This could change the neighborhood composition which is associated with the availability of stormwater BMPs as well as the involvement of these efforts from landscape architects, urban planners, stakeholders, and government is essential to accelerate the strategies to fair distribution and effects of stormwater BMPs on housing sale prices.Item Ensemble Kalman Inverse Parameter Estimation for Human and Nature Dynamics Two(2023) Karpovich, Maia; Kalnay, Eugenia; Mote, Safa; Applied Mathematics and Scientific Computation; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Since the widespread development of agriculture 10,000 years ago and particularly since the Industrial Revolution beginning in the 18th century, the coupled Earth and Human systems have experienced transformative change. The world's population and Gross Domestic Product have each increased by factors of at least eight in the last two centuries, powered by the intensive use of fossil energy and fossil water. This has had dramatic repercussions on the Earth system's stability, threatened by Human system activities such as habitat destruction, global warming, and depletion of Regenerating and Nonrenewable energy resources that increasingly alter environmental feedbacks. To analyze these changes, we have developed the second generation of the Human and Nature Dynamics model, HANDY2. HANDY2 is designed to simulate the dynamics of energy resources and population over the Industrial era from 1700 to 2200, flexibly incorporating real-world observations of population and energy consumption in an expanded suite of mechanisms that track capital investment, labor force allocation, class mobility, and extraction and production technologies. The use of automated Ensemble Kalman Inversion (EnKI) estimation for HANDY2's parameters allows us to accurately capture the rapid 20th-century rise in the use of phytomass and fossil fuels, as well as the global enrichment of Elites that puts pressure on natural resources and Commoners. EnKI-derived HANDY2 ensembles project that current world policies may lead to a collapse in the world's population by 2200 caused by rapid depletion of resources. However, this collapse can be prevented by a combination of actions taken to support voluntary family planning, lower economic inequality, and most importantly, invest in the rapid expansion of Renewable energy extraction.Item Three Essays on Environmental Economics(2023) Beatty, Lauren; Linn, Joshua; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Oil and gas production is associated with numerous types of environmental damages and hazards. This dissertation is a collection of three essays which empirically examine how oil and gas production affects environmental outcomes, with a particular lens on avenues for policy to remediate these damages. In chapter 1, I focus on the joint relationship between drilling, building pipelines, and emissions. Most oil wells co-produce natural gas. Producers can choose to burn this valuable co-product on site (known as flaring) if the cost of connecting to the existing natural gas pipeline network is sufficiently high. I construct and estimate a dynamic model of producer drilling and flaring decisions which depend on the current state of the pipeline network and expectations over its evolution. My model also allows producers to internalize spillover effects for their neighbors -- any pipeline they build will extend the network and weakly decrease their neighbors' future pipeline connection costs. Using my model estimates, I simulate pipeline development and flaring outcomes under counterfactual policies. My counterfactual simulations show that flaring abatement costs are higher than previous studies but suggest that a flaring tax could substantially reduce flaring. A $\$5/$Mcf tax reduces flaring by $39\%$. In chapter 2, I focus on the non-point source pollution nature of methane emissions from oil and gas production. New scientific literature demonstrates that methane emissions from oil and gas production are a far larger problem than previously estimated. However, very little economics work has been conducted on this problem. Methane emissions are caused by leaked natural gas which escapes during the normal operation of equipment as well as leaks from faulty equipment. This implies that there are two avenues to abate emissions -- operators can install more efficient pumps and pneumatic devices, or they can expend more effort finding and fixing leaks from faulty equipment. In this chapter, I seek to understand how operators respond to prices on each margin using output from an inverse atmospheric modelling tool which outputs a gridded inventory of emissions. If producers primarily abate emissions through capital upgrades, then an input-based scheme where the regulator observes capital choices, then asses a tax on imputed emissions will be fairly efficient. I find that both channels of abatement are important, and that a tax on imputed emissions would achieve significantly less emissions reductions than an equivalent Pigouvian tax. Finally in chapter 3, I focus on policy options to deal with governmental liabilities from abandoned oil and gas wells. There are hundreds of thousands of aging oil and gas wells scattered throughout the United States that pose serious environmental and safety risks. These well sites will require billions of dollars of investment in remediation. When producers go bankrupt before remediation is complete, the responsibility to clean up the site often lands with either the state or federal government. These wells are known as orphan wells, and have received increasing attention in the scientific and policy literature. In this chapter, I estimate a model of well-level status transitions, then use my model to simulate how a policy requiring producers to either bring wells back into production or plug them after two years of inactivity would affect well orphan rates. I find that since many wells are left inactive for years at a time, this simple policy would be an effective way to decrease government plugging responsibilities and prevent environmental damage without dramatically reducing oil and gas production.Item Fifty Shades of Green - Essays on Eco-friendly Consumption, Public Policy, and Income Inequality(2023) Gutiérrez Mendieta, Aldo; Uler, Neslihan; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation offers a thorough examination of the impact of income inequality on environmental quality, with particular attention to the obstacles encountered by low-income individuals and families in adopting sustainable and environmentally friendly consumption practices. Through the development of a general theoretical model, I provide a novel approach on understanding the dynamics of this relationship. By examining various income inequality scenarios, I assess their effects on environmental quality. Based on these findings, I propose a policy recommendation that addresses both income inequality and environmental concerns. Additionally, I propose an innovative laboratory experiment to empirically validate the theoretical predictions of the general model.In Chapter 1 I present a brief introduction emphasizing the significance of examining the impact of income inequality on the environment. he importance of exploring the individual trade-offs associated with consuming environmentally friendly goods (referred to as 'green goods'), which are more expensive, compared to their environmentally harmful counterparts (referred to as 'brown goods'), which are cheaper to buy. Building upon this framework of green and brown goods, I introduce a general model in Chapter 2 to comprehend individual behavior and investigate the impact of income inequality on environmental quality. This theoretical model offers insights into why income inequality can lead to improved, worsened, or neutral outcomes for the environment, which provides an explanation for the mixed empirical evidence found in previous studies. In Chapter 3, I propose a solution to address the issues of income inequality and the externality generated by the consumption of brown goods simultaneously. I propose the implementation of a permit market in which a regulatory agency issues a limited number of permits to cap the total demand for brown goods, thereby preventing environmental quality from falling below a predetermined threshold. Consumers have the opportunity to trade these permits, enabling income transfers from buyers to sellers and ultimately reducing income inequality. Finally, in Chapter 4 I present the design and analysis of a novel laboratory experiment aimed at empirically testing the theoretical predictions derived from the model introduced in Chapter 2. The experimental results reveal a positive effect of income inequality on environmental quality across all treatments, contradicting the predicted negative effect in specific scenarios. To account for these deviations, I augment the theoretical model by integrating two behavioral motivations, which effectively elucidate the observed behavior. These extensions not only contribute to a deeper understanding of the empirical findings but also offer promising prospects for further research exploration.Item ESSAYS ON ISSUES IN PUBLIC AND ENVIRONMENTAL ECONOMICS(2023) Kraynak, Daniel; Williams, Roberton; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation is composed of three applied economics essays about important topicsin public and environmental economics. The first is an analysis of the distributional effects of demand shocks or demand-shifting policies in the context of energy markets and climate policy. The second focuses on the use of remote monitoring technology and its effects on the provision of the local public good of public safety. The third analyzes the effect of imperfect real-world carbon pricing policies on carbon emissions. Chapter 1 studies the impact of declining coal demand on local labor markets in coal mining regions of the US. I separate the effect of a recent contraction in the coal industry from other factors driving economic trends in coal country by constructing an instrument for coal demand from producing counties. The instrument combines a regional model of coal plant dispatch with variation in the exposure of producing counties to demand shocks from the electricity sector. My estimates demonstrate that demand-driven declines in the value of coal produced eliminate jobs primarily in coal mining and adjacent industries, with the largest effects occurring in Appalachia and the West. I also estimate decreases in in-migration, home values, and expenditures on public education, and increases in poverty. Applied in a stylized spatial equilibrium model of location choice, my estimates imply an aggregate decline of $0.5-1 billion in the economic welfare of coal country residents resulting from a net decline of $3.7 billion in thermal coal production value from 2007- 2017. In Chapter 2, using a novel data set on CCTV cameras in Chandigarh, India, we test whether police officers’ effort changes in response to the presence of traffic cameras. Although the cameras are useful in sanctioning drivers, they can also capture the passive (shirking) or active (rent-seeking) corruption of officers. Accounting for the spatial and temporal variations in the operation of the cameras, we find that the presence of a functioning camera results in an increase in on-the-ground tickets. Although we do not rule out possible decreases in rent-seeking behavior, a decline in passive corruption appears to be driving the increase in officer ticketing behavior, particularly for the most common vehicles and violations that can be observed from the CCTV cameras. Our findings indicate that remote monitoring technology can serve, if not a substitute for, then as a complement to on-the-ground enforcement. In Chapter 3, we contribute to a growing body of empirical evidence on the efficacy of carbon pricing policies, much of which finds that carbon pricing has produced only modest reductions in emissions. We hypothesize that a complex policy environment and political uncertainty are two possible mechanisms behind the limited effects measured in the literature. We focus on the experience of Australia which substantially expanded subsidies for renewable energy in 2009 and also implemented a controversial carbon “tax” from 2012- 2014 before it was repealed. Using synthetic control and recent extensions, we estimate the joint effect of the subsidy expansion and the tax to be substantial. We explore the dynamic nature of the treatment effect as it relates to the changing political environment and explore the mechanisms for the observed reduction in emissions.Item Dynamics of Capital Investment and Pollution Externalities in Wholesale Electricity Markets(2022) Holt, Christopher; Linn, Joshua; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The field of environmental economics was built on the notion of internalizing into markets the social harm caused by pollution. This dissertation examines the implications of putting that idea into practice in the electric power generation sector, with a particular focus on market structure and short- and long-run industry dynamics. Environmental policy to mitigate climate change seeks to transform the capital composition of industries for the purpose of reducing carbon dioxide emissions. In deregulated wholesale electricity markets, firms may exercise long-run market power through investment and retirement decisions which affect future wholesale price settlement. In Chapter 1, I develop a dynamic structural model of the Texas electricity market spanning 2003-2019 to analyze how long-run market power exercise and environmental policy for reducing carbon emissions affect the capital composition of the industry over time. I find that market power exercise led to significant early fossil fuel plant retirements over this period, with an attendant decrease in consumer surplus on the order of $1.6 billion annually. Further counterfactual analysis suggests that federal production tax credits for wind power expanded the deployment of wind by approximately 73 percent, but the associated reductions in emissions were more than twice as costly as would have been achieved under a $20-per-ton carbon tax. In Chapter 2 I delve further into the issue of market structure and long-run dynamics. Economic theory suggests that setting the wholesale price of electricity at the marginal social cost of unmet demand during periods of scarcity results in optimal capacity investment in the presence of perfect competition. I examine the implications of applying this principle in a setting where competition is imperfect, and where the market was structured prior to the introduction of competition (deregulation) and therefore not established through firms’ profit maximizing behavior. I build a stylized model that approximates the effects of a scarcity price mechanism under the hourly demand distribution observed in the Texas wholesale electricity market in 2017. I use this model to demonstrate that the scarcity price mechanism may encourage incumbent firms with large portfolios to retire plants, and that firms with a threshold amount of existing infra-marginal generation capacity will be unwilling to invest in new capacity. I then use a dynamic structural model to demonstrate that the scarcity price mechanism introduced in Texas in 2014 accelerated turnover over the period 2014-2019 by driving greater retirement of capacity in addition to greater investment, relative to a counterfactual scenario in which the scarcity price design was not implemented. In Chapter 3 I shift my focus from long-run industry dynamics and environmental policy concerning a global pollutant (carbon dioxide) to short-run dynamics and harm from a local pollutant (ground-level ozone). NOx emissions are a precursor to ground-level ozone, a pernicious pollutant that is harmful to human health and ecosystems. Despite decades of regulations including NOx emissions pricing, and a corresponding precipitous decline in NOx emissions, episodic high-ozone events prevent many areas from achieving air quality standards. Theoretically, spatially or temporally differentiated emissions prices could be more cost-effective at reducing such events than a uniform price. To test this prediction, using data from the EPA and NOAA spanning 2001-2019, we use novel empirical strategies to estimate (1) the link between hourly emissions and high-ozone events and (2) hourly marginal abatement costs. The estimates form the basis for simulations that compare uniform and differentiated emissions pricing. Consistent with economic theory, differentiated emissions pricing is substantially more cost effective at reducing high-ozone events, but this advantage depends on the accuracy of the estimated NOx-ozone relationship.