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Environmental Damage Valuation & Cost Benefit News--June, 1997 (fwd)
From: Kenneth Acks <dva.ka@postoffice.worldnet.att.net>
-----------------------------------------------------------
I have forwarded half this newsletter If you want the other half please
let me know
There are lots of statistics which may be of value, from reparing
enviromental damage to cost cutting in the services.
Vic
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GENERAL
CLOSELY RELATED GOOD PRICES IN A TRAVEL COST MODEL
McKean, Walsh, and Johnson incorporate prices for closely related goods,
such as money and time costs of on-site time, on-site purchases, and other
trip activities into a travel cost demand study. They also estimate a
disequilibrium labor market model. Their sample was mainly composed of
persons who did not substitute earned income for leisure time. The few
persons who had the capability to substitute time for money were excluded
from the sample. Consumer surplus was estimated to be $69.00 per trip using
the expanded model. A model using only the conventional travel cost
variables resulted in estimated surplus per trip of $45.00.
John R. McKean, Richard G. Walsh, and Donn M. Johnson "Closely Related Good
Prices in the Travel Cost Model" American Journal of Agricultural
Economics; 78(3), August 1996, pages 640-46
DEPARTMENT OF DEFENSE POLLUTION PREVENTION STRATEGY
The Department of Defense (DoD) is instituting pollution prevention by
adopting centralized hazardous materials management programs. These
programs utilize strict management control of material and issue it only in
amounts necessary to accomplish the task at hand. They involve centralized
inventory control; just-in-time distribution; reuse, alternative use,
recycling; and detailed tracking, reporting, and analysis of materials.
In the Navy 6 prototype ships reported total cost savings and avoidances
from reduced procurement and disposal costs of $688,000 in 1993. Ten
prototype shore activities reported savings totaling $7.15 million. The
Naval Air Station in Mayport, Florida redistributed over $315,000 worth of
hazardous material designated as excess and set for disposal, for total cost
avoidance savings over $1.2 million. Jacksonville Naval Aviation Depot,
Florida cut procurement costs by $2.3 million between 1991 and 1993.
Portsmouth Naval Shipyard, New Hampshire reduced its hazardous material
stock levels from 12,000 to 4,000 items. Estimated total cost avoidance
savings for all regions in 1995 was $20 million.
The Air Force has also instituted centralized hazardous material management.
The Hazardous Material Pharmacy Program, like a commercial pharmacy,
features limited access, and distribution of material only to authorized
users in quantities needed to complete a task. Hill Air Force Base in Utah
reduced hazardous materials purchases and waste disposal costs to obtain $20
million in cost avoidances over two years. Andrews Air Force Base,
Maryland reduced the Navy's waste stream by 50% and avoided $67,000 in costs
per year after investing $25,000. Altus Air Force Base in Oklahoma has cut
the number of expired shelf life items by 80%, avoiding $60,000 in disposal
costs, and in 1994 Arnold Air Force Base in Tennessee saved $274,000 in
disposal costs.
The Army is using the Pollution Abatement and Prevention Analysis (PAPA)
Model, which employs a multi-objective analytical methodology to evaluate
the costs and benefits of pollution prevention opportunities against desired
goals. To meet the Army's goals of maximizing cost savings and reducing
toxic releases and transfers by 50%, the model will indicate which
prevention opportunities to fund, and when to fund them. For
maintenance activities, the Army issued a manual. The Army plans to replace
soil berms at firing ranges with foamed-concrete "bullet-catching" barriers
to prevent metal contamination from spent bullets and aid lead and copper
recycling. It is replacing pop-up targets operated by small hydraulic
motors which can leak fluids into the soil, with high-efficiency
nonhydraulic motors. Tooele Army Depot reduced hazardous materials
purchases by over
22% and saved $193,000 in one year.
DoD is also cutting hazardous materials in new weapons. The B-2 bomber,
produced by Northrup Grumman, incorporated 900 pollution prevention
processes and new materials, which cut emissions from 180,000 pounds 1989 to
less than 50 pounds in 1994, and reduced hazardous waste disposal costs
from $3.7 million in 1990 to $800,000 in 1993.
DoD is also attempting to develop life-cycle cost models that can account
for environmental costs over the entire life of a weapon system. It
surveyed more than 190 life-cycle cost models in studies available from the
Defense Technical Information Center (AD-A285431 "Environmental Management
Category Report,"--8/30/94;
AD-A285363 "Environmental Management Tool Screening,"--7/29/94; and
AD-A293148 "Evaluation of Environmental Management Cost-Estimating
Capabilities of Major Defense Acquisition Programs," 3/22/95).
In addition, the Defense Logistics Agency (DLA) found that acid-based
solvents could replace chlorofluorocarbons (CFC) in many testing procedures.
DLA then eliminated requirements to use CFCs set forth in over 3,900 testing
procedure standards and specifications, eliminating more than 600,000 pounds
used each year by 800 firms.
The General Dynamics Land Systems Division (GDLS) successfully prevented
production schedule delays, reduced worker health risk, and disposal hazards
through pollution prevention. During the 1980s, GDLS used a solvent-based
penetrant dye to inspect welds. By replacing the penetrant-dye process with
a dry magnetic particle weld inspection technique that uses no TCA and
generates little hazardous waste, TCA consumption fell from 50,000 pounds in
1990 to 7,000 pounds in 1992. The magnetic weld technique also minimized
the health risk to workers, and did not affect performance. Because the
system saved $245 per vehicle, the equipment paid for itself in just over
two months.
This combination of regulation by direction and cumbersome budget processes
has led, in part, to an unnecessary growth in compliance expenditures.
Because of this growth, DoD, in cooperation with EPA, has begun "ENVVEST
which requires a detailed analysis of current expenditures to satisfy
environmental rules and of the environmental return on each investment. The
evaluation also ranks projects that promise high rates of return on
investment, and attempts to eliminate needless bureaucratic procedures.
Cadmium is a toxic, hazardous material widely used in a plating process for
corrosion prevention and control. It has been banned by Sweden, Germany,
and other European nations. In the United States, airborne concentrations
allowable in the work place have been reduced by 95% since 1992. One study
estimates that elimination of cadmium would save DoD $39 million per year.
"Dept. of Defense mission and pollution prevention strategy" Envirosense
Federal Facilities Initiative Dept. of Defense Index Last Updated:
12/13/96 http://es.inel.gov/oeca/fedfac/initiati/dodmissn.html
EBRD LOANS WITH ENVIRONMENTAL BENEFITS
The European Bank for Reconstruction and Development (EBRD) is involved with
several projects which may produce significant environmental benefits.
In Poland a loan to Owens-Illinois for the acquisition and modernization of
Huta Szkla Jaroslaw, the largest glass container manufacturer in Poland will
require the company to address environmental issues, including NOx emissions
from the gas-fired furnaces, industrial waste-water discharges, and
occupational health and safety (OH&S) matters at a cost of ECU 23 million.
NOx emissions will be reduced by 60% and CO emissions will cease entirely.
Another loan is being used to modernize the Huta Warszawa - Lucchini Steel
Plant in the Warsaw area. Objectives include product quality enhancements,
production cost cuts, and compliance with environmental standards through
new technologies and improved management practices. An environmental
management action plan and a monitoring system related to atmospheric
emissions, effluent discharges, groundwater quality, waste management and
OH&S have been developed. The contractor has guaranteed that all installed
equipment will meet EU environmental standards. ECU 14.1 million is being
spent on environmental improvements. Atmospheric emissions have been
reduced by 30%, while production capacity has doubled.
In the Slovak Republic an EBRD loan and equity investment will finance the
modernization of an oil refinery and expansion of Slovnaft's retail gasoline
station network. An ECU 318 million environmental mitigation plan will be
implemented by 2000 under which the company will comply with EU (and Slovak)
air emission standards by 1998, and with waste water discharge standards by
1999. The tank replacement program will increase the proportion of double
walled tanks from the present 58% to 92% by 2000. It is anticipated that all
the waste generated at Slovnaft (61,000 tpa at present) will be recycled by
2000. The program includes the construction of a heavy residue
desulphurization plant, which will cut SO2 emissions to 50% of the 1991
level with a sulphur removal efficiency above 98%. Total environment-related
investments will be ECU 190 million.
An EBRD loan of US$110 million and equity investment of US$15 million to
Slovalco Aluminum Smelter in the Slovak Republic is being used to complete a
state-of-the-art energy efficient aluminum smelter which will meet
international environmental standards. Pollution of the Hron river will be
reduced. The loan will facilitate the closing of facilities which cannot
operate economically in accordance with modern environmental and health and
safety standards, including two aluminum smelters. A condition of the
investment is that immediate remediation measures be taken to contain
leaching and initiate a re-vegetation program on the red and brown mud waste
disposal sites. Emissions of fluoride, tars, NOx and dust will decrease
dramatically. Despite a doubling of capacity to 132,000 tpa,
Slovalco will consume only 10% more power than previously. The smelter will
cost ECU 209 million; the clean up and remediation more than ECU 9.4 million.
"EBRD industrial projects with significant environmental benefits: some
examples" http://www.ebrd.com/enviro/intro/e06.htm
RADON RESISTANCE
Since 1990, about one million homes have been built with radon-resistant
features. EPA has been working to reduce public exposure to radon, a
colorless, odorless naturally-occurring radioactive gas which cause an
estimated 14,000 lung cancer deaths per year. Techniques for building
radon-resistant homes include a 4 inch layer of gravel and plastic sheeting
beneath the foundation slab, and a PVC suction pipe from below the slab
through the roof. At an average cost of $350-$500, building in
radon-resistance from the start is cost-effective compared to remediating a
radon problem later. In addition, average energy costs savings are $65 per
year.
EPA's Office of Air and Radiation is promoting radon-resistance in new homes
by fostering changes in building codes, encouraging home builders to
voluntarily use the techniques, and increasing consumer awareness and thus
demand for homes with radon-resistant features. In 1995, 160,000 out of one
million new single family homes in the U.S. were built with radon-resistant
features. For more information, contact Paulina Chen (202) 233-9031.
"One Million Radon-Resistant Homes" Pollution Prevention News April-May 1997
United States Environmental Protection Agency Office of Pollution Prevention
and Toxics Washington, DC 20460 (EPA 742-N-97-003)
http://www.epa.gov/opptintr/ChemLibPPN/04_05_97.htm
REGULATIONS FOUND TO INCREASE FATALITIES
According to Ralph L. Keeney regulatory costs are paid by individuals, which
leaves them with less disposable income. Since individuals on average use
additional income to make their lives safer and healthier, regulatory costs
lead to higher mortality risks and fatalities. Based on data from the
National Longitudinal Mortality Study relating income to the risk of dying,
each $5 million of regulatory costs induces one fatality if costs are borne
by each citizen. If costs are borne proportional to income, $11.5 million
in regulatory costs induces a fatality. Cost-induced fatalities
disproportionately burden the poor and minorities, particularly blacks.
Ralph L. Keeney "Estimating Facilities Induced by the Economic Costs of
Regulations" Journal of Risk and Uncertainty; 14(1), January 1997, pages 5-23
STOCK PERFORMANCE OF ENVIRONMENTALLY RESPONSIBLE COMPANIES
A number of researchers have calculated the effect of environmental
performance on financial results (net income or stock price). The first
study, by James Hamilton of Duke University (1993) compared stock
performance to TRI data. Since then, over 36 reports have been produced in
the U.S. alone. Virtually none of the studies has reported any negative
correlation between environmental and financial performance. About a third
of the studies showed no statistically significant correlation between
environmental and financial performance; while two thirds of the researchers
found a positive correlation.
In "Pollution is News: Media and Stock Market Reactions to TRI Data (1993),"
James Hamilton, found that the greater the disparity between prior reported
emissions and TRI results, the higher the stock price for the firm. Firms
with little or no discrepancy between prior available data and TRI data
actually outperformed the chemical industry indexes. Firms were not solely
punished or rewarded based on level of emissions, but on level of disclosure
and magnitude. In "Does It Pay to Be Green? (1994)" Stuart Hart and Gautam
Ahuja of the University of Michigan found that two years after emissions are
decreased on a per unit of production basis, various measures of financial
returns showed improvements, with the highest returns linked to firms with
the highest emission levels prior to reduction activity. Mark White of the
McIntire School of Commerce, University of Virginia, writing about
"Corporate Environmental Performance and Shareholder Value" (1995)
determined that firms which signed the CERES (originally the Valdez)
Principles generate above-average risk-adjusted returns compared to a
portfolio of similar industry firms who have not signed the principles. The
results of a multiple regression analysis of Fortune 500 firms between
1987-1992, by Scott David Johnson were mixed: certain environmental issues
were apparently closely tied to financial performance, many others appeared
to have zero or negative correlation. In "The Performance Impact of an
Environmental Screen," by Jack Robinson and Charles Collins (published by
Winslow Management/Eaton Vance in 1994) stock prices of two portfolios of
companies were compared over a 22-year period. The more environmentally
friendly portfolio outperformed the less responsible portfolio by 15.0% to
14.3%.
John Ganzi, president Environment & Finance Enterprise, Chapel Hill, NC.
"Financial: Environmental Performance: Does Wall Street Care?" Pollution
Prevention News April-May 1997 US Environmental Protection Agency Office of
Pollution Prevention & Toxics Washington, DC 20460 (EPA 742-N-97-003)
http://www.epa.gov/opptintr/ChemLibPPN/04_05_97.htm
TOO MUCH OF A GOOD THING TURNS NITROGEN INTO A THREEFOLD MENACE
Scientists say synthetic fertilizers, cultivation of legumes, the raising of
cattle, and the burning of coal and oil have doubled the rate at which inert
atmospheric nitrogen is "fixed" (converted to forms that can be used by
living things). As a result, environmental disruption caused by a planetary
overload of nitrogen is emerging as a new concern.
Too much nitrogen can warm the earth's atmosphere, destroy the stratospheric
ozone layer, and destroy habitat. Effects include toxic algae blooms;
biological degradation in some coastal waters where many fish breed;
possible local extinction of some plant species, as well as animals and
microbes that depend on them; increasing atmospheric concentrations of
nitrous oxide; weakened ability of plants to remove heat trapping carbon
dioxide; and growing concentrations of nitric oxide, a major contributor to
smog and rain. Some plant species that thrive on nitrogen have
driven out others resulting in a net loss of biological diversity. When
these plants decompose their higher nitrogen
content leaks into ground water.
A panel of 9 experts in a peer-reviewed report published January in
Ecological Issues, produced by the Ecological Society of America, concluded
that the excess is causing serious and long-term environmental consequences
across many regions.
Scientists estimate that before humans began altering the nitrogen cycle,
natural processes fixed from 90 million to 150 million metric tons of
nitrogen a year. Today, human activity adds 132 million to 153 million
metric tons, of which fertilizer manufacturing accounts for 80 million tons.
The burning of fossil fuels like coal and oil by power plants, factories,
and motor vehicles adds another 20 million tons. An estimated 70 million
tons is released by burning forests and grasslands, draining wetlands and
clearing land for crops. The buildup has been rapid. Half of the
industrial nitrogen fertilizer used in human history has been applied since
1984, according to Dr. Peter M. Vitousek, an ecologist at Stanford
University who headed the panel. In the Northeastern United States and
northern Europe 10 to 20 times more nitrogen than in pre-industrial times
may now
be carried to the coast by rivers. Atmospheric concentrations of nitrous
oxide, a potent greenhouse gas and destroyer of ozone are increasing by 2%
to 3% a decade. Presently, nitrous oxide contributes a quarter as much to
global warming as carbon dioxide. The report says that the pace of nitrogen
buildup is likely to accelerate.
Dr. Robert W. Horwath of Cornell University, another member of the panel
noted that the Clean Water Act, for all its success in cleaning many of
America's rivers, "hasn't taken a bit" out of the nitrogen problem because
nitrogen in runoff from farm fields and in the effluent of sewage treatment
plants is not a target. The Clean Air Act has probably helped cut emissions
of heat-trapping nitrous oxide.
William K. Stevens "Too Much of a Good Thing Makes Benign Nitrogen a Triple
Threat" The New York Times December 10, 1996 pages C1 and C12
BENEFITS OF TOXICS INFORMATION PROGRAM EXCEED COSTS
The Massachusetts Toxics Use Reduction ACT (TURA) was passed in 1989 to cut
toxic chemical use and byproduct generation. TURA established six goals,
one of which was to cut toxic or hazardous byproduct generation by 50% from
1987 to 1997 through input substitution; product reformulation; production
unit redesign or modification; production unit modernization; improved
operation and maintenance; and recycling, reuse or extended use of toxics.
TURA does not require facilities to meet specific goals. It merely requires
600 facilities with 10 or more employees within 38 SIC codes to report on
usage and to undergo a planning process.
A study sponsored by the Massachusetts Toxics Use Reduction Institute
concluded that benefits exceed costs, even exclusive of human health and
ecological benefits. The following table summarizes their results.
MONETIZED COSTS AND BENEFITS OF TURA
1990 - 1997 in millions of 1995 dollars
Category Amount
COSTS
- Form S preparation $9.9
- TUR plan preparation $10.1
- Form S filing fees $29.1
- Other TURA fees (training & education) $0.3
- Capital investments $27.1
Total monetized TURA costs $76.5
BENEFITS
- Savings in operating costs $88.2
- Federal Grants $2.3
Total monetized TURA costs $90.5
Benefit/Cost Ratio 1.18
Non-monetized costs discussed include the following
Human health and ecological benefits from:
- lower worker health & safety risks from chemical exposure
- lower public health &safety risks from chemical exposure
- reduced environmental exposure to toxic chemicals
Higher revenue from process & product improvements
Activities of TURA agencies in other programs
Benefits to non-TURA firms
Value of TURA data to public users
Costs were tallied largely by multiplying labor costs and the number of
hours worked, and then adding fees and capital costs derived from a survey.
Benefits were also derived from surveys of affected firms.
Benefit-Cost Analysis of the Massachusetts Toxic Use Reduction Act The
Massachusetts Toxics Use Reduction Institute, University of Massachusetts,
Lowell Methods and Policy Report No. 15 One University Avenue Lowell, MA
01854-2881 (508) 934-3297 E-Mail: beckerm@woods.uml.edu Monica M. Becker,
Project Manager
prepared by Randi Currier and Christopher E. Van Atten Abt Associates Inc.,
55 Wheeler Street Cambridge, MA 02138 Contract S963490 Feb., 1997
WATER
ESTIMATING RESIDENTIAL WATER DEMAND
Dandy, Nguyen and Davies examine the impact of a pricing system on the
demand for water and related equity issues in metropolitan Adelaide,
Australia (population 1 million). In the winter the amount of water stored
in reservoirs lost to evaporation is equal to the rainfall. In the summer
evaporation losses exceed rainfall and the amount of water stored falls.
Typically, public water users pay a fixed fee plus a per unit charge above a
certain volume of usage. The authors found that the marginal benefit of
consumption from an additional unit of water was constant for homeowners
because there is only so much water a household can use, even if the
household members are wasteful. If there are no societal costs other than
the costs to deliver the water, then a uniform rate pricing system can be
used. If the increase in water demand means that the storage and
distribution system must be expanded and capital improvements made, then the
case can be made for an increasing unit rate pricing system.
Prior to 1991 the annual fixed charge was a percentage of the property's
market value. The volume of water supplied to a house was determined by
dividing the fixed charge by a fixed per unit cost, a house with a market
value of $100,000 pays a fixed fee of 0.168% of the value. The $168 fixed
charge, divided by an $0.80 per unit cost, means the household can use 210
units of water before incurring additional costs. Hence, properties with
high market values had no incentive to conserve.
In 1991/1992 a constant allowance of 136 units of water was allocated to
every household at a fixed charge of $116. Above this volume there is a per
unit charge. This change in water consumption was dramatic for high valued
property owners. The authors use this data to model consumption and pricing
decisions.
The data sources were billing records of the water company, and a survey of
400 households. Two regression equations were estimated, one for a static
model and one for a dynamic model. The dynamic model had the quantity of
water consumed as a function of the quantity consumed in the previous year,
the annual allowance, a dummy variable of 1 if the quantity consumed was
greater than the allowance and 0 otherwise, a dummy variable for the year,
property value, a vector of prices, and a vector of household and location
variables. It shows that when a household shifts from consuming less than
the allowance to more than the allowance that the changes in lagged
consumption, property value, and having a swimming pool are significant. If
you are consuming below the allowance you change the pool water often. The
per unit cost above the allowance is also significant.
The price elasticity of water for both models ranges from -0.63 to -0.77.
The authors comment that other studies have found the elasticity to be -0.20
- -0.50; Adelaide residents' demand is more elastic because 50% of the water
consumed is for pools and landscaping. Consumption is more elastic in the
summer (-0.69 - -0.86) than in the winter (-0.29 - -0.45).
The authors conclude that when the allowance is lowered it is the high
income households that will pay more, not the low income households. The
pricing system of a lower fixed allowance and a per unit charge above the
allowance is economically efficient and socially desirable.
Graeme Dandy, Tin Nguyen and Carolyn Davies "Estimating Residential Water
Demand in the Presence of Free Allowances" Land Economics February, 1997
Volume 73 Number 1 pages 125-139
CONNECTICUT METAL FINISHER FINED IN FEDERAL COURT
James J. Scalise of New Britain, Connecticut, owner and operator of Frey
Manufacturing Company, Inc., a metal finishing company, was sentenced to 6
months of home confinement, 3 years of probation, and a $15,000 fine.
Scalise pleaded guilty to 3 of 5 counts charging him with (1) discharging
wastewater containing excessive amounts of cyanide and acid into New
Britain's sewer system between November 1993 and April 1995; (2) operating
without a permit since at least November 1991; and (3) failing to report
analyses of discharges to the Connecticut Department of Environmental
Protection (DEP), and falsely representing to the DEP that there had been no
monitoring of Frey's discharges since it relocated to its current address in
1987. The company had also been charged in 1993, 1994, and 1995 for
discharging wastewater, and was fined $25,000.
VALUE OF WHITEWATER RAFTING ON SOUTHERN RIVERS
J.M. Bowker, Donald English, B.K. Donald, and Jason A. Donovan examine per
trip consumer surplus associated with guided whitewater rafting on two
southern rivers. First, household recreation demand functions are estimated
based on an individual travel cost model using truncated count data
regression methods and alternative price specifications. The authors
estimate mean per trip consumer surplus between $89 and $286, depending on
modeling assumptions and river quality. Magnitudes of these surpluses are
very dependent on assumptions about the opportunity cost of time.
J.M. Bowker, Donald English, B.K. Donald, and Jason A. Donovan "Toward a
Value for Guided Rafting on Southern Rivers" Journal of Agricultural and
Applied Economics; 28(2), December 1996, pages 423-32
ENERGY
VENDING MACHINE ENERGY SAVINGS
All 30,000 vending machines Asahi Soft Drinks Co. plans to install this
fiscal year will have energy saving functions that change temperature
according to sale conditions, and turn off cooling and fluorescent lights
after midnight. The systems can reduce electricity costs by 10%.
Energy Conservation News, Kevin Gainer, Editor "Saving with Soft Drink
Machines" June, 1997 page 3 Business Communications Inc. 25 Van Zant
Street, Norwalk CT 06855 voice: (203) 853-4266 fax: (203) 853-0348
http://www.buscom.com
AIR
MORE FROM THE WAR ON SMOKING FRONT
50 YEAR HABIT MAY COST SIX FIGURES
A cigarette pack now costs nearly $2. Hubert B. Herring assumes that public
pressure for higher taxes will raise the price to $3 a pack. Assuming one
pack is smoked a day implies 18,250 packs are smoked over 50 years for a
cost of nearly $55,000. Smokers must also pay $700 a year more for $250,000
in insurance, or a total of $14,000 over twenty years. A study by the
National Bureau of Economic Research has found that smokers earn 4% to 8%
less than nonsmokers because they are increasingly frowned upon in the
workplace, need frequent breaks to feed their habit, and are sick 5 or 6
more times a year than nonsmokers, so productivity is lower. A person
earning the average of $22,000 a year from age 20 to 65 would make nearly $1
million. Herring takes a conservative difference in earnings of 2%, or
$20,000 a year. Cleaning bills for clothes, carpets, and draperies would
add $400 a year, or a total of $14,000. Additional dental cleaning at $50 a
year amounts to $2,500 over 50 years.
The above costs add up to more than $105,000. This does not include the
200,000 fires a year started by smoking materials, and the $50 billion a
year in public health costs associated with smoking. However, the estimates
also do not take into account lower food consumption by smokers. Herrings
calculations are summarized below
Item Cost over
50 years
Cigarettes $55,000
Life Insurance $14,000
Earnings $20,000
Cleaning $14,000
Dental $2,500
TOTAL $105,500
Hubert B. Herring Where There's Smoke, There's Outlay: A 50-Year Habit May
Cost Six Figures" The New York Times April 27, 1997 Section 3
CIGARETTE TAXES
Congress recently passed a cigarette tax increase. Advocates are also
lobbying for increases in 19 states, and hope to have campaigns in all 50 by
next year. They would like to raise taxes to a uniform $2 a pack nationwide
from the current range of 2.5 cents in Virginia to 82.5 cents in Washington
State. Coupled with federal taxes, the average cost of a pack would rise to
$4.23 from $1.80.
Advocates and opponents say the current effort is more formidable than
previous attempts. Raising taxes is the number one anti-tobacco strategy of
the American Cancer Society, which is spending $10 million for this effort.
The Robert Wood Johnson Foundation in Princeton, New Jersey has committed
$100 million to the fight.
An internal memorandum from the Phillip Morris Companies written in 1981 has
recently surfaced. It said that the company should "take seriously" a
statement by the National Bureau of Economic Research in Cambridge, Mass
that higher Federal excise taxes could be used to reduce smoking by young
people. "It is clear that price has a pronounced effect on the smoking
prevalence of teen-agers" it said, adding that the bureau's estimate that a 10%
increase in cigarette prices would lead to a 12% decline in the number of
teen-agers taking up the habit was "of greatest significance to the company.
Adam Clymer "Panel Is Urged to Back a Higher Cigarette Tax" The New York
Times April 20, 1997 page 21 David Cay Johnston "Anti-Tobacco Groups Push
for Higher Cigarette Taxes" The New York Times April 3, 1997
PROPOSED SETTLEMENT--STOCK EFFECT
After a multi-billion dollar proposed settlement to resolve lawsuits against
tobacco companies was announced Gary D. Black, an analyst for Sanford C.
Bernstein & Company advised investors to hold onto their tobacco stocks,
"and take easy money when a deal is announced". He predicted that shares of
Phillip Morris would soar to $50 and shares of RJR Nabisco to $40 after a
settlement is disclosed. Phillip Morris shares closed at $42.125 on April
22, 1997 and RJR shares were at $31.875. If a settlement does give the
companies full immunity, many analysts predict their shares will double or
triple in value. If the effort fails, Martin Feldman, a tobacco analyst for
Smith Barney,
predicted that shares could go lower than they are now.
Glenn Collins "Market Place: Rewards uncertain, but anxiety is sure in
tobacco stocks now" The New York Times April 23, 1997
ON THE LIGHTER SIDE
The definition of "waste": a busload of economists plunging over a precipice
with three of the seats unoccupied.
A woman hears from her doctor that she has only half a year to live. The
doctor advises her to marry an economist and to live in South Dakota. The
woman asks: will this cure my illness? Answer of the doctor: No, but the
half year will seem pretty long.
Jokes for Economists on the Internet http://netec.wustl.edu/JokEc.html
Environmental Damage Valuation
and
Cost Benefit News
Editor & Publisher: Kenneth Acks
Associate Editor: Cindy Grant
Assistant Editor: Anthony Benanti
Staff Writers: Craig W. Allred, Kara Fishman,
John Nolte, Christopher Pyke & Lana Tran
Environmental Damage Valuation and Cost Benefit News is produced
by Damage Valuation Associates, a professional consulting firm
specializing in measuring the economic and financial impacts of
environmental hazards.
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Copyright 1997 Kenneth Acks
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