Abstract: Over the past several years, labeling schemes that focus on a wide range of environmental and social metrics have proliferated. Although little empirical evidence has been generated with respect to carbon footprint labels, much can be learned from our experience with similar product labels. We first review the theory and evidence on the influence of product labeling on consumer and firm behavior. Next, we consider the role of governments and nongovernmental organizations, concluding that global, multistakeholder organizations have a critical part to play in setting protocols and standards. We argue that it is important to consider the entire life cycle of a product being labeled and develop an international standard for measurement and reporting. Finally, we examine the potential impact of carbon product labeling, discussing methodological and trade challenges and proposing a framework for choosing products best suited for labeling.

Abstract: Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well-designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if profitable opportunities existed to reduce pollution, profit-maximizing firms wouldalready be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (PH). Yet even today, we find conflicting evidence and alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights into the PH to date, draws policy implications from these insights, and sketches out major research themes going forward.

Abstract: The purpose of this paper is to provide a conceptual framework for understanding how analysis of costs and benefits might be incorporated into an assessment of regulatory policies affecting deepwater drilling. We begin by providing a framework for analyzing the life-cycle impacts of oil drilling and its alternatives, including onshore drilling and importing oil from abroad. We then provide background estimates of the different sources of oil supplied in the United States, look at how other oil supply sources might respond to regulations on deepwater drilling, and consider the economic costs of these regulations. After providing a comprehensive description of the potential costs and enefits from various types of drilling—including, when possible, estimates of the magnitude of these benefits and costs—we discuss the extent to which these costs and benefits may already be taken into account (or reinforced) through the legal, regulatory, and tax systems and through market mechanisms. We conclude by presenting a framework and simple example of how a cost–benefit analysis might be used to inform regulation of deepwater drilling, and sum up the policy implications of our work.

Abstract: The Deepwater Horizon oil spill in the Gulf of Mexico in April 2010 led to the deaths of 11 workers, a six-month moratorium on deepwater drilling in the Gulf, and nearly three months of massive engineering and logistics efforts to stop the spill. The series of failures before the well was finally capped and the spill contained revealed an inability to deal effectively with a well in deepwater and ultradeepwater. Ensuring that containment capabilities are adequate for drilling operations at these depths is therefore a salient challenge for government and industry. In this paper we assess the Marine Well Containment Company (MWCC), a consortium aimed at designing and building a system capable ofcontaining future deepwater spills in the Gulf. We also consider alternatives for long-term readiness for deepwater spill containment. We focus on the roles of liability and regulation as determinants of readiness and the adequacy of incentives for technological innovation in oil spill containment technology to keep pace with advances in deepwater drilling capability. Liability and regulation can significantly influence the strength of these incentives. In addition, we discuss appropriate governance structure as a major determinant of the effectiveness of MWCC.

Abstract: Although the causes of the Deepwater Horizon spill are not yet conclusively identified, significant attention has focused on the safety-related policies and practices—often referred to as the safety culture—of BP and other firms involved in drilling the well. This paper defines and characterizes the economic and policy forces that affect safety culture and identifies reasons why those forces may ormay not be adequate or effective from the public’s perspective. Two potential justifications for policy intervention are that: a) not all of the social costs of a spill may be internalized by a firm; and b) there may be principal-agency problems within the firm, which could be reduced by external monitoring. The paper discusses five policies that could increase safety culture and monitoring: liability, financialresponsibility (a requirement that a firm’s assets exceed a threshold), government oversight, mandatory private insurance, and risk-based drilling fees. We find that although each policy has a positive effect on safety culture, there are important differences and interactions that must be considered. In particular, the latter three provide external monitoring. Furthermore, raising liability caps without mandating insurance or raising financial responsibility requirements could have a small effect on the safety culture of smallfirms that would declare bankruptcy in the event of a large spill. The paper concludes with policy recommendations for promoting stronger safety culture in offshore drilling; our preferred approach wouldbe to set a liability cap for each well equal to the worst-case social costs of a spill, and to requireinsurance up to the cap.

Abstract: This paper reports on a preliminary analysis of performance indicators on 3,020 platforms operating in the Gulf of Mexico between 1996 and 2010. Statistical analysis reveals that companyreported incidents (such as blowouts, fires, injuries, and pollution) increase with water depth, controlling for platform characteristics such as age, quantity of oil and gas produced, and number of producing wells. In addition to company-reported incidents, we examine government inspections and the type ofenforcement action (warning, component shut-in, facility shut-in, or civil penalty review) following an inspection. Fewer incidents of noncompliance are detected during inspections on deepwater platformscompared with shallow-water platforms; however, the magnitude of the effect of depth on noncompliance is not large. We provide a preliminary analysis of the effect of prior findings of noncompliance, suggesting that noncompliance is persistent. We also find significant variability in both self-reported incidents and noncompliance across leaseholders.

Abstract: This article provides a critical missing piece to the global climate change governance puzzle: how to create incentives for the major developing countries to reduce carbon emissions. The major developingcountries are projected to account for 80 percent of global emissions growth over the next several decades, and substantial reductions in the risk of catastrophic climate change will not be possible without a change in this emissions path. Yet the global climate governance measures proposed to date have not succeeded and may be locking in disincentives as carbon-intensive production shifts from developed to developing countries. A multi-pronged governance approach will be necessary. We identify a new strategy that will be an important component of any successful effort. Our strategy recognizes that in the context of climate change the simplified Coasian approach to pollution should be updated to include a more complete view of the options firms face in response to emissions reduction pressure and the sources of that pressure. We demonstrate how governments and non-governmental organizations can use expanded corporate carbon reporting boundaries and product carbon disclosure to harness social norms in developed countries. This informal social license pressure, in turn, will create incentives for firms to seek emissions reductions from their domestic and global supply chains. The private market pressure conveyed through supply chains will reduce leakage from developed countries, create new incentives for developingcountry firms and national governments, and play a surprisingly important role in the formation and implementation of a successful post-Kyoto global policy architecture.

Abstract: In this article, we explore the implications of this literature for understanding the relationship between climate change policies and consumption. We identify a number of ways in which accounting forthe implications of the new happiness literature could lead to laws and policies that influence consumption in ways that increase the prospects for reducing greenhouse gas emissions in developed anddeveloping countries. We do not examine every nuance of the growing happiness literature, but we provide a brief introduction and observations that we hope will stimulate further efforts by academicians and policymakers.