Sheila Olmstead
Associate Professor of Environmental Economics
Research Statement
Urban water demand and water pricing. Efficient water management requires clear price signals that provide incentives for efficient use of water by individual consumers. Administratively-determined price schedules are the norm for urban water systems, and water prices are usually inefficient. My working papers in this area demonstrate that the benefits of estimating structural models of water demand (in terms of unbiased estimates of the price elasticity of water demand) outweigh the costs. Work with colleagues Michael Hanemann and Robert Stavins also explores whether consumers facing increasing-block price structures are more sensitive to price than those facing uniform rates. Work with Erin Mansur measures the welfare impacts of restricting specific uses of water during a drought, like outdoor watering, rather than using prices to manage scarcity. This work, taken as a whole, is helping to define both how water demand functions should be estimated, and how market-based approaches to water management might increase social welfare.Impacts of information disclosure on drinking water violations. Over the past two decades information disclosure programs have become common as a method for environmental and natural resource management, but relatively little is known about their effects. With Lori Bennear, I am examining the impacts of an information disclosure requirement under the 1996 Safe Drinking Water Act Amendments, which mandated that community drinking water systems issue annual consumer confidence reports (CCRs) to their customers. We have a long research agenda in this area, and a grant proposal submitted to the National Science Foundation.
Access to drinking water among low-income communities. One commonly-asserted reason for public regulation of water rates is to ensure the universal affordability of drinking water services. However, poor communities frequently are omitted from central water service networks. Using data collected from Texas communities near the border with Mexico, I published a paper analyzing the factors that influence an individual poor community’s likelihood of obtaining drinking water service. I have a grant proposal currently in submission, with colleagues Brad Gentry, Mohamed Sohail, Noman Ahmed, and Mario Delos Reyes, to explore the reasons for high volumetric water rates among households served by informal sector water providers in developing countries, and to determine whether high prices can be explained, in part, by market power. This work will help to identify policy interventions that can increase drinking water service coverage.
Water quality trading. With Karen Fisher-Vanden, I am exploring the factors affecting the relatively low success rate of many point-nonpoint source (PS-NPS) water quality trading programs in the United States, with a particular focus on trading ratios that require more than one unit of NPS abatement to generate a one unit of PS emissions credit. We are creating a comprehensive list of the sources of uncertainty in PS-NPS trading, and developing theoretical alternatives to trading ratios that may increase the potential for PS-NPS trading while also achieving water quality goals. We have a grant proposal in submission to the U.S. Environmental Protection Agency. This work has the potential to both reduce the costs and increase the benefits of water pollution control under the Clean Water Act.
General environmental economics and policy. With Stavins, I have published a paper outlining the broad framework of one potential approach to international climate policy from an economic perspective. With Nathaniel Keohane, I have drafted a primer on environmental and natural resource economics. With Stavins and Robert Hahn at the AEI-Brookings Joint Center for Regulatory Studies, I have examined from an economic perspective major developments in national environmental policy during the Clinton Administration, work recently published in two textbook compendia of “classic” papers in the political economy of environmental regulation.
