PERCEPTION and REALIZATION By
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ESSAYS ON THE NEGATIVE EXTERNALITIES OF ENERGY DEVELOPMENT: PERCEPTION AND REALIZATION by HAIYAN LIU (Under the Direction of SUSANA FERREIRA) ABSTRACT Nonrenewable energy development is known to have various negative externalities, with air and water pollution, and ecosystems deterioration being the major ones. While water pollution is mainly local and ecosystems deterioration is global, the effects of air pollution could be both local (particulate matter, sulfur dioxide) directly affecting human health and global (greenhouse gas emissions) causing climate change in the long run. To help inform energy and climate policies for a cleaner and sustainable future, this dissertation considers three separate markets to inspect public perception of climate change and other negative externalities of nonrenewable energy development. Chapter 2 investigates the reaction of energy capital markets to hurricanes. Climate change is expected to increase the intensity and frequency of extreme weather events. Provided that capital markets are rational and relatively efficient, the impact of any information that a hurricane conveys about the immediacy and severity of climate change should be reflected in short-run stock price changes. Because carbon dioxide emissions from the combustion of fossil fuels are a sizeable contributor to greenhouse gas concentrations, and their reduction is a key ingredient in any climate change mitigation strategy, I focus on energy companies. Four hurricanes are examined with an event-study approach: Hugo (1989), Andrew (1992), Katrina (2005), and Sandy (2012). Chapter 3 and Chapter 4 inspect two important external costs associated with unconventional oil and gas development. In Chapter 3, I use a difference-in-difference hedonic model to evaluate the seismic risk induced by wastewater disposal. Using data from Oklahoma County, I recover hedonic estimates of property value impacts from nearby shale gas development that vary with earthquake exposure. Chapter 4 estimates the costs of shale oil and gas development in Texas’ health care market, focusing on four short-term health conditions: circulatory, digestive, respiratory, and skin and sense organs. Using a rich individual hospital visit data from January to June 2010 and a genetic matching method, I estimate the average impact of fracking on hospitalization rate and per capita total (non-covered) costs on the four categories for the entire population and by age group. INDEX WORDS: CLIMATE CHANGE; HURRICANES; EARTHQUAKES; ENERGY; HYDRAULIC FRACTURING; SEISMICITY RISK; HEALTH CARE ESSAYS ON THE NEGATIVE EXTERNALITIES OF ENERGY DEVELOPMENT: PERCEPTION AND REALIZATION by HAIYAN LIU BS, NORTHWEST A & F UNIVERSITY, CHINA, 2009 MS, CHINESE ACADEMY OF SCIENCES, CHINA, 2012 MS, NORTH DAKOTA STATE UNIVERSITY, 2013 A Dissertation Submitted to the Graduate Faculty of The University of Georgia in Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY ATHENS, GEORGIA 2017 © 2017 Haiyan Liu All Rights Reserved ESSAYS ON THE NEGATIVE EXTERNALITIES OF ENERGY DEVELOPMENT: PERCEPTION AND REALIZATION by HAIYAN LIU Major Professor: Susana Ferreira Committee: Berna Karali Brady Brewer John Bergstrom Electronic Version Approved: Suzanne Barbour Dean of the Graduate School The University of Georgia August 2017 DEDICATION To my loving family iv ACKNOWLEDGEMENTS Eight years ago, I set off on an intellectual journey. The need to start this journey was fostered by the extensive poverty in rural China, the controversy on agricultural development, and the inspiring writings of many great economists. Now I appear to have come to some milestone. The latest leg has been long and, often, hard going. I have benefited to no end from the advice, encouragement, and inspiration of my advisors, Dr. Susana Ferreira, Dr. Berna Karali, Dr. Brady Brewer, and Dr. John Bergstrom. I am deeply grateful and indebted to all of them. Their guidance has pushed my thinking beyond what I could have imagined when I started my Ph.D., and my work would be radically different without their support. I owe a particular debt to Dr. Ferreira who took me under her wings at the very beginning of my doctoral journey and has shared seemingly endless amounts of her time and attention with me. I am forever thankful for her incredible patience, technical direction and life advice as I completed the entire dissertation research. Many colleagues and friends also generously took the time to help me during this dissertation process. The comments from Nicholas Magnan and Greg Colson have substantially improved and strengthened this work. I am grateful to Thomas Werth who has been tremendously helpful in producing my job market paper. Without his help on georeferencing the property data, it would have taken me a much longer period to complete the research. Oleksiy Tokovenko deserves a special mention. He has been a friend, a mentor, and an informal advisor when I walked this long and difficult path. Thank you so much for your friendship and advice, v for being so supportive, for always listening, and for helping me reach further and to strive to be more innovative and independent. I am especially thankful for all the faculty and staff of the Department of Agricultural and Applied Economics and the University of Georgia. I would like to thank the department for the financial support throughout the whole program of study and one extended semester. Finally, I would like to give my most sincere gratitude to my family for their undying love and support and for their willingness to sacrifice everything for my happiness. Thank you for having not a slightest doubt in my ability to excel. None of this would be possible without you being by my side. vi TABLE OF CONTENTS Page ACKNOWLEDGEMENTS .............................................................................................................v LIST OF TABLES ......................................................................................................................... ix LIST OF FIGURES ....................................................................................................................... xi CHAPTER 1 INTRODUCTION .........................................................................................................1 2 HURRICANES AS INFORMATION SHOCKS? ......................................................12 2.1 Abstract ............................................................................................................13 2.2 Introduction ......................................................................................................14 2.3 Method .............................................................................................................19 2.4 Data ..................................................................................................................23 2.5 Results ..............................................................................................................28 2.6 Conclusion and Discussion ..............................................................................35 2.7 References ........................................................................................................39 3 THE HOUSING MARKET IMPACTS OF WASTEWATER INJECTION INDUCED SEISMICITY RISK ..................................................................................61 3.1 Abstract ............................................................................................................62 3.2 Introduction ......................................................................................................63 3.3 Background: Injection Wells and Earthquakes in Oklahoma ..........................66 3.4 Methodology ....................................................................................................68 3.5 Data ..................................................................................................................74 vii 3.6 Results ..............................................................................................................77 3.7 Conclusion .......................................................................................................87 3.8 References ........................................................................................................90 4 THE HUMAN HEALTH CARE COST OF SHALE GAS DEVELOPMENT ........109 4.1 Abstract ..........................................................................................................110 4.2 Introduction ....................................................................................................111 4.3 Method ...........................................................................................................115 4.4 Data ................................................................................................................121 4.5 Results ............................................................................................................123 4.6 Conclusion .....................................................................................................128 4.7 References ......................................................................................................131 5 CONCLUSION ..........................................................................................................146 APPENDICES A APPENDIICES FROM CHAPTER 2 .........................................................................52 viii LIST OF TABLES Page Table 2.1: Events, Estimation and Event