Friday, October 31, 2008

Nature sanctuary closing in Barbados

Bad environmental news from Barbados in yesterday's Nation News.

Graeme Hall Nature Sanctuary will be closing down on December 15 of this year. The sanctuary, home to the Graeme Hall mangrove swamp, is set in some 1,100 acres of lakes and woodland, and is one of the last significant wildlife habitats remaining on the island.

If the government of Barbados allows this area to be developed it would appear to be a very poor decision from an economic perspective. The land is for sale at a price of US$12 million. A recent valuation study (I have a copy if anyone wants to see it) puts the annual value of the sanctuary and adjoining lands at over US$551 million. Preservation clearly passes the benefit/cost test.

Considering the strong call for continued incentives to support tourism during the economic downturn, policy designed to save Graeme Hall seems a no-brainer. Of course, as with all public goods, the government has to be willing to make the payment up front in order for the environmental land rents to be distributed to society. Notice the importance of the public investment discount rate here.

One could argue that there are significant opportunity costs associated with investing $12 million now, and also forgoing all future tax reciepts that could be earned if the lands were sold to private developers. But, it is hard to imagine an alternative public spending project that could yeild this rate of return.

This is a complicated issue. Proper functioning of the swamp ecosystem requires that the swamp be drained regularly by opening a sluice gate that allows water from the swamp to flow to the sea. This is also critical in preventing flooding in the area. Below are some links to recent articles:

The swamp water contains tannins which makes the water appear dirty (though testing shows that its not dirty).

Tourists get upset when the dirty-looking water clouds the otherwise clear blue Caribbean Sea at adjacent beaches.

Clearly we have a trade-off between two important environmental goods, both of which contribute to the economy via tourism.

In terms of alternative uses, in 2004 a US $22 million dollar water park was proposed for the area as a tourist attraction (think Myrtle Beach, complete with mini golf and a "lazy river"). This was favored by some and opposed by others. The plans for the water park did not go through.

As much time as I've spent in Barbados, I've never been to Graeme Hall... I certainly have a positive willingness to pay (option value) associated with its preservation.

Cleaning up Dominica

Caribbean Net News has an interesting article today describing one of the largest environmental clean-up projects that has ever taken place in Dominica. I particularly like the idea of turning a former dump site (a public bad) into a public good.

Monday, October 27, 2008

Recycling myths, fact or fiction?

I always enjoy reading from the extreme sides of an issue in toward the middle. I suspect that reality usually lies somewhere in between extreme viewpoints, so I like to tackle issues by reading from the outside in.

It helps to know what both sides are shouting about (and convenently ignoring) when trying to find that elusive rascal called truth. For example, I regularly listen to both Sean Hannity (far right on just about everything) and Keith Olbermann (far left on just about everything). I also always read Charles Krauthammer (right wing writer for the Washington Post) and Paul Krugman (Princeton economics Professor, recent Nobel prize winner and New York Times writer who is usually to the left of things).

Personally, I don't completely agree with any of these people, but understanding their perspective helps me figure out my own. I definitly agree with some of these guys more than others by the way, and on some issues more than others, but being a good, objective instructor of economics, I'm going to keep that bit of information to myself. ;)

In EVS/ECN 330 we've been talking about trash and recycling (CERMES students should be reading that lecture about this same time), so here are a couple of opposing viewpoints to consider:

In the right corner we have PERC (Property and Environment Research Center)

In the left corner we have EDF (The Environmental Defense Fund)

Happy reading!

Sand stealing and erosion in the Caribbean

Here's an environmental issue that I was unaware of... people are stealing beach sand and using it for construction. Thanks Whitney K. for sending me the link.

Where's the economics?

For starters, the fine for stealing sand is too low in some of the nations cited in the article. We know that if the fine/fee does not correspond to actual damages incurred, the result will be an inefficient amount of the hazardous activity. Clearly there is a need for determining the economic loss associated with harvesting sand illegally so that the proper fine can be imposed (while factoring the probability of catching the offender).

Could this activity be the result of incentives created by regulation in other markets? For example, if limestone mining or legal sand mining is regulated via a tax, there is an economic incentive to seek an alternative. My understanding is that this is not the case in most of the Caribbean (in many cases mining is in fact subsidized), but it may be true in some nations.

Mostly I see this as a typical poaching problem: we have an open-access resource where use/harvest is "regulated" on paper, but the regulations are inefficient and not properly enforced.

A benefit from landfills in New Jersey

This topic was covered today in the local paper.

Here's a link to a Time magazine article discussing the benefits of capturing methane emissions from landfills, even long after they've reached capacity.

Trash... the gift that keeps on giving.

Notice the amount of solid waste produced per day by NJ residents.... wow, and yuck.
This is surprising to me because in New Jersey recycling is mandatory.

Here is some information provided by the state of NJ on recycling, including these pages of information on the economic and environmental benefits of recycling.

Friday, October 24, 2008

New dumping rules for mining waste in US

Here are some links to articles discussing the proposed new mining waste rules in the US:

Indiana Times

NY Times

Scientific American

Note that the new rules are subject to approval by the US EPA.

Tuesday, October 21, 2008

Economic downturn means more need for valuation

Here is an interesting article from the Environmental News Network that bridges many of our topics.

While I tend to agree with most of the article, being a realist I fear that this call for valuation will largely go unheeded. Why? Non-market valuation surveys tend to be expensive. As governments budgets are slashed in the face of the global economic downturn, can they afford to conduct expensive valuation studies? Of course, I'd like to argue that they cannot afford not to.

Monday, October 20, 2008

Economic slowdown and the environment

How will the global economic slowdown affect the environment?

We've already seen a significant drop in oil prices... this is not good news for the environment, because high gas prices serve as a strong incentive to find a cheaper alternative fuel. What will happen to the push for alternatives? If oil prices stay low, will we see a return to gas-hungry vehicles? also says it's not looking good in terms of industrial pollution.

On the other side of the coin, if consumers have less money, they'll certainly travel less, which means lower emissions. Travel and tourism forecasts for the Asian market and the Caribbean for 2009 are gloomy. More localized vacations (and consumption in general) would seem to lead to lower emissions.

Moving to macro-level issues, the EU has stated that it will not abandon its green goals despite the economic slowdown.

Here in the US, a lot will of course depend on who is elected president, but its easy to assume that given the current state of the economy, environmental concerns and spending may take a back seat for a while.


Guyana and Forest Carbon Partnership

Can we call this "Paying not to cut trees: part 2"?

Click here for more information from Caribbean Net News.

Note the distinction between market-based measures and strict standards toward the bottom of the article.

Thursday, October 16, 2008

Tightening the lead performance standard

Here is an article from the NY Times discussing the EPA's recent reduction in allowable lead pollution. Notice that this is a health-based standard.

I found the unintended consequence interesting as well ... this stricter standard may reduce the recycling of car batteries.

Paying not to cut down trees

Here is an article about wealthy nations paying poorer nations to not cut down forests.

Friday, October 10, 2008

Gas & Energy Subsidies in Barbados

Here are some links to a recent announcement by the government of Barbados lowering the price for gasoline and diesel fuel.

Nation News article
Barbados Advocate article

Yes, the price of gasoline is controlled by government in Barbados, rather than being determined by supply and demand. The price is set artificially low. Under normal supply and demand conditions, this would result in a market shortage (P < P* means that quantity demanded will exceed quantity supplied). However, in this case, the government of Barbados makes up the differential between the true market price and the price ceiling by directly paying the oil supplier. This prevents the shortage, but of course amounts to a subsidy for gas and diesel consumption... the opposite of a tax. Taxpayerswill (eventually) pay this debt.

You'll note in the articles that electricity consumption is also subsidized. Electricity of course is generated by burning fossil fuels. In the case of Barbados and most of the Caribbean, electricity comes from combustion of oil and coal.

What are the environmental implications of these subsidies?
Do these subsidies encourage or hinder the push for alternative energy sources?

Thursday, October 2, 2008

Recent info on Exxon Valdez

Here is a link to a recent article discussing the settlement:

I find it pretty amazing that Exxon was allowed to prolong compensation for such a long time, and pretty disturbing that US and Alaska governments permitted the delay. What does this say about the future? Suppose we were to have another oil spill, or worse a nuclear power accident? Would those affected have to wait 20 years for compensation? This type of red tape and government foot dragging is nothing new. Other environmental examples?

In more recent news, the bailout plan passed by the US Senate just hours ago contained some add-on provisions, including tax breaks for victims of Valdez. Perhaps this was some lawmakers way of making up for the delay and notable underfunding passed in early September.

Here is a quote from the USA Today article:

"The Senate also added a number of unrelated provisions to attract House votes, including a one-year fix to prevent the alternative minimum tax from hitting an estimated 24 million families with a tax increase. Other additions: about $15 billion in tax breaks for alternative energy over 10 years and two-year extensions of other tax breaks, which cost about $42 billion.

The non-partisan Congressional Budget Office estimates that the tax provisions would add $107 billion to projected budget deficits over 10 years. That could bring resistance from centrist and conservative Democrats who want the tax provisions to be paid for.

The bill also includes narrowly tailored tax breaks for film production, racetracks, Virgin Islands rum manufacturers and fishermen affected by the 1989 Exxon Valdez oil spill."

Alternative energy, fishing and rum... sounds like a winner to me.

Classic Externality in the Caribbean

Here is a link to an article citing a recent study about the effects of pollution on the health and status of coral reefs. Some of the numbers are pretty disturbing.

Click here to read the Caribbean Net News Article

I found the story of Cancun to be pretty interesting... An undisturbed and pristine area presents an opportunity for economic growth if used for tourism. Development ensues and tourists follow. However, the development and tourists damage the very resource that started the process in the first place. Clearly there is a need for a balance. Without proper management, the area will be left without resource quality and without tourist revenues.

Applicable economic theory?
Potential solutions?
What information needs to be gathered first?