Copenhagen

Chance for some blogging...

What is happening in Copenhagen next month?

What are the goals?

What are some of the keys to success?

What is the general outlook?

Cruise port expanding in Barbados

From today's NationNews: $70 Million Cruise Plan.

Wow.

Was there an environmental impact analysis?
Was there a cost-benefit analysis?

Suppose we were interested in understanding the merits of this plan. What information would we need? What costs and benefits would we have to measure? What valuation methods might be useful?

The article mentions a sustainable recreation experience. I wonder what that means...

Chance for some blogging credit

As we approach the end of the term, among other things I'm considering how everyone is grasping the big picture.

One central theme throughout the course is that while sustainable resource use is best for society, most decisions regarding use are made at the individual level. Often, when it comes to the environment, what is best for the individual is not what is best for society as a whole. Result: over-use.

Here's a question to think about ...

Are there circumstances under which the individual considerations of self-interest and the resulting social outcomes are compatible with true environmental sustainability? Or does this notion of compatable individual and social well-being have to be forced by policy?

Feel free to provide real, hypothetical or historic examples or a general description.

The definition of sustainable development

The United Nations Division for Sustainable Development defines sustainable development as:

"Development that meets the needs of the present without compromising the ability of future generations to meet their own needs".

What do you think about this definition?

Particularly, do you think this definition is useful for policy action?

Unintended consequences of REDDs

REDD stands for Reducing Emissions from Deforestation and forest Degradation.

The system works as follows:

Estimated carbon savings from standing trees are estimated.
Those carbon credits are then sold in international carbon markets.
This provides a monetary incentive to preserve standing forests, essentially by increasing the environmental rent to a point where it is higher than the rents from various forms of development.

Sounds good. We address the issues associated with the skewed intertemporal and international distribution of costs and benefits associated with deforestation, as developed countries buy carbon credits from developing nations and forests are preserved for future generations.

Problems and unintended consequences? Yep.

Read more here and here.

Norway to fund forest preservation in Guyana

From WorldWatch: "Norway to help protect Guyana's Forests".

This is a great example of econ principles in action.

Quotable line regarding land rent, discount rates and incentives: "If we don't start paying people for the ecosystem services that forests provide, they'll be used for other economic activities that result in deforestation and degradation." (Brendan Mackey, forest ecologist with the Australian National University)

Pigouvian tax on driving

From Deutsche-Welle (German newspaper), the Dutch government is imposing a new tax to replace current road taxes and auto sales taxes. The new system will impose a tax on each car based on distance driven. More fuel efficient cars will be taxed at a lower rate. Driving during congested periods will be taxed at a higher rate. How can they do it? GPS tracking. Interesting (and pretty solid IMO) application of Pigou ... but a bit scary in terms of, you know, the big brother implications.

What do you think?

Thomas Friedman on tropical deforestation

From today's N.Y. Times.

Friedman describes the state of the problem (it's all about relative discount rates isn't it?), and the need for wholesale change in the way we go about encouraging economic development.

He sums it up in one sentence: "But it takes money."

Connection between this post and the previous one?

Meat production, consumption and climate change

A new report from Worldwatch Institute suggests that up to 51% of annual worldwide GHG emissions are attributable to meat (cows, pigs, chickens, etc) grown for food. Previous estimates from FAO suggested the figure was 18%. Some of the conclusions of the new study will certainly be questioned. For example, the study includes animal respiration (breathing) in its calculations. You can read it yourself (pdf available here). But either way, there is no question that meat production is a huge source of emissions, responsible for more GHGs than transport (driving cars).

So, does this mean that you can't really claim to be an "environmentalist" if you eat meat?

Hat tip: env-econ

Costs and benefits aren't always immediately obvious

Here is a short report on an interesting discovery from the British Antarctic Survey.

Basically, melting ice can have positive impacts on climate change. New open land (that once was ice) allows trees to grow, sequestering C02. New open water (that once was ice) allows phytoplankton to bloom, also sequestering carbon. The former effect appears larger than the latter, and both are small relative to global emissions (less than 1%). Neither effect appears to have been incorporated into climate modeling and the associated predictions.

Science people... we call this 'negative feedback', right? That is, higher C02 creates conditions that diminish C02.

Sustainability fee shot down by UNCW student government

It didn't even come close to passing.

Read about it at the Seahawk online.

Cash for clunkers was really expensive (on average)

I haven't seen the actual report, so their numbers might be bad, but I found this interesting:

"Taxpayers real cost for cash-for-clunkers"

Note that this is an incentive program for getting old, inefficient cars off the road.

What were the goals behind the program? That is, what were the benefits that gov't was seeking to achieve?

We have an estimate of the average cost here... what would we need to complete the analysis?

UPDATE: It seems that the White House is not too happy about the report.

Krauthammer on climate change

Below is an excerpt from an interview that Der Spiegel did with Charles Krauthammer.

Der Spiegel is a German weekly news magazine.

Charles Krauthammer is a (very) conservative columnist for the Washington Post. I won't tell you whether I agree with his politics (I hope you have no idea about my political leanings, or even if I have any), or his thoughts about nuclear power, but he is an excellent writer; always clear, always concise, often biting, usually witty. He's won the Pulitzer Prize, and has an M.D. from Harvard. He also has an undergrad degree in economics and poly sci. He left medicine in the late 70's to work for the Carter administration, at which time he also began writing (including writing speeches for Walter Mondale, Carter's VP).

Note: If you're going to read Charles K., you've also got to read Paul Krugman, the Nobel Prize winning economist and liberal columnist for the New York Times. As I've said before, read everything (left, right and center) and form your own opinions. You won't learn much if you only listen to people that you agree with.

I've cut most of the interview, because the topics don't relate to our class, but I found this portion interesting enough to share.

"

SPIEGEL: How do you solve problems like climate change if international institutions are failing?

Krauthammer: It's not the institution that does it, it's the confluence of interests. Where there is a confluence of interests among nations, as, for example the swine flu or polio, you can get well functioning international institutions like the World Health Organization. And you can act. Climate change is different, because the science remains hypothetical and the potential costs staggering.

SPIEGEL: You think it's a speculative theory?

Krauthammer: My own view is that there is man-made warming. On several occasions I have written that I don't think you can pump carbon dioxide into the atmosphere indefinitely and not have a reaction. But there are great scientists such as Freeman Dyson, one of the greatest physicists of the last hundred years, who has studied the question, who believes quite the opposite. The reason transnational action is so difficult is because the major problem with climate change is, A, that there is no consensus, and, B, that the economic cost is simply staggering. Reversing it completely might mean undoing the modern industrial economy.

I'm not against international institutions that would try to tackle it. But the way to go, at least in the short run, is to go to nuclear power. It's amazing to me that people who are so alarmed about global warming are so reluctant to adopt the obvious short-term solution -- the bridge until the day when we have affordable renewable energy -- of nuclear power. It seems to me intellectually dishonest. Nuclear is obviously not the final answer because it produces its own waste -- but you have a choice. There's no free lunch. If you want an industrial economy, you need energy. If you want energy, it will produce pollution. You can have it in two forms. You can have it dissipated in the atmosphere -- like carbon dioxide -- which then you cannot recover, or you can have the waste concentrated in one small space like nuclear. That is far easier to deal with. The idea that you can be able to create renewable energy at a price anywhere near the current price for oil or gas or coal is a fantasy."

Tropical forests, carbon credits and discount rates

There's a good read over at WorldWatch: "U.S. Under Pressure to Protect Tropical Forests".

The short of it:

To meet emissions reduction goals via cap & trade, polluters in more industrialized nations need to purchase carbon offsets.

Reducing rates of deforestation in less developed nations (allowing standing forests to stand) can offset carbon emissions cheaply and effectively.

Now, think about discount rates and incentives ... does this sound like "win-win"?

Note the discussion of risks. Ideas for how to mitigate those possibilities?

Loggerheads in trouble

From Oceana: 2009 Nesting Data for SE States Shows Dire Status of Loggerhead Sea Turtles

Note that some of the data comes from Topsail and some from Baldhead (beaches immediately to our north and south).

Lots of issues here besides the obvious non-use benefits from the existence of charismatic megafauna...

When we think of turtle population trouble, we might first think of marine issues such as turtles being incidentally caught or trapped in fishing gear ("by-catch") or the destruction of habitat. But land use activities are also critical to turtle populations. Here's the rub. Beach renourishment generates or maintains untold millions in tourist revenues and protects valuable coastal investment. We all benefit from such investments via economic impacts, the beneficial effect of wider beaches on insurance rates and our share of the land rents from wide coastlines. Yet this same renourishment threatens an important species. What information do we need in order to inform policy aimed at protecting beaches AND protecting turtles?

More action on plastic bags

This time from Target and CVS.

Yes, incentives matter.

The Nobel Prize in Economics

On Monday, two American economists won the Nobel Prize in economics.

Read about it here at CNN.

Notably, Professor Elinor Ostrom (Indiana University) won the award for her work on governance of common property resources.

Check out this short YouTube video (a little over 8 minutes) for her take on the issue.

Notice:
Her opposition to "top down" control,
her insistence that it doesn't have to be a "tragedy",
her notion of collective ownership and enforcement of property rights ("who is a member?"),
her push for adaptive management, trust in the other members, the importance of local knowledge and that the diversity of management institutions match the diversity of the resources being governed.

Awesome.

P.S. We'll cover the Gordon model that she references later in the term when we get to fisheries econ.

China's Green Initiative

Thomas Friedman of the New York Times has a great piece on what is perhaps the biggest environmental news of the past few weeks.

Equity and valuation

This subject came up in class today and was raised previously by Derek here on the blog:

When we measure value we use "willingness and ability to pay" as our metric. We can take issue with this definition of value because it is "unfair" to those who do not have as much ability to pay. Using this measure, a resource will appear more valuable to someone who has more money (and is willing to spend it). As unfair as it seems, we need a solid measure of value. Without this particular definition, we really have no way of measuring what something is worth.

How do we deal with the unfairness? Can we make adjustments in our measures of value that account for unequal income distributions?

Yes, using something called "equity weights" in cost-benefit analysis. This basically means adjusting value estimates upwards for individuals/nations with lower incomes. The level of adjustment can be based on tax rates (higher tax rate, lower weight) or some other measure.

The following passage discusses the issue nicely:

A key issue that has not been satisfactorily resolved in welfare economics (the branch of economics on which cost-benefit analysis is largely based) is Jeremy Bentham’s utilitarianist principle that actions should be evaluated on the basis of whether they generate the greatest amount of overall happiness for society. Aggregation of individual ‘happiness’ or utility is problematic because of the lack of a common numeraire for the fairly nebulous concept of utility. Utility is not measurable or comparable.

In practice, standard cost-benefit analysis tends to assume that a given change in costs or benefits (for example, $100) arising from a policy or project is valued equally by rich people and poor people and that individuals’ benefits and costs can therefore be aggregated to give an overall measure of net benefit to society. (In technical language, the marginal utility of money is assumed to be constant.) This approach (see, for example, Sugden & Williams 1978: ch. 16) implicitly accepts that the analyst’s role is principally that of an adviser on the efficiency aspects of a policy or project, and that value judgements about equity considerations should be the province of the political decision-maker.

Nevertheless, economists do sometimes advocate the use of income or other equity weights in cost-benefit analysis where it would be helpful to explore adjustments for poorer groups. But such calls are invariably tempered by a strict reminder that a non-weighted analysis should also be provided, to allow the decision-maker to easily determine the effect of including ‘equity’ weights.

Pearce & Nash (1981: 10–11), however, point out that even standard cost-benefit analyses make a value judgement by not using weights because they accept implicitly that the existing distribution of income is an equitable one. While this is true, the standard, unweighted approach is still generally preferable because the current distribution of income in a democratic society reflects (albeit imperfectly) existing social preferences. To introduce any other set of weights risks the adoption of a paternalistic or authoritarian approach by the individual analyst or decision-maker. And where weights are used, transparency requires that the same analysis be presented to the decision-maker without weights so the effect of weighting is clearly discernible.

If the distribution of income across society is considered to be inequitable, the correct solution is to rectify it directly through progressive taxation or other policies, not by distorting the analysis of highly specific projects that may in any case affect only a small section of the community.

In more recent times, the issue of effect on different socio-economic groups has also been addressed more directly by disaggregating the results of cost-benefit analysis to show the potential incidence of the costs and benefits of a government program on various sections of society. This approach is more transparent and allows the decision-maker to weigh equity and political considerations against the overall social benefit achieved.

Excerpted from "Multicriteria Analysis: 'Good Enough' for Government Work?"
by Leo Dobes and Jeff Bennett, Crawford School of Economics and Government at The Australian National University.

John Loomis on Non-Market Valuation

This article appeared in Choices a few years back.

It is well worth the read.

As someone who does valuation as part of my job, I often encounter opposition to the very idea of placing monetary values on environmental and natural resources. We've seen some of that right here on the blog, and no doubt there are others that share the viewpoints of those who are brave enough to be vocal in expressing their opinion. Loomis does a great job of pointing out the merits and shortcomings of non-market valuation.

Krugman on basic econ of cap & trade

A nice follow-up to his last piece. Everyone should read this.

Economic value in standing forests might just save them

Standing trees store carbon.

Since the world is moving toward a cap-and-trade system, carbon storage is something that polluters need. Polluters, may therefore need trees and will pay for them to remain standing.

Read about REDD mechanisms at CNN.

Krugman on climate change

From yesterday's NY Times

And another perspective (slightly dated) from Bjorn Lomborg at Real Clear Politics.

Everyone please read!

I would like everyone to please read the comments following a post on anthropocentric value, quasi-option value and frogs.

An anonymous poster (let's call him/her "AP") has commented expressing an opinion that arises each semester. In short, the opinion is that the anthropocentric perspective is bad and that valuation of the environment is impossible and silly. AP is concerned that a) we cannot possibly know enough to understand the value of environmental and natural resources, and b) even if we could, we shouldn't try to do it. AP thinks it is crazy to try to understand every component of value and screams for an appreciation of intrinsic value. Finally, AP calls for a fundamental change in the way humans look at the natural world.

AP makes one great point (I'll leave it up to you to figure it out and comment on it). Unfortunately, I think there is a great deal of misunderstanding by AP (and by many of you as well) regarding the anthropocentric perspective of value and the notion of valuation.

To clarify a few things:

1. "Value" simply means what something is worth. In economics, value is measured by willingness and ability to pay. "Pay" does not necessarily imply monetary payments. You can "pay" with your time, energy or via trade. When you recycle, donate your time to environmental causes, etc... you are showing your value for the environment.

2. The anthropocentric perspective on value simply means that when we try to figure out what something is worth, we try to estimate what it is worth to humans.

3. Humans can and do value the well-being of other creatures. Humans can and do value the well-being of ecosystems. Humans can and do value the environment for intrinsic purposes.

Hence (and here is a huge source of misunderstanding), intrinsic values associated with the environment are perfectly compatible with the anthropocentric perspective. Numerous human cultures and religions emphasize harmony with nature and treating all living things as equal. Many people value care of the environment and promote conservation simply for the sake of conservation. Please note that these are human cultures, human religions and human values and therefore any respect, worship or other values held by people are examples of the anthropocentric perspective, not evidence against it.

4. The economic perspective of value (and a main thrust of natural resource economics) is that we should try to understand, and in some cases measure, all components of value. Market value, non-market value, use value, non-use value, ecosystem service values, etc...

5. Resource economists don't just go around trying to put a dollar value on everything on earth. We attempt to measure the value of things when there are trade-offs involved (its all about scarcity right?). That is, we engage in valuation when there is a need. For example, if a particular natural resource is under threat from pollution, development, etc... a valuation exercise can help us understand the opportunity cost (what stands to be lost) of that market activity. This lends clarity to the trade-offs we face as a society and therefore helps policy makers understand what is at stake.

Questions about the above?

Back to AP... From what I can gather, he/she seems to be worried that valuation will somehow cheapen the environment. To this, my reponse is: many people now look at the environment as FREE (it doesn't get any cheaper than that). Valuation can show everyone that their actions or inactions have a real cost. AP also is concerned that if we put a dollar value on the environment it is sure to be wrong because our understanding of things is incomplete at best. To this I ask: would you rather have an estimate or no estimate at all?

I don't mind the misunderstandings noted above, but here's where AP's comment gets me: AP really wants people to understand that nature has an intrinsic value, that it is indeed worth a great deal when conserved. But then he/she argues vehemently against the one sure way to deliver that message: measure and express that value in dollars.

Final note: If AP had not posted anonymously, I wouldn't use him/her as an example like this. But, since this person chose to remain hidden, I consider this fair game. Heck, for all you know, AP is me, and I'm just trying to get two of the quietest classes I've had in 12 years to start talking!

Trash on Masonboro Island

From today's Star News, a trash/pollution issue that needs a solution.

Masonboro Island is an 8.4 mile long barrier island between the Intracoastal Waterway (to the west) and the Atlantic Ocean (to the east) that lies between Wrightsville Beach (to the north) and Carolina Beach (to the south). The island is completely undeveloped and is protected as part of the North Carolina Estuarine Research Reserve. You can only reach the island by boat (or if you're daring, by swimming or paddling across Masonboro Inlet or Carolina Beach Inlet).

It is a beautiful place. Check out some pics here. It is home to several endangered bird species and is a nesting beach for loggerhead and green marine turtles. Most often there are very few people there, and you can have miles of perfect beach all to yourself. Camping on Masonboro is great, especially in the late spring or early fall when the mosquitos aren't so bad. However, during the summer holidays (Memorial Day, July 4, Labor Day), the island is hugely popular with partying boaters. If you've been there during these times, you know... the bay adjacent to Masonboro looks like a boat parking lot. Lately, the parties have been huge and people have been leaving loads of trash on the island.

Questions related to recent class topics:

What are the basic economics behind this environmental problem?

What are some potential solutions? Pros and cons of these?

What categories of value might we need to measure in order to understand the economic value of Masonboro Island?

New fuel economy standards coming in 2016

The basics from the Raleigh News and Observer.

More quotes and such from the N.Y. Times

More detail on the economics from Business Week.

What is novel here is that for the first time national automobile standards include a provision for CO2 emissions (California has done this for a while).

Notice the consideration of demand and supply in the Business Week article.

(Side note: I must mention that I get a little irritated when journalists say "The law of supply and demand"... because of course, there is no law of supply and demand. There is a law of demand, and a law of supply. Econ prof pet peeve I guess.)

Anyway, the article also points out a need for the true price of gasoline to be reflected in the price we pay at the pump, otherwise, the new regs may only serve to create a glut of tiny cars that no one wants.

These standards in question are called C.A.F.E. standards (Corporate Average Fuel Economy), and raising them may have an unintended consequence. Can anyone see it?

There is some good basics on C.A.F.E. standards here from NPR. Notice that we have not raised the standards in a long time.

Litter & dumping in Barbados

Nicholas Cox of the Barbados Advocate has a thought-provoking piece in today's paper.

Lots of issues here:

Environmentally "bad" and "good" behaviors as a function of income, education as a means to alleviate "bad" behaviors, individual obligations to "do something" when they are able... This is all The Tragedy of the Commons, no?

I was thinking about these same issues recently, in anticipation of an upcoming lecture (Mark your calendars for October 6). The issues that I'll be talking about (litter, beach erosion, tourism, species protection) are very similar to those that we deal with here in southeastern N.C. And, indeed, the problem seems to be different depending on the socio-economic status of the adjacent populous.

Here's an example: Wrightsville Beach and Carolina Beach are only separated by about 15 miles. CB is about twice as big and there are roughly twice as many people in CB than in WB, yielding the same population density. However, the people who live at WB are much better off. The median household income at WB is US$67,083 vs. US$45,194 at CB (source: city-data.com)

OK, who has been to both? Did you notice any differences in environmental quality? How does the causality flow?

Other examples?

Is this a technology standard or a performance standard?

From the N.Y. Times: "Feds, California look to Cut TV Energy Use"

Bahamas (finally) offers full protection for sea turtles

Here is a short article from the St. Lucia Star

What kind of regulation are these?

Notice the quote about turtles being worth more alive then dead... what information would we need to collect in order to empirically test this assertion?

Wind farm planned for the Outer Banks

From the Myrtle Beach Sun News: Outer Banks wind farm planned.

Costs and benefits?

The article cites some huge R&D costs. What will we need to learn in order to understand whether or not this passes the cost-benefit test?

Maldives to introduce green "tax" on tourists

From Reuters: Maldives to introduce green tax on tourists

What's going on here? Is this a Pigouvian tax or something else?

Charging tourists an extra "environmental fee" in hopes of raising funds for conservation efforts (or simply for adding to general revenues) is nothing new. Examples are found all over the world.

Tourism can create significant environmental impacts and can exacerbate the depletion of natural resources. In that sense, a Pigouvian tax is an appropriate means for internalizing a negative externality.

We should also expect (following the law of demand as the supply curve shifts back) that any increase in price will decrease quantity demanded, resulting in less crowding and better environmental quality (or at least a slowed rated of environmental degradation).

The fee therefore seems like a win-win... does anyone see a down-side?

Other examples of such fees? Have they been sucessful?

Anthropocentric value, quasi-option value and .... frogs.

Note: post has been re-titled for clarity.
Apologies for the confusion this may have caused.

Here is an interesting short read from CNN.

Welcome CERMES students!

Hi everyone,

I just want to extend a welcome to the students from the Centre for Resource Management and Environmental Studies (CERMES) University of the West Indies - Cave Hill, who are joining our blog as of this week.

CERMES students, if you scroll down to prior posts, you'll see that we've been discussing a few issues so far. Please feel free to join the discussion by clicking on comments, and then writing and posting your comment.

I'll be incorporating some Caribbean natural resource issues into the blog and I hope the UNCW students will join in that conversation as well.

Cheers,
-ps

Rainforest, cows and cash.

Here is an interesting article from the NY Times regarding deforestation in Brazil, and an attempt to mitigate deforestation by paying landowners not to cut.

Basic econ here: costs and benefits. How does this story fit in with our discussion of externalities?

Seems like we were just talking about this...

From Bloomberg: BP makes 'Giant' Oil Discovery in Gulf of Mexico.

Predicted effect on the price of oil? (feel free to make some assumptions about other factors)

Effect on the conservation push?

hat tip: Tim Haab at env-econ

Speaking of bans...

Europe bans incandescent bulbs (from the NY Times).

We're going to talk quite a bit about the efficiency of command-and-control regulation (such as this) vs. incentive-based systems.

Anyone care to take a shot at the pros and cons of this ban?

N.C. to ban plastic bottles in landfills

Starting October 1 of this year! Are we ready?

Also included in the legislation is a ban on wooden pallets, used oil and antifreeze, oyster shells, tires and certain types of batteries.

Read short news articles about it here and here and here.

The full legislation is here.

What is the intent of this legislation?

Do you think the ban will accomplish that goal?
(Be sure to consider N.C. recycling rates in your answer)

Do you think the legislation will result in any unintended consequences?

The larger issue is of course, why do we throw away so much trash (and why do we recycle so little)? We'll get to the details of these later in the semester... but it's all about costs and benefits.

What will happen to the demand for organic food?

Suppose that this is true... what will happen to the marginal benefits (demand) that consumers receive from organic foods? Price effect? and then...?

Supply & Demand for Solar Panels

Here is a recent article from the NY Times illustrating supply and demand in action in the solar panel market.

Solar panel prices are falling because...

An increase in the number of firms manufacturing polysilicon has increased the supply of this input used in the production of solar panels.

Increased supply of polysilicon lowers the price of polysilicon (as the polysilicon supply curve shifts to the right).

This lower input cost causes the supply of solar panels to increase (shift to the right), which causes the price of solar panels to decrease.

This increase in supply of solar panels appears to be coupled with a decrease in demand for panels (we can assume that this is largely due to lower incomes and cash-strapped governments eliminating subsidy programs).

Result? Lower prices of panels and an increase in quantity demanded.

Sounds good so far. More solar power is a good thing, right? But, what else might happen if prices stay low into the long-run?

Peak Oil from the NYT

Here is the op-ed piece I referred to today in class.

Here is a short comment from Keith Johnson at the WSJ.

And another perspective here from United Press (and the back story).

Basic info about peak oil here.

Wecome ECN/EVS 330 Students!

Welcome to the natural resource economics blog.

This purpose of this blog is to allow for online discussion of natural resource econ news for students at UNC Wilmington and UWI Cave Hill.

I'll post links to news articles, questions for discussion and tips to relevant on-line material throughout the term. If you find an article that you think would make for interesting or timely discussion, please send it to me via email (schuhmannp - at- uncw - dot - edu). My goal is for us all to learn from each other.

Please feel free to browse and respond to older content on the blog. As far as class participation (your grade), I'll only be monitoring content from this week forward.

However, please do read this post from May: What do natural resource economists do?

See you in class,
-PS

Ban on plastic bags in the Outer Banks

From today's local paper

White house Creates an Ocean Policy Task force

Be sure to read the Proclamation from the President and the memorandum.

White house Creates an Ocean Policy Task force

Final chance for some blogging!

Hi all,

I hope you enjoyed the class. I'm glad that we had the opportunity, and have enjoyed reading your work. I must confess that I would have strongly preferred a face-to-face class.

Here's a final chance to get some blogging in:

What did you think of the course material?

What topic did you find the most interesting? Why?

What topic was the least interesting? Why?

Any topics that were confusing?

Were there topics that you would have liked to have seen covered but we didn't get to?
(My first pick here would be renewable energy, which I usually spend at least a couple of weeks on!)

Take good care and enjoy the rest of your summer!

Recycling laws in San Francisco

Here's a recent article from the NY Times about recycling in San Fran.

Bottom Longlining and Turtle Bycatch

From Fishnews:

Recently, several NGO's petitioned the U.S. Department of Commerce for an emergency rule under the Magnuson-Stevens Act to address loggerhead sea turtle interactions in the bottom longline commercial reef fish fishery in the Gulf of Mexico. NOAA Fisheries has determined that the requested action is not warranted because an emergency rule was developed independently at the request of the Gulf of Mexico Fishery Management Council.

Read about the emergency rule here (tons of great info on turtle bycatch).

Read about the NOAA response here.

Bluefin Tuna Catch Limits

The Federal Register from last Monday provides an example of a catch limit for a specific fishery.

The ruling starts at the end of the first page, at the bottom of the third column under "Department of Commerce".

Notice that we have a daily catch limit (commercial and recreational) and a minimum and maximum size restriction (slot limit).

How and why did NMFS change the regulation from last year? What do you think the effect will be?

Squatting and deforestation to be easier in the Amazon?

Also from NewScientist, here is an article describing a new piece of legislation in Brazil that could make illegal deforestation easier (though the initial intent seems to have been to make it harder).

The bill effectively grants title to lands obtained illegally, permitting easier use (read: slash-and-burn for agriculture and then grazing) and/or sale of the land, and basically rewarding past illegal logging with title and profit.

More details here from Global Voices and here from MongaBay.

Caribbean reef degradation

A short article from NewScientist describes a trend in Caribbean reef composition: tall corals are disappearing and short corals are taking over.

Trees as carbon sinks from UNEP

This might be useful for the chapter 6 discussion question.

Note the point about "proper market signals".

Always question the source!

Check out this article: Reusable bags labeled as a possible health risk.

When I read the headline I was thinking that we have another great example of good intentions leading to bad unintended consquences... but then I read the article and saw who paid for the study. Hmmmm...

How is this related to topics in this course?

Recyling from Popular Mechanics

Here is a nicely written article from Popular Mechanics (Dec. 2008) regarding the economic and environmental implications of recycling. While recycling most products makes sense from an environmental standpoint, not all recycling passes the benefit-cost test.

Also, importantly, the costs and benefit of recycling depend a great deal on time and place: current prices for raw materials and local conditions. Regarding the latter, scrap prices are much lower now than those cited in the article, making recycling less likely to be beneficial from a purely monetary standpoint. You can check out current and historic prices of various recyclable products at scrapindex.com

Be sure to also read these articles from Popular Mechanics:

"Recyling Myths Debunked"

"Recyling by the Numbers: The Truth About Recycling"

While a bit dated, I think this short article sums up the situation nicely:

"Is Recycling Worth It?" by Cecil Adams of The Straight Dope

Stavins on CAFE standards vs. incentives

Robert Stavins discusses the new CAFE standards and the relative merits of standards vs. incentives at The Energy Collective.

Hat tip: env-econ.net

Econ principles in action

From the World Business Council for Sustainable Development, we learn that fossil fuel emissions have declined for the first time in nearly 3 decades.

Despite a marginally increasing GDP last year, emissions are down due to a combination of forces: high fuel prices causing a decrease in quantity demanded, and lower incomes causing a decrease in demand for just about everything. (note that the priciples lesson"changes/shifts in demand vs. changes in quantity demanded" is a bit blurred by the author of the above piece).

At the start of the economic downturn, especially during all the election hype, I was not optimistic about the prospects for environmental improvements given the state of the economy. From an investment and spending standpoint, when people and governments are concerned about their budgets and incomes, they tend to put environmental concerns on the backburner. Basic discount rate and time value of money theory can be applied here: Lower incomes mean higher discount rates and less spending on goods and services that yield benefits in the future.

A recent Gallup poll backs up this assertion, showing that people are more concerned about the economy (and other issues like healthcare) than they are about the environment, and most people are not making major changes in the way they live despite increased attention to climate change.

But, even if people and governments are not intentionally doing more for the environment, it seems that curtailed market activity handles a good bit of it anyway. Note the obvious tradeoffs here: we buy fewer market goods due to an income effect and as a result can indirectly enjoy more environmental goods. When the economy is booming, people are more apt to want to spend on environmental concerns, but are also consuming more goods and services that harm the environment.

How long will the current trend last?

It depends on a lot of factors of course. The speed of economic recovery, changes in gas prices and the passage (and details) of carbon legislation are the biggies that I can think of. What else?

Given that gas prices are not projected to exceed $2.50 in the short run, if congress does not pass a carbon bill, will consumers be motivated to increase their energy efficiency?

Topics in the news

Nationally, two big stories related to natural resource econ are making headlines:

1. New auto and emissions rules

Gallup has some survey results about how Americans feel about standards


2. The Waxman-Markey Climate Bill currently in the House

Krugman has an interesting take on it in today's paper
(note: Kruman is a Nobel Prize winning economist, and is pretty liberal)


Locally, we also have two big issues:

1. Titan Cement
Note the links to many other stories about this topic on the left under "related stories"
Also, if you search back in this blog to September 2008, you'll find lots of related discussion.

2. The legality and desireability of using hardened structures to prevent beach erosion


Suppose we were interested in studying one of these. How might the tools of natural resource economics be useful? What research questions might we want to address? Why would it be important to remain objective (i.e. employ positive analysis rather than normative analysis)?

Unintended consequences

A theme that we'll see several times throught this course is that of unintended consequences.

When we undertake a policy action for the purpose of something good, we often create ancillary effects that are bad. Luckily, the tools of economics often can help us predict these outcomes.

Examples:

Subsidizing ethanol from corn raises food corn prices and actually creates more pollution. oops.

CAFE standards mandating high MPG for automobiles decreases the marginal cost of driving so people drive more, creating more pollution. oops.

and from today's USA Today: Protecting one species harms another species. oops.

Other examples?

What do natural resource economists do?

As new students begin to study the discipline of natural resource economics, there is often a great deal of confusion about what the topic is really about. This is especially the case when students are coming from backgrounds with only limited exposure to economics (e.g. EVS, where you've only had one or two econ classes before this one).

Generally speaking, economists try to solve problems using a combination of theory, empirical analysis (data, statistics, math), and intuition. For example, macro economists try to address issues such as how to keep an economy growing without significant inflation. Natural resource economists try to solve problems associated with scarce natural resources.

Some examples from my work include: How to maximize fishery value while balancing the competing needs of commercial and recreational fishers and maintaining a biologically sustainable stock? How can Caribbean tourism grow without harming marine turtle popluations? What regulations would maximize the net gains to society from white tailed deer populations? In the face of depleted stocks, will a nation's supply of seafood increase or decrease with financial incentives to curtail fishing effort?

Obviously, these are complex issues that require interdisciplinary effort. One of the things that I really love about what I do is that I work side-by-side with biologists, policy makers and resource users to address these problems.

Here are links to two excellent essays that provide a nice perspective on the economic view of the environment.

The second essay covers non-market valuation, which we will cover in detail later in the term. It makes a good read now however, as it sets the stage for much of what we're covering at the beginning of the class (e.g. the anthropocentric view of value).

How do Economists Really Think About the Environment (Fullerton and Stavins, RFF, 1998)

Economic Values without Prices (Loomis, Choices, 2005)

Krugman on Carbon from China

Paul Krugman's column from Friday's NY Times paints a depressing picture of China's willingness to curb carbon emissions.

Notably, China plans to continue growing at a rapid pace relying principally on coal power.

If this is the case, what will be the implications of emissions reduction policy here in the U.S. and in Europe?

Background reading:

Last week the NY Times notes that China is building cleaner coal plants

Blog post on Nader discussing tax vs. cap-and-trade

Blog post on Al Gore and "The Climate for Change"

And a few short readings on cap-and-trade vs. carbon taxes:

gristmill

Greg Mankiw

Environmental Defense Fund

The Carbon Tax Center

Common Tragedies response to the CBO

Welcome ECN/EVS 330 Students

Welcome to the natural resource economics blog.

This purpose of this blog is to allow for online discussion of natural resource econ news for students at UNC Wilmington and UWI Cave Hill.

I'll post links to news articles, questions for discussion and tips to relevant on-line material throughout the term. My goal is for us all to learn from each other.

For those of you in ECN/EVS Summer Session 1 at UNCW, please feel free to browse and respond to older content on the blog. As far as class participation (your grade), I'll only be monitoring content from this week forward.

Best,
-PS

Mercury and Seafood

The U.S. Geological Survey has released a new study detailing the process by which mercury gets into seafood.

Read the highlights here.

Krugman on Cap & Trade

From yesterday's NY Times.

and here's an alternative perspective from Vaclav Klaus (President of the Czech Republic) over at Real Clear World.

EU fisheries over-capitalized; system broken

From ENN: "EU fishing policy not working"

Uncertian property rights lead to a "race to fish", excess fleet capacity and diminished stocks.
A system of transferrable quotas might be the answer... wow, who would've thought it?

Why is it taking so long for everyone to figure this out?

Options:

1. Make hard choices now that will upset some current fishers, but allow society to enjoy fish forever
2. Follow business as usual so that fishers are not upset in the short term; destroy fisheries in the long term

The limits to wind and solar

From the Washington Post

Friedman prefers carbon tax to cap & trade

Here's his piece from yesterday's New York Times.

Theoretically, the efficiency and outcomes of a carbon tax and a cap & trade system should be the same. Practically, the tax requires us to "get the price right" while the trade system requires us to "get the quantity right".

Friedman seems to be arguing for the tax on the grounds of political acceptance, which is usually the opposite of what we hear. One of the main arguments against a carbon tax is that it contains the word "tax", which will immediately turn people off. Considering the recent debacles in the financial world, the black box mystery of cap & trade might indeed be more of a turn off.

He also argues for having the discussion of carbon policy be framed in terms of national security rather than in terms of climate change. I agree with this, though I'd add saving money at the household level to that thought. Those that don't believe that humans are affecting the climate aren't going to change their minds very easily, so telling them that the tax will help a problem that they don't believe exists is a waste of time. If however, you can argue that the same actions will make us better off as a nation for other reasons and save them money, then you're more likely to get buy-in.

Friedman handles the macro concerns nicely. For the micro, driving a fuel efficient vehicle, re-using plastics, composting veggie waste in your garden, eating less meat and using less water will save you lots of money. No one can argue against that, no matter what they believe about climate change.

Thoughts?

Venezuela bans trawl-fishing, seizes vessels

Short article over at Caribbean Net News.

Well, that's one way to stop destructive fishing practices.

Does anyone have more info about this?

Iceland: Banks & fish

Here's a great article from Vanity Fair's Micheal Lewis about the rise and fall of Iceland's financial industry.

It is a long article, but well worth the read.

Ban and Gore on greening the stimulus

UN secretary-general Ban Ki-moon and former U.S. vice president Al Gore have an opinion piece in today's Financial Times.

Key issue here: Should policy try to "kill two birds with one stone"? Or should we have separate economic policy and environmental policy?

Reward system to solve free rider problem

Here is an interesting article from ENN that describes a competition for the development of by-catch reducing fishing gear.

I think this is a great idea. Here's why...

Inventing fishing gear that is more environmentally safe sounds like a great idea, but when you think about it, there's little incentive for an individual to undertake such efforts. Once invented, the "smart gear" will generate positive externalities (benefits that accrue to society at large) through the reduction of incedental catch that cannot be captured by the inventor. Hence, the inventor incurs a great deal of R&D expenses, but shares the gains with society. With open-access or common property fisheries, fishers have no incentive to invent or adopt new technology unless their profits increase or they are forced to do via a technology standard mandate.

By creating a monetary prize, we are in effect subsidizing a positve externality generating good (R&D to reduce by-catch).

Question: is this competition enough, or do we need an additional policy to go along with it?

Ecosystem markets

Here is an interesting article from ENN about markets for ecosystem services (biodiversity, water, carbon, etc).

I loved the quote near the end by the Director of USDA's Office of Ecosystem Markets and Services, who was at first skeptical about whether or not market mechanisms would work to enhance conservation. Regarding the standard (CAC) approach she says: "The regulatory framework that is so critical was driving people to do just the bare minimum"...

In other words, CAC mechanisms result in inefficiency as once you are in compliance, there is no incentive to do more.

Here is the press release from USDA.

How to know when a fish species is doomed

If it has these 2 qualities:

1. The fish is slow growing

2. The fish tastes really good to people

1 + 2 = 3. The fish will command a high price.

Read about a recent transaction here.

Read about the demise of the bluefin tuna here.