Wednesday, June 18, 2014

In the news part 3: SB 729

State Bill 729 is the Coal Ash Management Act of 2014, which calls for Duke Energy to remove or close all of its 33 coal ash dumps ("ponds") by 2029. The bill, currently making its way through the State Senate, also requires several "high risk" sites (including the local Sutton Lake site and the Dan River site) to be removed within 5 years.  Intermediate-risk sites will have to be removed within 10 years and low-risk sites will have to be removed or "closed" within 15 years. "Closing" a coal ash dump means that the site is capped and left in place.

Duke Energy, the largest power company in the U.S, has suggested that they need 30 years to close or remove all the sites and that this will be a very expensive venture, given that there is roughly 100 million tons of coal ash to be dealt with across the state. The bill prohibits the costs from being passed to taxpayers, but leaves room for Duke to increase utility rates to offset the costs. I think we can all expect to pay more for electricity soon.

Environmental groups are saying that this is a step in the right direction, but it could still allow for pollution of ground water, given that all of Duke's14 power plants and all 33 coal ash ponds are located near rivers or lakes that supply drinking water to municipalities. The bill allows some coal ash to be stored in unlined landfills or stored on site.

Coal ash contains numerous toxins, including arsenic, selenium, chromium, lead and mercury. Selenium pollution from coal ash in Sutton Lake has been linked to fish deformities and premature mortality according to a study by Wake Forest University Professor Dennis Lemly. More on that story here. Note the economic values attributed to the fish loss, and the use of "replacement cost" values as an indicator of opportunity cost.

As many of your are aware, all of this action was prompted by a spill of 39,000 tons of coal ash and 27 millions of gallons of coal ash waste water into the Dan River in Eden NC in February of this year.

This could all get much more complicated in the coming months, because the EPA will issue new national coal ash standards in December 2014

Tuesday, June 17, 2014

What works in fisheries management


Here is a great article by J. Sutinen illustrating the historical failure of command-and-control approaches to fisheries management.

You don't have to take an economist's word for it.  Read more here and here and here and here.

In the news part 2: Preservation via command-and-control

Related to the topic of land rents, last month the Obama administration proclaimed nearly a half-million acres of land in south-central New Mexico as a national monument. The area is called the Organ Mountains-Desert Peaks National Monument and will managed by the Bureau of Land Management as part of the US system of national conservation lands.

Read about it here at the

Here is an editorial on the topic in the Tampa Tribune that also appeared in today's Wilmington paper

Related to topics this week, today, the Obama administration will announce the creation of the world's largest marine sanctuary. The Pacific Remote Islands Marine National Monument will protect 782,000 square miles (for perspective, that's about 3 times the size of Texas) from all human activity.

Read about it here at the Washington Post

Note that all 3 stories cite economic value as a benefit of conservation!

Sunday, June 8, 2014

In the news, part 1

There has been a lot of environmental news lately.

At the national level, last week the White House unveiled a new plan to cut carbon emissions from power plants. The target for the emissions reductions is 30 percent below 2005 levels, but each state has its own target (performance standard) based on current emissions.  Emissions from power plants are the largest single source of CO2 in the U.S., and most of the existing power plants are more than 40 years old. It's important to note that U.S. emissions have been declining since 2005, so some of the reductions have already been met. 

This was interesting on a couple of levels. First, because of a 2007 Supreme Court ruling that gave the EPA authority to regulate CO2, coupled with a 2009 "endangerment finding" the President did not need approval of Congress for this new measure.

Second, the rules allow each state flexibility in terms of how they reach their target. States and power plants can use technology to directly reduce emissions (e.g. better scrubbers), they can covert coal plants to natural gas, they can subsidize or otherwise promote renewable energy sources, or they can engage in cap-and-trade systems.  Combining a standard with this flexible approach should offset some of the efficiency loss, but we can probably expect energy prices to rise. However, the EPA suggests that the benefits will be 8-12 times greater than the costs. The benefits of the new rules are estimated to be between $55 and $93 billion, which includes avoiding thousands of premature deaths and over 100,000 asthma attacks per year, in addition to slowing climate change, enhancing agricultural productivity and reducing ecosystem and species loss.

Finally, one day after the announcement, China announced a plan to place a cap on CO2 emissions as part of its next 5-year plan.

Questions to consider: 
Who is against the new regulations and why?
Who is in favor of the new regulations and why?
How will cap-and-trade work in this situation?
Will Pigouvian taxes or subsidies play a role?
What non-market costs and benefits might be affected?
What are the implications of China's announcement?

Objective responses please.

Monday, June 2, 2014

Reading articles is hard work!

The past two posts have provided links to additional readings on topics we're studying. Many of these readings are academic journal articles. As you get into these readings, one of the things you'll quickly learn is that reading academic articles (about economics or environmental studies, or anything else) is different than other types of reading. First, it's hard work. You have to read slowly. You have to read everything at least once, and some parts multiple times. You'll encounter language and vocabulary and math that you don't understand (you'll have to look it up). You have to take notes. Yes, this is a lot of trouble. But, if you want to understand things deeply, this is the way to do it.  Real knowledge and understanding isn't going to land in your lap without hard work, and you can't find it in a YouTube video. You have to read, and then read more. Some of you may hide behind the "its too boring" claim, justifying not reading by saying you're not interested in the topic.  I hope you don't fall into that trap, because honestly, when you really understand something, it absolutely ceases to be boring.  

Dig in. Engage your brain. Read like crazy.

Here is a blog post on the topic of critical reading by Jennifer Raff, a research fellow at UT Austin and occasional cage fighter. She's in the natural sciences (using genetics to answer questions related to anthropology), but much of what she says is pertinent to all disciplines. Hat tip to NR for the link.

More valuation readings

As we get deeper into our discussion of non-market valuation, I'm going to continue my efforts to convince you that economic analysis has a indispensable place at the conservation policy table. This argument is fairly easy to make when I'm talking to economists or economics students, but for those that have never really studied econ before, it's a bit tougher. This is because people who have only studied natural sciences may have a tendency to view all things dealing with markets as the causes of environmental problems rather than the solutions.  I hope you're starting to see that it's both.

Please read some of these excellent sources:

Why Economics Matters for Endangered Species Protection (Shogren et al., 1998)

The Role of Economic Valuation in the Conservation of Tropical Nature (Naidoo, 2008)

Conservation Pays (Yuskavitch, 2007, Defenders of Wildlife)

Marine Conservation: How Economic Valuation of Ecosystem Services Can Help (Environment Matters, 2008)

Can Environmental Economic Valuation Techniques Aid Ecological Economics and Wildlife Conservation? (Loomis, 2000, Wildlife Society Bulletin)

Of additional interest:

Economic Incentives and Wildlife Conservation (Bulte et al., 2003)

Tons of references and links here:

Economic Valuation References WRI

Reefs here and here and here

Wetlands here

This is a tiny fraction of what's out there. Thoughts?  I'd especially like to see if ECN students look at valuation differently than EVS students, so when you post, let us know your primary field of study. 

Sunday, June 1, 2014


This week we begin our study of valuation. Valuation means figuring out what something is worth, usually in dollars.

It is important to note that economic value involves much more than market transactions. People value things that are not traded in markets and people value things that they never use.  Another important point is that economists don't just go around trying to place a value on things for no reason. We engage in valuation when understanding what something is worth can help inform the policy process. Any time there is a tradeoff involving environmental quantity or quality, valuation can serve an important role in terms of helping us understand what is at stake.

One situation where valuation is useful is in determining the monetary value of a fine or fee to impose on a responsible party in the case of natural resource damages. For example, BP will pay about $4.5 billion in criminal and civil penalties for the Deep Water Horizon spill.  Transocean (the owner of the rig) will pay $1.4 billion.
What are some other scenarios where valuation might be useful for informing policy?

Interestingly, I sometimes encounter hostility when I first present the idea of valuation to people who have never been exposed to it.  One line of reasoning is that valuation somehow "cheapens" the environment by expressing its worth in dollars and cents. My response to this objection is that the default value is typically zero. That is, most people treat the environment as if it were free, and you can't get much cheaper than that.  Valuation often helps people realize that the environment is extremely valuable, despite it being available for "free".

Another thing to realize is that we are constantly engaging in valuation anyway, through our actions and choices.  For example, when society chooses to spend a certain amount of money on highways, healthcare, and social security and NOT spend that money on environmental protection, are we not indirectly placing a value on the environment relative to those other things?  On a micro level, when you choose to drive your car instead of walking, are you not revealing that you value your own convenience more than you value the environmental damage from your emissions?

Here are some links to more reading about valuation:

The National Ocean Economics Program

NOAA's State of the Coast

Ecosystem Valuation

Economic Values without Prices (Loomis, Choices, 2005) (hint: read this!)
FAO Fisheries Valuation Summary
Here is a pdf version of a presentation that I put together for SocMon Caribbean

More tomorrow.