Local environmental issue

If you have been paying attention to the news, you haven't escaped the recent story about an emerging contaminant being discovered in the Cape Fear River and in our drinking water.

The contaminant is known as GenX, a chemical produced by a company named Chemours and used in making Teflon for non-stick pans. Teflon is also used in nail polish, windshield wiper blades, carpet protection and clothing like Gore-Tex. Teflon used to be produced with a chemical called C8, but C8 was discovered to be toxic.  GenX is the replacement product, and we don't know much about it yet. As a result, there are no standards (allowable levels) for this chemical. This is why GenX is classified by the EPA as an emerging contaminant. We don't know enough about it yet to have regulations in place.  

More reading here, and here. Note that the Cape Fear Public Utility Authority has known about this for many months.

Listen to an interview with Dr. Larry Cahoon of UNCW here.

Here is a map of the area where CFPUA distributes public water from the Cape Fear (notice that our campus is right in the middle of it).

How would we analyze this issue using the tools from our course?
Could we do a cost-benefit analysis of some sort?
Perhaps a valuation study? 

How can we get landowners to preserve environmentally valuable lands?

We can create zoning laws that forbid certain uses of land.
Another option is to pay them to preserve.

Text below is an updated re-post:

One of the things we learn in natural resource economics is to look at problems in terms of their costs and benefits.  By asking questions about who gains and who loses (and when, and how) we can gain an important perspective on the causes of natural resource problems.

When given access to private benefits from natural resources, people tend to take actions that promote their own well-being. This access comes in the form of our daily contact with open-access and common property resources as well as extraction and habitat conversion on private lands. We all pollute in numerous ways to promote our own benefits (comfort, convenience, standard of living), because it’s cheap and easy to do so. As individuals, the costs we pay for access to the world’s resources are low because they are shared by everyone.

How do we change the calculus?  Let’s try everything and see what works. Education, an appeal to “do the right thing”, and legal mandates on acceptable use, all serve important roles.  Monetary incentives that affect individual costs and benefits also can be an effective tool in many situations. These incentives come in several forms, most of which we discuss in this course.

One incentive-based method that seems to be gaining favor in developing nations is PES. PES stands for Payments for Environmental Services. The basic idea of PES is to create incentives for conservation of natural resources by transferring dollars from those that benefit from conservation to those who bear the (opportunity) costs of conservation.

In some PES arrangements government and/or NGOs pay landowners to engage in activities to conserve or restore biodiversity. This can be as simple as letting a cow pasture revert back to its natural state or setting aside lands that would otherwise be used for another purpose.

Costa Rica is a leader in PES and a great example of the power of this approach. From the 1940s through the 1980s, Costa Rica had one of the highest rates of deforestation in the world.  As recently as 1987, forest cover in Costa Rica was as low as 21 percent of national territory, down from over 85 percent in the early 1900s. The principle causes of deforestation were incentives for the conversion of land to agricultural uses, such as preferable tax treatment for lands used to cultivate crops and support cattle, and heavier tax burdens for “unproductive” lands (i.e. lands not used to produce market benefits). People responded to the incentives they faced. Given the costs and benefits of land use it made sense to convert lands to other uses.

In 1996, leaders in Costa Rica decided to try to reverse this path of biodiversity loss. The main idea was simple: reward landowners for conservation rather than rewarding them for land conversion. A series of forest laws were enacted, which gave favorable tax treatment to conservation and reforestation, banned the export of primary forest products, mandated that banks provide low-interest loans for reforestation, created a system of national parks and forest reserves and, in 1997, enacted a PES system.  

Costa Rica’s PES system involves direct payments to landowners in exchange for the adoption of land uses and management techniques that provide one or more of four services:  Greenhouse gas mitigation, provision of water or other hydrological services, conservation of biodiversity or provision of scenic beauty for recreation and tourism. Payments are provided by government. Revenues from a fuel tax (ala Pigou) are a primary source of funding. Other sources of funds include sale of carbon credits to other nations and international loans. Between 1997 and 2005, a half-million hectares of forest lands were enrolled in the program. Forest cover is now over 60 percent and rising.

While this progress is exemplary, the Costa Rican Minister of the Environment recently stated that it is getting increasingly difficult to conserve. Without a system of international carbon markets, such as that which might take place through large scale adoption of REDD andREDD+ schemes, he suggested that the Costa Rican path of conservation will soon be unsustainable.

Read more about Costa Rica’s PES experience here at IIED.

Read more about PES here at Ecology and Society.

The economic value of the natural environment

A few weeks ago the Dean of the Cameron School of Business at UNCW, Dr. Robert Burrus, asked me to write a blog post for the Greater Wilmington Business Journal related to the economy and the environment.

Here is what I came up with.

Please let me know what you think.