Readings on economic incentives for pollution control

Here is a link to a report on the use of economic incentives for pollution control in the US. You can use the "quick links" on the right to navigate the document.

Environmental Defense Fund has a short piece on how the use of incentives was a powerful solution to addressing acid rain.

The Environmental Literacy Council has a nice short article on standards vs. incentives.

Here's more from the World Bank.

Here is a short article on economic incentives for water quality management from the WHO.

Here is a great article by Robert Stavins on the topic.

Lots of great information in this report on Economic Incentives for Pollution Control from UNEP.

Welcome CERMES students

Welcome CERMES students!

From today forward we will have 26 students from the Centre for Resource Management and Environmental Studies (CERMES) UWI Cave Hill joining us on the blog.

These students come from Barbados, Belize, The Bahamas, Dominica, Grenada, Guyana, St. Kitts & Nevis, St. Vincent and the Grenadines and Trinidad & Tobago. I hope I didn't forget anyone...

What do natural resource economists do?

This is a blog entry that I originally posted in 2009. I thought I would post it again for this year's students.
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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 populations? 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?  How can scuba diving sites be managed to maximize economic gains and minimize damage to corals?  How important is beach width to tourists? Is beach re-nourishment worth the expense?

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.

Below 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)

TBL 3BL

The topic of measuring the value of ecosystem services was recently raised in class. The context of the discussion was the inability of consumers to make "environmentally friendly" purchase decisions, because there is no clear accounting for the environmental behavior of producers.  Firms can easily present an environmentally friendly appearance in commercials and brochures, but understanding how "green" a firm really is can be a difficult undertaking for the average consumer or investor. Likewise, measures of national, regional or local output most often lack measures of environmental change.


Adding the value of ecosystem goods and services to measures of the bottom line (for a firm, nation, state or municipality) allows for a clearer picture of success, progress and well-being. Likewise, omitting such measures can be misleading. For example, suppose the services of a natural ecosystem such as an estuary are degraded via coastal development. The loss of naturally produced water filtration is not reflected in measures of national output such as GDP.  But if a water treatment plant is constructed to replace the lost ecosystem service, the associated market transactions will be reflected in an increase in national GDP.  Hence, the nation would appear to be better off as a result of replacing a natural ("free") service with a man-made substitute that is most likely inferior. Changes in GDP can therefore be inaccurate measures of changes in net output as well as changes in well being. 

The same is true for firms, though on a different level. Reporting traditional "bottom line" measures like earnings allows investors to make good decisions with regard to financial returns, but some investors also want to support environmental and social progress, and are willing to sacrifice some monetary gains to do so. Similarly, while it is true that all consumers seek to buy products that satisfy their personal wants and needs, some consumers also want to support the greater good, and buy products from firms that are socially and environmentally responsible. How can we measure environmental (and social) outputs so that they can be reported and compared?  Is it even possible to create a set of acceptable measures and common reporting standard for non-monetary outputs? 

A short piece on the triple bottom line here at The Economist.


The state of Maryland uses something called the Genuine Progress Indicator (GPI), which tracks and measures traditional economic measures as well as those related to the environment and people. Thanks to Nikolai for the link.

Food security and sustainability

One of the primary challenges of the day is meeting the growing food needs of our population while minimizing damage to the environment.  Alleviation of poverty requires economic growth and large-scale agriculture, but these things often cause significant environmental damage. Sustainable agricultural practices are available that are less damaging to the environment, but can they effectively feed billions of people? Probably not.

Is poverty reduction vs. environmental sustainability an inescapable tradeoff? I've always considered this to be the case and as such my enthusiasm for sustainable agriculture has remained tempered.  But a new study reveals that there may be hope for seemingly incompatible goals of feeding the planet and preserving critical ecosystem services. Read about it here at Science Daily.  The upshot of the analysis is that yield gaps can be closed with better management of water, land and fertilizer. In other words, it appears to be possible in theory if we can make some changes. These include shifting consumption toward a diet that includes less meat, using less food crops for fuel, using fertilizer more effectively (increasing use in some places and decreasing use in others) and curtailing the burning of tropical forests for low-yield agriculture.

Now the question becomes, can we achieve these goals?  If so, how? Can we rely on the market mechanism to get us there or do we need market intervention via active policy? If the latter, what types of policy interventions might move us in the right direction?

More on the topic here at Scientific American

More here at World Bank

54.5 MPG by 2025?

Achieving such a standard in 12 years seems ambitious given that this is roughly double the average MPG of 2011, but this is what new regulations put forth by the US EPA and Department of Transportation are aiming for. The true average fuel economy will be around 40 MPG because auto manufacturers can earn credits by selling alternative fuel vehicles and the standards only apply to cars, not trucks.

Read about it here at CBS News and here from the NHTSA.

Excellent source of basics on CAFE standards FAQ here from Edmunds. 

Massive detail and analysis here from US EPA. 

The guys at Freakonomics have a nice description of why standards such as these are often less desirable than taxes.  This is a topic that we're going to spend a lot of time with this semester.

CAFE Standards (Corporate Average Fuel Economy) originated in 1975 in response to the 1973 OPEC oil embargo. Here is a brief history of CAFE standards from PEW. 

Here are some basics on CAFE standards from NPR. 


Here is a consideration of unintended consequences of more fuel efficient vehicles.

Like most issues that we'll discuss in class, this one is controversial.

Some argue that the new, higher standards will create jobs (full report here).

Other argue that higher standards will cost jobs.

Final thoughts

What aspects of the course did you find the most interesting?
What are the key lessons that you'll take from the course?

NC House Committee Approves Fracking

Today, the NC House Environmental Committee approved a bill that will lift the current ban on the controversial natural gas drilling method of hydraulic fracturing. State agencies would have a little more than two years to devise regulations, and the make-up of the rule-making commissions is part of the discussion. Opponents suggest that two years is not enough time to study the issue and develop the proper safeguards. Proponents argue that fast-tracking the regulations for fracking and issuing permits sooner rather than later is necessary for economic growth.

Read about it here at the Charlotte Observer and here at CBS news.

Here is a link to reports on fracking by the NC Department of Environment and Natural Resources.
(check out the executive summary and recommendations if you don't have time to read the whole report)

One of the main conclusions of the DENR study is that hydro fracking can be done safely if the right safeguards are in place, and that the current ban on fracking should remain in place until proper standards and enforcement mechanisms have been established.

Here is an excellent series from Scholbohm at NCSU:

What N.C. needs to know about Pennsylvania's Energy Experience 

The Cold-Hard Facts about Fracking in North Carolina Part 1

The Cold-Hard Facts about Fracking in North Carolina Part 2

N.C. Senate proposes limits on forecasting of sea level rise

This is a complicated and controversial story that is front page news here at home, and is making headlines all over. A committee of lawmakers in the North Carolina Senate approved a bill that will limit the data that planning agencies are allowed to use in preparing for sea level rise.  Essentially, planners will only be able to base their forecasts on historical increases in sea level rise, which are relatively low compared to the predictions of a state appointed panel of scientists. The bill would allow only the NC Coastal Resources Commission to engage in sea level prediction, and would restrict the data and methodology that can be used.

Here is a link to the bill. The most controversial part is on the second page, part (e) and includes the following language:

"These rates shall only be determined using historical data, and these data shall be limited to the time period following the year 1900. Rates of seas-level rise may be extrapolated linearly…"

Read more about it here and here at the News and Observer (thanks Paul L.), here from UNCW's Spencer Rogers at NC Sea Grant, and for some comic relief, here is Stephen Colbert's take on the topic.

More on cap & trade

From the New York Times:

Cap & trade leads to lower energy costs for consumers

Cap & trade leads to lower emissions

More on the RGGI program here.

Here is a great article by Tom Tietenberg on cap & trade in the US