Standards vs. Incentives

As we move into discussion of correcting market failures, it’s important to have different perspectives and examples. Below are some links to excellent sources of information regarding standards (command and control) and incentive-based systems.

Here is some excellent reading from the US EPA on standards vs. incentives.
More detail is provided in this document (also from EPA. Note that Coase is covered on page 4-4). 
Here is a nice paper on the topic from the World Resources Institute.

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.

What are some success stories where economic incentives have been used to reduce pollution?

If incentive-based systems are superior, why do we rely so heavily on standards?

Economics and the Environment

As students begin to study the discipline of natural resource economics, there is often confusion about what the subject is 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.  Micro economists might try to find the best way to maximize profit for a particular firm or industry. 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 coral reef quality or marine turtle populations?  How can tourism serve to enhance the livelihoods of local populations?  What hunting 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?  What are people willing to pay to view marine turtles in the wild? Will people pay for marine turtle conservation, even if they never see a turtle in the wild?  How can these willingness to pay values be captured and used for conservation?

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. 

Something that should also be obvious is that these are contentious issues. It is easy to get caught up in the emotion that surrounds any debate about environmental issues. Please remember that an economists job is to provide objective analysis (i.e. no personal opinion or bias).  

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 economic view of value).

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

Economic Values without Prices (Loomis, Choices, 2005)

Welcome Summer Classes

Welcome to all students enrolled in ECN/EVS 330, UNCW Summer 1.

I will periodically post links to class related topics here.

My hope is that you will contribute by replying to my posts with questions, thoughts and/or links to additional material.  Please do not use this forum for expression of political or ideological views.

Pay per throw trash disposal in Raleigh?

Maybe.  Read about it here at the N&O.

Hat tip: env-econ

Thoughts on the course?

Happy Thanksgiving to those in the US.

Please feel free to provide your thoughts on the topics that we covered this semester.

Which aspects of the course did you find the most (or least) useful? Were there topics that we didn't cover that you would have liked to cover?  Anything that we could have spent more (or less) time on?  What will you take away from the course?

Crushing illegal ivory to send a message to poachers

I heard about this on NPR a couple of weeks ago.

Here is a link to the story at the WSJ.

Although we never directly studied trade in endangered species or associated products, there are a lot of topics that are relevant to our course here, including supply and demand, command-and-control vs. incentives and valuation. What do you think? Will destroying the ivory work as intended?

What works in fisheries management

Repost:
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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.

Monetary debt and ecological debt

Here is a thought-provoking article at ENN regarding the notion of "ecological debt".

Here is some additional context from the US EPA. 

Global forest cover app

From the University of Maryland department of geographical sciences, this is very cool.

You can view the change in forest cover all over the world from 2000-2012, and you can zoom in to particular countries and regions.  Be sure to check out the "zoom to area" feature in the bottom right corner.

Here is an accompanying article at BBC.

Thanks to DT for sending me the links.

Fracking

Hydraulic fracturing or "fracking" is a method of extracting natural gas deposits in shale rock using high pressure water.  Fracking involves drilling, sometimes to depths of over 10,000 feet (that's almost 2 miles down) and injecting millions of gallons of water mixed with sand and chemicals at very high pressures.  Horizontal drilling often occurs from the main vertical shaft. The pressurized water serves to break-up (fracture) the shale rock, releasing trapped gas deposits. The chemical additives serve many purposes, including thickening the liquid and dissolving minerals. The sand serves to keep the fissures open once cracks have been created by water pressure. Some of the water/sand/chemical mix stays in the ground after the gas has been extracted. Some has to be disposed of.

Fracking isn't new. The technology was first used in the late 1940s. But, the advent of horizontal drilling techniques in the 1980s combined with higher pressure water injection in the 1990s allowed access to previously unreachable gas deposits and started the current boom. 

The downsides of fracking are mostly related to water pollution at the drill site and disposal sites. The upsides pertain to a reduction in air pollution and costs, because natural gas is cheaper and burns much cleaner than coal.

It also appears that in the future, natural gas production may be cleaner than we thought and new technologies can reduce the associated water pollution.

Here is a short article at Grist providing a nice introduction to fracking and the sources of controversy. 

More here at The Economist

Here is a short article at USA Today looking at the future of the fracking boom

Here is an article at The Economist describing China's shale gas reserves.