Bag-and-tag

This week we move into a discussion of mineral extraction and a related topic: trash and recycling.

Below are links to some examples of formal bag/tag (pay-per-throw) systems in the US.

Dover, NH,
Charles County, MD
Mount Pleasant, MI
Sunnyvale, CA
Houston, TX
Duluth, GA
Tompkins County, NY
Malden, MA
Grafton, MA
Shrewsbury, MA

This is just a few. 

Here is a link to details on the success of a bag/tag program in Worcester, MA.

Success in Maine

Variations on pay-per-throw in RI


Can anyone provide international examples of pay-per-throw systems?

Good reading on the topic of waste in NC from NCSU

The idea behind these systems is a fairly straightforward application of internalizing a negative externality:  Impose Pigouvian taxes on things that cause external damage and society will be better off, because raising marginal costs creates an economic incentive for people to reduce quantity.

Here's a writer in Washington DC lamenting the lack of pay-per-throw trash disposal.

A related issue: plastic grocery bags. 

What do you think about this approach versus this approach? 

More valuation readings

Here is a great website for additional reading on valuation: 
Ecosystem Valuation

This article by john Loomis is also a good read for the "big picture": 
Economic Values without Prices (Loomis, Choices, 2005)

Here is another good summary article from Robert Mendelsohn and Sheila Olmstead:
The Economic Valuation of Environmental Amenities and Disamenities 

Settlement with BP to Resolve Civil Claims Over Deepwater Horizon Oil Spill

This came out on Monday, while most of us were engaged in watching the storm and ensuing flooding...

Attorney General Loretta E. Lynch Delivers Remarks at Press Conference Announcing Settlement with BP to Resolve Civil Claims Over Deepwater Horizon Oil Spill

Washington, DC

United States

~

Monday, October 5, 2015

Read the full Remarks as prepared for delivery 

Here are some parts that pertain to non-market valuation:   

...  The Gulf was flooded with oil.  And the Gulf coast way of life – a uniquely American way of life – was hanging by a thread.  Over the course of nearly three months, the Gulf region was inundated with more than three million barrels of oil.  And by the time the torrent stopped, it had inflicted unprecedented harm on the economy, the environment and the population of the Gulf region.  Ecosystems were disrupted, businesses were shuttered and countless men and women lost their livelihoods and their sense of security.  

... in December of 2010, the Department of Justice filed a lawsuit against BP to hold the company accountable and to provide vital relief for the people of the Gulf region.

... we have secured a historic resolution of our pending claims against BP totaling more than $20 billion – making it the largest settlement with a single entity in American history.  The resolution includes civil claims under the Clean Water Act, for which BP has agreed to pay a $5.5 billion penalty – the largest civil penalty in the history of environmental law.  It includes natural resources damages claims under the Oil Pollution Act, for which BP has agreed to pay $7.1 billion – on top of the $1 billion it previously committed to pay for early restoration work.  And it includes economic damages claims, for which BP has agreed to pay $4.9 billion to the five Gulf states and up to $1 billion to local governments.

... In addition, BP’s payments for natural resources damages will help fund Gulf restoration projects that will revitalize damaged habitats, such as coastal wetlands and support the revival of wildlife populations, including marine mammals, sea turtles, oysters and birds.  

---

I hope you see the role of non-market valuation in natural resource damage assessment. BP caused damage and should pay a fine. Many goods and services that are not traded in markets were damaged, impaired or ruined.  In order for the fine to be commensurate with the damages, we need to do the non-market valuation work.  

 

The Oil Pollution Act is an interesting piece of legislation. Enacted in the wake of the Exxon Valdez oil spill, it combines command-and-control (e.g. mandating double-hulled tankers) with Pigouvian taxation. The Valdez spill had a big impact on the subject of non-market valuation, especially as it pertains to the estimation of non-use values via the Contingent Valuation Method. 

I was an undergrad at UNCW when Valdez happened in March of 1989. Like the 2010 BP spill, it was big news.  You can see some of the images here at the Atlantic.  26 years later, while some of the natural resources in Prince William Sound have recovered, many have not. 

Costa Rica and PES

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 and REDD+ schemes, he suggested that the Costa Rican path of conservation will soon be unsustainable.

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

Read more about PES here at UNEP and at Ecology and Society.

Welcome CERMES, UWI students!

Starting this week we will be joined by 15 masters students at the University of the West Indies - Cave Hill.  These students are enrolled in the MSc in Natural Resource and Environmental Management program at The Centre for Resource Management and Environmental Studies (CERMES), and hail from 9 different countries:  Antigua and Barbuda, Barbados, Dominica, Grenada, Guyana, Italy, St. Lucia, St. Vincent and the Grenadines and Trinidad and Tobago.

The CERMES students will be with us until around Thanksgiving. Their course follows the same basic outline and topic coverage. 

Welcome!

Standards and 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.


Finally, the other day in class I mentioned CAFE standards (which set minimum miles-per-gallon averages for automobiles).  Here is a site with some of the basics from the USDOT.  More here (including history of CAFE standards) from the UCS.

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?

The real costs of gasoline (and electricity)

We're studying negative externalities. Externalities are an example of market failure and in the case of negative externalities are  situations where a market creates a cost that is paid by someone else.  The outcome is inefficient:  society would be better off if less of these goods were produced.

In class I mentioned pollution from automobiles as an example and suggested that the "real cost" of a gallon of gasoline is more than just the production and distribution costs, but includes higher mortality and morbidity, loss of productivity, congestion and resource depletion.  

Here is some reading on the topic:

An interview at NPR regarding a study by the IMF

A summary of a study from Duke University at ecomento (an electric car blog)

More on the Duke U. study here at Forbes

Here is the full study at Climatic Change

Are electric cars better?  It depends on where you live.

Welcome fall 2015 UNCW students

Hello class! Welcome to the Natural Resource Economics blog.
I'll use this blog to post links to readings that are relevant to our course.  Please respond with comments, links and questions.  More coming soon...

Happy Summer!

I hope you enjoyed the course. Please feel free to post your favorite or least favorite topics here. Did you learn some new and useful stuff?  What topics would you say are essential for EVS majors to understand? How about ECN majors? I enjoyed the course and our discussions very much. I hope the rest of your summer is great. 

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.

ITQ systems (aka: "catch share systems") are basically cap and trade for fishing, and look like a very promising policy solution.  Here is an article from EDF on the basics.  More here from the Fish Project (Oregon Institute of Marine Biology).  Here is a nice summary from the South Atlantic Fishery Management Council.

Here is another article from EDF regarding improved fisher safety under ITQs.   

Here is a map and list of ITQ managed fisheries in the world (old data, there are a lot more now).

Read about success in Iceland (from EDF). 

Are there downsides and complications to this approach to fisheries management? Yes, of course. No policy will be a panacea.  Perfect solutions do not exist.