Environmental Economics

I'm shovel ready

My seemingly suspended impacts of offshore wind energy on coastal recreation study funded by the state energy office could use a few thousand dollars to pay for some data collection:

The N.C. State Energy Office was awarded $30.4 million today, the agency's first infusion of federal stimulus money to create jobs and promote energy savings. ...

The State Energy Office has earmarked six areas for spending stimulus funds awarded under the American Recovery and Reinvestment Act. They include creating green jobs, improving government energy efficiency, promoting residential energy conservation and fostering renewable energy resources.

Link: http://www.newsobserver.com/business/story/1583295.html

Post recession summer getaways

Despite yesterday's declaration that the recession is over, many are still struggling to find a summer vacation for the family on the cheap.  For those to whom this applies, thank your Federal travel assistants for solving your dilemma (from CNN.com):

It's hardly a bailout, but the federal government is hoping that waiving fees at national parks will help boost local economies across the country. On three weekends this summer, the National Park Service will offer fee-free weekends to encourage cash-strapped families to visit the parks.

Secretary of the Interior Ken Salazar announced the initiative Tuesday at a news conference at Cuyahoga Valley National Park in Ohio.

"National parks also serve as powerful economic engines for local communities, and we hope that promoting visitation will give a small shot in the arm to businesses in the area," Salazar said.

Many national parks were bracing for a busy summer, and this improves the tourism forecast, said George Price, superintendent of Cape Cod National Seashore.

"Sometimes, when the economy downturns, places like the seashore see an upsurge because people choose to stay closer to home," Price said. "Visitation will be very strong this year. The question will be how much people will actually spend when they come to visit."

And, of course, what the local multiplier is?

...and how many jobs will be created?

A misuse of economic impact analysis to argue for beach nourishment

From the Future of the NC Coast (written by my former boss [chancellor] at UNCW):

Carolina Beach, Figure Eight, Kure Beach, Masonboro Beach and Wrightsville Beach — generates $3.9 billion a year in recreational expenditures. During the past 10 years, those beaches have been renourished 23 times at a total cost of $6.8 million. In other words, for every million dollars expended in beach renourishment there has been a return of $49 million in expenditures. This does not definitively resolve the debate about beach renourishment because, among other things, there isn’t an unlimited amount of sand in some regions. But it does give us a cost to benefit ratio.

The ratio 49:1 is grossly overestimated. Economic impacts (i.e., regional GDP) ignore substitutes. If the beaches went away the recreation dollars would go to some other vacation area (e.g., the mountains). Therefore, attributing all of the recreation dollars spent in beach towns to renourishment overstates the impact.

P.S. Figure Eight is a gated community. Riff raff aren't allowed on to the island. Masonboro beach is an undeveloped island that doesn't need nourishment. It sees odd that these two are included in the beach list above.

P.S.S. Another way to think about it from a distributional perspective is this: Mountain folk are robbed two ways. We pay to renourish beaches and protect houses built on sand which reallocates tourist dollars from the mountains to the coast.

Curses, foiled again

The National Oceanic and Atmospheric Administration submitted to Congress today its proposed Recovery plan to create jobs, strengthen the economy, and restore our environment. Under the American Recovery and Reinvestment Act, NOAA was provided $830 million.

NOAA estimates its planned expenditures will create a significant number of new jobs and strengthen the economy, spurring the creation of additional jobs. NOAA’s investments in weather forecasting and research, fisheries, ocean and coastal management are aimed at safeguarding lives and putting Americans to work.

Nowhere in the press release is an exact estimate of the number of jobs created. Therefore, I can't go all comic on it.

Stimulate this (beach)!

Check out this beach nourishment for an example of all of the arguments that don't make sense(Leaders urge Obama ...):

Some cities want bridges and schools from the federal stimulus plan.

Virginia Beach wants all of that and sand, too.

Beach officials are concerned the Obama administration will disqualify sand replenishment projects from receiving stimulus cash and have launched a pre-emptive lobbying effort.

Mayor Will Sessoms sent a letter to members of the city's congressional delegation asking that Virginia Beach get $10 million to replace sand at the Oceanfront.

The city needs the sand as protection against hurricanes and to lure tourists ...

"Luring" tourists points out the robbing Peter to pay Paul sort of policy that is beach nourishment. If tourists go to Virginia Beach they don't go somewhere else, negating the national benefits of the policy. Therefore, beach nourishment should not be a federally funded program.

... said Phillip Roehrs, the city's water resources engineer.

Operation Big Beach, the city's and U.S. Army Corps of Engineers' last major beach replenishment effort, ended in 2002. Since then, parts of the Oceanfront have eroded by 70 feet to about 200 feet wide, Roehrs said.

Beach nourishment is a very temporary solution.

The dust-up over this stimulus money is part of a long-standing debate about whether the federal government should pay for any beach replenishment efforts. Both the Clinton and Bush administrations didn't think so and argued it was a local expense.

"The question is who should pay for it," said James V. Koch, an economist and former Old Dominion University president.

A big beach helps Virginia Beach bring in more tourists and prevents flooding, Koch said, but should Midwest taxpayers pay for the sand?

Answer: No (see above).

Virginia Beach's sand replenishment project will directly employ about 60 people, including crews of dredge workers and surveyors, Roehrs said. The city also plans to contribute $5 million to the cost, he said.

At the $10 ($15) million cost, 60 jobs will cost $167 (250) thousand each. Wouldn't it be cheaper to provide temporary employment benefits (at full salary even) until these workers find jobs?

A benefit-cost analysis of beach nourishment should include the values to tourists and property owners relative to other options (e.g., retreat, praying for miracles).

Random empirical result of the day

As evidence that I haven't totally kept my nose to the grindstone during my sabbatical, consider the following statistical evidence of the effects of dependent variable topcoding on regression results (click the image on the right).

The dependent variable is days spent at the beach by North Carolina residents (DAYS) including zeros (n=1086). The data is the most recent National Survey of Recreation and the Environment.

Excluding zeros, the mean number of days spent at the beach among CAMA county residents (DAYS) is 29 while the median is 7 (n=91).

As is typical with recreation data, some folks say they go to the recreation site every day. Weird. To handle the weird people I topcoded the DAYS variable at the 90th percentile. In other words I recoded 180, 300, 300, 365 and 365 days to 50 days. After topcoding DAYS at the 90th percentile, the mean number of days at the beach (DAYS2) is 15 and the median is 7 for CAMA county residents.

Analyzing everyone in NC (n=1086), those in close proximity (CAMA=1) to the beach spend more days there (duh, but that's an important economic result! i.e., price matters). Income doesn't matter (although it does predict whether someone participates in beach recreation). Race, education, sex and age also help explain the number of days. Topcoding can have significant impacts on the magnitudes and statistical significance of the coefficient estimates. In other words, making outliers more than regular people (instead of discarding them) reduces the influence of outliers.

I like the todcoded DAYS2 model best, but that may be just me and my distaste of five weird people and the large impact they have on regression results. Typically, I topcode the heck out of my recreation data.

Note: Check out the cool table feature that collects results from up to 3 models in LIMDEP. The only problem is that it is not displaying my title (Negative Binomial Model of ...) in the first row as advertised on page R8-19 of the manual.

Download: Ncbeach.lpj | Ncbeach.lim

Renourished sand colored jobs (gray then bleached white in the sun)

From the NYTimes (Lawmakers ...):

Coastal-state lawmakers are battling to keep beach rebuilding projects eligible for economic stimulus funding.

Thirty House and Senate lawmakers urged (pdf) President Obama to fund the coastal projects after hearing that the White House Office of Management and Budget was yanking beach projects from the Army Corps of Engineers' stimulus list.

"If this is accurate, it is a continuation of a faulty Bush Administration policy that did not fund construction starts or any new feasibility studies for shore protection," they wrote. "Beach renourishment projects are an effective way to help our economy recover. It will create thousands of good paying jobs and help protect and promote tourism economies in coastal areas."

...

An OMB spokesman said no decision has been made on beach-nourishment funding.

The lawmakers cited a 2002 study commissioned by OMB that found a single beach project can create nearly 2,000 full-time jobs. They also said the projects are vital to protecting communities against hurricanes and other strong coastal storms.

There would be many more jobs created if they used handtools shovel and pail instead of dredges.

Update: Beach nourishment is an effective means of protection in the short run. However, the sand washes away and there are no good arguments for why society should pay instead of homeowners. The only long term solution is beach retreat.

Opportunity cost of time

I'm in Cary, NC on the campus of SAS Institute for the first time:

PROC REG;
MODEL Y = X1 X2;
OUTPUT OUT = DATA2;
RUN;

In addition to telling SAS jokes, I'm attending the NC Sea Level Rise Risk Management Study Scoping Workshop. There are about 75 people here, I'm guessing about 50 are volunteering their time. If the value of our next best alternative (e.g., teaching, research) is $50/hour, then the cost of each hour is $2500. We're busy for about 15 hours. Total cost to society is on the order of $37,500.

Aquamarine jobs

From NOAA Fishnews:

Funding for coastal and marine habitat restoration projects is available under the American Recovery and Reinvestment Act, and a competitive application process is underway. The emphasis is on "shovel-ready" projects that involve regionally or nationally significant species and ecosystems. Habitat restoration projects that are funded through NOAA provide social and economic benefits for people and their communities, in addition to long-term ecological habitat improvements. NOAA anticipates that up to $170 million may be available for coastal and marine habitat restoration; typical awards are expected to range between $1.5 million and $10 million.

Shhhh!

Beach retreat in North Carolina ... might happen (Proposed coastal fund would pay to remove threatened oceanfront structures):

It’s not a word often uttered by coastal officials who rely on proximity to the beach for the tourists who drive their local economies.

But two weeks ago the N.C. Coastal Resources Commission and its advisory board unanimously passed a resolution that could open the door to taxpayers helping with the removal of threatened oceanfront structures.

Granted, retreat wasn’t the word used in the resolution asking the General Assembly to consider creating a state trust fund to help finance “coastal infrastructure projects.”

“Removal of structures encroaching onto public beach areas” was just one of several proposed uses of the funds, which also included beach nourishment, inlet channel realignment, beach access and dredging projects.

Beaches below the high-water mark are public property in North Carolina. So as a beach erodes, oceanfront home­owners can quickly find themselves in the public right of way as their sandy private property is washed away.

That retreat was included in the resolution could signal a new awareness that North Carolina can’t afford to defend all of its oceanfront development while facing sea-level rise, shrinking budgets, tightening environmental regulations, a dearth of sand in some places and persistent political opposition by some to fighting an unwinnable battle against Mother Nature.