Environmental Economics

A carbon offset story

A friend:  "Hey, do you know anything about carbon offset programs?"

Me: "A little."

A friend: "I'm thinking of relandscaping my yard and putting in some new trees.  Do you think I can get somebody to pay me to do it?"

Timber sales and the economic theory of crime

Screaming Trees (Timber thieves ...):

Across the country, trees are disappearing in cases that are often small in scale but largely unsettling, probably prompted by the rise in timber value and the increase in worldwide demand for American hardwood — particularly from builders in Europe and China. The total value of the American log export market has more than doubled since 2000, industry experts said, and it continues to grow.

In the United States, forests are not being illegally logged on a systemic scale, ... Here, the issue is often scattered and intimate, and often affects homeowners, parks and public forests.

An egregious misuse of public funds

H.R. 3454 [CBO's cost estimate (PDF)]:

H.R. 3454 would require the Secretary of Agriculture to convey a small parcel of Forest Service land to the Central Advent Christian Church in Alleghany County, Virginia. The land that would be conveyed contains a cemetery used by the church as well as an adjoining tract of land. CBO estimates that implementing H.R. 3454 would have no significant impact on the federal budget. The church would pay for all costs of the conveyance. Enacting H.R. 3454 would not affect direct spending or revenues.

Free-market, non-secular forestry?

I-66 (almost the devil's number)

From my hometown paper, a Christmas X-iday story:

I-66 once was planned as a transcontinental highway, but current plans call for a drastically scaled-back version -- two relatively short segments in Southern and Eastern Kentucky.

And even those have come under fire for being too expensive ($3.5 billion or more for 61 miles of roadway), unlikely to fulfill supporters' claims of an economic-development bonanza and a threat to inflict significant environmental damage.

How much money could 61 miles of roadway save in eastern Kentucky?

Let's say that you can save an hour of time on each trip into the Daniel Boone National Forest. If time is valued at $25/hour, it would take 140 million trips to justify the $3.5 billion price tag.

A Nobel* Response to Forest Carbon Sequestration Concerns

Last week I wrote about work Brent Sohngen and colleagues are doing on incorporating forest carbon strorage into climate change negotiations.  Since really smart reactions often get lost in the shuffle of comments, I thought I would post Brent's response to the discussion following that post.  For context, reader John noted:

What all the (very worthy) eggheads at the IPCC don't talk about is the difficulty of avoiding deforestation and the whole institutional infrastructure this will involve in countries which often suffer severe capacity constraints.

Problems of enforcement aside, it is unlikely, given the extremely high discount rate of the very poor communities that often live in forested areas, that the future discounted value of carbon storage credits will out weigh future discounted value of the timber. That is to say unless more holistic strategies are put in place to offer forest communities viable alternatives to felling trees, even with payments for carbon storage the incentive structure will not be in place to achieve the desired results.

See below for Brent's--er, Nobel Laureate* Sohngen's--reaction.

*This joke never gets old.

Do Reforestation Policies Prevent Energy Conservation?

I attended a department seminar yesterday given by Brent Sohngen, a climate change expert and recent co-recipient of the Nobel Prize in Economics.*  Brent's seminar addressed the interesting question:  If land use policies, storing carbon in forests in particular, are included in international climate change treaties will energy abatement take a backseat? 

As Brent and coauthors put it**:

...it is widely assumed that allowing forestry options would reduce incentives to develop important abatement technologies, and these technologies are ultimately necessary to achieve a stable, albeit changed, climate.

To an economist this is interesting because carbon sequestration in forests may be significantly cheaper than changing the entire world energy consumption and production infrastructure.  To an environmentalist this is interesting because storing carbon cheaply in forests may simply delay the inevitable need to reduce energy consumption, or so the argument goes.

So what effect does forest carbon sequestration have on energy abatement and innovation?  Some, but there are significant advantages too...

Yule tree Q and A

Q: Where does a pagan ritual and forestry economics collide?

A: Boone, NC

Q: When?

A: The weekend after Thanksgiving

Q: Why?

A: To provide env-econ post fodder

A common site in the high country the weekend after Thanksgiving is a big SUV with a yule tree or two strapped to the top, heading back home to Winston-Salem or Charlotte after a "day in the mountains" fetching the tree (and doing a little shopping we hope). We also export these trees to far off lands (e.g., Raleigh, and even further) with temporary markets set up in ad-hoc locations (e.g., parking lots).

Luckily for our readers, being a student of religion (in college and currently in the pilgrims class at the local Episcopal church) and a professor of natural resource economics (about 10 years ago), I have a keen interest in both the pagan ritual and the forestry ... enjoy!

The Gene Snyder

Ever been to Louisville (pronounced "Loo-uh-vul", not "Loo-ee-vil"), KY? Ever asked for directions and someone told you to take "the Gene"? The Gene Snyder Freeway is I-265, the outer loop. Well, it is not really a loop since it stops before crossing the Ohio River. Take a look here at Google Maps (head up towards Cincinnati in I-71, stop in LaGrange and visit my mom).

Louisvillians are in the beginnings of a controversial bridge building project to connect I-265 with I-65 across the river in Indiana. The sordid story involves threats to nature preservation, cost overruns, noise pollution for the wealthy, and etc (Prospect tunnel bids over estimate).

Is it possible to hold yourself for ransom?

I can't decide if this is economic brilliance or complete insanity:

Under pressure to preserve the environment while at the same time ease the poverty of his people, Ecuadorean President Rafael Correa has come up with an unusual solution.

Correa wants wealthy nations to pay Ecuador $350 million a year in exchange for leaving an estimated 1 billion barrels of oil under the ground in the pristine Yasuni rainforest.

On the one hand I like the idea that Correa is making the first offer in the bargaining process, on the other hand it has the slightly odd flavor of someone holding a gun to their own head and threatening to shoot if we don't pay.

Coase in practice

It's rare to find a clear cut (pun intended) example of Coasian bargaining over nonmarket environmental amenities. Here's one--and if you read all the way to the end there's an opportunity for you--yes you--to take part in the bargaining:

In the shadow of towering Douglas firs, two deer stop and stare at a small group of humans wandering toward them.

Ninety years ago, deer like these had no place to hide. All of Heybrook Ridge was bare, and the town in the valley below was thriving.

Few complained back then about the denuded hillside. Logging and the carving of granite blocks out of nearby mountains put Index on the map. The straight, fine-grained timber was the best on the market. The granite was also choice -- used to build the steps of the state Capitol.

But last year, when the logging company WB Foresters proposed another clearcut on the ridge, town folk rallied against the idea.