Environmental Economics

Timelapse

From the inbox:

Google collaborated with NASA's Landsat program to generate video of man's impact on the earth's surface. TIME magazine got the exclusive rights to write it all up in an article, which was released today. Here is the link:

http://world.time.com/timelapse/

Lots of environmental economics in this. My favorite is the expansion of the Aurora phosphate mine on the south shore of the Pamlico River in North Carolina.

The video shows the mine growing southward on the left hand side and then northward on the right hand side back up to the river. Back in the 1990s I worked with the Tar-Pamlico River Foundation (serving on "anti-PCS" committee and then the board for awhile) opposing all of that. It looks like the legal battle continues. One of my greatest failures as an economist was not suggesting some Coasian resolution. 

I'll be rolling out other "greatest failures" posts all summer. 

Ooooohhhh....land prices, natural gas and intrigue (and snark)

Under the direction of CEO Aubrey McClendon, Chesapeake Energy Corp. plotted with its top competitor to suppress land prices in one of America’s most-promising oil and natural-gas areas, a Reuters investigation has found.

Having grown up in Maryland, I think Chesapeake Energy should be a Maryland/Virginia based company.  Nope...Oklahoma.

In emails between Chesapeake — which is involved in Ohio’s Utica-shale ventures — and Encana Corp., Canada’s largest natural-gas company, the rivals repeatedly discussed how to avoid bidding against each other in a public-land auction in Michigan two years ago and in at least nine prospective deals with private landowners in the state.

Pssst...I'll show you mine if you show me yours.

In one email, dated June 16, 2010, McClendon told a Chesapeake deputy that it was time “to smoke a peace pipe” with Encana “if we are bidding each other up.” The Chesapeake vice president responded that he had contacted Encana “to discuss how they want to handle the entities we are both working to avoid us bidding each other up in the interim.” McClendon replied: “Thanks.”

John and I once smoked a peace pipe...no wait, that was something different.

That's a joke and should be taken as an admission of nothing.

That exchange, and at least a dozen other emails reviewed by Reuters, could provide evidence that the two companies violated federal and state laws by seeking to keep land prices down, antitrust lawyers said.

Sheesh, what's wrong with a little monopsony power over land prices?  Other than the whole inefficiency thing I mean.

“The famous phrase is a ‘smoking gun.’ That’s a smoking H-bomb,” said Harry First, a former antitrust lawyer for the U.S. Department of Justice, of the emails.

In my head, Harry Frist sounds like Jeff Spicoli when he talks.  Awesome!

“When the talk is explicitly about getting together to avoid bidding each other up, it’s a red flag for collusion, bid-rigging, market allocation.”

'People on 'ludes should not drive.'

The revelation of the discussions between Encana and Chesapeake, the nation’s second-largest natural-gas producer, comes as McClendon already is under fire. The company’s board stripped him of his chairmanship after Reuters reported that he took out more than $1.3 billion in personal loans from a firm that also finances Chesapeake. The IRS and the Securities and Exchange Commission have launched inquiries.

Well, if we just banned reporters we wouldn't have these problems.

Ohio Attorney General Mike DeWine is looking into allegations of fraud by Chesapeake that might have led to investment losses for Ohio pension funds.

Red, Red, DeWine, you make me feel so fine.

The Oklahoma-based company has leases on about 1 million acres in Ohio’s Utica shale, more than any of its competitors.

Private-industry cartels are forbidden in the United States, where price-fixing between competitors is illegal under the Sherman Antitrust Act. Violations carry stiff penalties. Companies can be fined $100 million and individuals $1 million for each offense.

Given that choice, I'd rather be an individual.

via www.dispatch.com

On non-use values, second best, job creation and other oddly related things

To save the imperiled spotted owl, the Obama administration is moving forward with a controversial plan to shoot barred owls, a rival bird that has shoved its smaller cousin aside.

The plan is the latest federal attempt to protect the northern spotted owl, the passive, one-pound bird that sparked an epic battle over logging in the Pacific Northwest two decades ago.

The government set aside millions of acres of forest to protect the owl, but the bird’s population continues to decline — a 40 percent slide in 25 years.

Bastardized version of the Theory of Second Best: In the presence of an uncorrectable (non) market failure, it is sometimes better to create a secondary market failure.

A plan announced Tuesday would designate habitat considered critical for the bird’s survival, while allowing logging to reduce the risk of catastrophic wildfire and to create jobs. Habitat loss and competition from barred owls are the biggest threats to the spotted owl.

I like the slipping in of jobs...but remember as John so often points out: JOBS ARE COSTS.

Interior Secretary Ken Salazar called the draft plan “a science-based approach to forestry that restores the health of our lands and wildlife and supports jobs and revenue for local communities.”

And we know how well science and policy get along.

By removing selected barred owls and better managing forests, officials can give communities, foresters and land managers in three states important tools to promote healthier and more productive forests, Salazar said.

But what if I value the barred owl more than the spotted owl?

The new plan, which replaces a 2008 Bush administration plan that was tossed out in federal court, affects millions of acres of national, state and private forest land in Washington, Oregon and Northern California.

The plan to kill barred owls would not be the first time the federal government has authorized killing of one species to help another. California sea lions that feast on threatened salmon in the Columbia River have been killed in recent years after efforts to chase them away or scare them failed.

The U.S. Agriculture Department kills thousands of wild animals each year — mostly predators such as coyotes — to protect livestock. Other animals, including bears, wolves and raccoons also are killed through the program.

This is interesting. In other cases, the culling of species is to prevent market losses (salmon have market value, livestock have market value...).  In this case, the administration is promoting culling to prevent further non-market (existence) losses.  If the spotted owl goes extinct, no markets would collapse.

The latest plan for spotted owls was accompanied by a presidential memorandum directing Interior to take a number of steps before the plan is finalized, including providing clear direction for how logging can be conducted within areas designated as critical habitat and conducting an economic analysis at the same time critical habitat areas are proposed.

More economics analysis is always better (for me and John at least).

Officials acknowledge that the plan to kill barred owls creates an ethical dilemma, but say an experiment on private land in northern California has shown promising results. Spotted owls have returned to historic territories after barred owls were removed.

Tradeoffs.

Salazar and other officials stressed the new plan’s job-creation component, noting that for the first time logging would be allowed in areas designated as critical habitat for the owl. Previous plans had prohibited logging in areas designated as critical habitat.

Jobs are costs.

“Appropriate timber harvests consistent with ecological forestry principles (should) be encouraged,” the Interior Department said in a statement.

The American Forest Resource Council, a timber industry group, was skeptical that so-called ecological logging would produce a significant amount of timber or jobs. At the same time, the plan has the potential to double the amount of acres designated as critical habitat, said Tom Partin, the group’s president.

Count me among the skeptics.  That's not to say I'm opposed.  Just skeptical of any jobs claims.

via www.washingtonpost.com

Scary

From the inbox:

In the spirit of Halloween, Huffington Post published an article called “The 10 Scariest Real Places in America.” Wondering about the number one scariest locale? Downhill from strip mining operations in West Virginia. Whether it’s the toxic coal slurry, the flooding, or the constant threat that forceful blasting will send a chunk of flyrock through your roof, living near a mountaintop removal site is indeed a scary thought.

How much would be willing to accept to not accept money to develop your potentially radioactive land?

People who live near a once-secret, contaminated nuclear-weapons factory in southwestern Ohio fought for years to get the federal government to clean up the site and contain its radioactive waste.

Today, the former Fernald uranium-processing plant is a nature preserve with a Cold War exhibit, and now the state government wants the neighbors to do something.The Ohio Environmental Protection Agency plans to offer a total of $13.75 million to property owners who promise never to develop their land. The money is part of a settlement between the U.S. Department of Energy and the Ohio EPA.

...

The $13.75 million in settlement funds would be spent to preserve land in a 9,000-acre “focus” area north and west of the Fernald preserve in Butler and Hamilton counties, where storm water drains to Paddys Run. It’s not clear how much would be offered per acre, or how much land would be preserved.

My guess is at least $1,528 per acrea and less than 9,000 acres.

Just a guess.

EPA approves more ethanol in gas. Others dissaprove.

Time for some Env-Econ insight. And snark. Mostly snark.  Little insight.

The Environmental Protection Agency has approved blending higher concentrations of ethanol into gasoline for newer vehicles, allowing the corn-based fuel to be up to 15 percent of mixtures sold at the pump.

Hmmmm. I wonder if this has anything to do with EPA's ethanol mandates?

The current maximum blend is 10 percent. The EPA announced Wednesday that the higher blend will be approved for cars and light duty trucks manufactured since 2007, if retailers want to sell it.

...and IF consumers want to buy it.  Call me unAmerican, but facing a choice between E0 and E15 for refueling my mostly American built car engine, guess what I'm picking? And I'm pretty sure I'm not alone.  Too much uncertainty.

"Thorough testing has now shown that E15 does not harm emissions control equipment in newer cars and light trucks," EPA Administrator Lisa Jackson said in a statement. "Wherever sound science and the law support steps to allow more homegrown fuels in America's vehicles, this administration takes those steps."

Mandated production of corn-based ethanol leads to inefficient increases in demand for corn. 

The move, which comes less than a month before November's midterm elections, is politically popular in rural farm areas.

Shock headline: Increased demand for corn is popular among corn farmers.

But ethanol faces strong opposition from the auto industry,

Because potentially higher fuel prices, and potentially higher maintenance costs lead to decreased demand for cars.

environmentalists,

By at least one measure I'm aware of, EcoIndicator 99, E10's potential environmental damages over the production and consumption are an order of magnitude higher than the damages from 100% gasoline.  E15's damages are, well, higher.

cattle ranchers,

Increased demand for corn for other purposes increases cattle feed prices which decreases the supply of beef and dairy which increases the price of beef and dairy which decreases the quantity demanded for beef and dairy which results in a decrease in profits to cattle ranchers.  See? Economics is easy.

food companies,

See cattle ranchers.

and a broad coalition of other groups.

Including snarky environmental economists.

via www.google.com

I'm everybody's All-American (homeowner that is)

Your score: 340 of 410

If your total is less than 50 points, check your address: You may be living in a different country.

Between 50 and 150 points puts you on the fringes of the typical homeowner profile, as defined by the U.S. Census Bureau.

If your score is between 150 and 249, you're nearly normal.

If you're over 250, you qualify as the genuine article, a real All-American homeowner -- post-modern, three bedrooms, mortgage and all.

via money.cnn.com

Want to find out if you're as normal as me (and if you are, you should be afraid)? Take the All-American homeowner quiz here. Report your score in the comments.

And for those of you who don't think this is environmental enough, what could be more environmental than identifying housing preferences to understand development patterns at the urban/rural interface*?

*Yes, I'm just trying to justify spending time at work taking brainless CNN.com quizzes.

Looking for a Natural Resource/Water Economist/Modeler

Sign #1,986 the economy might be on the upswing:  We're hiring.

The Ohio State University-Assistant Professor: The Department of Agricultural, Environmental, and Development Economics (AEDE) is searching for a tenure-track assistant professor. The position is funded jointly with the university initiative in Climate, Water, and Carbon (CWC), and is one of several such positions in various departments. We seek outstanding applicants with high potential for achieving scholarly excellence in natural resource economics and modeling, with primary interests in regional and/or global water resource issues. Complementary interests in climate change, land use, and energy issues would be helpful.  Expectations include teaching and research to serve AEDE’s mission, and collaboration with colleagues in the CWC initiative. Faculty members are expected to achieve national scholarly recognition, and to contribute to outreach and public engagement.  The appointee will have an academic year (9 month) appointment with competitive salary and benefits package. 

All I ever need to know is on my PhD reading list

Economics PhD candidates (likely most of these are at the best schools) are saying silly things about the Ostrom/Williamson (mostly Ostrom) Nobel Memorial Prize in Economic Sciences. Here are my favorites from Economics Job Market Rumors (don't follow the link if you are offended by potty mouth; apparently, PhD candidates at the top schools use profanity when they are angry):

• Multidisciplinary?? Other disciplines are all rubblish. Why let them conteminate (sic) our purity?

I need a shower.

• Never heard of Ostrom in my life. Lame.

All I ever need to know is on my PhD reading list.

• what the [expletive deleted] is "land economics"?

Er, one of my favorite journals?

• The fact that most of us have not heard about her says enough about her contributions.

Er, it says that you don't know everything?

• The Nobel Memorial Prize in Economic Sciences is not a Nobel Prize.

Right on! It is not one of the original Nobel Prizes. Yet, Nobel Prize is a useful nickname for the mouthful of "Nobel Memorial Prize in Economic Sciences."

• I taught environmental economics once. Her work is mentioned in the sections on public goods and tragedy of the commons stuff, particularly with fisheries. Krugman notes that this is a win given for new institutional economics, and I think that's the common thread between her work and Williamson. In my memory from the environmental economics, some of what Ostrom and her colleagues had been doing was trying to understand why in some areas, over-fishing occurred but in others it didn't, even though technically in both situations, the incentives for the tragedy of the commons outcomes was present. I have this memory, but don't have my Tienteberg textbook here to check, that she argued that there was an enforcement mechanism that discouraged over-harvesting when the fishermen were part of the same community, but not when they were part of different communities.

This contribution is an attempt at explaining Ostrom's contribution. But I can't get past the "I taught EE once" without a yuck and a grin.

Hat tip: Aguanomics

Environmental economics (the field, not the blog) claims a share of the Nobel Prize

From the The (WSJ) Morning Brief:

Two American economists, Elinor Ostrom and Oliver Williamson, who study the way decisions are made outside the markets on which many other economists focus, were awarded the Nobel Prize in economics Monday.

Ms. Ostrom, who teaches at Indiana University in Bloomington, Ill., is the first woman to win the prize, which, before Monday, had been awarded to 62 men since it was launched in 1969 to celebrate the 300th anniversary of the Swedish bank. The judges cited "her analysis of economic governance, especially the commons," the way in which natural resources are managed as shared resources. It is an area of research that she said was relevant to questions surrounding global warming, and suggests that decisions by individuals can help solve the problem even as governments work to reach an international agreement.

Ms. Ostrom "challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized," the Nobel judges said. "Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, [Ms.] Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes."