In cases of adverse events, we are all tempted to measure the maginitude of the damages by calculating teh cost of clean-up...
Columbus has spent $723,000 to get rid of the rotten taste and smell in drinking water caused by toxic algae at Hoover Reservoir.
Toledo spent $3 million last summer to keep Lake Erie’s toxic algae out of the city’s drinking water. Dozens of water-treatment plants along Erie are in the same boat.
And in western Ohio, the city of Celina spends about $450,000 a year on problems at Grand Lake St. Marys, which has become the poster child for the state’s algae problems.
Cyanobacteria, or blue-green algae, grow thick in Lake Erie, Grand Lake and other inland lakes each summer, feeding on phosphorus from manure that rain washes off farm fields. The algae can produce liver and nerve toxins that threaten people, pets and wildlife.
Columbus is just the most-recent city to have to battle the issue with dollars.
...which is fine for accounting purposes, but such costs have little relationship to the true economic costs of the adverse event. The true economic cost of an adverse event is the amount of money consumers would be willing to give up to restore their well-being to what it was prior to the event. For example, one way to measure the economic cost of damages to drinking water supplies might be to calculate the increase in consumer expenditures on bottled water during such events. While not a full measure of economic cost, the change in expenditures to avert the damages reflects the willingness to pay, thus the monetized value of the change in well-being, on the part of consumers. We call this method of measuring damages the Defensive Expenditure method, or the Averting Behavior method.
As for the title of the post...
In 2012, algae toxins were detected in the raw water at 13 treatment plants, including those in Toledo, Celina, Lake County, Findlay, Lima and Clermont County. None of the toxins contaminated treated drinking water.
State efforts to combat the algae have focused on reducing the flow of phosphorus to streams from farms, which are considered the prime contributors to Lake Erie and Grand Lake St.
Marys. Farmers near Grand Lake St. Marys are required to monitor and limit the amount of manure they spread on fields. Phosphorus-reduction efforts are voluntary elsewhere.
In September, Lake Erie algae toxins overloaded the Carroll Water and Sewer District treatment plant in Ottawa County.The plant was the first in Ohio to post an algae-related “do not drink or cook” warning. The ban, which affected 2,000 customers, lasted two days.
Carroll Township paid $125,000 for a treatment system. Henry Biggert, water-district superintendent, said the new system will destroy all toxins and other compounds that create odor and taste problems.
Celina’s system was installed in 1995 to eliminate toxic algae. Water superintendent Mike Sudman said that before the system was in place, drinking water tasted like “licking a carp straight out of the tap.”
The accidents kept coming, and so did the calls for a plan to improve West Virginia’s chemical safety regulations.
Last week’s massive chemical spill into West Virginia’s Elk River was the region’s third major chemical accident in five years. It came after two investigations by the federal Chemical Safety Board in the Kanawha Valley, also known dryly as Chemical Valley. And it came on the heels of repeated recommendations from federal regulators and a local environmental advocacy group that the state adopt rules embraced in other communities to safeguard chemicals.
All of those recommendations died a quiet death with barely any consideration by state and local lawmakers, federal regulators and local environmental groups said. ...
“People always beat the drum about too much government regulation,” [Jeffrey V. Kessler, the president of the West Virginia Senate] said. “My goodness, there are 300,000 people I guarantee wish they had a little more regulation.”
So, if the costs of some sort of regulation is below $5.4 million (300,000 x 6 x $3), weighted by the probability that it might happen again plus the expected costs of other episodes avoided by the regulation (pause for breath), then the regulation is efficient.
Warning: Spoiler Alert below the jump. If you haven't read 'Inferno' yet, don;t read below the jump, I'm going to give away the plot and ending.
I recently finished reading Dan Brown's (author of The Da Vinci Code) newest book 'Inferno.' As a casual reader of the book, I found it entertaining. Brown does his typical job of keeping the action moving, mixing in some interesting conspiracy theories, making me want to visit some cities I've never been to, and making it seem like being a college professor might be cool (although I have my doubts). I didn't enjoy it as much as The Da Vinci Code, which I didn't enjoy as much Angels and Demons, but still a good read (and I refuse to accept that The Lost Symbol was written).
But, as an economist, I found the book to be complete nonsense.
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:
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.
"From my own experience, there has been a change in the environmental ethic of the general population, and the regulatory population as well," [Ken Greenberg, chief of the EPA Clean Water Act compliance office for
Region 9, which covers Arizona, California, Hawaii, Nevada, the U.S.
Pacific Islands and 147 Native American tribes] says. "People are just more responsible about their environment. That's one of the real sea changes I've seen over the last 40 years."
An example of market-based environmental theory put into practice:
Faced with a planned federal mandate to cut water pollution from power plants, American Electric Power and other utility companies might simply pay farmers to do the job for them.
In a “water quality trading” test program recently announced by environmental regulators in Ohio, Indiana and Kentucky, farmers could cut polluted stormwater runoff from their fields and sell the reductions as credits to power companies.
Either way, proponents say, streams, rivers and lakes would be cleaner.
Installing and operating pollution-treatment systems at power plants would be much more expensive, according to officials with the Electric Power Research Institute.
“There are substantial savings,” Jessica Fox, senior scientist for the institute’s Water and Ecosystems Program, said of the credit concept.
And that's the point. Efficiency is gained if society gets the same (or more) reduction in pollution for less money (that is the fewer resources necesaary to achieve a given level of pollution reduction, the more resources available to be used for other productive activities).
But how much saving can be achieved? If power companies are to be believed...a bunch:
AEP’s Cardinal station, located along the Ohio River near Brilliant, Ohio, would be among the first plants to participate in the program, said Melissa McHenry, a company spokeswoman.
She said it would cost $52 million to install a system to keep Cardinal’s ammonia out of the Ohio River and at least $3 million a year to operate it.
Paying farmers to cut a similar amount of phosphorus, she said, could cost as little as $100,000 a year.
Farmers typically plant buffer strips of grass along ditches and streams instead of using those areas to grow crops. The strips absorb manure and fertilizers washed from fields during storms.
Whether farmers participate depends on whether they can make more money from selling credits than they could growing corn or soybeans.
Larry Antosch, the Ohio Farm Bureau Federation’s environmental policy director, said many farmers likely will consider the offer.
The toxic blue-green algae that will spread across the western basin of Lake Erie this summer likely won’t be as dense as last year’s record bloom, experts say. However, the researchers who track Erie’s water woes say the algae could appear a month early this year, tainting water by June instead of July.
Blue-green algae, or cyanobacteria, are common in most lakes but grow thick in sun-warmed water by feeding on phosphorus from manure, fertilizers and sewage that storms wash into streams and ultimately lakes. The algae can produce as many as four toxins that can sicken people and kill pets.
State officials are beginning to focus on farms to combat the algae. For example, farmers who tend crops near Grand Lake St. Marys face mandatory limits on how much manure they can spread on fields. The state also sprayed the central portion of the lake with alum, a compound that starves algae.
As for Lake Erie and the much larger, 4 million-acre Maumee River drainage area, the state is pushing a voluntary program that encourages farmers to limit the use of chemical fertilizers and to reduce runoff.
Some clean-water advocates say they doubt the state’s Lake Erie strategy will work without mandatory limits.
“Usually, it takes more than volunteerism to make that happen,” said Sandy Bihn, the director of the Lake Erie Waterkeeper group.
Larry Antosch, the environmental policy director for the Ohio Farm Bureau Federation, said no mandate is needed.
“I think the farmers in the watershed would be more than willing and able,” he said.
I used to worry about those folks out west, what with their swimming pools and desert lawns and not enough low priced water. No longer, I think they'll be fine with new technology:
With climate change threatening to diminish water supplies in the fast-growing Southwest, more cities are considering the potential of reclaimed water. A new report from the National Academy of Sciences said that if coastal communities used advanced treatment procedures on the effluent that is now sent out to sea, it could increase the amount of municipal water available by as much as 27 percent.
San Diego’s success, 12 years after its City Council recoiled from the toilet-to-tap concept, offers a blueprint for other districts considering wastewater reuse.
OK, I usually try to poke a hole in it whenever anyone says they've found a win-win policy. But, this one seems to be the real deal. With a single wastewater treatment plant we can finally get around to more efficiently pricing water out west. Now I think the incentives are in place to ration scarce water with a high price on virgin supplies and a lower price on toilet water.
"This blog aims to look at more of the microeconomic ideas that can be used toward environmental ends. Bringing to bear a large quantity of external sources and articles, this blog presents a clear vision of what economic environmentalism can be."
... the Environmental Economics blog ... is now the default homepage on my browser (but then again, I guess I am a wonk -- a word I learned on the E.E. blog). That is a very nice service to the profession. -- Anonymous
"... I try and read the blog everyday and have pointed it out to other faculty who have their students read it for class. It is truly one of the best things in the blogosphere." -- Anonymous