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. 

That's nice, but I wonder if it has to get up to pee in the middle of the night?

The Clean Water Act is turning 40:

"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."

via www.mnn.com

Water Quality Trading in Practice

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.

via www.dispatch.com

If they are more than willing and able, why don't they?

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.

via www.dispatch.com

Raise your hand if you are willing to impose cost on yourself for my sake.

Listen to me, listen to me*

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.

via www.nytimes.com

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.

Get real, right? Sigh.

*Quote of the day from, your boy, Digger.

Slightly relative

Water quality in the state’s lakes, rivers and streams has improved slightly over the last two years, according to a new report by the Ohio Environmental Protection Agency.

The agency’s draft 2012 water quality report — a biannual analysis required by the federal Clean Water Act —found that 57.7 percent of waterways now meet quality goals. That’s up from 56.7 percent in 2010.

The new report removed 260 waterways previously deemed “impaired,” but added 244 newly impaired waterways.

Major areas of concern include excess nutrients and pollutants present in many waterways, often attributed to agricultural land use and urban development that can harm aquatic ecosystems.

Water quality in the state’s largest rivers also decreased from the 93 percent meeting standards in 2010 to 89 percent in the new report.

via www.dispatch.com

Original Headline: State report: Lakes, rivers, streams improving slightly

Alternative Headline 1: State report: Lakes, rivers, streams improve by 1.8%

Alternative Headline 2: State report: Rivers worsen by 4.3%

Alternative Headline 3: State report: 260 waterways removed from 'impaired' list

Alternative Headline 4: State report: 244 waterways added to 'impaired' list

It's all in the interpretation.

Jobs and environmental regulation

Wow, Econ4 has already had an impact, people are starting to do benefit-cost analysis (sarc)!

Gernot Wagner:

In a 2010 analysis of rules passed in the prior decade, the non-partisan Office of Management and Budget calculated benefits-to-cost ratios across various government agencies. The EPA came out on top with the highest ratios by far, with benefits from its regulations exceeding costs by an average of more than 10 to 1. If you care about well-functioning, free markets, the EPA would be the last federal agency you’d want to cut.

None of this is magic. It’s something much more mundane: honest accounting.

As any economist worth his or her professional crest will tell you, regulation solves problems that markets ignore. For example, they ensure that the costs of those who pollute show up on their own books, rather than increase the costs for others — either those left with cleanup costs or the healthcare expenses of those who live downwind or downstream.

Those who create costs pay for them — that simple idea is the logic behind the Clean Air Act and most other environmental regulations. It forces markets to reckon with the true costs of doing business, to be more efficient, and to innovate. And it does so at a great benefit to society, even boosting GDP in the long run by making us all healthier and more productive.

via e360.yale.edu

The post goes on to argue that tighter EPA regulations are good for the macroeconomy in the short run, increasing net jobs through investment ("Yes, EPA regulation does bring down the unemployment rate ...."). I'm not quite ready to go there (are there any published studies that show that?), since in a simple demand and supply model a regulation raises production cost and price so that the net effect on consumer and producer surplus is negative. It takes inclusion of nonmarket benefits to make a regulation pass the benefit-cost test, and not all do.

Hat tip: Gernot's publicist.*

*Gernot has a publicist?

Bad logic?

The NYTimes editorial page uses it and implies that current air quality regulations are inefficient (Bad Theory, Bad Legislation):

... the fundamental premise, that environmental regulation destroys jobs, is simply wrong.

Earlier this year, the Economic Policy Institute conducted a study of a proposed rule that would require power plants to reduce emissions of mercury and other airborne toxics. It said that investment in new controls would actually create 92,000 jobs beyond those that might be lost through plant closings and higher electricity prices. Other studies of clean air laws have come to similar conclusions: These rules are job creators, not killers.

via www.nytimes.com

On the other hand, some studies show that environmental policy reduces net jobs. Fortunately for us, this is the wrong question to ask and answer. Here is more (edited from the "probably the best summary of the stupidity of the green jobs debate I have seen" to be more general and moving towards some env-econ.net boilerplate):

This editorial falls into the trap of arguing that jobs created are a side benefit of environmental policy (i.e., "win-win"). Environmental policy should create jobs in clean sectors and reduce jobs in dirty sectors. Net jobs generated by environmental policy are largely unproductive. These jobs are producing something, pollution control labor and capital, that people really don't want. People want final goods and services. Environmental policy should be designed to create jobs for people figuring out the best ways to produce goods and services while reducing pollution.

In addition to final goods and services, people also want clean air and water but the demand for these is very different than the demand for final goods and services. There is no market for clean air and water so people will try to enjoy these things while, at the same time, trying not to pay for them. But, if you actually ask someone if they would vote for clean air and water at a specific cost you'll find that the demand and willingness to pay is out there. People recognize that nothing is free and if they want clean air and water they must give up something in return.

The jobs issue plays to the politics that there is a free lunch and only jobs matter in environmental policy. This could not be further from the truth. What matters is the extra market benefits produced: improved health, visibility, recreation and et cetera. Counting jobs created or destroyed by environmental policy is not the correct comparison. We should be comparing the cost of the policy to the environmental benefits of the policy. I'm hoping that stricter environmental policy produces very few jobs. This would indicate that businesses have found low cost ways to achieve clean air and water.

A bad couple of days for the Great Lakes

Thursday...

A federal appeals panel has rejected the request of five Great Lakes states to close Chicago-area shipping locks. But the panel warned yesterday that if ongoing efforts to stop the advance of Asian carp halt or drag, the issue could be revisited.

...

A native of China with no known predators in the United States, Asian carp have out-competed native fish populations for food, jeopardizing the Great Lakes’ $7 billion annual commercial and recreational-fishing industry.

via www.dispatch.com

Friday...

The toxic algae that spreads across the western basin of Lake Erie each summer is the worst recorded since researchers started tracking the problem in 2002.

In fact, this “bloom” of blue-green algae is more than twice as dense as the record bloom that plagued the lake in the summer of 2009, according to tests performed by the University of Toledo.

...

The algae pose a threat to the lake’s $10 billion annual tourism industry. In addition to threatening the health of people and pets, the algae also help create a vast oxygen-depleted dead zone where fish can’t live.

via www.dispatch.com

Some people say the same of my blogging*

Grand Lake St. Marys, the poster child for algae pollution in Ohio, is getting some federal help.

U.S. Sen. Sherrod Brown's office announced this morning that the Department of Agriculture is making available $1 million toward the purchase of a methane digester.

What is a methane digester? The facility turns methane from manue into energy. Manure that is spread onto farm fields as fertilizer often washes off in the rain and ends up in streams and eventually lakes. The phosphorus from these wastes feed the toxic algae that grows in so many Ohio ponds and lakes.

Blue-green algae, also called cyanobacteria, is common in most Ohio lakes but grows thick in water feeding on phosphorus from manure, fertilizers and sewage that rain washes into streams and eventually into lakes.

The algae can produce liver and nerve toxins.

Grand Lake St. Marys has been suffered with excessive algae for three years. Warnings to stay away from the water have hurt tourism at the western Ohio lake. This year the warnings are not as grave.

Quasar Energy Group of Cleveland was sought the $1 million federal grant for the $2.24 million facility.

The facility likely would be located south of the lake in a central spot in the watershed and take six months to build. The amount of manure to be processed isn't set, but three producers in the watershed have said they can each supply up to 50 tons of manure daily.

via www.dispatch.com

*Re: last line of the story