Environmental Economics

Paper rejection day

From the fax machine:

Our reading of your manuscript referenced above is now complete. Two individuals provided very careful reports, and their comments are included.

Emphasis added: "very careful reports" = 6 pages of single-spaced criticisms. I rather appreciate a shorter negative report.

Lester Brown on ethanol dominos

From the AP via the Columbus Dispatch:

"One of the consequences of this enormous shift of grain is that hunger and malnutrition, which were supposed to be declining during this period, haven't," said Lester R. Brown, the [Earth Policy Institute's] president and the author of the report. "They are now projecting that the 800 million people (living in hunger) will number 1.2 billion by 2025."

Brown said he believes the rapid rise in corn and grain prices during the biofuel boom is causing a slew of unintended consequences. Besides rising prices, the U.S. will ultimately export less grain, harming nations that rely on imports, he said.

CVM: thumbs up

Carson and Hanemann break into the RePEc top 10:

Carson, Richard T. & Hanemann, W. Michael, 2006. "Contingent Valuation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 17, pages 821-936 Elsevier.

Earlier this month this paper was citation-ranked #17 among all RePEc papers. As of today, it has moved up to #9. This is a ginormous leap! I wonder what caused it? ... other than a mention at www.env-econ.net on January 3.

Water trading California style

I'm all for water trading in times of water restrictions, or any time really.  The sale of marketable water rights is a simple way to efficiently allocate scarce water.  But what if the water rights being sold were obtained at a discount--from the government?

From the AP:

With water becoming increasingly precious in California, a rising number of farmers figure they can make more money by selling their water than by actually growing something.

Because farmers get their water at subsidized rates, some of them see financial opportunity this year in selling their allotments to Los Angeles and other desperately thirsty cities across Southern California, as well as to other farms.

Like I said, I'm not against the sale of the allotments.  But the current problem was at least partially caused by the subsidized water allotments. With the subsidies, water is over allocated to farmers.  Now a quantity constraint leads to the discounted asset becoming more valuable to farmers.  What's the rational farmer to do? 

This sounds an awful lot like the debate over permit allocation in the carbon cap and trade debate.  The government hands producers an asset at a discount (carbon permits) then allows them to sell at the market price.  When market prices rise, the producer receives a windfall. 

The difference, though, is in the case of carbon, cap and trade is designed to correct a market failure--no scarcity of carbon.  In the case of water, scarcity already exists.  Efficient water pricing would result in a better allocation of water.  Subsidizing water to farmers increases farm profits, but creates an inefficient allocation of water. 

I hate love Google

Last weekend I drank to mourn the loss of our friends.  This weekend I drink to celebrate their return.  Next week I'll find another reason.

A quick example of the perils of ignoring substitution effects

From CNN.com:

The world's rush to embrace biofuels is causing a spike in the price of corn and other crops and could worsen water shortages and force poor communities off their land, a U.N. official said Wednesday.

D'oh.

Picture of the day

Crossing under the Blue Ridge Parkway, HWY 421 E (10 miles from home):

Source: The (Watauga Democrat) Editor's Blog

A mighty (offshore) wind

From the WSJ Energy Roundup (last week):

Offshore wind power in the U.S. got a big boost yesterday when a government report concluded the Cape Wind project off Nantucket Sound wouldn’t have any major environmental impact. If only it were so easy to get the wind farm up and running economically.

...

Offshore wind power isn’t as mature or cost-competitive as the onshore variety. That’s because the capital costs—the bulk of wind power’s expense—are even higher. Turbines have to be bigger, more robust, and salt- and water-proofed. Maintenance costs are higher offshore. Transmission of electricity back to shore requires laying new undersea infrastructure. The result: a bill for offshore wind that’s about 25% higher than for the onshore variety.

It seems more polite to locate the wind offshore, away from people who might be offended, but lots of times it is simply impossible to release, er, harness, the wind effectively except in a crowd.

Global warming my butt

Picture from inside my car this morning.

New environmental economics blog

Another one from Jim Casey, The Jolly Green General, at W&L (temporarily at UNCW):

http://energyexternalities.blogspot.com/

This looks and feels like a course-focused blog. I deduced this, intuitively, from the first post:

Hello UNCW students. Welcome back. I hope you all had a relaxing, refreshing break and are ready to get back to work. This blog will serve as the official homepage for our course.

Funny story: I used to teach at UNCW ...