Environmental Economics

Diminishing returns or increasing costs?

For the last month, Americans have watched with growing horror as a huge leak on a BP oil rig has poured millions of gallons of oil into the Gulf of Mexico. As I wrote on Sunday in the Week in Review section of The Times, there is also shock that technology has so far not been able to control it.

But it is important to remember that this mammoth polluting event, so extraordinary here, is not so unusual in some parts of the world. In an article published Sunday in The Guardian of London, John Vidal, the paper’s environment editor, movingly recalls a trip to the Niger Delta a few years ago, where he literally swam in “pools of light Nigerian crude.”

A network of decades-old pipes and oil extraction equipment in the delta has been plagued by serious leaks and spills. “More oil is spilled from the delta’s network of terminals, pipes, pumping stations and oil platforms every year than has been lost in the Gulf of Mexico,” he writes.

O.K., Nigeria may seem far away to most Americans. So what does this have to do with us?

Well, consider this: According to Mr. Vidal’s piece, the Niger Delta supplies 40 percent of all of the crude oil imported by the United States imports. Companies that drill in the area include BP, Shell and Exxon.

Here in the United States, people express outrage at BP’s actions in the gulf and demand that the oil giant behave responsibly in our waters. But should they also insist that oil companies behave well in the developing countries where their oil comes from? After all, many people insist on “fair trade” coffee and non-sweatshop clothing.

One more excerpt from Mr. Vidal’s fascinating article: “If this gulf accident had happened in Nigeria, neither the government nor the company would have paid much attention,” said the writer Ben Ikari, a member of the Ogoni people. “This kind of spill happens all the time in the delta.”

via green.blogs.nytimes.com

Diminishing returns: "OK. This ain't no big deal. This happens all the time in the rest of the world." So, the marginal damage of one more oil spill is lower than previous spills.

Increasing costs: "Crap. This is a big deal. This happens all the time in the rest of the world." So, the marginal cost of one more oil spill is higher than previous spills.

"Report lists Walker College Economics Department among top 25 percent in country"

RePEc, short for Research Papers in Economics, defines itself as “a collaborative effort of hundreds of volunteers in 70 countries to enhance the dissemination of research in economics.” Recently, the group listed its top 25 percent US Economics Departments, as of April 2010. Of the 111 universities listed, Appalachian State was ranked 91st.

The rankings are “based on data about authors who have registered with the RePEc Author Service, institutions listed on EDIRC, bibliographic data collected by RePEc, citation analysis performed by CitEc and popularity data compiled by LogEc.” Other North Carolina-based schools on the list include Duke University (No. 23), UNC Chapel Hill (No. 75), UNC Greensboro (No. 79) and NC State (No. 102).

On other RePEc lists, Appalachian is No. 56. among top 10 percent Institutions and Economists in the Field of Environmental Economics and is No. 30 among the top 10 percent Institutions and Economists in the Field of Experimental Economics.

via www.business.appstate.edu

Coastal wind farms don't spill oil

That is the title of Craig Landry's presentation (not really -- it is "coastal wind farms and recreation demand") at CNREP 2010: 3rd National Forum on Socioeconomic Research in Coastal Systems (pdf). I went to the first two CNREPs but decided not to go this year so that I could attend the WCERE (funny story: my WCERE paper/poster got the big rejection; what sort of idiot gets rejected for the poster session?). Needless to say, I wish I was in NOLA last week to get a feel for the socioeconomic mood surrounding the oil spill.

Here is a link to the presentation: Download Landry_CNREP_2010. Here are the conclusions:

Note to Craig: I hope to work on this one soon!

Next.

BP's "top kill" attempt to stop the flow of oil from a ruptured well in the Gulf of Mexico failed, the company's chief operating officer said Saturday.

The oil giant has tried for days to stop the the largest oil spill in U.S. history by pumping heavy, mudlike drilling fluid into a ruptured oil well, a method known as "top kill."

via www.cnn.com

"Spill May Be Much Bigger Than Estimated"

The Gulf oil spill may be a good deal bigger even than the numbers issued Thursday suggest, some of the scientists who worked on the estimate said.

BP PLC's oil well is leaking between 12,000 and 19,000 barrels of oil a day, according to initial estimates announced by the U.S. Geological Survey on Thursday. Even using the more conservative figure, of 12,000 barrels a day, the spill already has become the largest in U.S. history, surpassing that of the Exxon Valdez accident in Alaska in 1989. The USGS statement Thursday called the numbers "the overall best initial estimate for the lower and upper boundaries."

But some of the researchers who came up with the range of 12,000 to 19,000 say that is merely the minimum amount gushing out, not the lower and upper limits.

via online.wsj.com

It's bigger than Shaq.

No such thing as a free lunch?

From the May 2010 AERE Newsletter (you gotta join AERE to get the Newsletter):

Issues of the Day: 100 Commentaries on Climate, Energy, the Environment, Transportation, and Public Health Policy By Ian W.H. Parry and Felicia Day, editors This book brings together leading experts from across the social sciences to provide short, nontechnical assessments of a broad range of timely policy issues. Essays assess the current state of affairs in climate policy, natural resource depletion, air and water pollution, environment, and development. Broader problems related to energy dependence, expansion and congestion of urban areas, and public health issues, such as disease transmission, are also explored.

What a great idea! Get 100 qualified individuals, or teams, to produce brief, 2-page analyses of urgent policy issues—a nontechnical encyclopedia of current issues in climate, energy, ecology, and related topics. My suggestion: read one each day, and think about it all day. In a hundred days you’ll be hugely enriched. Only RFF could do this.

-- Thomas C. Schelling University of Maryland, College Park Winner of the Nobel Prize in Economics.

This unique book offers an impressive set of brief, understandable, and authoritative analyses of 100 issues in the important policy areas on which recent RFF research has focused. It belongs on the bookshelf of everyone who has ever encountered an unfamiliar issue in this broad domain and wondered, “What is the best thinking on this?” It is a terrific source of readings for courses dealing with public policy.

-- Richard Schmalensee, Massachusetts Institute of Technology.

Download the book for free at: www.rff.org/issuesoftheday

25% of Gulf of Mexico waters are closed to fishing as of 6 pm, 5/28/10

From NOAA's Southeast Fishery Bulletin: BP Oil Spill: NOAA Modifies Commercial and Recreational Fishing Closure in the Oil-Affected Portions of the Gulf of Mexico (PDF):

Current revisions to the closure, described below, will be effective on May 28, 2010 at 6 p.m. eastern time (5 p.m. central time). All commercial and recreational fishing including catch and release is prohibited in the closed area; however, transit through the area is allowed.

The closure is 60,683 sq mi (157,169 sq km), which is about 25% of the Gulf of Mexico exclusive economic zone. The majority of federal waters in the Gulf of Mexico are open to commercial and recreational fishing.

"These are America's wetlands."

Gloom and doom (state budget edition)

The state House is proposing deep cuts to the state's university system. ...

The House budget provides a far gloomier scenario for public universities than previous spending plans put forth by Gov. Bev Perdue and the Senate. It recommends new cuts for the UNC system totaling $175 million, on top of about $50 million in cuts approved a year ago, according to draft budget proposals.

If approved, the cuts would lead to the elimination of about 1,700 positions across the university system, a far larger total than the 1,200 in jeopardy under Perdue's spending proposal, UNC President Erskine Bowles said Thursday.

via www.newsobserver.com

My model suggests there will be between 2 and 37 named storms during 2010

In its forecast for above-average hurricane activity, the National Oceanic and Atmospheric Administration has left itself plenty of wiggle room.

The agency provided a broad range Thursday in its prediction of how many significant storms will occur in the Atlantic this year, expecting anywhere from 14 to 23 "named storms." Even with that amount of latitude, the agency said there is a 30% chance that the number of storms will fall outside the estimated range.

It is possible that NOAA is keeping its estimates loose to avoid having egg on its face later: In the past nine years, NOAA's May storm-count predictions have proved accurate about 40% of the time. NOAA didn't respond to requests for comment. But climate scientists outside the agency note that forecasting hurricane frequency is extremely difficult, especially before the storm season gets under way in June.

via online.wsj.com

I'll continue to revise my estimate until Thanksgiving Day, 2010. At that point my forecast should be fairly accurate.