Environmental Economics

Dang, I thought North Carolina was one of the top higher ed budget cutting states

Mark Thoma:

More here.

via economistsview.typepad.com

I guess UNC system faculty that threaten to leave when they don't get raises, labs and travel don't have many places to go.

Just in time for the summer semester

From the WSJ Weekly Review:

U.S. Approves Expanded Gas Exports
by: Keith Johnson and Ben Lefebvre
May 18, 2013
Click here to view the full article on WSJ.com

TOPICS: International Trade

SUMMARY: The Obama administration cleared the way for broader natural-gas exports by approving a $10 billion facility in Texas, a milestone in the U.S. transition into a major supplier of energy for world markets. "Proponents of greater exports, including the oil and gas industry, say that exporting inexpensive natural gas will help the U.S. trade balance, help advance the adoption of clean-burning fuels around the world and shore up energy-poor U.S. allies. Opponents counter that exports may cause domestic prices to rise, hurting consumers and some industries such as chemicals that have benefited from cheap natural gas. Some environmentalists oppose exports for a different reason, saying the U.S. shouldn't encourage more fossil-fuel production."

CLASSROOM APPLICATION: Students can analyze the effect of the federal government's approval of broader natural gas exports on the U.S. natural gas prices and U.S. consumer surplus. Students can also examine the effect of the policy on fossil-fuel production.

QUESTIONS: 
1. (Advanced) What is the effect of the federal government's approval of broader natural gas exports on the price of natural gas in the U.S.? What is the effect of the policy change on consumer surplus in the U.S.?

2. (Advanced) What is the effect of the federal government's approval of broader natural gas exports on the worldwide burning of natural gas and also the burning of other fossil fuels? What is the effect of the policy change on the overall production of carbon?

3. (Introductory) Why is the Obama administration clearing the way for broader natural-gas exports?

 

Only my mom will be interested in this one

Go to the 5:20 mark to see me carrying the Department of Economics banner (click on the picture):

And don't miss my exit at 91:03 (especially if you'd like to see me wearing a tie).

A belated Memorial Day post: Jason Isbell “Dress Blues”

Twangville:

Our Monday Morning Video, Memorial Day edition, arrives courtesy of Jason Isbell. Here’s the emotional story behind the song, written for a high school friend of Isbell’s.

Pow?

The Comics Curmudgeon:

Mark Trail 5/27/13

Guys I … I don’t think Cherry knows where her shoulder is

Is he shooting a pop gun? Wouldn't a real gun go "bang"?

[Also, the lack of a period at the end of the quip is a holdover from the original post.]

Economics of Natural Hazards on the Moore, OK Tornado

Kevin Simmons:

I was interviewed on Bloomberg Friday.  The video link is here.  One of the questions was about saferooms and given the horrible tornado in Moore last week it is an important topic.  I live in North Texas and have seen my share of tornadoes.  Surviving one depends on many factors but the most important are the size of the storm, the amount of time you have to prepare and the type of structure you are in when the storm hits.  A well-built engineered structure is the safest.  The worst is a mobile home.

Permanent homes provide reasonable shelter from small tornadoes and with modest enhancements in construction can also provide reasonable shelter from many strong storms.  That would account for almost 98% of all tornadoes (EF0-EF2).  The Insurance Institute for Business and Home Safety suggests building homes to meet their Fortified Home Program.   Some communities are adopting aspects of the program in their building codes.  Moore OK, is one of those.  But that would not apply to homes built prior to the enactment of enhanced codes.

For residents of permanent homes to get protection from violent tornadoes some type of shelter is required, in residence or underground, and the options for those are growing every year.  We recently converted our hall closet to a shelter. ...

The public policy question is whether or not we should require the installation of shelters by homeowners.  They do add a significant cost to the price of a home.  Some homeowners, myself included, are willing to pay the added cost but I’m not sure that most people would, even those that live in tornado alley.  A second policy option is to offer a subsidy to homeowners for a shelter.  Dan Sutter and I have written extensively about this.  This is a very expensive program and will reduce fatalities but at a higher cost than programs to reduce casualties from other risks we face.  

via kevinmsimmons.blogspot.com

Here is a link to Kevin and Dan's book, Economic and Societal Impacts of Tornadoes. 

Only Professor Biddle might think the benefit exceeds the cost*

The professor is the only human being who has ever lived in intimate contact with that rare and remarkable bird:

The California condor’s slow 20-year climb back from the brink of extinction has long been a fragile not-quite-success story in the conservation world. So when the news came on Friday that developers of a wind-energy project near the Mojave Desert would not face criminal charges if the blades killed a single condor, environmental groups expressed grave concern. ...

It has been 46 years since the condor — a bald, black carrion-eater that can fly nearly three miles high on wings that span up to 10 feet — was declared endangered. In that time, the Interior Department’s Fish and Wildlife Service has almost never waived criminal penalties for the “taking,” or killing, of a condor. ...

The Alta East project is designed to generate 153 megawatts of electric power, bringing the overall capacity developed or managed by Terra-Gen closer to 1,500 megawatts of wind power. ...

There are 234 condors living in the wild mountains of central California. ...

via www.nytimes.com

If one megawatt can power 1000 homes then 153 megawatts can power a small city, 153,000 homes, and reduce CO2 emissions by about 90,000 (~153*.225*2600 tons per MW) tons per year. If the social cost of carbon is $25 per ton then the annual value of the wind power in terms of climate change is about $2.25 million. 

My read of the article says that the risk to the condors is small, the wind farm is on the edge of their range, so if the risk to one condor is 1% (a WAG, but see this), not allowing the wind farm to be cited would place an implicit value on a condor of $2.25+ billion. 

Am I getting these numbers about right? I'm sure that the answer to that question is no, so where am I going wrong? [note: the above "analysis" has been edited in response to comments]

*You can watch it here: http://www.tvland.com/episodes/16388/beverly-hillbillies-the-bird-watchers. In 1966 the California Condor was five years away from being place on the endangered species list. 

 

NAAFE special session on non-market valuation: moderated discussion

I participated in the NAAFE special session on "Non-market Valuation in Fisheries and Aquatic Ecosystem Research" [pdf] last week. The session included a moderated discussion of more general issues, but we ran out of time. Here are the discussion questions and the things I wanted to say. 

1. Where do you see the greatest need for non-market values associated with fisheries and aquatic ecosystems and why?

One issue that is not fully addressed in fisheries management is the allocation of catch between commercial and recreational sectors. There is a need for nonmarket valuation estimates of recreational catch and a comparison to the value of commercial catch to determine the efficient sector allocation of the optimal yield.

Note that expansion of catch share programs to multiple fishing sectors might achieve the same goal.

Nonmarket valuation could also be used to estimate the passive use value of stressed fish stocks. Where the passive use value exceeds the market and nonmarket values of catch, the fishery should be shut down.

2. In your experience, how has non-market valuation been received by policy analysts and decision makers? Has your research been used in making policy decisions? If it has not been used, what are the primary barriers you see for it being used?

Policy analysts and decision makers give a wink and a nod, but little else, to non-market valuation. For years, fishery management plans in the South Atlantic contained some boilerplate language about recreational fishing values but these numbers were never used in any management decisions (other than, perhaps, justifying maintainence of the status quo allocation to the recreational sector). The barrier to its use may be the same as in any management situation, market values (i.e., impacts) trump nonmarket values (i.e., surplus). 

Reference

Haab, T., J. Whitehead and T. McConnell. 2000. The economic value of marine recreational fishing in the Southeast United States: 1997 Southeast economic data analysis. Final Report for NMFS Contract No. 40WCNF802079. [link]

3. Do you see value in conducting another expert panel on stated preference methods akin to the NOAA Blue Ribbon Panel on Contingent Valuation (1993) to evaluate stated preference methodologies and establish a new set of best practices or standards for the field?

Yes. Following on Hausman's denouncement of contingent valuation, there is a need for some sort of focused effort by a cross-section of economists that sets out the benefits and costs of the various stated preference methods. There is still a lot of ignorance about the progress that has been made in contingent valuation. Non-non-market valuation economists continue to make suggestions and criticisms that have been dealt with long ago. Also, there is a need to separate the method itself from the estimation of passive use values (they are not synonomous).

Contingent valuation and choice experiments both have their uses but the assertion that choice experiments are somehow "better" is still made. This assertion has its roots in the CVM debate of the 1990s, stated preference researchers happily fled the CVM and have not looked back. Choice experiments have largely been given a pass on three issues that Hausman uses to place a nail in the coffin of CVM: hypothetical bias, scope tests and WTP vs. WTA. There are a few papers, but I know of no choice experiment literature (i.e., enough papers to determine a pattern of results) that amasses evidence to even suggest that choice experiments are immune to these issues. 

References

Carson, Richard T., Jordan J. Louviere, A Common Nomenclature for Stated Preference Elicitation Approaches, Environmental and Resource Economics 49(4):539-559, 2011. [link]

Haab, Timothy C., Matthew G. Interis, Daniel Ryan Petrolia and John C. Whitehead, From Hopeless to Curious? Thoughts on Hausman’s “Dubious to Hopeless” Critique of Contingent Valuation, Working Papers from Department of Economics, Appalachian State University. [link]

Hanley, N., Mourato, S. and Wright, R. E. (2001), Choice Modelling Approaches: A Superior Alternative for Environmental Valuation? Journal of Economic Surveys 15:435–462. [link]

Hausman, Jerry. 2012. "Contingent Valuation: From Dubious to Hopeless." Journal of Economic Perspectives 26(4):43-56. [link]

Lew, Daniel K., Kristy Wallmo, External Tests of Scope and Embedding in Stated Preference Choice Experiments: An Application to Endangered Species Valuation, Environmental and Resource Economics
48(1):1-23, 2011. [link]

Ready, Richard C., Patricia A. Champ, and Jennifer L. Lawton, Using Respondent Uncertainty to Mitigate Hypothetical Bias in a Stated Choice Experiment 86(2):363-381, 2010. [link]

 

 

NAAFE special session on non-market valuation: my presentation

I participated in the NAAFE Forum special session on "Non-market Valuation in Fisheries and Aquatic Ecosystem Research" (link) last week. Here is the link to the PDF of my presentation, which has significantly changed since the SEA and CNREP meetings (surprise!).

Download A Comparative Analysis of the Multi-Mode Chesapeake Bay

My co-authors are listed on the second slide [Todd Hartman, Jim Kirkley (deceased), Ted McConnell, Tanga Mohr].

Amenity Value

Dr. Stephen P. Leatherman, otherwise known as Dr. Beach, is a coastal scientist and professor at Florida International University who evaluates 650 public beaches along the U.S. coasts and creates a Top 10 list every year. His report is based on 50 criteria that include sand softness, rip currents, pollution, lifeguards and safety record. Topping the 23rd annual list is an underdog that bounced back from a deadly storm.

via local.msn.com

I've been to #'s 2,3,5 and 8. Good calls on 2 and 3.