Environmental Economics

Free Webinar: Valuing Environmental Catastrophes (with an impressive lineup of experts if I do say so myself!)

Feel free to promote far and wide. Intended for a non-expert audience (my goal is to get a spot in the sequel to this blockbuster).

If you don't like QR codes, you can register here.

 

 

 

 

Env-Econ Book Review: The Fishermen and the Dragon

I just finished reading Kirk Wallace Johnson's The Fishermen and the Dragon: Fear, Greed, and a Fight for Justice on the Gulf Coast. Here's my book review (from the view of an Environmental Economist of course).

The Fishermen and the Dragon tells the true story of the evolution of the Texas Gulf Coast crab and shrimp fisheries in the post-Vietnam era. The era is important to the story because tension builds along the Texas coast when post-war Vietnamese refugees locate to the Gulf Coast creating economic competition and (racial) tension between the existing anglers and the refugees. The racial tensions play out against the backdrop of the encroachment of the Ku Klux Klan into post-war political asylum issues and the the environmental problems that come along with rapid industrialization of the Gulf Coast. 

So why would an environmental economist care? Honestly the story has a bit of everything: Tragedy of the commons, Coasian bargaining, Ostrom-like institutional building, credible (and incredible) threats, industrial organization, the role of government in regulating the commons, natural resource damages (oil spills), environmental and health externalities, social and environmental justice. 

Part Erin Brokovich (an initially reluctant environmental crusader), part John Grisham-like southern legal thriller tinged with undertones of racism, part Pat Conroy-like description of the hardships of coastal life, this true story reads like a popular fiction thriller.

If I have one complaint, it would be that there is a slight disjoint between the story of race tensions between the refugees and local fishers, and the story of corporate greed and environmental disaster. There is overlap in the main characters, but stories seem to be separated in both time and presentation.

Nevertheless, a good read with Env-Econ lessons abound. 

I give it a solid four out of five beers raised.

 

What’s the value of a clean beach? Here’s how economists do the numbers

I was asked to write an article for The Conversation that explains how economists place values on environmental goods (with examples).  Here's what I came up with.   Apologies to all of those involved in the research if this comes across as self-promoting--the perils of writing with an editor.  All of the examples mentioned in the article were team efforts--most were not my idea--and I was a minor part of each team.  It takes a village, and every village needs an idiot.

Millions of Americans head outdoors in the summer, whether for a day at a nearby lake or a monthlong road trip. For environmental economists like me, decisions by vacationers and outdoor recreators offer clues to a challenging puzzle: estimating what environmental resources are worth.

In 1981 President Ronald Reagan issued an executive order that required federal agencies to weigh the costs and benefits of proposed major new regulations, and in most cases to adopt them only if the benefits to society outweighed the costs. Reagan’s order was intended to promote environmental improvements without overburdening economic growth.

Cost-benefit analysis has been so successful as a tool for policy analysis that every administration since Reagan has endorsed using it. However, it requires measuring benefits that are not “priced” in typical markets. Fortunately, putting a price on non-market environmental outcomes, such as safer drinking water and fewer deaths from exposure to dirty air, has proved to be possible, and highly valuable. These estimates help to make the case for actions such as cleaning up beaches and protecting scenic areas as parks. ...

If we all line up on the coast, count to 3, and jump in the ocean yelling "CANNONBALL" I think we could splash out enough water to counter sea-level rise*

Alabama Rep. Mo Brooks on possible causes of sea level rise:

"What about erosion?...Every time you have that soil or rock, whatever it is, that is deposited into the seas, that forces the sea levels to rise because now you've got less space in those oceans because the bottom is moving up."

Anyone still question the need for more science education in our schools?

*Flashback to my childhood...Dad, almost daily: "Leave some damn water in the pool!"

"Public willingness to pay for a US carbon tax and preferences for spending the revenue"

Abstract:

We provide evidence from a nationally representative survey on Americans' willingness to pay (WTP) for a carbon tax, and public preferences for how potential carbon-tax revenue should be spent. The average WTP for a tax on fossil fuels that increases household energy bills is US$177 per year. This translates into an average WTP of 14% more on average for households across the United States, where energy costs differ significantly across states. Regarding the tax revenues, Americans are most in support of using the money to invest in clean energy and infrastructure. There is relatively less support for reducing income or payroll taxes, returning dividends to households, and other expenditure categories. Finally, Americans support using the tax revenues to assist displaced workers in the coal industry enough to compensate each miner nearly US$146 000 upon passage of a carbon tax.

Matthew J Kotchen, Zachary M Turk, and Anthony A Leiserowitz, Environ. Res. Lett. 12(9), 2017: https://doi.org/10.1088/1748-9326/aa822a

via iopscience.iop.org

And this:

A separate survey question asked respondents about whether or not they think global warming is happening. The omitted category of 'don't know' is compared against respondents answering either 'yes' or 'no.' We find statistically significant results for both. Those who believe global warming is happening are 35 percentage points more likely to support the carbon tax, whereas those who do not believe global warming is happening are 25 percentage points less likely to support the carbon tax.

Looking at the supplementary tables, willingness to pay is $368 higher for the 70% who believe that global warming is happening and $260 less for the 13% who don't believe it is happening (estimated relative to the 17% who don't know). These are huge differences from the $177 mean willingness to pay. 

Is Climate Change Fair?

Just got around to reading the Hsiang et al piece in Science on the inequitable economics impacts of climate change.  Here's the abstract:

Estimates of climate change damage are central to the design of climate policies. Here, we develop a flexible architecture for computing damages that integrates climate science, econometric analyses, and process models. We use this approach to construct spatially explicit, probabilistic, and empirically derived estimates of economic damage in the United States from climate change. The combined value of market and nonmarket damage across analyzed sectors—agriculture, crime, coastal storms, energy, human mortality, and labor—increases quadratically in global mean temperature, costing roughly 1.2% of gross domestic product per +1°C on average. Importantly, risk is distributed unequally across locations, generating a large transfer of value northward and westward that increases economic inequality. By the late 21st century, the poorest third of counties are projected to experience damages between 2 and 20% of county income (90% chance) under business-as-usual emissions (Representative Concentration Pathway 8.5).

Here's a pretty picture (with a really long caption) that sums things up:

Caption: County-level median values for average 2080 to 2099 RCP8.5 impacts. Impacts are changes relative to counterfactual “no additional climate change” trajectories. Color indicates magnitude of impact in median projection; outline color indicates level of agreement across projections (thin white outline, inner 66% of projections disagree in sign; no outline, ≥83% of projections agree in sign; black outline, ≥95% agree in sign; thick white outline, state borders; maps without outlines shown in fig. S2). Negative damages indicate economic gains. (A) Percent change in yields, area-weighted average for maize, wheat, soybeans, and cotton. (B) Change in all-cause mortality rates, across all age groups. (C) Change in electricity demand. (D) Change in labor supply of full-time-equivalent workers for low-risk jobs where workers are minimally exposed to outdoor temperature. (E) Same as (D), except for high-risk jobs where workers are heavily exposed to outdoor temperatures. (F) Change in damages from coastal storms. (G) Change in property-crime rates. (H) Change in violent-crime rates. (I) Median total direct economic damage across all sectors [(A) to (H)].

Env-Econ Summary: We're all screwed, just some of us are screwed more than others.   

My presentation at the "NC's Coastal Conference"

So, I always make light of the fact that I'm doing coastal and marine research and my affiliation is in the mountains. So, my joke is that I'm from that "prestigious, marine science institution, Appalachian State University." It might receive a bit of a chuckle but I imagine folks give me a pat on the back for the effort at the making of some levity. This time I'm making even more effort. After my introduction with the phrase in quotes I'll then advance to slide 2 and explain that I've never included a visual aid and here it is ... "You can see the marine science institute right on the water on the left." 

Anyway, here are my slides: Economic Value of Coastal Tourism[*.pdf]. 

I'm discussing a range of critical issues

"Perils of Climate Change Could Swamp Coastal Real Estate"

The big data consulting firms seem to be out ahead of the academic researchers:

Real estate agents looking to sell coastal properties usually focus on one thing: how close the home is to the water’s edge. But buyers are increasingly asking instead how far back it is from the waterline. How many feet above sea level? Is it fortified against storm surges? Does it have emergency power and sump pumps?

Rising sea levels are changing the way people think about waterfront real estate. Though demand remains strong and developers continue to build near the water in many coastal cities, homeowners across the nation are slowly growing wary of buying property in areas most vulnerable to the effects of climate change.

A warming planet has already forced a number of industries — coal, oil, agriculture and utilities among them — to account for potential future costs of a changed climate. The real estate industry, particularly along the vulnerable coastlines, is slowly awakening to the need to factor in the risks of catastrophic damage from climate change, including that wrought by rising seas and storm-driven flooding.

But many economists say that this reckoning needs to happen much faster and that home buyers urgently need to be better informed. Some analysts say the economic impact of a collapse in the waterfront property market could surpass that of the bursting dot-com and real estate bubbles of 2000 and 2008. ...

Over the past five years, home sales in flood-prone areas grew about 25 percent less quickly than in counties that do not typically flood, according to county-by-county data from Attom Data Solutions, the parent company of RealtyTrac. Many coastal residents are rethinking their investments and heading for safer ground. ...

Banks and insurers need to protect their collateral and investors more by improving their methods for estimating climate-change risks and creating more standardized rules for reporting them publicly, economists warn.

In April, Sean Becketti, the chief economist for Freddie Mac, the government-backed mortgage giant, issued a dire prediction. It is only a matter of time, he wrote, before sea level rise and storm surges become so unbearable along the coast that people will leave, ditching their mortgages and potentially triggering another housing meltdown — except this time, it would be unlikely that these housing prices would ever recover. ...

In the past year, home sales have increased 2.6 percent nationally, but have dropped about 7.6 percent in high-risk flood zones in Miami-Dade County, according to housing data. Many coastal cities are taking steps toward mitigation, digging runoff tunnels, elevating roads and building detention ponds.

via www.nytimes.com

But here is a new paper that is finding some impact of Hurricane Sandy on housing prices: Rising Sea Levels and Sinking Housing Prices. This literature is likely a growth area unless I'm missing something (i.e., please add references in the comments section).