Environmental Economics

Someone called me a moron (and it wasn't one of my kids)

Apparently Steven Goddard doesn't like me pointing out his misrepresentation of the NOAA sea level data:

Lies, Damn Lies and Sea Level Data

A Drudge headline this morning points to this story that claims sea levels have been falling for the past 6 years.  And the story is correct.   Here's the graphic proof based on data from the National Oceanic and Atmospheric Administration:

Nothing to look at here.  Everyone's safe.  No worries. 

But, perhaps unsurprisingly, given the source, the picture fails to tell the whole story. 

Here is the same graph extended back to 1910. 

According to the data--yes, the same data used in the top graph--sea levels fell from about 1920-1930, and again from 1945-1950, and again from 1970 to 1980, and again from 2000-2005 and from 2008 to 2009 and from 2010-2016. 

Yet somehow sea levels rose from 1910-2016. 

By almost .4 meters.

Upshot:  Part of the story doesn't tell the whole story.  As I tell my students in my econometrics classes:  If you tell me the conclusion you want people to draw, I can find data to support your conclusion.  But the trick to good statistics is to draw conclusions from the data and not draw data for the conclusions.    

 

 
 

I wonder how many jobs this is going to cost?

When a clean environment is important for the economy the criticism will still be unmerciful:

The Obama administration is expected to withdraw its plan to permit oil and gas drilling off the southeast Atlantic coast, yielding to an outpouring of opposition from coastal communities from Virginia to Georgia but dashing the hopes and expectations of many of those states’ top leaders.

The announcement by the Interior Department, which is seen as surprising, could come as soon as Tuesday, according to a person familiar with the decision who was not authorized to speak on the record because the plan had not been publicly disclosed.

The decision represents a reversal of President Obama’s previous offshore drilling plans, and comes as he is trying to build an ambitious environmental legacy. It could also inject the issue into the 2016 presidential campaigns, as Republican candidates vow to expand drilling. ...

via www.nytimes.com

But this is just a movement along the production frontier between two sectors of the economy, tourism and energy (not the nonmarket value part of the environment, but that will be protected too as a result of this decision). With low energy prices one could make the argument that increased drilling off the southeastern coast is not all that necessary. 

Dumb and Dumber Economics of Coastal Erosion

Raise your hand if you want to work with me...

The Department of Agricultural, Environmental, and Development Economics (my department) in the College of Food, Agricultural and Environmental Sciences (my college) at The Ohio State University (my university) is hiring for four new faculty positions--and I am not ashamed of taking advantage of this blog to promote the positions.  If you have (or are close to earning) a PhD with interests in agricultural economics, environmental economics, regional economics, development economics or some combination of those fields along with other interests, then we can probably align your interests with one of our four positions. 

Come join me in a top rated department (according to the National Research Council at least) in a top 20 public university (according to US News at least) in the Best Opportunity City in the U.S. (according to Forbes at least).

Our open positions are:

• Assistant or Associate Professor in Global Economic Modeling: a tenure-track assistant/associate professor position in the area of global economic modeling and integrated assessment. Economic modeling approaches of particular interest include dynamic optimization and computable general equilibrium modeling, as well as familiarity with approaches for handling decision making under uncertainty. Individuals with experience integrating economic models with physical/biological models are encouraged to apply.
• Assistant or Associate Professor in Sustainable Food and Farm Policy:  tenure-track assistant/associate professor position to conduct innovative research on policies related to food, farming and sustainability and to provide intellectual leadership to the Department and to the University’s Discovery Theme Initiatives in the area of sustainable food and farm policy. 
• Assistant Professor in Agribusiness: a tenure-track assistant professor with teaching and research responsibilities in agribusiness.  Applicants with interests in agricultural markets and marketing, finance, supply and demand analysis, industrial organization, international trade or agricultural and food policy, that complement a primary interest in agribusiness are encouraged to apply.
• Assistant or Associate Professor in Sustainable Development and Economy: an assistant/associate professor, tenure-track position to develop an internationally recognized program of research and teaching focused on sustainable development and the trade-offs among economic development, social equity and environmental protection in international or regional contexts.  Areas of interest include, but are not limited to: economic growth; equity; resource use; technological change; socio-ecological systems; sustainable and resilient communities. 

Click on the links for full descriptions and application info.  

Challenges of Natural Resource Economics and Policy | 5th National Forum on Socioeconomic Research in Coastal Systems

This is a great conference. I've attended three out of four and have always learned something important. It is the sort of conference where an economics paper focuses more on the economics than the statistics. I've been given clearance to try to attend this year so I'm crafting my abstract as we speak (so to say)!

Challenges of Natural Resource Economics and Policy
5th National Forum on Socioeconomic Research in Coastal Systems
March 20-22, 2016 • New Orleans, LA • Royal Sonesta Hotel

Join us in New Orleans!

Meet with your colleagues, friends, and other professionals in an exciting multidisciplinary setting hosted in the unique city called “The Big Easy.” Highlighting the challenges of socioeconomic research and policy in coastal systems, the 5th National Forum promises to generate collaborative efforts while providing a prominent venue for your current research, extension, and policy work.  Mark your calendars for CNREP 2016 to be held March 20-22, 2016, in New Orleans, Louisiana, at the Royal Sonesta Hotel.

What are the challenges?

It’s been 10 years since Hurricane Katrina devastated the coastal communities of the northern Gulf of Mexico.  During that period, the region has endured an additional five major storms and a man-made disaster of unparalleled proportion.  In responding to these acute impacts, coastal decision makers have been forced to acknowledge more chronic and insidious challenges – ranging from relative sea level rise to the globalization of domestic markets. These challenges have focused national attention on the importance of the social sciences in natural resource restoration and management. Understanding both the market and non-market values of water, wetlands, fisheries, and other ecosystem-based goods and services is critical to efficient policy development. As the nation’s longest running coastal socioeconomic conference, the triennial CNREP forums have always strived to address these difficult challenges while focusing on coastal resources and their role in the economic, social, and cultural systems of the world.

What are the Topics?

Abstracts for oral and poster presentations and dedicated sessions and panels are currently being sought for CNREP 2016. Topics of interest include, but are not limited to:

• Economics and policy of climate adaptation
• Risk perception and hazard mitigation
• Ecosystem services: valuation and application
• Public and private use conflicts in coastal zones
• Energy policy in coastal environments
• Socioeconomic impacts of coastal restoration
• Economics of fisheries access and allocation
• Reconciling navigation with restoration
• Economics of water: Emerging priorities
• BP settlement: Implications for the Gulf economy
• Linkages between coastal resources and economic activity
• Indicators and indices of coastal resiliency
• Economics and policy of coastal recreation
• Market-based mechanisms for resource management
• Incentivizing private resource stewardship
• Sociological considerations of coastal restoration
• Working waterfronts and direct marketing
• Measuring and managing coastal sustainability

Basic and applied research, extension-oriented, and policy discussion submissions are all welcome.

Who Should Attend?

A balanced mix of technical and non-technical presentations is planned, and noted research and policy professionals will be invited to present keynote addresses to the conference that provide a framework for conference sessions and discussions. Attendees will include:

• Economists, sociologists, and anthropologists
• Legal scholars and policy analysts
• Ecological and environmental researchers
• Extension agents and specialists
• State and federal resource managers
• Environmental consulting firms
• Non-Governmental Organizations
• Graduate students

Call for Sessions – Due October 10, 2015

The CNREP 2016 planning committee is currently seeking proposals for dedicated sessions or discussion panels lasting 90 minutes each. For each proposal, session chairs are required to provide a brief description of the session (500 words maximum) and to identify 3-4 presenters or panelists.  In the case of discussion panels, the session chair must confirm each participant, and provide contact information and a brief bio for each participant (200 words max).  In the case of dedicated sessions with individual presentations, the session chair will be required to secure abstracts from each presenter per the guidelines below.

Call for Abstracts – Due November 20, 2015

Please submit your 500 word (maximum) abstract via email (address below) by November 20, 2015.  Include the abstract as text in the body of your email or as an attachment in MS Word format.  Please provide the title of the presentation, names and affiliations of authors, addresses (including email addresses), and key words.  Please also indicate the presenting author and whether you would like to present orally or as a poster. Abstracts received by the deadline will be reviewed for quality and authors notified of acceptance by December 11, 2015.  All abstracts, both oral and poster, will be published electronically in the conference book of abstracts that will be posted on the CNREP website. Note: All presenters are responsible for the conference registration fee and paying for travel and lodging.

Special Edition - Journal of Ocean and Coastal Economics

In addition to the book of abstracts, all submissions will be evaluated for a possible manuscript invitation for a special issue of the Journal of Ocean and Coastal Economics. More information about this opportunity will be forthcoming, but for now you can view the journal website, along with the instructions for authors, at the following URL: http://cbe.miis.edu/joce/

All abstracts are to be submitted no later than November 20, 2015. 
Please email them to: 

Dr. Rex H. Caffey, Professor of Resource Economics
Center for Natural Resource Economics & Policy (CNREP) 
Louisiana State University Agricultural Center
Email: [email protected]

 

via www.cnrep.lsu.edu

 

Some BP Settlement Math: When is $18.7B really only $11.7B?

After yesterday's announcement of a tentative settlement between BP and federal and state negotiators, BP has provided details of the payment schedule for the $18.7B settlement.  The settlement consists of payments for civil penalties ($5.5B), natural resource damages ($7.33B), and state damages ($4.9B) over 18 years.  An additional $1B is set aside for payments to over 400 local entities bringing the total to the reported $18.7B. 

Year after consent decree	Civil Penalty payments	Natural Resource Damages (NRD) payments	NRD additional final payment	State Claims payments
0				$1,000,000,000
1	$379,310,345	$489,655,172
2	$189,655,712	$244,827,586
3	$379,310,345	$489,655,172		$260,000,000
4	$379,310,345	$489,655,172		$260,000,000
5	$379,310,345	$489,655,172		$260,000,000
6	$379,310,345	$489,655,172		$260,000,000
7	$379,310,345	$489,655,172		$260,000,000
8	$379,310,345	$489,655,172		$260,000,000
9	$379,310,345	$489,655,172		$260,000,000
10	$379,310,345	$489,655,172		$260,000,000
11	$379,310,345	$489,655,172		$260,000,000
12	$379,310,345	$489,655,172		$260,000,000
13	$379,310,345	$489,655,172		$260,000,000
14	$379,310,345	$489,655,172		$260,000,000
15	$379,310,343	$489,655,172		$260,000,000
16			$232,000,000	$260,000,000
17				$260,000,000
Totals	$5.50 billion	$7.10 billion	$0.23 billion	$4.90 billion

When performing benefit-cost analysis, a dollar today is not worth the same as a dollar tomorrow. Spreading the payments over 18 years means that BP will be laying out less than $18.7B out of pocket. How much less depends on the interest (discount) rate assumed for calculations.

Using the payment schedule above, and standard present value calculations, the present value of BP's $18.7B is between $11.7B* (at a 7% discount rate) and $15.0B (at a 3% discount rate)**.  In other words, if BP were making a cash payment today, they would be on the hook for significantly less than the reported $18.7B. 

I'm not making a judgment.  Just pointing out the math.  I will leave it to others to make the judgment.

UPDATE: Hmmm...I just realized this note at the bottom of BP's press release might render the present value calculations moot:

"Interest will accrue at a fixed rate on the unpaid balance of the civil penalty and natural resource damges payments, compounded annually and payable in years 15 (CWA) and 16 (NRD).

The interest rate will be fixed at the average market yield on U.S. Treasury securities at 2-year and 3-year constant maturities, quoted on an investment basis by the US Federal Reserve (H.15 Release), for the period from 28 May 2014 to 27 May 2015."

If I am reading that right, that means BP will effectively borrow against future payments which offsets the savings that would occur from delaying payments, 

*I've assumed the $1B payment to local entities is being made immediately.  Not a realistic assumption but without more information, we can't predict when these payments will be made.  Delaying or spreading these payments over time would reduce the present value of the outlay further.

**And just for reference, BP's profits in Q1 of 2015 were $2.6B.

The Tricky Economics of Ongoing Subsidies for People Who Want Their Beach and Eat it Too

Some good stuff (new research) from a colleague of mine here at Ohio State (Sathya Gopalakrishnan--who I was smart enough to hire) and a couple of other 'contributors' from some schools in North Carolina*:

The value of many oceanfront properties on the East Coast could drop dramatically if Congress were to suddenly end federal beach nourishment subsidies, a new study by researchers at three universities finds.  

In beach nourishment, new sand, often dredged from nearby inlets or the offshore sea floor, is added to an eroding beach to widen it and help prevent future erosion.

“The expectation that the federal government will continue to provide subsidies for erosion-control measures has significantly inflated property values in many coastal communities,” said Dylan E. McNamara, associate professor of physics and physical oceanography at the University of North Carolina Wilmington. “If these subsidies were suddenly removed, our model suggests values could experience a rapid and dramatic adjustment downward.”

“Values could erode by as much as 17 percent in towns with high property values and almost 34 percent in towns with low property values,” said Martin D. Smith, professor of environmental economics at Duke University. “This would be analogous to the bursting of a bubble.”

Researchers from the UNCW, Duke and The Ohio State University published their findings today in the open-access peer-reviewed journal PLOS One.

Alarming as the new numbers are, the researchers caution that their findings should not be viewed as the last word on the issue nor should they be interpreted as a policy recommendation to continue the federal subsidies.

“This analysis doesn’t include all the factors that affect coastal property values, but the erosion-related factors we examine are important ones, and the model is grounded in hard empirical data,” said A. Brad Murray, professor of earth and ocean sciences at Duke. “We expect our model’s predictions to be close to what could actually happen.”

To assess the effect federal beach nourishment subsidies have on property values --  and what the impact might be if subsidies abruptly ended -- the researchers incorporated historic and current resale values of oceanfront homes on nourished beaches and un-nourished beaches in North Carolina into a specially designed stochastic dynamic optimization model. They also incorporated three types of erosion that commonly affect beach width and stability in the state: chronic background erosion caused by rising sea levels or differences in alongshore sediment transport; sporadic erosion of nourished beaches from storms; and temporary increases in erosion that can occur as beaches adjust to recent nourishment.

By analyzing the data, the model clearly showed that “if the beach is being protected from erosion by nourishment, a large part of the value of the house comes from that protection,” said Sathya Gopalakrishnan, assistant professor of agricultural, environmental and development economics at Ohio State.

Though the model is based on North Carolina data, its findings are broadly applicable, said Gopalakrishnan. “It lines up well with the range of property values and environmental parameters found on most other East Coast sandy shorelines with the exception of a few urban areas like Atlantic City,” she said.

Between 1995 and 2002, the federal government spent $787 million on beach nourishment and has historically subsidized two-thirds of the total nourishment costs incurred by coastal communities. In recent years, however, some legislators have called for deep cuts in federal spending on nourishment or ending the subsidies outright.

“It’s a complicated issue, especially at a time when rising sea levels and increased storminess are projected.” said Smith. “No one wants to foot the bill for unnecessary subsidies. But if you don’t pay for defensive nourishment and end up having to pay more in disaster relief, it doesn’t make economic sense.”

Said McNamara, “Our results suggest that if nourishment isn’t a long-term strategy the federal government wants to use to manage eroding coastlines, a gradual removal is more likely to smooth the transition to more climate-resilient coastal communities.”

Dylan McNamara at University of North Carolina at Wilmington, and Marty Smith and Brad Murray at Duke (although I'm sue Sathya is the brains of the operation).

What is a California beach town willing to pay to avoid oil drilling?

Numbers. I can't resist:

On Tuesday, the residents of Hermosa Beach are going to vote yet again on an oil and gas drilling initiative — whether to allow a contract with the energy company E&B Natural Resources Management to proceed despite a current drilling ban.

The contract, which could mean hundreds of millions of dollars for the local government, received final approval from the City Council in 1992, but it has been in limbo ever since. A vote to block the drilling would come at an unusual cost: $17.5 million in damages to the energy company, the equivalent of about half the annual general fund budget in this city of almost 20,000 people. ...

“It’s a little more than we probably should have paid,” Mayor Peter Tucker said, referring to the deal for potential damages. “But if it gets us out of this constant, constant oil issue we’ve had hanging over us for 30 years, I think it’s money well spent.” ...

An environmental-impact statement commissioned by Hermosa Beach listed nine potential areas of concern that it said the company would be unable to mitigate, including air quality, aesthetics and noise. ...

Supporters of the project say the fears voiced by opponents — declining property values, offensive odors and the potential for a spill that could spray fuel into the water, on the beach or over neighboring houses — are exaggerated. ...

The company anticipates that the drilling would produce 35 million barrels over the 34-year life of the project, producing a potential $500 million windfall for Hermosa. (The revenue projection was made when the price of oil was close to $100 a barrel; it is about half that now.) ...

The city has a surplus of close to $7 million that it has put aside to help pay the penalty. The rest would be paid in roughly $800,000 annual installments.

“An $800,000-a-year payment to preserve the quality of life and the special beach community that we have certainly seems worth it,” said Stacey Armato, one of the leaders of the anti-drilling effort.

via www.nytimes.com

Voting against oil would lead to a loss of between about $250 million to $500 million over 34 years. Using the midpoint, that is about $550 per person per year (undiscounted). Losing the $7 million surplus is $350 per person. The $800,000 a year payment is $40 per person per year.

So, the total cost of voting no is a one-time $350 payment and about $600 per person per year. Multiply by 2.5 to get the household costs. 

Marine debris results in lost recreational value*

Marine debris has many impacts on the ocean, wildlife, and coastal communities. A NOAA Marine Debris Program economic study released today shows that it can also have considerable economic costs to residents who use their local beaches.

The study found that Orange County, California residents lose millions of dollars each year avoiding littered, local beaches in favor of choosing cleaner beaches that are farther away and may cost more to reach. Reducing marine debris even by 25 percent at beaches in and near Orange County could save residents roughly $32 million during three months in the summer.

via marinedebris.noaa.gov

I just like when things I work on get press releases.  You can download the full report here.

*Warning: Blatant self-promotion