Environmental Economics

Invasive species and forestry

http://comicskingdom.com/mark-trail/2015-04-06

I don't think there is much Mark can do against an enemy as  invasive species. But, we'll see soon. The DOA just showed up today to "investigate the strange beetles Mark found on trees in Wallace Wood's tree farm." 

And, I might be dim, but considering the simple Faustmann model (below) couldn't Wally Wood cut down the trees today and receive almost as much revenue (i.e., stumpage value, V) relative to waiting one more year? It isn't the optimal time to cut down the trees (t*) but it still generates stumpage value, right?

Alternatively: (a) is Wally an all-or-nothing guy who thinks those who finish second are losers? and/or (b) do some types of beetle infestation make the trees unsuitable for sale?

And if Wally is the big shot forester why did it take a visit from an outdoors journalist to find the beetle infestation? 

Susan is praying for inflationary pressure

An optimal timing problem from The Daily Trail:

... if Ol’ Wally Wood is growing hardwoods, he might get a cutting in once or maybe twice in a lifetime…  Unless he inherited a stand of mature oak, and is replacing as he goes with sound forest management practices,  Susan may be waiting for a long time to get a ring on her finger…

In order to gain insights into her loveless future, Susan should be comparing the growth rate of the stand of trees against interest rates. And with such low interest rates she should realize that Wally Wood will never pop the question!

"A Carbon Offset Market for [Tropical Forests]"

Time to update the encyclopedia (don't follow that link unless you can stomach self-promotion):

Tropical forests store huge amounts of carbon. When their trees are cut or burned, the carbon is eventually released into the atmosphere, mixing with oxygen to form the long-lasting greenhouse gas carbon dioxide. The pace of deforestation is so great today that it accounts for an estimated 12 to 15 percent of global carbon dioxide emissions annually.

Economic forces drive this destruction — for timber, rangeland, mining and development. But there is also a powerful economic argument for preservation. Forests’ carbon reserves can be monetized and sold as offsets to greenhouse gas emitters who need them to comply with regulatory emissions limits, or who voluntarily want to reduce their carbon footprint.

These offsets typically are sold by utilities or other industrial companies that have reduced their emissions below a government-imposed cap. The offsets equal the emissions below the cap; their price is determined by supply and demand. The buyers are companies whose emissions are above the cap; the offsets are subtracted from their excess emissions, enabling them to avoid penalties. There is also a voluntary market where companies and individuals buy offsets to reduce their carbon footprint. The revenue is used to finance energy efficiency and other projects to reduce emissions.

These markets are booming, with trades each year in the tens of billions of dollars. But a potential pool of offsets has been largely left off the table — offsets that represent carbon emissions avoided by not destroying tropical forests. These were difficult to value because there was no way to accurately quantify the carbon savings. Nor were there reliable, transparent systems to ensure these forests would remain standing or that proceeds would be returned to local communities.

For those reasons, the European Union, which has the world’s largest system for trading carbon offsets, has not allowed offsets for what’s known as avoided deforestation. Other carbon markets, like the one run by the California Air Resources Board, are considering it.

The objections are now being addressed. In recent years, accurate and inexpensive techniques have been developed to quantify and verify carbon emissions that would be avoided by not destroying forests. Credible mechanisms for indemnifying offset credits (meaning, an acre of forest will always be protected even if the specific acre behind the credit is destroyed) and returning the proceeds from the sale of the offsets to local communities have also been devised. A new system that combines all of those components and biodiversity conservation, known as the Rainforest Standard, which we and 60 other scientists, lawyers and businesspeople have developed, is now being tested in South America to safeguard a 1.6-million-acre forest. ...

via www.nytimes.com

Following the link:

The Rainforest Standard’s underlying principle is that emission reductions must be permanent to justify credit revenues, and reductions will not be permanent unless economic benefits flow fairly to all local forest users and owners, who would otherwise have no stake in their permanence.

Daily demand and supply: perfect complements and shortages

Living in a somewhat dysfunctional three-level house, we decided to put up a second tree to better spread holiday cheer. I live in an area that grows a lot of Christmas trees so they are not hard to find. After getting the first tree at a farm with hay rides and hot chocolate on Black Friday, we hit the Boy Scout market at the side of the road and got a 6' tree for $30. Like, peanut butter and jelly and autos and petrol, Christmas trees and Christmas tree stands are perfect complements. We don't have a second stand so I went to the market ... and struck out. Walmart, Lowes, Harris Teeter and a local building supply are all out. Walmart says that they have run out twice. Twice!

Due to the shortage, I can only conclude that Christmas tree stands are priced too low. And some advice, make sure that you can buy both complements before buying one of them (e.g., don't buy a car unless you have resolved your fears about Peak Oil).

Our second tree is leaning against the garage right now and my facebook friends are helping me find a stand. 

Finally, any clues why the local business firms were not ready for the demand for stands? It's not like if you stock too many they will rot or depreciate. 

Well it's about dang time...

In the mail yesterday--get yours today (it will help our publisher recoup our whopping advance):

Apparently the new Farm Bill was written by Scrooge

After a long and sometimes heated debate, a new U.S. Farm Bill was passed this week (being in a College of Ag, I'm required to know this for continued employment).  Inside the bill is a little provision that is sure to spoil almost no one's holidays next year:

Tucked inside the massive new farm bill, which House Republican leaders are speeding to the floor, is a controversial 15-cent fee the government will collect on every Christmas tree cut in or imported into the U.S.

Dubbed the “Christmas tree tax” by opponents — a term to which industry backers vehemently object — it is an idea that’s been kicking around the Capitol for years, but finally got enough support to land inside the 959-page farm bill.

via www.washingtontimes.com

Here are my and John's take on the Tannenbaum Tax, or Christmas Tree Fee, or Scrooge Screw, or Grinch Pinch, or Pagan Price, or Yule Tithe, or whatever you want to call it, from 2011.

Is that a cell phone or a walkie talkie?

http://www.seattlepi.com/comics-and-games/fun/Mark_Trail/2013-10-18/

Nothing to lose? I'm no attorney, but recording a conversation without permission might be illegal. But nevermind, like an idiot, Mark let the battery on his giant cell phone run down before he planted it. So, Mark is going to bluff an obnoxious, and potentially dangerous if you ask me, Big Oil Company lobbyist who is also somehow the "right hand man" for The Senator (isn't it against the rules for someone in Congress to employ a lobbyist?) with a taped conversation that isn't.

What could go wrong? In reverse order of importance:

1. Johnny Walker teases Mark Trail about the size of his cellphone.
2. Johnny Walker loses it and beats the heck out of Mark Trail.
3. The Senator is disgusted by Mark's shady tactics, introduces the Lost National Forest Development Aact and gets rich developing the heck out of Lost National Forest.
4. Johnny Walker steals Mark Trail's giant cell phone while he is tracking the wounded "old buck" Elk, breaks the antiquated security system is seconds, downloads Mark's embarrassing selfies and shuts Mark up forever. 
5. Mark Trail goes to jail for illegally recording a private conversation.
6. I continue to obsess about the faulty logic and contrived exclamatory conversations in Mark Trail leading to duel collapses of my research agenda (and I'm using that word loosely) and teaching evaluations, a scolding from the upper administration of the university and a continuation of my public humiliation.

Ashhole update

I wonder if any NC State economists think this one is exaggerated?

Several dead or dying ash trees dot lawns along Canterbury Road, but only one has drawn the attention of Upper Arlington city arborists.

Last week, Jim Lekoy and Scott Conover pointed to a dead limb in one backyard that hangs over a set of power lines.

The city has ordered the homeowner to remove the tree before the limb snaps and falls on the lines.

“They want to take it down in September,” Lekoy said. “We’re here to see if it will last that long.”

Such visits have become more frequent as the emerald ash borer spreads through central Ohio, where it is expected to kill nearly every mature ash tree by 2018.

...

Ash borers were first discovered in 2002 near Detroit, where they likely had hitched a ride in wooden packing crates shipped from China. A minor pest in Asia where ashes are more resistant to borers, the insects have proved deadly to North American ashes. Borer larvae eat the soft wood under the bark, cutting off water and nutrients in the trees.

via www.dispatch.com

I hate to go all free market on you but ...

Is there a market failure in the tree nursery industry?

Insurance claim money earmarked for rebuilding a tornado-devastated tree nursery in eastern Kentucky may be spent instead to help close a state government budget gap, putting the nursery’s future at risk.

The nursery, one of two operated by the Kentucky Division of Forestry, was flattened by the March 2012 tornado that raked West Liberty in Morgan County. It produces more than 1 million seedlings a year, all native varieties chosen to match the region’s climate and soil. ...

The nursery offers native trees at a reasonable price, said Henry Duncan of Versailles, a past president of the Kentucky Woodland Owners Association, which has about 200 members.

The bare-root seedlings are available in bundles of 10 or 100 and range from $30 to $48 per bundle, according to the agency’s website.

Duncan said some of the work at the nursery seeks to bring back the American chestnut, which was wiped out by a blight in the early 1900s. The nursery also grows most of the trees for planting on reclaimed strip mines, he said.

The only other state nursery, in Western Kentucky, could not meet statewide demand, he said. Commercial nurseries out of state are more expensive and don’t usually offer seed stock that comes from Kentucky trees, which makes them better suited for survival in Kentucky, he added.

via www.courier-journal.com

I can't think of any reason not to expect entry into this market by a private Kentucky nursery firm. The resulting seedling price might be higher without government subsidies but there may be little reason to subsidize tree growing. 

That is, unless the carbon sequestration benefits exceed the cost of the subsidies. But I'd argue this is a role for the federal government and not the states. And those benefits are likely less than the costs since climate change is a global problem, the difference between the number of subsidized public seedlings and private seedlings is likely to have small climate impacts and the impacts are way down the road. 

"Paying Ecuador to Protect the Rainforest"

Common Resources:

A recent episode of NPR’s Planet Money discussed Ecuador’s proposed solution to a national dilemma: the fact that a massive oil discovery and a national park happen to be in the same place. Ecuador’s proposal is to forswear drilling – but only if other countries donate half the value of the oil in aid (about $3.6 billion). For the show, Planet Money journalist David Kestenbaum interviewed RFF University Fellow and Duke University professor Billy Pizer, formerly Deputy Assistant Secretary for Environment and Energy at the Treasury Department. Here’s how NPR summarized his comments:

“The joke we always used to always talk about was, you know, ‘Give me the money or I’ll shoot the trees,’ . . . Pizer says he’d love to keep the park safe. But he says the proposal worried him as a potential precedent that would encourage other countries to threaten to destroy their own forests unless the world pays up.

The show is worth a listen. But, inevitably, material gets left on the cutting room floor. Here are more of Pizer’s views on the Ecuadorian proposal.