Environmental Economics

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Episodic Release in Ohio: Train Derailment Forces Controlled Burn of Toxic Chemicals

From NPR on February 8th (Residents can return home after crews burned chemicals in derailed tanker cars):

"About 50 cars, including 10 carrying hazardous materials, derailed in a fiery crash Friday night on the edge of East Palestine. Federal investigators say a mechanical issue with a rail car axle caused the derailment."

The derailed cars belong to Norfolk Southern who worked with the EPA to conduct a controlled burn of the chemicals, causing an evacuation of the area: 

"Authorities in East Palestine had warned that burning vinyl chloride that was in five of the derailed tanker cars would send hydrogen chloride and the toxic gas phosgene into the air."

Hazardous transport derailments happen from time to time. In 2005, Norfolk Southern also had a train accident in which two of its trains collided due to a faulty railroad switch (image below). 

The EPA regulates emissions transport by requiring all hazard-carrying train companies to register with the EPA, to maintain an accurate manifest of the chemical aboard, and to report and move swiftly to remediate any spill or leak. So, it appears the approach is one in which we recognize that train crashes are infrequent, but when they occur the most important thing is to have an accurate idea of what the heck we just spilled into the environment (so we can quickly remediate). 

While Norfolk Southern failed to timely-report the 2005 incident (and paid a fine), it appears they followed protocol with this weeks incident. Still, they are being sued for economic damages by local businesses and residents. And they may face civil suit payments for violations of the Clean Water Act. In 2005, they paid nearly $4M for the spill of several tons of cholrine as well as diesel fuel into the water supply.  

*All information for the 2005 Graniteville, SC spill can be found here: EPA Report Graniteville Spill

The (horrible) gift of government shutdowns?

The US government did not shut down in FY 2023. That is immensely unremarkable...

But, I had a social media memory pop up about the most recent shutdown in the US, so I'm going to write about them. It was the longest shutdown in US history: 35 days (December 22nd 2018 to January 25th 2019) because agreement could not be reached to fund a giant wall between the United States and Mexico. The federal government has had major shutdowns under each of its last three presidents, so it will probably happen again soon. *See the end of this post for a quick primer on how shutdowns occur.  

Flashback 10 years: I was in grad school during a sixteen-day shutdown in 2013 under President Obama and was deep in literature on the local impacts of EPA Superfund remediation. Several papers estimate the impact of cleanups on local housing markets (when they are discovered, housing prices fall; when they are cleaned, housing prices increase). I remember thinking, 'WHAT A HORRIBLE GIFT a shutdown is researchers!' Horrible because shutdowns are very costly (380,000 federal employees were furloughed due to the 2019 shutdown), but a gift because shutdowns may be a true, sharp, random shock to government programs that are uncorrelated with local characteristics. They hurt... but, they give us a good shot at some causal estimates of program impacts! 

But... thankfully... this line of research is pretty much a non-starter in environmental... I think. Today (2.9.2023) I searched "government shutdown" in JAERE, JEEM, REEP, and ERE and found 0 results of environmental econ papers that work with government shutdowns. And that may good news for society... because when shutdowns happen, the EPA mostly stays operational if it involves human health. The EPA actually regularly publishes a contingency plan for government shutdown. All cleanups underway (or site discoveries) that involve immediate harm to human health continue operation. Benign waste sites and work-in-progress at safe sites get halted.  

Good for society, bad for researchers. If a Superfund site does experience a shutdown pause, it's likely becuase it is not a risk to human health... which means it is perhaps not located near a large population, and potentially correlated with other local characteristics. Darn... exogeneity ruined. 

There may be other interesting environmental questions to answer with shutdowns, however. For example, I found a paper by Todd Gabe in Applied Econ Letters estimating the impacts of shutdown-induced National Parks closures on local tourism and gate fees. Insofar as we don't get to observe high quality counterfactual data in a world where massive national parks don't exist, government shutdowns may provide us the opportunity to value the local impacts (hey, John! Talking about valuation over here!). 

**A quick primer: each year, congress has to pass twelve budget appropriations to fund crucial entities, like many of the EPAs activities. The twelve bills are consolidated into one large appropriations bill and usually passed at the end of the year. If congress can't pass the bill, they can pass a "continuing resolution" which uses the previous year's budget to fund activities until the new appropriations pass. If they can''t do either of those, the government shuts down until the appropriations pass. The BIG result is that many government programs come to a screeching halt. 

The value of life as revealed by the media

From FiveThirtyEight.com:

On Tuesday, two things happened: A New England Journal of Medicine article by Harvard researchers argued that the death toll from Hurricane Maria in Puerto Rico was most likely thousands higher than the official number of 64; and Roseanne Barr, the sitcom star, was fired for a racist Twitter rant. According to the watchdog group Media Matters, CNN devoted nearly five hours to discussing Roseanne, and just over 12 minutes to discussing Puerto Rico. The other cable news networks, Fox News and MSNBC, were similarly lopsided, with Fox spending just 48 seconds on the Puerto Rico study.

Apparently if John wants to make it in this profession he should stop researching hurricanes and start researching Roseanne.

Benefits and costs of evacuation (under uncertainty)

This is a tough one (Watching a ridge slide in slow motion ...):

The fissure was first spotted in October on Rattlesnake Ridge in south central Washington State, overlooking Interstate 82 and the Yakima River. Since then, a 20-acre chunk of mountainside — roughly four million cubic yards of rock, enough to fill 25 football stadiums to the top of the bleachers, eight stories up — has been sliding downhill. Geologists can measure its current speed — about two and a half inches a day — but they cannot say for certain when, or if, it might accelerate into a catastrophe. And they are powerless to stop it. ...

The usual course of events when nature comes unhinged is for researchers and responders to look back in time, trying to understand what happened, as they assess and address the damage done. Here it is precisely the opposite: They are looking forward in time at a disaster in waiting, in which all is still potential and nothing is certain.

The worst-case scenarios — considered unlikely but possible — have the slide breaking loose suddenly and roaring down toward the Yakima River, blocking the channel and flooding the valley, or burying the interstate that runs along the river, carrying 30,000 vehicles a day. Either would mean big trouble for a rich agricultural district where apples and hops are king, about two and a half hours’ drive from Seattle. ...

By giving scientists, officials and the people who live nearby so much time to stew over what could be happening, the slow-motion nature of the slide — at least so far — has already created tensions. About 75 people have been evacuated from nearby houses that may or may not ever be damaged. The local road at the foot of the hillside has been closed. Irrigation canal operators stand ready to open dams and take water from the river if it is blocked by a rock slide. Alternate highway routes have been mapped out, in case the interstate becomes impassable.

Current projections, based on dozens of motion sensors that have been installed on the ridge, suggest that the collapse is most likely to happen sometime in late February. ...

Mr. Emmons, the emergency management director, says he gets updates every day from state geologists and other experts about the odds and percentage predictions of the slide’s likely path. And then he tosses those odds out the window.

“I can’t rely on percentages, because in my world, 1 percent is still a chance,” he said. “I don’t feel comfortable banking on a percent number for public safety, or life safety. In my view, everything is possible.”

My guess is that if the analysis was done using the expected* benefits and costs then the net benefits of evacuation are less than zero. The economic analysis would suggest no evacuation. But the worst case scenario is likely very large and a risk averse emergency manager (see the last two paragraphs) will likely base the decision on that number. 

*For example, the expected benefits would be estimated as E(B) = p1*B1 + p2*B2 + ... + pn*Bn; where p is the probability, B is the benefit of evacuation and slide scenarios go from 1 to n. 

Natural disasters and net-migration? @mattkahn1966

I feel the earth move under my feet, I feel the sky tumbling, a'tumbling down ... (Quakes and Fires ...):

For the half-century after World War II, California represented the epitome of middle-class America on the move. As people poured into the state in search of good weather and the lure of single-family homes with backyard orange trees, the state embarked on a vast natural engineering project that redirected northern water southward, creating the modern Southern California and making the state the most populous in the nation.

Those days are long gone. For more than three decades, California has seen a net outflow of residents to other states, as less expensive southern cities like Phoenix, Houston and Raleigh supplant those of the Golden State as beacons of opportunity. California still has a hold on the national imagination: It has lots of jobs and great weather, along with the glamour of Hollywood and the inventiveness of Silicon Valley.

Still, for many Californians, the question is always sitting there: Is this worth it? Natural disasters are a moment to take stock and rethink the dream. But in the end, the calculation almost always comes down to cost. ...

California was once a migration magnet, but since 2010 the state has lost more than two million residents 25 and older, including 220,000 who moved to Texas, according to census data. Arizona and Nevada have each welcomed about 180,000 California expatriates since the start of the decade. ...

California has 40 million people and has grown through much worse. ...

Two million divided by 40 million is 5% in out-migration. That seems fairly large to me. But, I don't think the numbers include in-migration so net migration is likely lower. 

The theme of the article is that if it wasn't so dang expensive in California the residents might ride out the disasters. But many are in disequilibrium (i.e., the value of the amenities is lower than the cost of living) and moving out. Here is one of the earlier papers looking at this: Berger and Blomquist, J. Urban Econ. (1992). 

And it might get worse:

Right now it is the Republican tax plan that is causing people to rethink their finances and ultimately where they want to live. The plan, while still a work in progress, is almost certain to land harder on California and other heavily Democratic states if it passes. The state’s median home cost is $500,000, twice the national level, and for decades residents have softened the blow from high home prices and high state and city taxes by using generous federal deductions that lower their taxes.

Curious as to how this might change Californians’ outlook, Redfin, a national real estate brokerage firm based in Seattle, recently asked a sample of 900 homeowners if they would consider moving if they could no longer deduct state and local taxes. Some 37 percent of Californians said they would consider it. Californians looking elsewhere are already among the most popular searches on the Redfin website.

The first paragraph might be misleading, I don't think the mortgage deduction is in the GOP tax bill. It is the deduction for state and local taxes that will hurt Californians. Getting rid of the mortgage deduction (i.e., rich person's housing subsidy) is probably a good idea. My public finance is too rusty for me to figure out if getting rid of the deduction for state and local taxes is a good idea.  

Iran is headed our way!

CNN may have just inadvertently started WWIII.

Daily Demand and Supply: Requisite Natural Disaster Price Gouging Post

When the Super Bowl comes to town hotels increase prices for rooms.  Bars increase prices for drinks.  Restaurants increase prices for food.  

So why when the Super Bowl of hurricanes comes to town would we expect anything less?

When they checked rates online as Hurricane Harvey was strengthening and about to make landfall in Texas, a room with two queen beds was between $120 and $149 a night.

But when a KXAN TV crew from Austin showed up on Saturday to get a room at that same hotel—a Robstown, Texas Best Western Plus, 20 miles from Corpus Christi—the clerk at the front desk quoted a price nearly triple what the crew had seen online: a staggering $321.89 a night, according to KXAN.

The TV crew cried foul, and pushed back against the price. Eventually, the clerk admitted the room rates were much higher than usual. “Weekends start at $149, sometimes we start at $189,” the clerk told KXAN.

“But, why is it so much?” KXAN reporter Wes Rapaport asked of the $321.89 charge.

Why? Econ 101: That's why!

When demand increases, prices rise.  It's that simple.  Without an increase in prices there would be a shortage (the quantity demanded would be greater than the quantity supplied).  The price serves a function:  to ration scarce goods.  As goods become more scarce, the price rises to alleviate the shortage. 

I get it...higher prices are unpopular.  And higher prices during times of need give us all an icky feeling.  But consider the alternative: prices don't rise.  If prices don't we need to find another way to allocate an increasingly scarce resource.  Shortages lead to tensions and tensions lead to bad outcomes (think doorbuster sales on Black Friday).  Rising prices during natural disasters are the worst outcome...except for all of the other outcomes.  How else should we allocate scarce resources other than allowing prices to ration the goods?  

It always strikes me as disingenuous when authorities, concerned with perceptions, step in with superficial solutions. 

Hotels aren’t the only ones guilty of price gouging as Houston grapples with continued rainfall and flooding from Hurricane Harvey, the most powerful storm to hit Texas in more than 50 years. Over the weekend, more than 500 complaints of price gouging were lodged with the Texas attorney general’s office, according to CNBC—including $99 cases of bottled water, gas at $10 a gallon and hotels tripled or quadrupled in price.

"These are things you can't do in Texas," Texas Attorney General Ken Paxton told CNBC in an interview Monday. "There are significant penalties if you price gouge in a crisis like this."

 

Rather than grandstanding how about we address the real issue and find ways to increase supply more quickly--which will hold prices down, increase the number of people served and reduce tensions.  A focus on rapid response and readiness will benefit far more people than legislating against markets. 

Beware the broken window fallacy

I don't get a whiff of "Harvey might be good for the economy" from this article but, still, beware. From CNBC: 

Devastating Hurricane Harvey, unprecedented in its rainfall, could be a slight negative for U.S. growth in the third quarter, but economists say it may ultimately provide a tiny boost to the national economy because of the rebuilding in the Houston area.

Goldman Sachs economists estimate a very preliminary impact of the storm to be $30 billion in property damages, making it the ninth largest since World War II in terms of domestic property damage. Goldman economists say, in a note, the storm could take 0.2 points off of growth in third quarter because of the impact to the energy sector.

JPMorgan chief U.S. economist Michael Feroli said JPMorgan analysts estimate physical damage from Harvey at between $10 to $20 billion, putting it in the top 10 costliest storms but still well below the record $159 billion damage from Katrina. He said it could add about 0.1 percent to growth, but so far he is not changing his forecast for 2.3 percent third quarter growth and 1.8 percent fourth quarter growth. ...

Growth is tracking at just around 3 percent in the third quarter. Swonk estimates that Harvey could add a few tenths of a percent of growth to the fourth quarter, which she sees at 2.4 percent. ...

The Goldman economists said the overall impact of the hurricane on second-half growth is uncertain because the negative effects will likely be offset by an increase in business investment and construction activity.

And here is the part I'm really puzzling about: 

There are also some ways the storm could spark a rise in inflation, which has been surprisingly weak this year.

In Houston's case, the storm's impact on the refining sector and gasoline prices could spark inflation, said Swonk. Inflation slowed down this year and is a point of concern to the Federal Reserve, which would like to see more before it raises interest rates later in the year.

The obvious way Harvey could affect inflation is through gasoline prices at the pump, which are already rising just because Houston and the surrounding area have been forced to shut down refining production. ...

But that number could rise if any refineries or pipelines look to be out of commission for more than a few days. The refining sector remains a wild card, and could be a drag on the consumer and economy if there's any significant damage that would send prices spiking for any length of time. ...

Another reason Houston could generate a little inflation is because it's already facing a shortage of construction workers, and if the massive rebuilding effort attracts workers from other states, that shortage could go national, Swonk said. The competition for workers could lead to higher wages.

Another temporary blip in inflation and a boost in consumption could come from car sales. Car prices, for new and used models, have been falling but an expected a surge in demand to replace vehicles lost in flood waters could result in an increase in prices, particularly for used cars.

There could also be a pickup in building materials sales and possibly prices, with lumber already rising because of the new U.S. tariffs on Canadian soft lumber, Swonk said. However, any pickup in inflation could also be offset by a decline in inflation, due to the Amazon and Whole Foods merger. Amazon already cut prices at the grocery chain on its first day of ownership.

I'm skeptical that Hurricane Harvey will contribute to inflation. Every increase in gas prices is not a 1970s style oil shock and the Amazon and Whole Foods merger ... wait, does someone really think that will put downward pressure on the overall price level in the U.S. economy?

And if you want to donate to the relief effort here is one option at the American Red Cross.