Environmental Economics

Monday's Misleading Headline: A short-term dip does not a trend make

Gallup reports: "Concern About Several Environmental Problems Dips in U.S."

Here's the evidence.

So, I downloaded the data, redrew the graphs, added trendlines, then deleted the original data to better suss out the underlying trends without all the confusing squiggly lines. Here you go.

Oh, and I gave it a new title: No Obvious Conclusion Can be Drawn about Trends in Attitudes Toward Environmental Problems in the U.S.

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.

 

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

Ummm, @PeterGleick, I addressed this 5,958 days ago: Free markets are, in fact, not free

"Dr. Peter Gleick is a leading scientist, innovator, and communicator on global water and climate issues." He is also a frequent Tweeter and sometimes instigator. Yesterday he tweeted this:

I'm fairly certain Dr. Gleick knows there are a large number of 'atypical' economists who understand the non-market values of water (I'm not sure what a non-economic value is because value is inherently economic). Anyway, here's what I wrote on this exact topic (Are Free Markets Free?) almost 15 years ago...

"EPA is soliciting comment on issues related to water quality trading" @willwheels

This might be the first good thing to be coming out of the EPA in quite some time. via Will Wheeler on twitter:

EPA is soliciting comment on issues related to water quality trading ... (looks like the http://regs.gov docket is not live, but that just means you have more time)

Here is the link: https://www.epa.gov/sites/production/files/2019-09/documents/water_quality_trading_under_the_npdes_program-signed_pre-pub.pdf

Here is the summary at the beginning of the document:

The Environmental Protection Agency (EPA) is requesting comment on policy approaches for addressing “baseline” issues in watersheds with EPA-approved Total Maximum
Daily Loads (TMDLs) where policy makers would like to pursue water quality trading as a regulatory option for National Pollutant Discharge Elimination System (NPDES) permit compliance. These policy approaches may also be of interest to stakeholders pursuing marketbased water quality improvement programs outside of the NPDES permit program.

And the end: 

The EPA is considering modifying or clarifying existing EPA policy and guidance on water quality trading to remove unnecessary barriers and better support market-based mechanisms, including water quality trading, consistent with the 2019 Memorandum. The EPA is requesting comment from states, tribes, stakeholders and other members of the public on all aspects of this notice. In particular, the Agency is requesting comment on:

• The proposed approaches described in Section III, including preferences between the approaches and the recommended mechanisms to implement those approaches;
• Other policy ideas or enhancements that could help promote or facilitate market-based programs to improve water quality; and
• Other aspects of the 2003 Policy and the 2019 Memorandum (including potential conflicting or ambiguous policy advice) that may benefit from additional policy or clarification from the EPA.

 

Cathy Kling: Polluting Farmers Should Pay

The subtitle is "Fertilizer runoff is making us sick. States can step in to regulate farmers." It's interesting that we're hoping states, not the federal government, will do the dirty work of telling farmers that they are making people sick. 

Here is the end of the article: 

Differential treatment of agricultural polluters cannot continue. Requiring polluters to pay has been the backbone of substantial and persistent water quality gains in other sectors. Yes, such measures will raise the cost of meat, dairy and grain products, they will result in lost exports (though fewer than in our current trade war), and they will affect some farmers’ bottom lines. But without them, costs will continue to fall on families returning from a day at the beach with stomach aches, on households whose members unknowingly drink contaminated water, on pet owners whose animals suffer the effects of toxic water and on consumers who must pay for bottled drinking water.

Voluntary adoption is a flawed policy. To achieve swimmable and fishable water for all Americans, we must go beyond it.

This is the basic message from the theory of the negative externality that is ((I hope) covered in every sophomore level principles of micro course ever taught. One way to make farmers pay is a pollution tax and another is water quality trading (cap-and-trade). Farms have been involved with water quality trading for a long time as a low cost alternative to point source dischargers. For example, a regulated factory would be encouraged to purchase a pollution permit from a farmer who reduces pollution in lower cost ways. All it would take to expand this sort of program would be to cap nonpoint source pollution (i.e., agriculture).

I've finally hit the Journal of Hydrology!

Here is the propaganda from App State: "Respondents willing to pay for stormwater management and reduce negative effects from runoff"!

Using the Boone Creek watershed that runs through Appalachian State University’s campus as a laboratory, an interdisciplinary research team at Appalachian has been studying impacts from stormwater runoff and how to manage that runoff.

“What our research shows is that stormwater runoff causes high temperatures and high salt levels in Boone Creek,” said Dr. William “Bill” Anderson, professor in and chair of Appalachian’s Department of the Geological and Environmental Sciences.

In an article recently published in the Journal of Hydrology, a team of seven faculty researchers and two Appalachian students presented results from a model assessing how effective various stormwater management measures may be for reducing high temperatures and salt levels in the Boone Creek watershed. ...

In addition to assessing how to reduce runoff, the team has conducted surveys throughout the Appalachian region to learn more about public perceptions of stormwater. Funding for this survey work was provided by the Research Institute for Environment, Energy and Economics (RIEEE) at Appalachian.

“We found that people are somewhat concerned about runoff, generally, as a water quality issue,” said research team member Dr. Tanga Mohr, professor in Appalachian’s Department of Economics. “Those people who were concerned, did report a willingness to install stormwater management technologies on their property,” she added. ...

In the latest survey, the research team asked respondents if they would vote for a referendum to charge a one-time tax ranging from $28–$329 to manage stormwater and lower salt levels in local waterways. Preliminary results reveal that a majority would vote in favor of such a tax, even at the higher levels of $226–$329.

Additionally, the survey results revealed the respondents’ willingness to pay such a tax is influenced by the amount of the tax coupled with how effective the management measures would be. For example, 82% of respondents reported they would pay $28 to reduce salt levels by 10%, and 71% of respondents indicated they would pay $122 to lower salt levels by 50%.

And yes, we found plausible scope effects. However, we didn't initially. My mistake, I distanced the information about scope (and the tax amount) from the referendum question in the survey (let's call that one a pretest [a rookie mistake from a 30+ year veteran). In a revised survey we tightened everything up and the willingness to pay model looks good. It makes one wonder how many of those papers that don't find scope effects could be improved with a redesigned survey. 

I'll be looking to hit the conference circuit with these results in 2020. Or ... invite me for a seminar!

Ohio waterways are 'distressed.' Economists can help.

Today, Ohio Governor John Kasich will issue an executive order asking the Ohio Soil and Water Conservation Commission to declare eight Ohio waterways 'distressed' due to high phosphorous levels (phosphorous is one of the primary ingredients in commercial fertilizer): 

Frustrated by lawmakers’ refusal to consider a bill to get tougher on sources of agricultural pollution feeding Lake Erie’s chronic toxic algae problem, Gov. John Kasich on Wednesday took matters into his own hands with an executive order.

“This is just requiring farmers to figure out a way to manage their land in a more effective and environmentally friendly way,” the Republican governor said. “I believe that farmers want to do that.”

Under the order, his administration will ask the Ohio Soil and Water Conservation Commission at its July 19 meeting to designate eight watersheds or portions of watersheds with high phosphorous levels within the Maumee River Basin as “distressed.”

That would trigger the writing of rules affecting all agricultural nutrient sources, including such things as storage, handling, and application of manure; erosion and sediment control from the land; and other agricultural practices. Civil penalties could apply for violations.

Phosphorous loadings into the Maumee river watershed are the primary cause of Harmful Algal Blooms (HABs) in the Western Lake Erie Basin.  HABs cause a variety of health and economic losses including contaminated drinking water, reduced recreational activities and decreases in local housing values.  Kasich's Executive Order, followed by the 'distressed' designation will broaden the set of tools available to policy makers to address the HAB issue in Ohio.  As part of a college-wide effort to document and consolidate Ohio State's research and outreach efforts in this area, a group of environmental and agricultural economists were asked to draft a section of a report on the Economics of Nutrient Reductions to Control Harmful Algal Blooms.  While the full report isn't quite ready for public consumption, I can highlight here a few of the main points from the economics section (really these are just the opening sentences to each paragraph):

• Numerous policies have been recommended to reduce agricultural nutrient emissions, ranging from purely voluntary efforts to strict regulations. 
• While purely voluntary programs may struggle to achieve widespread application of conservation practices, or even nutrient reduction, society has developed large-scale subsidy programs to encourage these practices through the Conservation Title of the Federal Farm Bill. 
• Regulatory programs are at the opposite end of the spectrum from voluntary subsidy programs. 
• There have been [few] efforts in Ohio to use market mechanisms to reduce agricultural nutrient emissions.
• Market mechanisms use economic incentives to encourage behavioral shifts among economic actors, such as farmers.  Market mechanisms include policy instruments like pollution taxes and tradable pollution permits.  Pollution taxes work by raising prices for polluting inputs or outputs, thus encouraging farmers to use or emit less of the input or output. Tradable pollution permits impose limits on emissions but then allow trading among the regulated sources to reduce the costs of meeting the targeted aggregate abatement level.

There's a lot more in the draft section about the types of ongoing research environmental economists are undertaking to estimate the benefits and costs of reducing HABs, and the types of market-based policies that can achieve the necessary reductions in phosphorous loadings.  But, the upshot is this: 

• Voluntary programs to reduce phosphorous loadings have been unsuccessful in reducing phosphorous loading to optimal levels. 
• Command-and-control type regulatory programs (everyone must do A, then B) may work, but are very costly to farmers and society. 
• Market-based mechanisms, like taxes, subsidies, and tradable emissions programs, designed correctly, can achieve optimal nutrient reductions AT A MUCH LOWER COST.

There's no silver bullet to solving this problem.  Hopefully, working together, we can solve the problem as painlessly as possible. Any solution is going to cost someone something, but not solving the problem will cost a lot more.

Daily Demand and Supply: Who else ya' gonna call when you have a bourbon-related supply decrease paired with a negative environmental side-effect? We'll be waiting by the phone.

I'm not sure how I missed the original story, but I'm surprised John and I weren't the first call when this happened:

Whiskey barrels were piled in a mountainous heap Wednesday after the rest of a whiskey storage warehouse collapsed in Kentucky, nearly two weeks after part of the decades-old structure came crashing down.

The remainder of the massive structure collapsed at the Barton 1792 Distillery in Bardstown, Nelson County Emergency Management spokesman Milt Spalding said. No injuries were reported in either collapse, he said.

"It is a mountain of bourbon barrels," he said Wednesday.

Environmental and wildlife officials were on the scene to determine if any whiskey spilled into a nearby waterway, he said. The distillery owner Sazerac, a Louisiana-based spirits company, already was facing a state fine stemming from the initial collapse.

 

At What Cost? Legislators come up with solutions to Harmful Algal Blooms. Environmental Economists come up with cheaper solutions.

The Legislature of the State of Ohio is currently considering legislation to reduce Phosphorous loadings into Lake Erie by 40%.  This is a good thing, as reducing Phosphorous going into Lake Erie will reduce the incidence and impact of Harmful Algal Blooms in the Western Lake Erie Basin.  

The proposed legislation establishes a Clean Lake 2020 plan that includes:

A significant new Clean Lake Capital Fund that may appropriate up to $100 million per year for five years for both Lake Erie algae reduction, and agricultural best practices.  Funding may include establishing facilities to improve manure application processes, projects to reduce open lake disposal of dredged materials, funds to local governments for water quality-based green infrastructure, water management projects to help reduce nutrient and sediment runoff impacting the lake and other strategies.

A new Soil and Water Support Fund, with some of the funding provided directly to soil and water conservation districts to assist farmers in soil testing, nutrient management plans, installing edge of field drainage devices, encouraging inserting of nutrients (subsurface placement), and agreed to conservation methods that may include riparian buffers, filter strips and cover crops.

To the casual observer, this all looks good.  The proposed bill has widespread support among agricultural groups, and local and state authorities. As one of the bill's sponsors notes:

“These are not brand new ideas, just a greater sense of urgency to implement them,” Arndt said.  “There appears to be widespread agreement with state officials, environmental and agriculture groups, tourism advocates and business leaders that many of these strategies will make a big difference.”

And he is right, these strategies could make a big difference. 

But as economists we are trained to ask, 'At what cost?'