Posts Tagged ‘environmental economics’

David Roberts at Grist has a post about underground environmentalism in East Germany. The whole thing is interesting, but his conclusion is the really important part:

First, what happened to industry under GDR is what happens when decisions are controlled by a small group of people, usually people who own — or have financial or political ties to those who own — the means of production. The focus inevitably turns to rapid growth, gigantism, pollution, and profits. The poor and defenseless (a large class in the GDR) have no voice and so they suffer while a small group benefits. Those who profit always claim to be acting in the public interest, but given a real choice, the public puts a far higher premium on health and safety.

Now, here in America we don’t live under a communist dictatorship. So that’s good. But if there’s one sector of our economy that comes closest to socialism, it’s energy. Decisions are made by a small group of owners, regulators, and politicians; there’s nothing approximating a free market and very little in the way of public participation.

Sure enough, the results tend toward the big, dirty, and hostile to regulatory constraints. This kind of centralization and gigantism has become so familiar to us in energy that we scarcely notice it. We have become accustomed to thinking of our future in terms of ever-rising demand and ever-larger power plants (despite the recent failures of that approach).

But when communities own their own means of energy production, when they live next to it, they are willing to pay extra and consume more conscientiously in exchange for cleanliness. Something new is happening in Germany now: Of all the country’s renewable energy, just 4 percent is owned by the four big utilities. The remaining 96 percent is owned by private households, small municipal utilities, rural and energy cooperatives, and people’s wind parks.

Bringing the production of energy closer to its consumption is one way to rationalize the externalities unseen in everyday life. This idea can be applied to many spheres, especially labor. The only weakness is that communities need to be well-organized and somewhat well-resourced to take the first step in owning their energy production. This financial reality necessitates policies from the top that also encourage social costs to be recognized personally.

Of course, when one looks to policy, there is a wide debate. For example, a recent NBER paper received some attention. The authors use common integrated assessment models, and find a central value of $21 per ton of CO2 emissions. Another paper, by two heterodox economists, criticize the IAMs used in this paper, because of heavy discounting and aggressive assumptions about how damages fall across countries. Indeed, they cite a UK study yielding $83 as the central value, 4x as high as the more mainstream value.

I’m not going to belabor the nuances of mainstream versus heterodox approaches to valuing carbon; the clear takeaway is that assumptions vary widely and matter greatly.

In absence of the consensus and political will needed to implement policies reflecting the true social cost of carbon (on which I tend to side with Ackerman and Stanton), one needs local action like that described by Roberts. Energy purchasing cooperatives are one example of ordinary citizens taking more ownership over their consumption. However, localizing and owning the production of energy, which is easier with renewables like solar and wind, is a definite pathway to sustainability. Local alternatives can also pave the way for broader acceptance of the true costs of dirty energy. Ultimately, we will need the local and global to align for a sustainable energy future.

Happy Earth Day!

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I’ve written before about the movement to reduce meat consumption as a way of reducing greenhouse gas emissions. Reading the UN’s 2008 livestock report was what prompted me to drastically reduce my meat intake (I still have chicken 2-3 times a week, the occasional deli meat sandwich, and beef once or twice a month). Anyways, I was surprised when I saw this article by Bob Holmes in the New Scientist, which, by the headline, argues that cutting society’s meat intake may not be so green after all.

A meat-free world, then, would be greener in many ways: less cropland, more forest and, presumably, more biodiversity; lower greenhouse gas emissions; less agricultural pollution; less demand for fresh water – the list goes on…

But wait. If everyone opted to give up meat there would be significant costs, too. It is true that most livestock today are fed grain that people could otherwise eat, but it doesn’t have to be so. For most of human history, cattle, sheep and goats grazed on land that wasn’t suitable for ploughing, and in doing so they converted inedible grass into edible meat and milk…

Fed in this way, livestock represent a net gain of calories and protein in the human diet while dealing with some of the estimated 30 to 50 per cent of food that goes to waste…

Another downside would be the disappearance of animal by-products.

This case seems flimsy at best, and doesn’t convincingly show the counter-factual of emissions/unit of nutrition under the less-meat scenario. Holmes also confuses things by making statements like,

There is another alternative, though: treat livestock as part of the ecosystem. Garnett envisions returning animals to their original role as waste-disposal units, eating food leftovers and grazing on land not suitable for crops. “In that context,” she says, “methane emissions per animal will be higher, but overall emissions would be less because there would be fewer animals.”

And then, towards the conclusion of the article, Holmes says,

Given the deforestation, soil erosion, water pollution and greenhouse gas emissions that will result if worldwide meat production continues to rise, some people are already choosing to eat less meat. And the message is definitely less, not none. For best results, meat should be medium-rare.

Thus, most of the article makes the case that eating less meat is greener. Statements that temper this sentiment are equivocal at best. Holmes also omits the fact that grain-fed cattle reduce world grain supply’s, as it takes 10 pounds of grain to make one pound of meat.

And of course, the headline is pretty dishonest- “why eating green won’t save the planet.” I’m going to stick to my new diet, thanks, and hope that others join me, and that the when we someday get a carbon price, it includes the environmental costs of meat. In the meantime, scientists should study the general equilibirum effects of a broad reduction in meat consumption on greenhouse gases, so we don’t have confused half-statements like this article.

Update: I meant to include “Not” in the title of this post.

Update 2: My brain must be a friday mush. I changed the title back.

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Via Mark Thoma, tar sands oil is another example of resources that should perhaps be left in the ground- especially for wealthy countries like the US and Canada, who are far along the Kuznets curve, but also for developing countries.

News reports about chemical tests are never as dramatic as the sight of oil-drenched birds and fish.  Maybe that’s why a study released in 2007 did not prompt a dramatic response from environmentalists in the lower 48.  In that year, an ecologist with Treeline Environmental Research issued a report finding high levels of carcinogens and toxic substances in fish, water, and sediment downstream from the tar sands fields.  The New York Times quoted a local health official as saying, “For years the community has believed that there’s lots of cancer.  When they drank from the water, there was an oily scum around the cup.  We now know that there is something wrong.”  At the time, an Alaskan research scientist commented, “This could actually be worse, in some respects, than the Exxon Valdez.”

I’ll probably be posting more rejoinders to my review of Collier’s book in the future. This is just another reminder (along with mountain top removal, for example) that it’s not just romantic environmentalists who want to leave depletable resources in the ground.

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I’ve been chewing on this review for a while, but I think I need to just post the darn thing, so here goes (and as a disclaimer, I was sent a review copy of this book, although I was not directly solicited or charged to write one). As an added disclaimer, well, look at the time stamp on the post- I tried my best to weave together some disparate threads and half-thoughts…the principle of charity is my friend on this one.

Several weeks ago, I wrote about the introduction to Paul Collier’s new book, Plundered Planet. The chapter touched on something that is receiving more focus in the environmental economics discussion, the notion that ethics and value judgments can enter into the debate. And, of course, they must; I know that I harp on the discount rate constantly in this space, but when dealing with complex climate models, this rate is both incredibly important and wholly non-arbitrary. How we value the future is necessarily a value judgment. Other issues like cross-national equity pale in comparison to this one, and I’m glad Collier emphasizes this point. However, as I describe below, I think his book fails to move the ball forward in our understanding of environment action in some very key ways.

His entry point for talking about this critical issue is the “ethics of custody,” in which we are custodians or stewards of scarce and depletable natural resources. As a student of Catholic social tradition, which uses the language of stewardship, I really appreciate this language. It’s an all-too-rare normative statement in a discipline focused on making purportedly positive judgments. Economists, as citizens of the world, should be able to make these ethical statements, and transparently so.

Rather then spend the whole book on climate change, Collier, a development economist through and through, spends the greater part of the book discussing the tensions of governance and resource stewardship in developing countries. These issues, as you might guess, are thorny. There are so many corruptible steps in which plunder, as Collier calls it, can occur, and he readily admits that it’s highly unlikely that each of them will go as they should. Instead, Collier seeks an expansion of transparency, such that resource extraction is met with accountability in at least some stages. His involvement in initiatives to foster this transparency is laudable, but he admits they may not be a cure-all.

While his coverage of resource-use issues is thorough, he makes a key conceit when dealing with depletable resources. He seems to gloss over the externalities of extraction in favor of maximizing their long-term benefit stream. Granted, developing countries would be much less polluted if resources were extracted at a rate in keeping with Collier’s ethics, which would leave much more in the ground for future generations. Neverthless, it was at this point that I became frustrated with Collier’s repeated dismissal of “romantic environmentalists,” who supposedly have a disdain for economic growth. As it turns out, Collier can only temporarily set aside his economist hat, and he lets a one-sided notion of “development” carry the day. By ignoring things like the BP oil spill (or the decades-long pollution of the Niger Delta), it is he who seems romantic. Undoubtedly the extraction of resources involves the plunder of myriad other natural resources with less easily measured value.

What’s problematic is that Collier’s other glossings-over likely alienate those most important to the movement- it’s the “romantics” who are most likely to step up and act, and their involvement requires a holistic ethic. Decrying plunder while encouraging extraction that maximally beneficial from an economic standpoint is philosophically and practically dissonant.

Thus, it’s problematic that when Collier zooms out to issues global governance with respect to climate change, he argues that grassroots understanding of climate issues- a form of transparency, no doubt- are paramount. He eschews global frameworks, but instead hopes that citizens demand their politicians act at a national level to price carbon in an internationally consistent manner. This general mindset is apparently in keeping with his ethics of custody approach. Citizens motivated to act as custodians can and should rise up together to speak for future generations. Unfortunately, given the recent collapse of efforts in the US Senate for a relatively watered-down climate change bill, it’s hard to believe that a bottom-up movement will result in effective measures. While ever cognizant of the political economy of plunder in developing countries, Collier seems to miss the information asymmetries in the US’s political economy, in which information is distorted, corporations assert their will by way of access, and citizens are unable to really affect the process.

I have no idea if Collier is aware of the effectiveness of community organizing, but I doubt he’s referring to it when he calls for a bottom-up approach. Instead, I’m guessing that he’s hopeful a movement (better and stronger this time, we promise!) will emerge, forging a citizen’s consensus on climate change. While the process may be time consuming, I think it may be time for environmental advocates to take a step back, realize that their movement building has failed, and build an organization. What is interesting is that his ethics of custody could actually serve as a unifying framework for such an organization.

I’ve gone off the rails a bit here, but ultimately, Collier’s final chapter is a call to action, and I just found it a little lacking in substance. The meat of the book is incredibly instructive for folks who care about natural resources. The problem, though, is that Collier doesn’t seem aware of what action looks like on an issue as big as climate change. Transparency, as his initiative on mineral plunder shows, is certainly important, but so is power. It’s unsurprising, but still disappointing, that this economist fails to see that. While not directly related to his seeming misunderstanding of the romantics, it seems both oversights are cut from the same economist cloth. I appreciate Collier’s intent- understanding the normativity of these judgments is important, but at this stage in the game, it’s more essential that we know how to act.

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Douglas Rushkoff understands the bigger picture implications of how the Obama administration handles the BP oil spill. This, of course, relates to the problem of corporate personhood stemming from limited liability, and opens up space for us to think about alternative approaches to the firm in our society.

In the latest round of empty fist waving by Obama and apologetic posturing by BP, the President raised the issue that while BP has spent a few tens of millions on the cleanup effort and damages so far, the company’s annual dividend to shareholders is about $10.5 billion. The company is acting as if all its resources are being diverted to address this spill, when – financially anyway – this is clearly not the case. So as a way of changing the widespread perception that it is underspending on the crisis, BP suggested it might “suspend” – meaning pay later, not never – its quarterly dividend. A gesture of goodwill.

What a brilliant move. By suggesting they might suspend their dividend, BP initiated widespread panic about what would happen if that dividend were compromised in any real way. All of a sudden, business newspapers and cable channels begin calculating just what this means for shareholders – those people and institutions who park their money in an oil company and expect returns. How many pension funds have invested in BP? And how many retirees in England have made the oil a company a central part of their retirement portfolios, and are depending on these dividends to maintain their quality of life?

So now, instead of an transnational oil company against the American gulf fishermen, beach workers, and ocean itself, it’s the interests of presumably innocent British pensioners against American workers. We’re supposed to limit BP’s liability for wrecking our lives and our planet, because of the impact that appropriate penalties will have on those collecting dividends off the oil company’s crimes against us. This means bailing out the company by using government funds to pay for its spill.

[Photo design by J-cal76 at LogoMyWay, ht:dfr]

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According to the Guardian,

A global shift towards a vegan diet is vital to save the world from hunger, fuel poverty and the worst impacts of climate change, a UN report said today.

Recognition of the contribution of livestock to anthropogenic global warming is growing. However, this is by no means low-hanging fruit. In fact, it’s likely that the livestock contribution will only get worse:`

Ernst von Weizsaecker, an environmental scientist who co-chaired the panel, said: “Rising affluence is triggering a shift in diets towards meat and dairy products – livestock now consumes much of the world’s crops and by inference a great deal of freshwater, fertilisers and pesticides.”

Both energy and agriculture need to be “decoupled” from economic growth because environmental impacts rise roughly 80% with a doubling of income, the report found.

Achim Steiner, the UN under-secretary general and executive director of the UNEP, said: “Decoupling growth from environmental degradation is the number one challenge facing governments in a world of rising numbers of people, rising incomes, rising consumption demands and the persistent challenge of poverty alleviation.”

This message needs to get out there more. I’m not a vegetarian, but I’m trying hard to reduce my meat consumption. This is a hard sell in the US, where most of us grew up on “Beef, it’s what’s for dinner.” Beef and dairy products should be taxed just the same so consumers internalize the social costs of what they are eating. If taxing other emissions requires delaying this action on livestock, that’s fine, as long as it’s on the agenda. Again, this one will take years of attitude changing, but we can’t afford to ignore environmental degradation just because it’s inconvenient.

Besides, there are a lot of great substitutes, like TVP, which goes great in a vegetarian chili. Unfortunately, these substitutes force us to eat healthily in other ways, as they require complementary fresh vegetables and herbs, rather than merely salt and butter.

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The Niger Delta receives much less attention than it’s Mississippi counterpart. Here’s some great journalism from Guardian:

We could smell the oil long before we saw it – the stench of garage forecourts and rotting vegetation hanging thickly in the air.The farther we travelled, the more nauseous it became. Soon we were swimming in pools of light Nigerian crude, the best-quality oil in the world. One of the many hundreds of 40-year-old pipelines that crisscross the Niger delta had corroded and spewed oil for several months.

Forest and farmland were now covered in a sheen of greasy oil. Drinking wells were polluted and people were distraught. No one knew how much oil had leaked. “We lost our nets, huts and fishing pots,” said Chief Promise, village leader of Otuegwe and our guide. “This is where we fished and farmed. We have lost our forest. We told Shell of the spill within days, but they did nothing for six months.”

That was the Niger delta a few years ago, where, according to Nigerian academics, writers and environment groups, oil companies have acted with such impunity and recklessness that much of the region has been devastated by leaks.

In fact, more oil is spilled from the delta’s network of terminals, pipes, pumping stations and oil platforms every year than has been lost in the Gulf of Mexico…

Shell, which is often described as a relatively eco-friendly company, pretty much defers blame:

Last month Shell admitted to spilling 14,000 tonnes of oil in 2009. The majority, said the company, was lost through two incidents – one in which the company claims that thieves damaged a wellhead at its Odidi field and another where militants bombed the Trans Escravos pipeline.

Shell, which works in partnership with the Nigerian government in the delta, says that 98% of all its oil spills are caused by vandalism, theft or sabotage by militants and only a minimal amount by deteriorating infrastructure…

These claims are hotly disputed by communities and environmental watchdog groups. They mostly blame the companies’ vast network of rusting pipes and storage tanks, corroding pipelines, semi-derelict pumping stations and old wellheads, as well as tankers and vessels cleaning out tanks…

There is an overwhelming sense that the big oil companies act as if they are beyond the law. Bassey said: “What we conclude from the Gulf of Mexico pollution incident is that the oil companies are out of control.

“It is clear that BP has been blocking progressive legislation, both in the US and here. In Nigeria, they have been living above the law. They are now clearly a danger to the planet. The dangers of this happening again and again are high. They must be taken to the international court of justice.”

These incidents are in no way unique. Limitless extraction of valuable natural resources will continue to claim casualties until it is taxed appropriately. Unfortunately, incidents like these are the black swans of environmental economics, and are left out of the social cost of carbon.

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