Saturday, April 27, 2013

How much is a caribou worth?

One of the students in class this semester included this gem in his paper. In case you didn't know the true value of a caribou, it's right here:

Sums it all up, doesn't it? :)

...from Ben Abdallah, S., & Lasserre, P. (2012). A Real Option Approach to the Protection of a Habitat Dependent Endangered Species.Resource And Energy Economics, 34(3), 295-318.

Thursday, April 25, 2013

Futurists' projections part II

The New York Times is chiming in with a whole section on Energy today. One of the articles is about predictions, and there are some fun ones in there. The first is that the US might become an energy exporter by 2030. Think about that for a minute: how wonderful the loss of power and influence of nutballs like Saddam Hussein and Hugo Chavez who've done crazy things on the world stage. Unfortunately it's not like petroleum suppliers will no longer matter- they will still be rich and successful and depended on by many, just not as extremely influential as they are now. Also, non-hydro renewable energy will account for over 30% of growth in overall power generation. That's something to look forward to!

Some of the less bright sides are in trying to figure out how to bring power to developing countries like China and India. This blog has recently discussed pollution in China, and though efforts are underway there to wean themselves from coal, the alternatives are costly. The government there is investing heavily in alternatives but who knows what will turn out to be the best new thing? Markets do a better job with that than governments, but energy markets currently don't do a good job of taking into account all the relevant costs, so government has a role to play.

All in all, energy in the US has a bright future! Yuk yuk yuk.

Wednesday, April 24, 2013

Peak oil not a worry, but don't worry: you can still worry

Interesting article on about an analyst predicting "peak fossil fuel use" could come as soon as 2030. The piece starts off talking about how the catastrophic end of oil access isn't likely to come soon (as some members of my class fear) but it also notes that 80% of such fuels must remain in the ground if we are to avoid a climate-based disaster.

Fortunately other types of energy are gaining steam, if you will. By 2030, the analyst predicts that 73% of investments in energy will be investments in renewable energy. That's good news.

Will it be too little, too late? Tune in 20 years from now for the exciting conclusion.

Monday, April 22, 2013

Maryland's "Rain Tax"

            Starting on July 1st, 2013, ten Maryland counties will begin collecting a so-called “rain-tax” from its residents and businesses. Officially, the tax is called a “stormwater remediation fee” and will be assessed based on the amount of impervious surfaces, such as roofs, driveways, and parking lots, that a parcel of land contains. The rain tax in Maryland is being implemented as a means to fulfill the requirement, set by the EPA in 2010, to reduce stormwater runoff to the Chesapeake Bay such that nitrogen and phosphorus levels fall by 22% and 15% respectively by 2025. The estimated cost for Maryland to meet these requirements is $14.8 billion. This particular effort to reduce nutrients to the Chesapeake Bay is not federally funded, and, therefore the state (i.e. thetaxpayers) must pay the cost.
            The counties applying the tax include Anne Arundel, Baltimore, Carroll, Charles, Fredrick, Harford, Howard, Montgomery, and Prince George’s counties, as well as Baltimore City. The fees will be assessed on the county level and can consist of flat rate fees or graduated rate fees determined by impervious surface cover, via analysis of satellite imagery. For example, under Baltimore County’s plan, single-family homes would pay $39 annually, townhomes would pay $21, and condos would pay $32. Under Baltimore City’s plan, single-family residentially zoned properties would pay a flat annual rate of $48, $72, or $144 based on the level of imperviousness and commercial and industrial zoned properties would pay $72 per 1,050 square feet of impervious area. These fees may be reduced based on a set of guidelines and requirements, also set by the counties, and would largely apply to non-profit organizations. It is also noted that government-owned property will be exempt from the tax.  Monies generated by this tax will go towards stormwater management costs, stream and wetland restoration projects, and community education and outreach.
            I like the idea of reducing nutrient pollution in the Chesapeake Bay and realize that to do this, requires substantial amounts of money. According to the Chesapeake Bay Foundation, the largest source of nitrogen and phosphorous pollution to the Chesapeake Bay comes from the agriculture sector at about 38%; sewage and septic combine to account for roughly 23%, air pollution accounts for 21%, and stormwater accounts for 16%. However, I feel that the amount of ‘pollution costs’ that these different sectors pay might be disproportionate to their level of accountability. For example, Maryland currently charges $30 annually for sewer pollution (which accounts for 19% if separated from septic) yet pollution in stormwater off of (not from) impervious surfaces can cost a homeowner upwards of $100 annually? Additionally, I know that the agriculture sector must comply with nutrient management regulations but can receive government subsidies generated from state general obligation bonds (mostly property taxes), up to 87.5 % of the cost to do so.
--April Dunn

More on Carbon Trading Failures

Today's NYT has an article on the collapsing market for carbon allowances. Since it's become close to free again to release carbon into the environment, people are doing so: Britain used 30% more coal last year.

Carbon markets put a price on emissions, but like any market they are somewhat artificial, including some costs and excluding others. In this case, too much provision was made for things like continuing steel production (not happening) and for coal burning in Poland (which was needed to get them on board, but which has driven the price down precipitously).

The market can still work if the supply is tightened, but the prospect of tightening supply is not an appealing one in tough economic times. We'll see if the time for the idea comes soon, or if it has come and gone.

Friday, April 19, 2013

A Problem with Assumptions

Just saw this working paper by some top folks on pricing negative pollution externalities. They find that as we might expect, the price of nearby housing declines when a new toxic waste-generating plant opens. However, the effects on housing values are only seen in the area nearest the plant, but the effect of the environmental damage can be seen on infants up to a mile away.

Do you know everything that's within a mile of your home?

End of the Emissions Trading System

On April 16, 2013, the European Parliament voted against the environmental policy of emissionstrading. The Emissions Trading System works as a ‘cap and trade’ principle which allows producers to emit a set level of carbon and other greenhouse gases from their factories and power plants. Companies all over the world buy and trade emission allowances to eventually cut down on high-carbon technologies. The recent problems with this system is that 16 billion tons of carbon are allowed to emitted between 2013 and 2020; recession caused a decrease in demand for trading permits; and too many allowances have been granted launching an excess of carbon supply and fallen prices. A proposal from the European Commission called “backloading” would take 900m tons of carbon allowances off the current market to help strengthen the demand for permits. This plan and the trading system as a whole are still in debate. It’s not that Parliament is against the concept of the ETS. European companies just don’t want higher carbon prices imposed on them. But voting against the ETS will make it harder to set up a world carbon price. In Europe, once carbon goes cheap, coal would look more attractive to use than natural gas, making the price of pollution greater. The vote does not end all debate but some environmentalist fear that European climate policy will focus more on the costs than the benefits. (Economist)
     I do believe that the Emissions Trading System would be a good idea but policy makers have to prioritize and vote on something that offsets a cost but brings just an equal benefit. Greenhouse gases are the cause of global warming and yes, a price or tax should be imposed. Even though emissions are “bad” to the environment, we also have to think about how carbon use helps fuel the economy through manufacturers. I would lean towards the trading system just because the use of carbon is monitored whereas a tax fluctuates with variable unregulated use. 
--Ciara Blake

Wednesday, April 17, 2013

Fracking for... oil?

      The first article that I read about was titled “Shale Oil find fuels boom in U.S. business”. This article was about a major oil find in the Eagle Ford Shale deposits, about 60 miles up the road from Corpus Christi, that had been storing oil for millions of years in a underground bedrock. This oil became available at a cheap price due to advancements in technology to extract oil from the shale, by fracking. Along with oil, a plentiful amount of natural gas was also found, which only makes things better for Eagle Ford. According to John Larue, executive director of the Port of Corpus Christi, this find will help in his aggressive plans to expand. He expects the local economy to double or triple in a few years.
      This oil find is seen as a “boom in US business” because we are able to acquire this oil safely and efficiently. US businesses will flock to this area, in hope of producing their goods without outsourcing and for a cheap price. This oil find will also bring in international businesses within the US, because the energy found is cheap. There was also a good amount of natural gas found, which attracts businesses that use gas to power their factories. Companies from Austria and China are expected to pay $700 million and $1billion, respectively, to place factories in an area where they are powered by the Eagle Ford Gas. This will also lead to about 350,000 jobs that pay $60k to $80k a year, with more jobs coming from construction and servicing. 
      The second article I read was not as intensive as the first, but did elaborate on funding for the development of oil and gas assets in the area and the amount of oil that will hopefully be retrieved. This article also discussed how there will be 20 different well locations for each reservoir. Each well will retrieve 120,000 to 150,000 [barrels].
      I believe that the only issue with this oil find is that there is no way of efficiently transporting the oil to businesses located along the east coast, such as Philadelphia and Pittsburgh. Due to federal law, it prevents the gas being transported, unless the oil is carried in US made vessels. These cities on the East coast needed this oil badly, but had no way of getting it, which ultimately lead to the closing of those factories. Only small barges have been able to ship the oil, which is very inefficient. Even though the transportation costs are high through these barges, it is still cheaper for these companies to acquire from Eagle Ford than to import crude oil.  Ideas of extensively dredging the Mississippi River and Intercoastal Waterway have been brought to light, but the federal government is unwilling to authorize this.
      I have an indifferent opinion on the situation. Overall, I think that it is good that we have found oil efficiently and that we are able to do it safely. I think it is also a good thing for our economy because it will allow us to minimize outsourcing and even bring foreign companies into the US to make profit. What I am indifferent about is the fact that there is no efficient way to transport the oil to parts of the country such as Philadelphia. The only way that we can do so is by intensive dredging, which is harmful to the environment, which leads to other issues. Overall, I do believe that this find is good for the economy, but without being able to transport efficiently, I am not sure how major of an impact this really can have for our whole country.
--Jonathan Ma

Crab pickers

First, see a short previous post on the subject....

A 2010 Washington Post article gives conflicting accounts of conditions faced by the "girls" (aged 20-60ish?) who come to Maryland to pick crabs.

A 2012 report by an advocacy group describes poor conditions in homes, strange deductions from pay, heavy dependency on the hiring company, little training, and frequent layoffs without pay. They don't want to stop the program but have a set of recommendations that include enforcement of the minimum wage, health & safety training and outreach, education about rights as tenants, limit recruitment fees (which are illegal but widespread in Mexico, where many are hired), and allow women to change employers if they choose.

There's information here about a movie on the workers.

iPhone factory workers

Amy sent me the below (first) article, rendering this subject non-quizzable, but it's pretty interesting.

According to Cult of Mac, "High-tech factory work represents an opportunity in many cases to sacrifice a few years to save money for a brighter future. Young Foxconn factory employees live in miserable and cramped conditions. But those conditions enable workers to squirrel away money, which is why they’re there in the first place. They hope to come out of it as young adults with thousands saved for a down payment on a house, and enough money to get married and start a better life than their parents had. It’s a brutally tough life, not just during the factory years, but before, too. Poverty is harsh, and factory work is a way out. That so many young people are willing to work so hard and so skillfully is what makes China the world’s factory. As bad as those factory conditions are, the alternative is no job and no future. In fact, these are the prospects for most of the world’s poor, who live in countries that do not have the economy and the workforce to attract iPhone-like factories. It’s also important to note that nothing in China is static. The biggest problem Chinese factory managers now have is finding enough workers. In order to attract workers, they have to increasingly raise wages and improve conditions. Very soon, the labor shortage in China will make the country less attractive as a location for new factories, and more factories will be built elsewhere in hungrier markets. China will become more like the United States, with more workers doing higher-paid jobs and the economy being more about consumption than production."

I did some more searching and came up with a few more reports centering around a reported clash between policy and angry workers that happened in fall of 2012. If "Cult of Mac" seems perhaps a less than objective source, some of these other sources are likely sensationalistic in preferences.

This article says that workers are denied vacations and are constantly under tremendous pressure.

This article calls conditions "hellish," saying that workers have long shifts with few breaks (sometimes no meal break during a 14 hour shift) and must meet extremely exacting standards. The company denies that conditions are so poor, contending that breaks (including meal breaks) are standard.

Finally, the New York Daily News sums up the factories this way: "Foxconn, with a staggering 1.2 million workers, has been accused of sweatshop conditions, paltry pay, high suicide rates and forced labor to meet production demands."

Monday, April 15, 2013

Tax Credits for Wind Power

Quick Background
As part of the fiscal cliff bill, Congress renewed the production tax credit (P.T.C.) this past January. It “is [currently] worth 2.2 cents per kilowatt-hour of energy produced by new wind installations [and will last] for their first 10 years of operation” (Kaufmann). The origin of the P.T.C. is derived from the Energy Policy Act of 1992; which offered “tax incentives and marketing strategies for renewable energy technologies in an effort to encourage commercial sales and production” (Wiki).  Under this act the P.T.C. was originally 1.5 cents per kilowatt-hour, but has since been adjusted annually for inflation. Due to the uncertainty that the tax credit would continue towards the end of last year, the wind industry took a turn for the worst and left many developers idle and several factories shutdown.  According to the American Wind Energy Association “turbine-parts manufacturing plants laid off thousands of workers in recent months, and developers put new projects on hold, threatening another 37,000 jobs” (Kaufmann). 
Article Summary
            Diane Cardwell’s article in the New York Times Renewed Tax Credit Buoys Wind-Power Projects explains how the production tax credit has impacted the wind industry in the past and how the recent extension will affect wind-energy producing firms. (more after the jump)

Friday, April 12, 2013

Elasticity of demand

A fascinating article in today's Wall Street Journal was pointed out to me by Prof. Rhoads. It's posted under "blog readings" in Blackboard.

We think of gasoline as an inelastically demanded good, meaning that we will consume about the same amount regardless of the price. In Venezuela, though, where they produce a lot of oil, gasoline is cheap because the government keeps prices low. One taxi driver pays more for a small cup of coffee than it costs to fill his tank: a gallon goes for between 2-6 cents. Since gas is so cheap, they use a lot more than do neighboring countries: about 5-6 times as much per person. If Venezuela were to sell that gasoline abroad, they could have instead about $11 billion per year, about three times as much money as they spent on health care last year and twice as much as they spent on education. Can you say, "Opportunity costs"?!

While that's good for the poor, who get access to something they probably couldn't afford, it's even better news for the middle and upper classes, who are more likely to have cars and much more likely to have bigger cars. It will be difficult to wean the country off of that cheap gas some day: when they tried once a few years ago, the price of riding the bus increased so much that there was a violent backlash, and hundreds of people died when the military fired on protesting civilians. Yet another example of subsidies causing huge externalities....

Wednesday, April 10, 2013

Rain forest economics

The rainforests of the world are now down about 20% from what they originally were. The majority of the problem is due to croplands, cattle ranches and logging. The human population is expanding and is driving the demand for more land dedicated to food production. The forests are home to millions of species of plants and animals and with more loss to the forest then the more species will be lost. Studies are now suggesting that deforestation is slowing down through various means of effort, however deforestation still continues and it seems to be centered on illegal logging.
Many laws have been put in place to stop logging or at least limit it. This has caused numerous mills to go bankrupt and thousands have lost their jobs. As a result, some companies continued logging but it was more off of the books. Bribing also became a serious issue because it showed that companies that were either caught overharvesting or logging when they were supposed to be closed and getting away with it. If the companies were able to log, they could then sell the timber overseas without problems because no laws prevented it. In 2008, the Lacey Act was amended to make selling illegal timber a crime. Many countries have been fighting logging at every turn and the data is showing a decline. However, the forests are still disappearing.
           I think this is a good thing to happen for the forests and all of the plants and animals living in them, however, it is costing a lot of people their jobs and money. It is no surprise to see companies start illegally logging and bribing out of desperation. The bribing is one way of getting around the laws and it shows that even stricter laws are necessary and more effective overseers are required. With the rise in the human population continuing it will be difficult to stop deforestation completely. 

--Andy Feild

Arkansas spill looking bad

Non-quizzable contribution from Kellen Lamp:

Things are looking bad in Arkansas, where processed tar sands have broken out of a pipeline and inflicted major damage on a small community. A short video shows the oil flooding out of the ground and down the street. Here's Stephen Colbert's take 1 and take 2.

Local food

This is old news, but a nice piece by Steve Sexton on Freakonomics address the problems with local food. Again, it's not that it's wrong to grow your own food or eat what's produced by the farm down the street: it's the locavore's insistence on consuming local as much as possible that can get to be a problem. Maybe you disagree, but at least read the article to see what this guy's thinking.

Tuesday, April 9, 2013

Perspectives on the Proposed Bottle Bill in Maryland

Bottles litter the streets, clog stormwater drains, and pile up in the Inner Harbor and the Bay at large. Baltimore alone spends roughly $10million a year to clean up litter and implement control measures. Overall, Maryland is estimated to recycle only 22 percent of about 4 billion beverage containers sold annually. This compares poorly to the national recycling rate of 35 percent. Maryland House Delegate Maggie McIntosh has sponsored a bill titled “Recycle for Real” which would attempt to remedy the situation by instituting a 5 cent refundable deposit on drink containers. In other states that have a 5 cent refundable deposit, recycling rates go up to around 75 percent.

Strong opposition to the legislation comes from beverage distributors and merchants, who claim that it would jeopardize sales and employment. Since interstate competition would keep beverage prices from rising, the consumer would not incur the cost of the deposit, rather the cost would be shifted to beverage companies. Other arguments against the proposed bill claim that the bill will take away from recycling programs run by municipalities who offer single-stream curbsidepick-up and drop-off locations.

Proponents of the bottle bill argue that it would “reduce litter, create jobs, and that its costs are manageable” since the unclaimed deposits would be returned to redemption centers in the form of 3 cent handling fees.

If recycling rates were to increase as dramatically as in other states, the environmental benefits seem clear. However, it is unclear how the shift in recycling patterns would affect existing recycling programs. Would recycling streams from curbside pickups and drop-off centers simply be funneled toward bottle deposit returns? Or would the refundable deposit attract a new stream of recycling, perhaps from lower income earners for whom the refund would be worth the effort to recycle? Ironically, the deposit program operates best with a margin of unreturned bottles, since this unclaimed portion generates revenue to fund the program. Perhaps the combination of recycling programs would allow some of the bottle deposits to be refunded to those willing to put forth the effort of reclamation, while those who would rather forgo the refund and the effort could take advantage of the more convenient single-stream curbside pickup programs.

--Daniela Beall

**For a more detailed analysis of the impacts:
University of Maryland Environmental Finance Center. (2011, Dec 15). 2011 Impact analysis of a beverage container deposit program in Maryland. Retrieved from

Thursday, April 4, 2013

Tangier Island

Tangier Island, Virginia is home to a community of about 470 people. The close-knit community lives a simple life but the island faces the problem of major erosion caused by rising sea level. The effects of storms are becoming more severe as the sea level increases which is causing the entrance to the Western side of Tangier Island to widen. The widening exposes the island to bigger waves. The community is willing to try anything to slow the loss of their home land. They are currently implementing experimental buoys previously tested in labs of the U. S. Naval Academy. The innovative buoys have projecting fins and are larger than a person. The goal of the buoys is to reduce the wave's energy by slowing them down. Also underway are plans to build stone jetties beside Tangier Island. The state and federal government plan to spend $4.1 million on the jetty. Tangier Island is just one of many places under threat. As the pace of sea level rising accelerates, concern for future generations increases. According to studies, reducing carbon dioxide emissions will help slow the rate at which it rises but not stop it completely. If emissions continue at the rate they are going, sea level will increase 2 to 5 feet by 2100. If emissions are greatly cut, sea level is estimated to still increase 1 to 3.5 feet by 2100. Regardless, people are going to have to adapt to the increase in sea level. Cutting emissions will decrease the acceleration and buy time for adaptations for future generations. 
            As I was reading the articles I thought to myself, are there enough benefits to support continued costs of saving Tangier Island? There are about 500 people that could be saved by the installation of buoys and the jetty but these are not permanent solutions. Innovation like the jetty for instance, may not be effective once the sea level breaches a certain point. New costly innovations will need to be implemented in the future. The root of the problem is carbon emissions. I think the government should invest money into this which will not only help Tangier Island but many other people at risk from sea level increase.

Discussion Question: Do you think the government should spend money on innovations to combat the impacts of increasing water levels or should the government focus money on decreasing emissions?
--Kim Maier

Wednesday, April 3, 2013

Market affects CSAs

Non-quizzable contribution from Kim:

While doing some research about urban farming in Baltimore City for another class I stumbled across some information relevant to topics we've learning in class.

"We remain committed to providing wholesome, local meat to our community and will do all in our power to keeps costs low and affordable. Feeder pigs have almost doubled in cost from 3 years ago. Pig feed, which is primarily corn and soybeans, has increased again. For those who are interested, corn was $2.50/bushel just 4-5 years ago. Because of corn use in ethanol and the droughts last year and this year, corn has shot to $9/bushel and is expected to go into the teens by the end of 2012.  While our beef and lamb is grass fed, the price of cattle and sheep is set by the market, which in the US is based primarily on grain fed animals.  Further price pressure comes from the supply side. The US beef herd is at its lowest level since 1957, about half of what it was just a few years ago. "
--Kim Maier

Tuesday, April 2, 2013

Air pollution kills 1,000,000 Chinese people a year

Yeah, that's bad.

Climate Change graphic

Allison Lee put together this infographic on Climate Change (after the break):

More on the Arkansas Spill

A non-quizzable contribution from Andy Feild:

I thought this would be a good add on to the Keystone pipeline. It is not connected to Keystone, but it has the related argument.
Thanks Andy
Pipeline leak brings crude reality