Logging in a forest preserve

Textbook example of economics in The Nature Conservancy's Woodbourne preserve in Pennsylvania. The preserve was created to protect trees from logging, and yet the staff made the decision to log part of it and sell the timber. The emerald ash borer, a beetle that devastates certain tree species, was on the march and extremely likely to destroy the trees anyway. In the face of this likely doom, the decision was made to sell the trees in order to protect the hemlock, which was under attack from another pest, the wooly adelgid. With the trees sold, the preserve was able to buy pesticides. Mike Eckley, conservation forester there, put it this way:  “Given the circumstances, this was a high-quality outcome. We maximized financial return on the situation, while reducing liability to people and enabling us to better fund hemlock conservation. We weren’t giving up on ash trees so much as doing what was best for Woodbourne.”

Economics is all about making tough decisions like this one!

Impacts of the carbon tax

Another nice paper posted online recently uses micro-level data from England to look at the impact of a carbon tax. The authors find that taxed firms use less energy, but don't change their employment levels, don't lose revenue (though no doubt the cost increases mean less profit), and don't exit the industry. In other words, plant owners may take a bit of a hit, but it's not enough of a hit to force them to cut back in production in any significant way.

GMOs and the environment

Different GMO's work different ways, but one type of GMO seems to be having a very positive effect on the environment. Unlike engineered crops such as Roundup Ready varieties, which encourage extra application of the herbicide glyphosate, the Bt variety has pesticides built into the crop and thereby reduces application of chemicals. A recent study found that use of the variety in India greatly reduced the environmental impact of agriculture there.

I'm still not sure where the knee-jerk anti-GMO sentiment comes from unless it's the same anti-science bent that makes people "not believe in" other scientifically established truths like climate change. Surely we need to be careful with any new technology, but mindlessly fearing it without knowing what it does can't be good!

Saving money and the environment

Yet another time when economists and environmentalists agree! Save energy and money at the same time with energy efficiency improvements. Don't overlook them; I think that our school's Sustainability Office is on top of opportunities like this but who knows if there might be more...

Where the Domesticated Things Are

All the world's cattle, pigs, and chickens, in map form! Demand is expected to increase by about 3/4 from 2010 to 2030. There are already about 700 million chickens on the Eastern Shore: will we squeeze 3/4 more on that land, or will we dedicate more land to that industry? Neither one is a great choice for the health of the Chesapeake. I guess it's better than in North Carolina where they raise pigs!

Opportunity to put a price on carbon

We've been talking in class about how much prices matter: when something is priced too low, people will consume too much of it, which leads to waste. In many countries, fuel is subsidized, often since it's seen as a way for governments to help the poor. Of course, the poor aren't the only ones who use fuel, and there are a lot better ways to help the poor than by subsidizing fuel use. Taking away a price support is politically tricky, though: it can make you look pretty greedy if you are getting rid of a policy that is supposed to help the poor! That's why some people are encouraging that subsidies be dropped now, while oil prices are down. If it happens now it won't be noticed so much.

The executive director of the International Energy Agency says, "There is no time for action like the present. It's an opportunity to put a price on carbon and slash fossil fuel subsidies." Environmentalists and economists should agree on this one!

Pricing externalities

In class we're about to get to the idea of incorporating environmental damage into supply and demand curves. One way to do this is to have taxes and fees represent the damage being done, and in a blog post today by the World Bank, the leader of PGE (a power company in California) recommends doing so in the form of a carbon tax. This idea was mentioned earlier in the blog by David Zilberman, and it's an idea that economists have been pushing for decades or more. Here's to hoping that with industry report it can become a reality sooner rather than later!