A conclusion to Environmental Econ

In all of environmental economics the one thing that has specifically stuck with me was the water crisis in California. What we essentially learned was that due to water rights and subsidies given to farmers, they were able to obtain water for a cheaper price than those in the city. So while the city was struggling, the farmers were ok. We then discussed different ways that polices might help alleviate this problem. We discussed a possible cap and trade policy that might help limit the price water is sold, but shortly after learned that this would not be cost effective. We then talked about perhaps allowing the farmers to sell water. It seemed through this practice we were able to eliminate the problem of water being too expensive, while still being cost effective. It seemed that the problem could be fixed without harming or effecting one side.

This idea really made me think about the world’s problems and how it is possible to fix them. There are a lot of issues that need to be resolved, poverty, climate change, water rights and international relations. Through this simple solution to a hard problem it shows that it may be possible to solve the worlds problems one day, not necessarily from only economic solutions, but using different thinking or attacking the problem in a way that is not conventionally thought.

Batteries

In class we are discussing many ways in which the transition from dirty technologies to new technologies presents difficulties for a government and a society to make. It is difficult to make because when a society participates in such dirty technologies for so long, they become dependent on that path and it becomes costly to shift into cleaner, more sustainable energy sources.

The United States addiction to oil will be one that truly fits the definition of “Path Dependence”. It will be extremely difficult to cut ties to this addiction. However there are many technologies being developed that would perhaps make this transition easier and one I believe will be the most influential is the development of Batteries.

Batteries will help resolve our addiction to oil because they help alleviate the production of power by allowing the user to store the energy instead of just constantly slurping it from the original power source, which is the cause of countless tons of carbon in the atmosphere. It is important that we continue to research because of it is the key to making a successful infrastructure for sustainability. Since our current infrastructure is not suited for an electric transition, batteries will aid in this transition, because new batteries will last longer, it will better reproduce the effect that gasoline engines produce and allow consumers to make the transition easier and make the transition sooner.

In the wave of controversy that comes with sustainability I feel that batteries are a solution that is commonly overlooked. However, with the development in this technology it could greatly benefit our move away from path dependence and a cleaner environment for the future.

Just Another though about the EPA

In class on Monday we discussed the Foundations of the EPA, as well as the policies and the potential problems that seem to consistently occur with the EPA. For this blog I will be primarily discussing the common reoccurring problem of biases with the EPA and a potential solution.

During lecture, as a class, we learned about the process of Environmental Regulation and what seemed to most obvious is that with any step that in this process there seems to be room for corruption. For example, the EPA simply cannot afford to do research on the topic of environmental health, so in order to supplement this information, they might go to an independent firm who will do the research for them. If an independent firm does environmental research for the EPA, then there are ways that information can be biased. When biases occur they seemingly lead us away from potential solutions, but rather into debates of the legitimacy of claims.

Also Political influence plays a huge role the the EPA’s policies in the sense that certain politicians will latch onto a side of the polarized environmental debate simply because they can get funding from that specific side, this will most certainly lead to biases because those are the people who will decide to shut down the EPA or keep it running.

The list of these biases continues on, and one reoccurring reason why this happens, is money. If the EPA had enough money to execute power in an independent, non-biased way, then the pursuit of a clean environment would be in our reach.

So how can we get them money? As sarcastic as it sounds, why not just give them more? I mean our country is in incredible debt and continues to rollover that debt by paying off principle and interest with more loans, while at the same time does not affect any Americans consumption (or at least below a livable level of consumption). So theoretically, we can afford it because it only would add a fraction of the overall debt to the deficit and it wouldn’t affect us. The only difference is that the change in policy would eventually pay off because it is an investment in our future, (i.e. breathing easier, no flood repair costs). So, why not give the EPA as much as they want? Or any other program for that matter.

Are motorcycles good for the environment?

Surprisingly, there is a debate going on about the effects of riding a motorcycle on the environment. To me the logic seems clear, smaller engines equals less gas consumption and motorcycles are smaller creating less manufacturing pollution, all suggesting that they would help in the fight against pollution. So why would it even be a debate?

Although there are more reasons why motorcycles would be good for the environment than what I listed, lets look at some negative effects. First and foremost, like any product that is “environmentally friendly”, you have to look at the means in which its distributed. Motorcycles are shipped throughout the US and some even shipped overseas, which can create a lot of pollution.

Also, according to “US Green Technology” some big Harley Davidson motorcycles consume up to 42 miles per gallon, good, but as the article says that most environmentally friendly cars can attain number.

I also didn’t consider the lack of carpooling abilities a motorcycle has. Although it has no problem letting your ol’ lady ride spider, a motorcycle only has one seat, whereas a car might be able to transport more than one person substantially decreasing pollution per person. (Now think about a school buses carbon footprint per person, wild!).

There are possibly many more reasons on top of these why motorcycles are bad for mother earth I’m sure, but what I noticed throughout reading these is that most of these problems are present in most cars.

1) Carpooling doesn’t happen as much as people would like it to happen so all things held constant, a single motorcycle rider may not that bad.

2) Keeping that Idea in mind, 42mpg for a motorcycle with on rider is better for the environment than a single driver, driving most common cars in 2013 with a gas mileage of 24.8mpg according to green car reports.

3) Also, lets not forget that cars are distributed as well, a whopping 253 million of them. Saying that motorcycles are bad for the environment because of distributional externalities is kind of a stretch (there are about 7 million registered motorcycles in the US).

From all this, my conclusion is that the issue around motorcycles is the same for all topics, there are solid reasons for and against every environmental issue, and I am concerned about the legitimacy of arguments when you narrow your scope. It’s really easy to find reasons to say motorcycles are bad for the environment if you are only looking for them. You are only limited to your creativity to come up with new reasons. This represents the difficulty of measuring costs, benefits and externalities because they theoretically could go on forever, which defeats the purpose of even measuring them.

http://usgreentechnology.com/alternative-fuels/green-transportation/are-motorcycles-greener-than-cars/

http://www.greencarreports.com/news/1089565_new-car-average-fuel-economy-rose-to-24-8-mpg-in-2013

http://www.latimes.com/business/autos/la-fi-hy-ihs-automotive-average-age-car-20140609-story.html

http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/special_reports_and_issue_briefs/special_report/2009_05_14/html/entire.html

The Difficulties of Assigning Values to non market values

In class on Wednesday we discussed three different types of Non-market benefits; use value, option value, and passive use value. Each of these is a way to establish a dollar cost for things that do not actually a market value for them. Use value is when we come to a dollar value based on the value of its use. Option value is the dollar cost comes from the option of having that thing in the future. Passive value is coming to a dollar value based on having the good even if they never use it. These prices can actually be measured using polling and asking people for real values.

However I believe that these definitions lead to some grey areas. For instance, what about national parks? National parks have value in all three categories. Use value could be the economic benefits from the park rangers having jobs. The option value could be having the future benefits of cleaner air that trees make for your children in the future. The passive use value could be just being proud that your country has created a national park system, and that you’d be upset if they were all demolished. This goes to show that although polling might work, it could never cover all of the values, and that could lead to a juristically different value because there is so much grey area when measuring values

Policies

I went to International Colloquium on Global Environmental sustainability at CSU and attended “Economic Insights on Climate Policy: Global to domestic”. One of the speakers mentioned various public policies for climate sustainability and his argument for such policies interesting.

A topic he brought up was cap and trade. In this policy, the government would set a pollution goal and set up tradable permits to pollute while never exceeding that standard, expecting the magical ways of the market to work it out. The firms who can pollute efficiently will not need permits, so they can sell their excess permits to less efficient firms.

Another one was a tradable Performance standards in which the firms that are polluting at less than the Goal rate of pollution earn credit and those who do not pay taxes for polluting. Essentially the goal was to make it so that the “good” firms wouldn’t have to pay.

Cap and trade policies require payment of both the “good” and the “bad“ firms. Tradable performance standards, he warned, might actually cause an increase in pollution, because good firms are being paid to pollute at a rate, so he was concerned that they wouldn’t stop producing pollution, even if it were at the low rate. So my biggest comment is maybe create a combination of both cap and trade policy and performance standard. These two policies tend to fix each other’s problems. The credit system might help the firms who pollute efficiently, not have to endure the cost of permits and the “cap” part of cap and trade would fix the problem of firms milking the credit system. I believe that a combination of these two policies might actually prove helpful in the environmental sustainably conversation in regards to policy.

Steve Howard’s “Lets go all in on selling sustainability”

Steve Howard’s “Lets go all in on selling sustainability” is a Ted Talk regarding businesses making the transition to sustainable products that are actually appealing to the customer. Since populations are growing and the environment continues to get polluted it is crucial that the population starts taking the initiative towards sustainability. Steve argues that businesses can help; they can lead the way for consumers using LED light bulbs as an example. LED bulbs are extremely more efficient than the old halogen and florescent bulbs, so business need to completely stop selling the old inefficient bulbs. They need to go “all in” when selling the new products so people will purchase them, hence the title of the program.

He also talks about IKEA’s work to become sustainable, by putting turbines and solar panels on the big buildings he is able to saying money, and typically break even with electricity costs. Free electricity, he says, looks good for the CFO and for the environment people. Howard’s bottom line is that we can’t wait for change to happen; we must act on it now and lead the way.

When watching this video, I very much agreed with what he is saying. The video started to sound like an IKEA commercial but nonetheless his message was clear. We can sell sustainably if we take the plunge and lead the way for people.

I don’t like the safety standard

In class on Wednesday, we talked about pollution policy in America and the safety standard. We learned about the safety standard in practice and what specifically the EPA deems to be “Safe”. For example, “safe” is defined by a mortality rate of less than 1 in 1million and “unsafe” if there is a mortality risk of more than 1 in 10,000. The EPA’s definition of Safe and unsafe in my opinion are a very weak standard to practice.

Starting right off there is an area that is not deemed safe or unsafe because it is in-between the two probabilities, 1 in a Million for safe and 1 in 10,000 for unsafe. The leads me to conclude that the regulations are very contextual based and subjective, and therefore any universal ruling would be too ambiguous and wouldn’t really solve the individual problems, so why even have these policies?

Also the fact that we are using human death dolls to measure pollution doesn’t really logically make sense, if we are trying to limit pollution, we should limit pollution itself, not the externalities. Pollution harms more than just humans and effects more than humans can even measure, and the scope of the EPA’s “safe” and “unsafe” measurements are too narrow and specific. Until we can account for all those externalities we can’t have a real picture of the costs of pollution. Logically speaking, we only know for sure that pollution is bad, so we should be focused more on what we can fully understand, then the side effects will be reduced by themselves.

Just an opinion……

In regards Wednesday’s class in which we played a game that simulated the prisoner’s dilemma, I noticed that it is an accurate way to show the economic behavior of independent agents in a market, but not a good demonstrate of human nature, which is what the game almost unintentionally shows.

The game basically showed that a group of people would always choose to make themselves better off, rather than make the group mutually better off. It assumes that humans are only self-interested and in a world of competition and always typically fail to lend a hand to others.

However, I do not think that is how humans really are. I think in an environment where agents want to win or be better off is when usually when they will put themselves ahead of others. This I feel will hold true when the game is played for demonstration, bonus extra credit points in class, or even cash. BUT, the game would be played very different if the stakes would put others at a loss. For instance, forgive my extreme example, if the losers (those with the lowest points) were put to death. In that game, everybody would be on the same page, no (rational) person would let another suffer, which is where I would see humans true caring nature flourish. At this point the group would most certainly help each out, a very different outcome than before.

I am not trying to criticize the game from an economic standpoint; just trying to address the dark realist views about human nature the game falsely projects after playing it.

Using money to show negative Externalities

It’s a proven fact that cigarettes are bad for you. However, when you smoke a cigarette the negative effects stretch far beyond what you’d think. When you smoke, it’s obvious you decrease your own lifetime, but what you may not know is that you are also harming America’s GDP.

In Joe Rojas-Burke’s article, “ The True cost of a pack of cigarettes is $18.83” he states that when The American Lung association researched and compiled the negative externalities of a cigarette, including the fact that a shorter lifespan means less ability to work, the true cost of a pack of cigarettes is $18.83. This number was achieved by looking at the cost and benefits of cigarette smokers quitting, and seeing how much money was lost from tax revenue and retail versus how much money was gained from a decrease in medical costs and increase in productivity. The numbers that they had found led to a big increase in the cost of a pack of cigarettes.

It is interesting to see studies like this play out, and this strategy could be applied to change policies regarding pollution. They should start to publicize the real dollar costs of externalities for products that damage the environment, so that people may be able to truly understand the cost, in terms that make sense to everybody and the US dollar seems to do that well.

Article; http://www.oregonlive.com/health/index.ssf/2010/09/the_true_cost_of_a_pack_of_cig.html