Wednesday, September 27, 2006

Economics and Government

Many say the Endangered Species Act is becoming less effective. I think the main critisism of the ESA is that it encurages private land owners to "shoot shovel and forget it" That is Land owners are givin the insentive to kill those species that threaten the value of thier land and the very least to under report thier existance. "Such a law would encourage developers to go looking for environmentally sensitive areas to propose projects and seek compensation." And this is a bad thing...one thing that we can be sure about is that species would no longer be under reported...and those with such species on thier land would have the incentive of keeping them there and keeping thier populations healthy. My simple question is what is the intent of the ESA? To punish land owners and developers or to protect species for extintion. The advantage of such a law is two fold first it gives insentives to land owners to preserve wild life and second it puts the burdon of preservation on the public rather then the individual land owners. Which is good becouse it is the public that benifits.


Economics and Government

Tuesday, September 26, 2006

The Failure of the Endangered Species Act

Many say the Endangered Species Act is becoming less effective. I think the main critisism of the ESA is that it encurages private land owners to "shoot shovel and forget it" That is Land owners are givin the insentive to kill those species that threaten the value of thier land and the very least to under report thier existance. "Such a law would encourage developers to go looking for environmentally sensitive areas to propose projects and seek compensation." And this is a bad thing...one thing that we can be sure about is that species would no longer be under reported...and those with such species on thier land would have the incentive of keeping them there and keeping thier populations healthy. My simple question is what is the intent of the ESA? To punish land owners and developers or to protect species for extintion. The advantage of such a law is two fold first it gives insentives to land owners to preserve wild life and second it puts the burdon of preservation on the public rather then the individual land owners. Which is good becouse it is the public that benifits.







Endangered Species Act

Woodpecker.

Cliff Brown

Sunday 24th edition of the NY times, published by the Associated Press (AP) featured an article about endangered Red-cockaded Woodpeckers.

The Federal Fish and Wildlife Service put the town of Boiling Springs Lakes, N.C. on notice that the woodpecker was being threatened due to development. It planned to potentially assign certain neighborhoods as protected habitats. As a result landowners requested logging and some building permits and clear-cut their lands in the hopes that the option value of actually being able to build would be quashed if/when the protected habitats are assigned.

Certainly the landowners have considered the use value of their land, but those who are not actually obtained building permits have not done so efficiently – I doubt whether they considered setting up a wildlife sanctuary and selling bird-watching permits. What they have done is based their decision solely on that of their option value – they have paid to clear cut in the hopes that at some future point they will be able to use their now barren, desolate plots for something of economic value. Their has been no consideration of the non-use value of these lands. They did not allow the Nature Conservancy, or some other agency to pay the landowners for doing nothing to the lands. They simply performed a pre-emptive strike and assumed their lands would hold little value IF it was deemed to be in one of the protected areas.

Indeed it is stated that just because a tree has a woodpecker does not necessarily mean a house cannot be built – providing an alternative home can be found. Surely those tracts of land that were large enough to have both trees and houses on have now declined in value (Surely people would pay more for a plot of land that also provided a home to a rare bird)

One of the landowners who stripped his land of the offending trees after holding his 2, one-half acre-plots of land for 23 years, is now upset because the plot of land had finally obtained some value (to developers). That value has now been taken away (presumably with the announcement of the endangered species) according to the landowner in defense of cutting. Perhaps a better understanding of the environmental economics of “value” would have allowed him, and many other landowners, to re-think their strategy.

Perhaps the reason the value of land was increasing in the area was because of the wildlife around. Now many of the areas are barren and “uglier” perhaps the use value will decline and the landowners will regret that they did not have a better grasp on the economics of the situation – especially those who did not obtain building permits.

Roadless Rule

The deforestation has caused many problems such as dramatic climate change, decreased biodiversity, agriculture decline, increased deforestation, and also has lead to the declin of people indegenous to forests. One other problem that has come about from the cutting down of forests is the increasing amount of endangered species. In the article the forest service had failed to point out that there is a major rule that is mandated by law that were ignored by the policy of endangered species. The problem with endangered speices is that there are people out there that are willing to pay for the use of seeing the species in ther natural habitat. There are also the people that will pay to know that the species will be there in the future so they or someone else can see them as well as just the fact to know that they do exist and are not extinct. In Bush's new plan it is to superiority that will give govenors over the national forests within some boundaries. If we dont save the forests then we cant get the maximum benefit from the forests. a forest can be an output when harvested and also a capital good in which if left standing the forest will grow and also it can be made into a recreational good that will bring about more revenue. These current forest practices are violating substainability and efficency criteria. Deforestation can be benefical in the short run as well as in the long run.

Sunday, September 17, 2006

hunting endangered species will save them??

Bet you never would have thought that was possible.... but there is already in place a system that uses, hunters and the money they, generate to directly help with conservation in ways the federal government and taxpayer weren’t willing or able to do. The system allows the laws of economics to create a financial situation which benefits the endangered wildlife. Remember scarcity breeds value!!! And what better than an endangered product!!!!
So as a solution to the problem of endangerment we need to find market failure or at least the missing valuation equation and make it right. If the problem is chemicals get rid of the offending chemical. If its habitat provide habitat. Seems simple!!! Well it is, but paying for the solution is a whole different story... .. .using any solution that pays for needed habitat, and that pays to change business and consumer chemical usage is not likely if the marginal cost is too high. So who is going to pay??? I guess we do if we want to protect a species.
We all have great faith in the system and we have trust that in absence of externality the market will succeed in creating optimal situation. So why not use market forces rather than tax payer dollars. As I said the best product to sell is a scarce one. I found a radio show that explains an innovative solution to this problem of raising funds .It is a 12 minute segment and I think its worth listening to .It is great way to use governments force to save taxpayer dollars and save a species . It sells permits to kill endangered species and therefore save them. Little counter intuitive but it is and has been an effective method to fund conservation.
The permits are limited in number so they sell for an extraordinary price.
$69,000 to kill 1 big horn sheep!!!!!! This in turn pays for the workers and the program budget the program then employs people to provide water sources for the sheep feed in extreme winters and security from poachers etc. The workers are less likely to be corrupt in that their lively hood is what they are protecting their entire income revolves around the sheep..
This is akin to the border of Mexico idea of giving 1 million dollars to 5 generals in Mexico to be paid annually at end of year to protect 1/5 of the border from illegal immigration. The cash is reduced by 10k every time an immigrant is caught crossing to the USA. This gives powerful incentive to the generals to police the border themselves and ends up costing us taxpayers 5 million to protect border rather than the hundreds of millions we currently spend.. Currently Mexico has little incentive to prevent crossing . This internalizes the costs of illegal immigration, and it’s the same with this species protection program . It internalizes the costs of letting a species die off . It helps the situation at a much lower cost to the government..

It’s truly a great idea...

It may be hard to implement with less desirable species but it is a start. And it is the kind of outside the box thinking that’s needed to solve the externalities we face economically with endangered species..


Big horn comeback in Colorado we went from Zero to 400+ ,Utah was devoid of life http://biology.usgs.gov/s+t/noframe/r039.htm
Another story of comeback
http://www.enn.com/today.html?id=11415
Link to text interview
http://www.loe.org/shows/shows.htm?programID=06-P13-00032#feature2
audio! 12 minutes
http://stream.loe.org/audio/060811/060811hunting.mp3



Coal ,clean diesel ,and economic growth who knew!!

I have for some time heard about the nazi fuel production of fuel from coal in the final months of WWII . and it had been discounted as a non cost effective way to produce fuel . well last year the Nobel prize was given for a new method which produces diesel at a verry low cost and seperates out the sulfer to produce a Ultra low sulfer clean burning diesel fuel. this has huge ramifications to the economy and the environment.....

If the number of diesel vehicles in private use went from less than 10% to over 60% of the private US vehicle fleet, mirroring European diesel engine adoption rates, we would see a 25% reduction in the amount of oil used in the US.
This equates to all of the oil we currently import from all of the OPEC countries and twice as much as we import from the Middle East...
Any improved efficiency in our vehicle fleet helps us reduce our dependence on foreign oil and any reduction in oil imports helps us stay clear of getting entangled in the politics of the Middle East.

Often overlooked, an efficient substitute for high dollar high tech machines of tomorrow is sitting right where we left it, it has benefits much like the ones promised by machines that aren’t already in production .Diesel engines are an existing technology that offers us reduced emissions, flexibility for fuel sources, and 40% higher efiency. It is this very efficiency and durability, that has made diesel engines are the workhorse of the U.S. economy. Diesels already play an indispensable role in transportation and agriculture, construction, and mining. The people who run these companies are interested in getting the maximum value from their investment so if a choice is more efficient they will use it.
Diesel by its very nature contains 20% more energy in a gallon of fuel than a gallon of gasoline. This Combined with the diesel engine's much higher compression ratios and reduced pumping losses it is not hard to see why vehicles like the VW Jetta TDI get 40+ MPG highway, the US fleet average of only 23mpg is pathetic. The us fleets diesel percentage is also pathetic much lower than the European average of 68% of all passenger cars. For people who say diesel is slow how about the Opel Eco-Speedster sports car prototype. The 1.3-litre Ecotec Diesel engine produces 112 hp, giving the car a maximum speed of over 155 mph and fuel consumption of 94 mpg. And as far as hybrids go the gasoline hybrid is leaving untapped efficiency on the table domestically we aren’t talking about them and even European automakers, initially resisted the trend, choosing instead to focus conventional on diesel-powered automobiles whose fuel efficiency rivaled even the best gasoline hybrids they succeeded. But now are finally looking into PSA diesel hybrids. These start on electric power exclusively, avoiding the use of diesel in low-power, low-temperature modes where the engine is the least efficient. Also During braking, the vehicles recover energy by recharging their battery packs. Their Fuel consumption 69 mpg this sets a new record for a European compact family car, and far surpasses the current benchmark the Prius (which delivers around 50-55 mpg). The BMW 530d goes from 0-60mph in only 7 seconds, and still gets over 40 miles per gallon. This same car powered by a gasoline engine only manages to get 23 miles per gallon.

Recent innovations in diesel design and electronic control has many States developing clean air plans using diesels, many cities are looking for greater emissions reductions. Most will find that a diesel retrofit program offers one of the most cost-effective solutions for achieving real and immediate air quality as well as fuel consumption benefits. Its better to retrofit clean diesel than to wait for new technology to be produced as it will be at a much higher cost and the day of implementation may be years from now Diesel retrofits ( basically a replace, repair, refuel, retrofit or repower )offer a number of benefits over other emissions reduction strategies, including: immediate and significant reductions, flexibility for fuel sources , and no new infrastructure requirements. Advances in diesel engine technology, fuel, and exhaust treatment will make new diesel vehicles virtually emissions-free “According to the U.S. Environmental Protection Agency (EPA), by 2030 total emissions from diesel trucks, buses and off-road equipment will have been slashed by 80 percent compared to 2000 levels thanks to new regulations that start taking effect in 2007.”
However, these new clean diesel advances do not affect the approximately 11 million engines in use today. Fortunately, the same clean diesel technologies that will power the next generation of diesel vehicles and equipment can be applied to some older engines – reducing emissions by up to 90 percent. In fact Detroit diesel and the DOE just made a wonderful announcement “As part of its presentation at the recent Diesel Engine Emissions Reduction (DEER) Conference in Chicago, Illinois, Detroit Diesel Corporation (DDC) announced that it has demonstrated technology to achieve greater than 45 percent brake thermal efficiency while meeting the 2007 emissions regulations -- a result of its collaboration with the United States Department of Energy (DOE) on the Heavy Truck Engine project. This target is a key milestone for fiscal year 2005 project objectives. This technology demonstration lays a strong foundation for the next generation of development, targeting 50 percent thermal efficiency at 2010 emissions regulations. Brake thermal efficiency is a measure of the amount of fuel energy converted into useful power during the combustion process in the engine.”

so to swith to diesel we are also going to end up with an environmental gain by less use of fuel or simply a more efficent use of fuel. but also will gain flexibility that will allow us to be more resistant to oil shocks....
CI engines whether diesel or not are significantly more efficient than gasoline engines. Due to a higher compression ratio and reduced pumping losses.
Diesels also run on many more alternate fuel sources than their gasoline counterparts. This has implications including national security and the Middle East these include
• Biodiesel
• SVO or straight vegetable oil.
• WVO waste vegetable oil
• Propane diesel mixes.
• Biodiesel methanol mixes.
• Coal derived diesel fuels. (Which should be the cleanest burning diesel possible thus known as "green diesel.")

The concept of using vegetable oil as a fuel dates back to 1895 when Dr. Rudolf Diesel developed the first diesel engine to run on vegetable oil. He demonstrated his engine at the World Exhibition in Paris in 1900 and described an experiment using peanut oil as fuel in his engine. In fact In 1911 Rudolf Diesel stated: "The diesel engine can be fed with vegetable oils and would help considerably in the development of agriculture of the countries which use it." In 1912, Diesel said "the use of vegetable oils for engine fuels may seem insignificant today. But such oils may become in course of time as important as petroleum and the coal tar products of the present time." Think we have had long enough to let this settle in
Biodiesel is a great choice and is very similar to normal petrochemical based diesel fuel. It is basically composed of processed WVO or SVO mixed with diesel another interesting property of diesels is that Adding propane actually improves power as well as economy. This is due to a n effect of propane causing a much cleaner much more complete burn in the chamber. SVO is a renewable fuel source and runs great but is harder to start and doesn’t always work in colder climates. Vegetable oil can be created from oil feedstock plants like soybeans, palm oil, rape seeds, palm oil, sunflower seeds and even some types of algae. WVO is Recycled vegetable oil from local restaurants and other used sources. These businesses are also a useful reservoir of renewable fuel for diesel engines as approximately 4.5 billion gallons per year of used vegetable oil is available in the USA. Using fuel that has already contributed to the economy by producing something is very beneficial to production in our system of capitalism
With more than 4 choices to power the diesel engine it seems to be a great choice in uncertain times. If world oil supply’s were to be shut down one would merely have to switch to a renewable source like vegetable oil and the engine would be back in service alternately one could convert to coal derived diesel fuel.
Diesel should ultimately be cheaper to produce than gasoline because it takes less refining to create diesel fuel, which is why it should be cheaper than gasoline but disproportionate tax rates seem to make up this difference and raise prices so diesel cost currently is not in line with actual production costs.

Recently the Nobel Prize was given in relation to diesel fuel I found this article:
“Clean Diesel from Coal”
"When I saw this I thought it was really a terrific contribution that could be very important," says Richard Schrock, professor of chemistry at MIT, who won the Nobel Prize in Chemistry in 2005, with two other scientists, for discovering the type of catalyst used in the second step. Combining two catalysts this way "is pretty rare," he says. "You can't just throw any two things together and expect to get the results you anticipated."
According to Robert Grubbs, professor of chemistry at Caltech, who shared the Nobel Prize with Schrock, "The key is finding catalyst systems that are compatible, and will operate at the temperatures where you can do both processes together?"
"Two percent of the United States' energy reserves are in oil, 3 percent is in gas, and 95 percent is in coal," said Dr. Maurice Brookhart, W.R. Kenan Jr. Professor of chemistry in UNC's College of Arts and Sciences. "Many people in the energy sector think that when oil starts to run out, coal will be a source of transportation fuel for some time before we perfect the science behind solar and hydrogen-based energy. Producing diesel fuels from coal is especially attractive since diesel engines are more efficient than gasoline engines."
The Fischer-Tropsch method of making synthetic liquid fuels from coal and other carbon sources has been used since the 1920s. Today, Fischer-Tropsch fuels power most large vehicles in South Africa, and American companies have expressed interest in these fuels, which emit fewer particulates and less carbon monoxide than conventional diesel fuels. Such fuels have been termed "green diesel." The Fischer-Tropsch method of making synthetic liquid fuels from coal and other carbon sources has been used since the 1920s. Today, Fischer-Tropsch fuels power most large vehicles in South Africa, and American companies have expressed interest in these fuels, which emit fewer particulates and less carbon monoxide than conventional diesel fuels. Such fuels have been termed "green diesel."
Diesel fuel produced in this way has several potential advantages. Most ordinary diesel contains molecules, called aromatics, that, when combusted, produce particulates, Goldman says. But the diesel formed by the new catalysts does not include aromatics, so it burns much cleaner, overcoming one of the major objections to diesel fuel. This could lead to more vehicles using diesel engines, which are about 30 percent more efficient than gasoline engines.
The method, described in the current issue of the journal Science, uses a pair of catalysts to improve the yield of diesel fuel from Fischer-Tropsch (F-T) synthesis, a nearly century-old chemical technique for reacting carbon monoxide and hydrogen to make hydrocarbons. The mixture of gases is produced by heating coal. Although Germany used the process during World War II to convert coal to fuel for its military vehicles, F-T synthesis has generally been too expensive to compete with oil.
Part of the problem with the F-T process is that it produces a mixture of hydrocarbons -- many of which are not useful as fuel. But in the recent research, Alan Goldman, professor of chemistry and chemical biology at Rutgers University, and Maurice Brookhart, professor of chemistry at the University of North Carolina at Chapel Hill, use catalysts to convert these undesirable hydrocarbons into diesel. The catalysts work by rearranging the carbon atoms, transforming six-carbon atom hydrocarbons, for example, into two- and ten-carbon atom hydrocarbons. The ten-carbon version can power diesel engines. The first catalyst removes hydrogen atoms, which allows the second catalyst to rearrange the carbon atoms. Then the first catalyst restores the hydrogen, to form fuel.

Thursday, September 14, 2006

Sustainable Retreat?

I was recently reading an interview of James Lovelock and I ran across an idea you might find relevant to our work with Daly and Cobb:
"Q. You say in the book that sustainable development is a fantasy, essentially, and you have a different notion for what needs to happen, of “sustainable retreat.”

A. At six-going-on-eight-billion people, the idea of any further development is almost obscene. We’ve got to learn how to retreat from the world that we’re in. Planning a good retreat is always a good measure of generalship."

Friday, September 08, 2006

Possible new oil source and today's prices

Possible new oil source and today's prices

So I saw an article regarding the recent discovery of the oil field in the Gulf of Mexico. (Sure you all heard about that). I have a couple of concerns regarding the authors’ analysis of this discovery.

We don’t know really know how much oil is in existing oil fields – true. We don’t know how much oil is in this new field – also true. So now we have an uncertain amount of crude oil (possibly useable this decade) to add to our already uncertain amount of reserves, the short run effect will be – according to the author - “lower prices for oil”. Isn’t the price of oil determined by the market? The cost of a barrel of oil decreases when more oil is put into circulation (and increases when supply decreases) and not simply because it has found some more oil. If the oil in that reserve was useable NOW I could see how the price would fall, but it is still many miles underground.

Adding to the supply constraint is our refining capacity. Simply getting more crude oil does not help lower gas prices, it has to be refined. Perhaps this is where government could/should step in, or rather step back, and ease the provisions for constructing new refineries and allow the market to determine our refining capacity.

It was said that that oil could, in the future, be added to our domestic reserves which will lower prices as our future supply will be more stable (we still have some if OPEC cuts us off) and can be used when needed (such as another Katrina) but that would only serve to stabilize prices in the event of a supply shock, and not to lower prices now.

“Knowing that we have a reserve that will be ready for use 10 years from now means we can use the current reserves faster--today.”

What! First. It was made clear that we don’t know how much oil is down there, so would we really burn all our oil now in the hopes that in ten years our reserves will be replenished? Or does the author mean that since the quantity supplied has increased, prices will fall and the demand will increase - which is being defined as using our reserves faster.

Second. Would the government really put its reserves out to pasture just because more is coming in a decade? What if we have to fight another war in the next decade (unlikely I know :))? Do we not remember how long it took to tap into our reserves last year following Katrina to alleviate the high gas prices.

“Without the new reserve, scarcity of oil would put upward pressure on the price, encouraging conservation and slower withdrawal.”

And I thought that our conservation was due to the high prices (again a supply issue) and possibly the negative externalities our increased desires for consuming oil produced. And how would this [currently] unusable, unrefined oil be reducing our scarcity? If it is not able to be used now for something other than filling a rather large hole underground, what effect can it have on our existing scarce reserves that we can use? And even if the oil was useable now wouldn’t it still be the demand/supply of that scarce commodity that determines its price?

As a consumer do you demand more gas now because in ten years time the quantity supplied may increase?