Monday, December 17, 2007

IPCC Falsifies Sea Level Data

The IPCC falsified data showing a sea level rise from 1992-2002 according to Dr. Nils-Axel Morner, former head of the Paleogeophysics and Geodynamics department at Stockholm University in Sweden. In an interview by George Murphy, Morner cites various examples of falsification of evidence claiming sea level rises...

This shouldn't be a surprise to anyone, the IPCC and similar groups of pseudo-scientists have a long history of falsification and intellectual dishonesty. Piltdown man and stem cell cloning to name a few.

This does raise the larger question of how our esteemed elected officials plan to reconcile their previous statements. After reading an IPCC report Senator Barbara Boxer boldly proclaimed:

This powerful report confirms the very real dangers that global warming poses for us all. The effects of global warming will be felt throughout the world. 1

This wouldn't the first time the vapid witch of the west has put her foot in her mouth.

Beyond that, it should concern you that policy makers are making policy based on falsified research. Or even for that matter, policy makers are making policy based on science itself. Assume for a moment that the IPCC wasn't wrong, the sea level is rising dramatically. It doesn't tell us anything about policy. Climatologists don't ask the question of does it matter? Does it matter sea levels are rising? The question is left up to other disciplines of thought. Simply saying that the sea levels will rise or fall does not mean government will better everyone or anyone by intervention.

Morner goes on to say in the article:

Then, in 2003, the same data set, which in their [IPCC's] publications, in their website, was a straight line - suddenly it changed, and showed a very strong line of uplift, 2.3 mm per year, the same as from the tide gauge. And that didn't look so nice. It looked as though they had recorded something; but they hadn't recorded anything. It was the original one which they had suddenly twisted up, because they entered a 'correction factor,' which they took from the tide gauge.

This is why I consider myself a far superior scientist to the kind at IPCC. The methods they use are not scientific. They are not empirical methods. The correction factor they used is because of falling sea levels in areas of Hong Kong. In other words, a falling sea level in Hong Kong doesn't fit in very well with the computer modeling of global sea levels rising. Instead of checking to see if the data in the field is correct, it is automatically discarded. Wholly unscientific.

Saturday, December 15, 2007

Privatized Deforestation and Profits

Let’s start from the very beginning. One of the commonly accepted statements that were explicitly made throughout the semester was that privatization of forests would eliminate inefficiency of forest logging. In this post I examine the incentives of forest loggers and question the validity of the accepted class’s theorem.

Assumptions. I hereby assume the model of a non-corporate private sector entity (a non-public firm that is either a sole proprietorship or a partnership) that generates positive profits in the forest logging industry that is not a monopoly market structure. Under a logical presumption that the current owner of the business is not going to live forever, the owner will most likely try to sell the business to a younger individual at some point. I also presume that the current owner will try to maximize the price for which he will sell the property in the course of price negotiations with the buyer.

I emphasize that this is a private company because the mechanism for property appraisal differs between the privately held companies and publicly held companies. Here is how it works.

First, a company is selling goods at some price(s) making total revenue. If we were to subtract the cost of revenue (which is the cost of goods sold, do not confuse with total cost!) from total revenue, we would get the firm’s gross profit. After subtracting operating expenses (which are a sum of fixed and variable costs) from gross profit, we then derive earnings before interest and taxes (EBIT). Now, if it were a privately owned company, its sale value would be determined by multiplying EBIT by a number between 8 and 10 years. That way, it would estimate the forgone future income for the following period between 8 and 10 years.

If the current owner is interested in maximizing the price he can receive from the sell of the property, he will most likely be interested in maximizing EBIT during the last year before the sale occurs. Doing so means maximizing total revenue. Given that a logging industry is not a monopoly implies a single firm’s somewhat limited control over price of homogenous goods (after all, it is wood we are talking about). It also means that the firm will try to maximize its total revenue by increasing the quantity supplied, which means it will cut down even more forest. (I realize you might think that a single year’s increase in logging each time the business gets resold may not mean much but I strongly urge you to consider the power of aggregates given the number of logging business out there as well as the frequency of ownership changes). As you can see, evaluating the value of a privately held logging company based on EBIT may not be the best environmental choice. Instead, a party interested in purchasing the forest for the purposes of logging may suggest a few different approaches for calculating a mutually agreed upon price. Such approach will result in a slower rate of deforestation, lower price that the business would be sold for, and it would even contribute a miniscule part to inflation reduction.

Another way to calculate the value of the business is to calculate the present value of an annuity of the business under consideration (with an embedded assumption of equal payments in the future). Such calculation would presume that the amount of total revenue that the business would most likely generate would remain fixed over a number of years. Quite naturally, it implies that real (inflation-adjusted) annual incomes from that business diminish annually. Even though theoretically possible, it is empirically highly unlikely. Instead, I would advise using the sum of present values of an asset discounted with appropriate interest rate. Such approach eliminates the incentives to drastically increase the logging’ output throughout the year preceding the buyout and as a result leaves more trees for you, me, and the tree huggers. As you can see, it is not the privatization of forests that will be efficient but the mechanism of evaluating logging businesses that will influence efficiency.

Friday, December 14, 2007

Rainforest not depeleting as fact as we thought. This brings to light new ways to fight it.

In the early 1980's, people feared that without intervention, the rain forest in Brazil would have been completely gone by the turn of the century. Well, the turn of the century came and went, as here it still is. This should, very well the nature of an "emergent future." Factors, including period of debt that Brazil's militant government experienced slow the growth. It is very possible that the "over-logging" of the forest was, itself th cause for this debt and subsequent reduction.

I think a lot of the fears about the rain forest inflate the statics. They act on the assumption the rate current rate will continue until the loggers drive themselves into the ground, as though they are blindly going to go forth with the same amount of logging always dispute cost or benefit.

There is a lot of talk to "act now" in fixing this problem. There are people telling the Brazilian government what to do with their own property, which is inconsistent with liberty. If some people highly value the rain forest and think it is going to go away, despite it's slowing in depletion, they need to pool their resources and buy parts of it. If they value it more than the brazilians value it's using, then they will get the forest. If it would truly cause an externality on other countries for it to be gone, then nations could buy portions of the forest, to keep it around for research.

Tuesday, December 11, 2007

Green Evolution

Profit maximization, an ultimate goal of every business, possesses its inalienable theoretical simplicity: an elegant amalgamation of total revenue’s maximization and total cost minimization. What else is there to it? In the absence of externalities, equating marginal revenue to marginal cost determines the optimal quantity of output and achieves the above stated goal- yielding maximum profit. Until relatively recently, the traditional combination of cost minimization and revenue maximization used to be the traditional and, on a large enough scale, the only way of conducting business, but it is not anymore.

At the end of the twentieth century an environmentally friendly business model started gaining popularity. The trend continued and received substantial support carrying the new business model well into the new millennium. What exactly am I talking about? I believe it would be a fair statement to point out the following. The business community observed a shift from traditional profit maximization model to conducting business while taking environment into consideration. After that we made the next step, introducing the entire segment that made environment its focal point and generated profit solely via helping the environment. Today, it seems there are companies that approach business in an even different manner. Instead of supplying a good or a service to satisfy the existing demand or create a supply that would in turn create its own demand, few companies are putting emphasis on environment at the expense of profit maximization. If anything, such conduct seems to be counter intuitive to neo-classical economics. Surprising as it is, such is a new business trend.

Allow me to illustrate. For simplicity purposes, let us consider the paradigm shift within the food industry. For generations, we have all enjoyed the good old pesticides-filled and antibiotics affected foods. Then came “Whole Foods Market,” “Wild Oats,” and “Vitamin Cottage,” making promises to change business and rescue the consumers’ bodies of pesticides, hormones, and poisons. After achieving such goal quite abruptly, it was those companies that pledged to bring yet another change to conducting business. Now the goal of those commercial enterprises was to alter their business models and tailor them to the existing preferences of the general population, which in the 21st century are unquestionably environmentally centered.

Take a closer look at Whole Foods Market. If you see what I see, then among other things you will take note that the company is fueling its trucks with biodiesel at four out of nine company’s distribution centers; it is the only FORTUNE 500 Company to offset 100 percent of its electricity use with renewable energy credits. Also, it is developing green construction methods, building some stores to LEED certification standards, and selecting green building materials. Finally, in addition to recycling glass, plastic, and aluminum the company offers a bag refund in an attempt to promote reusing packaging materials as well as compostable food packaging for prepared foods. For more information on Whole Foods, please visit

To top this list, may I mention that Whole Foods recently received Green Power Partner of the Year Award from U.S. Environmental Protection Agency for second consecutive year. Why? Well, according to their website “In 2007, Whole Foods Market is being recognized for increasing its green power purchasing to include more than 509 million kilowatt-hours of wind-based renewable energy credits. This is enough renewable energy to offset 100 percent of the electricity used in all of its stores, facilities, bake houses, distribution centers, regional offices and global headquarters in the U.S. and Canada. Whole Foods Market is the only FORTUNE 500 Company to offset 100 percent of its electricity use with renewable energy credits.” Well, that doesn’t really fit together with the traditional framework of cost minimization, does it? After all, what kind of cost-minimizing business would double its expenditures on electricity?

Let me guess what you are thinking. If you are a diligent student of Economics, right about now you might be thinking that it is a part of the business model of a natural, organic grocery chain. Appealing to people’s environmental preferences and supplying organically grown foods, that is just good business and creates an even better reputation for the company, right? What’s more, you might be thinking that Whole Foods got lucky to be in a position where it can supplement its traditional revenue sources with a good environmentally friendly reputation. Seriously, how many traditional (non-electricity generating) businesses would buy green credits and most importantly why?

Surprisingly, to name just a few, Kohl’s Department Stores, New York University, Pepsi Americas Inc, The Pepsi Bottling Group, Pepsi Bottling Ventures LLC, Starbucks, Johnson & Johnson, Mohawk Fine Papers, PepsiCo, Staples, Sloan Valve Company, City of Bellingham (WA), Wells and Fargo, and of course Whole Foods- all of them have purchased enormous quantities of renewable energy. Together, these companies account for a purchase of more than 3.55 billion kilowatt-hours of renewable (mostly wind powered) energy (see details at I seriously urge you to consider the amount of energy 3.81 billion kilowatt-hours provide. Other participants include Bank of America, Hewlett-Packard, Dell, and Google (who actively seek and implement environmentally friendly practices into their business models. For details, go here

As you can see, it not just organically fed tree huggers proclaiming slogans about the virtues of saving the whales. Numerous industries’ large capitalization leaders assume the responsibility for their environmental practices. The above listed names constitute only the top of the pyramid, representing the tip of the sword in the battle for the quality of environment for us all. Their voluntary participation and invaluable contribution demonstrate the unflinching willingness and considerable ability to provide unparalleled leadership among businesses. Make no mistake in your mind: this is a beginning of a trend that will only become stronger. This is no longer a world of governmental coercion to make businesses abide by some arbitrarily set pollution legislature or standard. This is an unprecedented evolution of corporate thought. This is a Green Evolution.

Sunday, December 09, 2007

The Hidden Costs of Recycling

Earlier today, I came across an article written by an economist named Daniel Benjamin. Earlier this semester, we discussed recycling in class, and questioned whether it really helps the environment or not. The article is entitled the “Eight Great Myths of Recycling.” In this article Benjamin defines these eight myths as follows:

· Our Garbage Will Bury Us
· Our Garbage Will Poison Us
· Packaging Is Our Problem
· We Must Achieve Trash Independence
· We Squander Irreplaceable Resources When We Don’t Recycle
· Recycling Always Protects The Environment
· Recycling Saves Resources
· Without Forced Recycling Mandates, There Wouldn’t Be Recycling

I originally come from Bergenfield, New Jersey. In Bergenfield, recycling is mandatory. Everybody there seems to believe the sixth misconception about recycling, which is that recycling always protects the environment. The problem with recycling is that in order to turn the recyclables in to useable goods, resources must be consumed, hence creating pollution. In addition to pollution created from processing recyclables, other negative effects of recycling are shown in the following example:

This effect is particularly apparent in the case of curbside recycling, which is mandated or strongly encouraged by governments in many communities around the country. Curbside recycling requires that more trucks be used to collect the same amount of waste materials, trucks that pick up perhaps four to eight pounds of recyclables, rather than forty or more pounds of rubbish. Los Angeles has estimated that because it has curbside recycling, its fleet of trucks is twice as large as it otherwise would be—800 versus 400 trucks. (Benjamin)

This example is proof of many unseen negative effects of recycling. For example, the city of Los Angeles now has to pay twice as many garbage men because of the increased size of its fleet. In addition to this it has to spend a larger portion of its tax revenue on fuel and maintenance for these garbage trucks. This either causes increased taxes or budget cuts from other areas of the local economy. There is no doubt in my mind that these same effects are present in virtually every city and town with mandatory recycling. Although recycling sounds good on paper, the unseen costs it carries may actually make it worse than simply throwing things in the trash.

Green Protectionism

For many people there has become a growing concern about global warming and what we can do to help limit its effects. A new bill (that is fairly well supported by both democrats and republicans in congress) would be a big step toward unified efforts among states domestically. The primary concern regarding the bill is that it would be very wide reaching, and could possibly have some strong positive effects for protectionists.

While Al Gore has been strutting his stuff on stage, behind the scenes America’s quieter greens have been successfully lobbying powerful interests. Many companies have come round to the view that they would do better with a single federal system than a patchwork of state-level rules. Farmers have bought the idea that they can make money out of biofuels. Christians have been persuaded that they need to be better stewards of the earth…But two powerful groups have remained determinedly skeptical: energy-intensive manufacturers and organized labor, who fear the effects of higher energy costs in America and their impact on jobs.

Those people who are in the manufacturing sector have legitimate concerns that need to be addressed before the bill is passed. Some have suggested that imports from the manufacturing sector, and possibly others, would need to be certified as to their carbon content and then be charged a tax according to their content. Some are apprehensive about implementing a tax because it will hurt trade overall. Places like China and India will then have a significant barrier to bypass in order to compete on the international market in trading. Another legitimate concern is that once a tax like that is placed on goods there is almost no going back. It would then enable protectionists to fight their personal battles with government support.

“The people who worry the most about the costs of trying to constrain carbon emissions are the very ones demanding protectionist measures. But if those measures are passed, America risks something far costlier than a switch to cleaner energy: a global trade war.” The concerns surrounding the legislation and the bill are very real. Depending on if and how the bill goes into effect, and what the ramifications associated with it are, trade in the United States and world wide could be impacted significantly. Is a bill like this one even necessary? Many people would agree that it is not. The market functions well as it is right now, and to throw one more thing into the mix may begin to muddy the waters with trading partners worldwide.


Friday, November 30, 2007

More money for the U.S to spend!

Link to the article
There was a report published by the United Nations Development Programme which stated the effects of global warming poorer countries around the world. Of course it stated all the dire consequences that emitting carbon dioxide has and how the poor women and children are going to be the most. This article is a summary of the report and it caught my attention because in the second paragraph it states that the U.S needs to cover $40 billion of the annual $86 billion needed to protect the poor in other countries. This report which I skimmed through says that the two major contributors of carbon dioxide emissions (the U.S and China) are responsible for the money needed to “strengthen the capacity of vulnerable people”.
So if I got this right this report commissioned by the UN wants the U.S government, the U.S citizens to pay for the damages that global warming causes to other countries. This payment is not too far off in the future ether. By 2012 it is estimated that the full $86 billion in “climate proofing” will be needed annually. This money will mostly be spent on flood and drought relief in poor countries around the world. Seems to me to be a little bit of a stupid idea to spend $86 billion every year on clean up rather than spend it on prevention of the “mess maker”. Hopefully after spending $86 billion for possibly a few years the “mess maker” could be contained and no more money need be spent instead of spending that money indefinitely. That is if humans have a significant impact on the “mess maker” global warming.
The 400 page report says a lot of nothing I think. If the UN embraces it though, nothing will still be done. The problem of putting in place some law to make the U.S pay the money is that there is no one to enforce it. The UN had no army or power to make other countries enforce it. The idea that this report has is a waste of time and caused more damage to the environment in the printing of its 400 pages than environmental protecting it would have caused if it was followed.

Ethanol Craze Cools as Doubts Multiply

Ethanol Craze Cools as Doubts Multiply
Wall Street Journal

It seems that the use of ethanol as a clean fuel source is under fire due to rising food price, the concern for straining our already dwindling water supply and the type of pollution caused by burning ethanol with gasoline. Ethanol is perceived to be the temporary solution to the United States oil dependence and is the cornerstone President Bush's plan to reduce use of foriegn oil. Currently, proponents of ethanol are pushing to have oil refiners blend more ethanol into gasoline but opponents from various food producers and livestock farmers are grabbing the attention of Congress as well.

Etter of the WSJ states, "the U.S. gives oil refiners an excise-tax credit of 51 cents for every gallon of ethanol they blend into gasoline. And even though it's the oil industry that gets this subsidy, the industry dislikes being forced to use a nonpetroleum product. The U.S. ethanol industry is further protected by a 54-cent tariff on every gallon of imported ethanol.The ethanol tax credit will bring refiners an estimated $3.5 billion this year"

Using ethanol gives oil refiners incentive to use the product but environementalists and energy experts are questioning the tradeoffs of ethanol use. They are mainly concerned with the use water and fertiliziers it takes to grow corn to produe ethanol.

Etter of the WSJ also states, "back in early 2005, President Bush gave ethanol a boost in his State of the Union speech by calling for "strong funding" of renewable energy. Energy legislation that summer required oil companies to blend a total of 7.5 billion gallons of "renewable" fuels into the nation's fuel supply by 2012. The legislation also effectively extinguished ethanol's chief competitor as a clean-burning additive, methyl tertiary-butyl ether, which had groundwater-pollution issues. The bill anointed ethanol as the default additive and instantly created demand nearly double what was produced that year."

By forcing the use of ethanol, the U.S. has artifically created a demand that they may not have anticipated to create the tough choice between energy security and food security.

Etter writes, "a study coauthored by Nobel-prize-winning chemist Paul Crutzen said corn ethanol might exacerbate climate change as the added fertilizer used to grow corn raised emissions of a very potent greenhouse gas called nitrous oxide. The ethanol industry replies to that one with an Energy Department study concluding that use of ethanol reduces greenhouse-gas emissions by 18% to 28% on a per-gallon basis, provided that coal isn't used to run ethanol plants.

Opponents of ethanol also have hammered on an Agriculture Department projection that by 2010, less than 8% of the U.S. gasoline supply will come from corn-based ethanol -- and 30% of the corn crop will be used to make it. That suggests to some that the tradeoff between food and fuel is unbalanced.

The government of Quebec, which has offered loan guarantees for corn ethanol plants, recently decided not to initiate any new ones. Instead it will turn its attention to so-called cellulosic ethanol, which would be made from switchgrass, wood chips or other plant matter. It concluded that "the environmental costs of corn ethanol are higher than expected," says a spokesman for the province's minister of natural resources."

It seems that there might be a better option to helping the environment through different fuel sources. The U.S. is trying to find that diamond in the rough to help combat the rising prices of oil. Ethanol seems to be the wrong answer for the fight against oil dependence. The U.S. may need to ditch the idea and look elsewhere ... perhaps the car that uses air pressure for an energy source or hydrogen fuel cells.

Is Acid Rain Killing Off Wood Thrushes?

A study from the Cornell Laboratory of Ornithology has named acid rain as the cause of the declining population of Wood Thrushes. This bird breeds in eastern United States and southeastern Canada and migrates to Mexico and Panama for the winter. The Breeding Bird Survey (BBS), completed as a cooperative effort by both U.S. and Canadian wildlife agencies, claims that the Wood Thrush is just one of many migratory birds whose population has steadily been declining at a rate of about 2 percent per year from 1966 to 2000. Cornell researchers compiled data from the BBS, government studies on acid rain and from Cornell’s own lab study on forest fragmentation to perform a statistical analysis and came to the conclusion that an increase in acid rain might discourage Wood Thrush breeding.

The term acid rain was coined in 1952 by British chemist Robert Smith but acid rain did not become public knowledge until the 80s when the media reported its negative effects on the environment. Soon thereafter young Al Gore produced a documentary called “An Inconvenient Rain” but the film received little recognition. (Kidding) Acid rain results when fossil fuel combustion byproducts, sulfur and nitrogen, join forces with water in the atmosphere. The result of this diabolical duo is known as acid rain. Most of this is allegedly created by Midwestern industry and blown by wind to the east coast. The researchers acknowledge that the Clean Air Act has indeed helped to reduce the amount of acid rain but claim that there are still great amounts falling in the eastern U.S. where some bird populations continue to decline. Most research has focused on acid rain’s effects on habitat loss but this study focuses primarily on its other effects such as calcium depletion in soil. Acid rain causes calcium to leach form the soil which harms the calcium rich food that the Thrush feeds on such snail shells, isopods such as pill bugs, millipedes, and earthworms. Without the necessary calcium a Thrush will produce thin and brittle eggs which might not survive the incubation process. If baby birds do emerge then the Thrush will have a very difficult time locating calcium rich food for her offspring.

It seems that economic efficiency is the only realistic way to examine the apparent Wood Thrush dilemma. Our economy would certainly suffer from greater regulation of the Midwestern power plants in an attempt to save the Wood Thrush and other affected species. If action were taken and power plants and other polluting industries were more strictly regulated throughout the Midwest and eastern parts of the county then it seems likely that the costs incurred from lower outputs/less polluting outputs would get passed on to the consumer. If prices were pushed too high we certainly wouldn’t have achieved efficiency. It does seem unlikely that strenuous pollution legislation will be passed when considering the benefit to millions of people provided with power and other goods produced by polluting industries. Could it be that the market has already determined the efficient amount of acid rain causing pollutants? I would tend to think so considering the millions of Midwesterners (and probably Easterners) provided with power at a reasonable price at the cost of some amount of calcium in northeastern soils.

Thursday, November 29, 2007

More Leadership?

After a recent meeting on global climate change Ban Ki-moon Secretary General of the United Nations called for the United States and China to take "a more constructive role." After all they are the worlds biggest greenhouse gas emitters. This meeting took place before the IPCC was to meet in Indonesia. The IPCC report says we need to take action immediately in order to slow global warming. They also say that global climate change could have a catastrophic affect on the world if we don't act now; island nations could be flooded and deserted, African crops could be reduced by 50%. Many articles I have read says that the people most effected by climate change will be in developing nations. Developed nations will be able to adapt because a main portion of their economy depends on services not agriculture like developing nations. The IPCC also look to the U.S. and China for a quick solution. They want them so spend money on new technology so that the whole world can benefit from it. If the U.S and China were to do this it would have to be because they are going to benefit far greater than by not doing it. That is one reason, I believe, they are not taking any action. The Global Climate is a public good we can not exclude one country from it. To me this means the only way we are going to stop global warming we need a government that can enforce everyone not just put pressure. Another aspect I think that should be explored is developing nations. There is more incentive for them to take action since they are going to be the ones most harmed by climate change. Policy makers need to explore this possibility when writing treaties. This point might be a bit controversial but we would not ask them to do much; just something simple like cutting back on deforestation. When it comes to global warming everyone is looking for more leadership, but no one is wanting to take action. We can not leave this problem to be solved in the hands of two countries.

Tuesday, November 27, 2007

Yeah...I'm concerned about Global Warming!

“We simply must do everything we can in our power to slow down global warming before it is too late. The science is clear. The global warming debate is over.” This quote about global warming did not come from a far left leaning democrat, but a moderate Republican, named Arnold Schwarzenegger. It seems today though that the debate continues on about global warming. This essay will try to shed some light on why the debate on this global crisis continues (my value judgment tells me that the debate should be over) and what can be done on economic level as well as a scientific level to reduce global warming when the debate concludes. So why does the debate continue on about global warming?

The debate continues not because most people reject the idea of global warming but because of two rather minor reasons. The first reason is that as a society we are not sure how to deal with global warming in way that that creates an efficient end result. Although we are not sure, I think that we should at least try something becasue we know that it exists and it is harming the population, I believe this to be fact, but you can take it as my value judgement. The second reason is that sometimes we simply choose not to address the issue, except for when it supplements an argument on another issue. We need to make Global Warming the issue not tip toe around it because it suits us; if we are able to move away from the debate around global warming then we might be able to start addressing the problem.

The most likely economic approach to dealing with global warming is creating a hybrid policy that creates a market, which includes elastic short-term permits along with, a specified number of long-term permits. The permits could be bought and sold or leased without restriction, and each one would allow the holder to emit one ton of carbon per year. Once distributed, the permits could be traded among firms or bought and retired by environmental groups. In addition, each government would be allowed to sell additional short-term permits for a specified fee. The hybrid plan thus combines the key advantages of tax and permit policies. Like a tax, it places an upper limit on the marginal cost of abatement, and the hybrid policy also avoids many of the distributional issues of an emissions tax.

Now moving from an economic approach to solve global warming to a scientific one, one such idea is injecting chemicals into the upper atmosphere to cool the poles, or blocking sunlight by making clouds more reflective or stationing mirrors in space. However, consequences of planetary engineering that cannot be anticipated may be serious and even harm the earth. Hopefully, at the very least the discussion about geo-engineering will finally sound an 'audible alarm' for others.

On one subject, though, there was wide agreement: interest in geo-engineering is no longer merely theoretical. The participants in the conference noted that global emissions of greenhouse gases were already moving above the upper limits predicted by many climate models. As a result, several said, the projected arrival of ice-free summers in the Arctic Ocean has shifted, in a few years, from 2100 to 2040 to 2013. And survival estimates are changing for the Greenland ice sheet, whose melting would cause a potentially devastating rise in sea levels. Once estimated in terms of millenniums, they are now expressed in estimates of only mere decades. It is time for something to be done, I’d rather we respond to this crisis now using an excise tax on global emissions, than geo-engineering, but at this point I am willing to try anything…

Monday, November 26, 2007

Carbon Tax vs. Cap-and-Trade

Summary of the Article

Most people agree that reducing carbon emissions will aid in solving to so-called problem of global warming. The only problem is that a tax would be required to incentivize people to reduce the amount of carbon emissions they commit. Capitol Hill would rather set caps on greenhouse-gas emissions (with allowances to trade emission permits) and tighten up regulations, such as fuel-economy standards than develop a tax for carbon emissions. A few problems with cap-and-trade plans, as evidenced by other nations, are that they take a long time to set up and perfect and raise energy prices for consumers, however, not as directly as a tax.

Carbon Taxes and Incentives

A carbon tax would send a signal to the market to reduce carbon use. In addition, the tax would provide an incentive for research and investment into renewable sources. The article suggests that tax revenues could be returned to taxpayers. For example, “every worker would receive a tax rebate of about $560, cutting the tax bill by 18% for those earning $20,000, or by 4% for those earning $90,000.” In addition, carbon taxes will assist in predicting energy prices. There is urgency in solving the climate crisis, such as global warming. Carbon taxes can be implemented quicker than the cap-and-trade system.

Furthers problems of Cap-and-Trade

A cap-and-trade system is an administrative approach used by a central body, such as the government, to control pollution using economic incentives for achieving reductions in the amount of emissions of pollutants, such as carbon. Unlike the transparency of carbon taxes, the cap-and-trade system is harder for business to predict because of constant fluctuations. The costs of cap-and-trade are very high. The costs are for implementation and for the improvement in technology that would cut carbon emissions. These costs will likely be passed onto consumers with less possibility of a tax shift that the carbon tax could offer.


In conclusion, carbon taxes will be more efficient in reducing carbon emissions. They will be more efficient because nobody likes a tax. Therefore, the greater the chance of being taxed, the more incentive there will be to take responsibility in reducing the amount of carbon emissions.

Sunday, November 25, 2007

The standout crowd no longer standing out!

Well it seems as though the final frontier may have been reached. According to a recent article found on, the long standing climate change apathetic Evangelical Christian demographic is tossing its chips in on the climate change camp. The article details how a sudden shift in evangelical thought surrounding climate change could have a drastic impact on the way this large demographic votes in the coming election.

As a christian myself, I find this rather interesting. For years... strike that... forever, the Christian Church has been rebuking and battling science on everything from birth control to evolution. Now, for some reason, on a topic that a fair portion of the secular audience would say is fallable at best, the Christian demographic seems to be jumping ship and running with science.

Should predictions be correct about the number of evangelical Christians now voting with climate change in mind, there are two very important implications that come as a result of this. First, if the climate change skeptical crowd wants to have any chance at slowing hasty policy making decisions, it better act now! Even those that we would expect to not vote based on climate change policy are beginning to vote that way. There are very few people left still have an unbiased view.

Second, this goes to show the power that the global warming campaign has had. It's a very multifaceted campaign that's now been able to morph itself into a biblical context to grab the attention of perhaps the most key demographic. Furthermore, the momentum that global warming policy would pickup as a result of gaining the large evangelical demographic would be huge.

If indeed it is the case that the sudden shift of thought among christians has really happened, then it would represent a major hurdle crossed for those with incentive interests in passing global warming policy. Personally, I see it as a majore hurdle lost in slowing down this paranoia freight train.

Monday, November 19, 2007

china's three gorges dam

China is quickly becoming one of the world’s leading polluters. Recently, Chinese air pollution has been known to travel up to 3,000 miles away and can be found blowing in to American coastal cities like San Francisco and Los Angeles (

With a huge percentage of its population moving from rural areas with no electricity or running water into an urban environment for job opportunities, China’s government is struggling to keep up with the infrastructure necessary to accommodate the influx. Coal burning for electricity is the current source of most of China’s energy at present, but the government is making an effort to provide more efficient ways to supply the changing population’s need for energy.

One of the alternatives being implemented is harnessing the massive Yangtze River’s currents by building dams to supply hydroelectric power. These dams will drastically change the environments around the river. Also, these large projects involve relocating an estimate 11 million rural people away from the river because of rising waters upstream.

The Three Gorges Dam is getting criticism from environmentalists and economists alike. The former point out the poor environmental planning that went into the project from the start. The river has seen garbage and silt accumulation behind the dam, fertilizer runoff from the flooded land formerly used for agriculture, and no planned infrastructure to remediate the environmental damage. Economically, the Gorge project is costing China much more than many think it is worth. The Dam’s price includes the dam itself, relocating the shore-dwelling people by offering them subsidies and cash rewards to move to the city, and remediating the unplanned for environmental issues, while ensuring they don’t happen in the future.

China’s Three Gorges Dam is an interesting case study on a developing country struggling to meet its energy needs. The growing pains are lessons for everyone.

Link to Wall Street Journal Article:
Link to accompanying video:

Thursday, November 08, 2007

Inner Economist

If you are looking for a winterim course, then you might be interested in my Econ 398 Inner Economist. Maybe another title for this course would be "Economics For My Life." The course will involve reading two books: (1) Tyler Cowen, Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist, and (2) Tim Harford, The Undercover Economist: Exposing Why The Rich Are Rich, The Poor Are Poor -- And Why You Can Never Buy A Decent Used Car! The course will culminate with a set of assignments suggested by The Economic Naturalist. Perhaps a better title for the course would be: "Economics for My Life." You could almost expect to find this stuff in the "self help" section of your favorite bookstore.

Wednesday, November 07, 2007

Gore the Pure

Environmental support comes at a cost- Gore the Pure

“Nobel laureate Al Gore is unlikely to run (for Presidency) again. His Ideas are catching on, but people still don’t want to pay for them.”

One man who seems to always gain media attention is the former vice president, Al Gore. He is a main proponent of many controversial issues that have an impact on environmental economics. Global warming is one concern for many Americans that is gaining recognition. “The proportion of Americans who say they worry ‘a great deal’ about global warming has risen from 28% to 41% in the past four years. Over the same period, the proportion favoring ‘immediate, drastic action’ to protect the environment has risen from 23% to 38%.” Where these percentages came from is not listed in the article, but it raises the questions regarding why there is a sudden concern about the environment. Clearly changes that are made regarding America’s use of energy and emissions will have an impact on the nation’s economy. For the 2008 election it seems that candidates will have to take some sort of stand on what type of policy they will enforce regarding the environment because it is a hot issue that is not going away any time soon.

… no plausible candidate of either party favours a carbon tax, the most efficient way to tackle emissions… Voters prefer solutions that are either cheap or that they thing will be paid for by someone else. A poll for the New Scientist magazine in June tried to quantify this, with sobering results. Only half of Americans would favour rules to force power companies to emit less if that raised their monthly electricity bill from $85 9the average in 20050 to $155 (an estimate of the hike needed to lower American emissions by 5% by 2020). And only 37% could stomach a tax that raised petrol (gasoline) prices to $4 a gallon.

Given these results from the poll it is hard to imagine that any candidate will garner much support if they support making changes such as the ones given as examples above. “You cannot win the White House by telling Americans that they must pay more to drive, or by telling Midwestern coalminers that their industry must clean up or die.” Although it is not certain whether there is really a significant climate change, or global warming, the issue has consumed a substantial portion of media attention and will be addressed politically and have wide reaching economic effects.


Captain Planet

I hate captain planet.

Well, not him per se, but more what the cartoon represents. Captain Planet is a subversive piece of propaganda Joseph Goebbels would be proud of. It teaches innocent children to ignore economic reality. Villains are persons (sometimes less than so) who share two things in common; an unexplained hate for the earth and a desire to make profits. Of course, the real villain is the idea that profits are mutually exclusive from a healthy environment.

Unfortunately for captain planet and his band of multicultural teenagers, people making profits by voluntary transaction is the most “environmentally friendly” social structure. The almost instant rejection of unregulated markets by the common man is simply a sign of how successful captain planet was in polluting minds. This may also be why a former founder of green peace recently wrote a book detailing the organizations hijack by anti-capitalists, not concerned environmentalists. The danger, like many things, comes in the form of common opinion.

Averagely intelligent and poorly educated people are easily manipulated. If one can convince another that exchange (free markets) hurts the environment, it doesn't become a far leap for one to dissuade exchange simply by accusing someone else of not loving the environment. Echoes of “think of the children” and “save the whales” comes to mind in a hauntingly comical fashion. Captain Planet is simply a graphical “think of the children” no less tiresome, but certainly more stylish (red spedos are STILL in)

Alexander Devore

Hawaii's Growing Pains

Since becoming a state in 1959, Hawaii has grown substantially. The main area of growth has been in the tourism industry. According to an article posted to “The Economist” online on September 20, 2007, some people believe that the tourism industry in Hawaii is eroding natural resources, the local culture and the infrastructure. The latest addition to the tourism industry connects the busiest island with two smaller and less crowded ones, Kauai and Maui.

Tourists in Hawaii last month witnessed an unusual display of marine life: not sea turtles or a rare monk seal, but a line of surfers and swimmers preventing a ferry from docking at Kauai. The Superferry is the first big passenger boat to link Oahu, Hawaii’s most crowded island, to two less developed ones, Kauai and Maui. Some say such a link is sorely needed. But critics object that the ferry, which can hold more than 800 people, may interfere with whales and other wildlife, and worry about the asses traffic, fishermen and cheap labor it will bring.

Hawaii is currently one of the most expensive states to live in and also to do business in. With high levels of tourism and vacationers, there are also high rental and living costs. By creating a new route for tourism via the new ferry they are creating an increase in building high priced vacation homes for tourism, and possibly making the current cost of living more expensive for people who already live there. New building of homes and businesses will also diminish the amount of open space on the islands. The problem is two fold. There is a creation of new jobs and possibly some new industry, but it comes at the expense of higher prices and less open land. Some people suggest that a better way of encouraging economic growth is by encouraging more agriculture which is often very environment friendly. Others would contend that the best way to protect the land is to ensure that it is developed it in an efficient way. In considering the issue and growth it is important to look at the environmental implications. Too much tourism over time will certainly have negative and positive effects on the state as a whole. What is the best way to deal with the growth that will allow for more growth over time and not have significant negative long term effects?

On September 22, 2007 a group of civic and political leaders are meeting for the “Hawaii 2050 Sustainability Summit” to determine a long-term growth plan. Many people are at odds on the issue, but it is obvious that there is not just one simple solution to the problem. Subject/cfm?storyid=9833

Jenna Cluley

Tuesday, November 06, 2007

High cost for Environmentalism

Today in class we discussed the importance of the environment to many in the class. Our discussion seemed to also bring some skepticism to the global warming information presented.

As I have mentioned before, I subscribe to Bruce Yandle's theory of Bootleggers and Baptists. He has written a paper discussing this theory with regards to the environment, in particular the Kyoto Protocol. Thinking about what Yandle mentions about carbon trading and other "trading" occurring because of the treaty got me thinking about how many of my fellow classmates will be willing to pay more for reducing global climate change. Since it will be governments "trading" with one another to satisfy the protocol, and the governments will need to have revenue in order to make some of the arrangements, taxes will need to increase.

So my question for my fellow students is this: How much are you willing to pay to reduce "climate change". And, according to the link I have to Environmental Economics, which states that more than half did not pay anything for the album, how will they feel when they have to pay for my share, should I choose not to pay. What if you don't agree with all of the policy the government, are you still going to pa the tax?

Just a thought.

Thursday, November 01, 2007

Pros and Cons of a sharp shift in supply.

In Norway, negotiations have begun on the assigning of drilling rights for oil off of the Norweigian continental shelf.

Environmental groups, however are opposed to this drilling, they would be opposed to any damaging of the environment. They are veheimently opposed to any drilling there whatsoever.

Perhaps these environmentalists prohibitions of new oil production can bring about change moe quickly.

As more and more of the world is the developed and drilled,the amount of untainted land lessens and lessens. Presumably, as this happens, the nvironmentalists will be more and more passionate in their efforts to stop further drilling and development. Put in Economic terms, of the law of demand, as the quantity of natural, untouched land decreases, price (or the lenghths to which enironmentalists would go) for this land increases. If environmentalists increasing efforts hamper and slow the finding of oil, then supply in oil will drop more and more rapidly, raising costs. This will lower the opportunity cost of finding new forms of non-oil energy, potentially quickening the process.

So as tree-huggers increase the implicit cost of oil, production of new fuels may speed.

I say: Hug on, Treehuggers!

Wednesday, October 31, 2007

Why Oil May Not Stop at $100

Neil King, Jr. who wrote an WSJ article stating that after an energy conference , several leading oil experts claiming that oil may go past the $100 mark per barrel due to shrinking supply and higher global demand. These oil experts state that new pockets of oil are harder to reach and more expensive to tap. Yet, two members of OPEC tend to disagree. They assert that the falling dollar is contributing factor in rising oil prices while many of the theories presented at the this year's Oil & Money conference stated that there could be many reasons as to why oil prices are so high. It's hard to pinpoint a single cause.

One concern and possible theory that oil prices are so high is that fact that a lot of production in the Middle East is done fron mature oil reserves. These oil reserves are about 41% depleted and may cause a 15 year production plateau. There are more reserves in the wait but to get to them in time would be very costly and may not be possible due to technology and lack of funding.

OPEC officials have aggressively struck down the notion that they are to blame for the high prices by insisting that the market has more control over oil than OPEC.

With 2/3 of the world's oil coming from OPEC, consumers can hardly discern whether oil prices are set by OPEC or by other factors, such as geopolitics, currencies and/or financial investments within the industry. With the Gulf of Mexico and the North Sea reserves helping to ease the control that OPEC may have thought they exuded over oil prices, these prices, like everything else, have more than just one factor to determine how the price is set. With the dollar falling, that may be a bigger factor to oil prices than OPEC.

Man slain by government lawn watering restrictions

OK, well maybe not just like that but factual errors and sensationalism are instep with the news. Anyways, according to CNN a 66-year-old man was killed while watering his lawn after a physical confrontation with a 36-year-old man. The two were arguing about SYDNEY, Australia's watering restrictions. Two things are striking, how someone watering their lawn can lead to murder and that a third of the article on CNN is about if the old man was right in watering his lawn at that time.

“I killed the last man who watered his lawn before 5.” Might be the new motto of our next generation of prison birds. Attacking someone on their own property is usually indicative of a strong motive, maybe its to steal their chain, maybe you are a contract killer, maybe you want to enforce water regulations. Who knows? Arguing about water regulation shows a deep commitment to upholding the regulation itself.

“The victim was complying with Sydney's water restrictions when he was killed.” well, that was a close call, for a second I thought this might just be a case of self-defense on apart of the young man. I mean, if water use isn't planned than we would run out of water and humans cant live without water.

The underlying message of this article is that without government intervention in resources we would be utterly lost. It ignores that prices communicate knowledge of scarcity. If water is more scarce prices increase and the opportunity cost of using water goes up. This is just one of many examples illustrating how most people are completely retarded.

A Greener California

Automobile enthusiasts around the country have dubbed California legislators as the “Emissions Nazis.” California legislators earned this nickname because in 2002 they passed laws that greatly restrict the emissions of automobiles. They also require that, by 2016, car manufacturers must reach a 30% reduction in emissions in their vehicles to sell them in California. The opponents (car manufacturers) claim that this is unfair because federal law says that it is up to the National Highway Traffic Safety Administration to set gas mileage standards. California legislators reacted to this by saying that they are not regulating fuel economy; rather they are controlling air pollution for the good of their people.

I think that California is well within their right to limit air pollution in their state. However, I do think that what legislators are doing is ridiculous. I grew up in New York City, and was both there, and in California, this past summer. I did not feel any healthier in California than in NYC. In fact, I did not notice any difference, whatsoever, in air quality. If the legislators actually had a way to measure air pollution, and determined that pollution from automobiles was harming their population then their emissions rules would be justified. However, I have never heard to people living healthier in California than in other states. However, I have heard that people will pay more for cars in California. And this is not just hear-say, this is a fact. In order to comply with emissions standards by the year 2016, consumers will most likely have to purchase vehicles such as hybrids. These vehicles are much more expensive than comparable, non-hybrid, cars. In a nutshell, what will happen is people will spend several thousand dollars more for a low emissions car, and never really see any benefits. In this case, California’s use of command and control policy, is providing no benefits to its population and will eventually cause them to have to spend more hard-earned money on cars.

IHS Essay Contest

The Institute for Humane Studies has an essay contest you might be interested in. You can find the information on the contest here. The topic is: What factors lead to prosperity, progress, and human flourishing?

$1 Trillion for 0.13 degrees

The link to the article:,06212.cfm
This article is a great commentary about the Low Carbon Economy Act of 2007 introduced by Senators Jeff Bingaman, D-N.M. and Arlen Specter R-Pa and the big mistake it would be to enact it. To sum up the article; Steven J. Milloy (Author) said the bill would use a “cap and trade” method of reducing carbon emissions. So a limit would be set, arbitrarily set by the government of course, then sell permits to that amount of carbon emission and allow the permits to be traded. Milloy goes on to address what the EPA’s estimates of future carbon emission would be in 2095 with the LCEA implemented. There would be a 23 parts per million reduction from the non LECA world from 718 ppm to 695 ppm. For reference the current level of carbon is 380ppm. Milloy goes on to say that would be at best a reduction of 0.13 degrees from the non action scenario of a change in average temperature of 1.2 degrees. Milloy contends that the $1 trillion dollars required by this bill in the first 10 years and the possible many more trillions required in the future are not worth the reduction in average global temperature increase from 1.2 degrees to 1.07 degrees. I completely agree with this, $1 trillion dollars in more taxes to the American people is way too big of a speculative preventative measure.
Although I agree with his argument, I believe he left out another very important part to his argument. Liberty, what Milloy argues here is a good argument if Liberty is not considered. What I mean is this argument works good if the government owns the world and air. Global warming is a global issue not just an American issue. Where does the government get off in forcing me and others to pay for a global issue when the other people in the world are doing the same exact “damage” and are not paying? When the government sets an arbitrary level of carbon emissions, it is forcing me to consume at some level that I might not find acceptable for my situation when it doesn’t have the property right over the object that I am allegedly damaging in the first place. Having tradable carbon emission permits may be an efficient way of lowering the carbon emissions if that is the main intent, because people could choose the most effective profit maximization for the amount of carbon that is regulated. But, the path to efficiency may destroy liberty in the process. I say spend those trillion dollars to find better ways of enforcing or crating property rights then let the markets truly work. This way we will have an efficient level of carbon emissions and liberty will not be destroyed. That’s my opinion because I value liberty more than efficiency and believe we could achieve both at the same time, which would also be efficient.

Cheney Vs. The Environment

I recently read the above article/blog which discusses the Cheney Vice Presidency with respect to the environment. It is evident that on many occasions Cheney has sided with economic growth rather than environmental concerns. Most specifically, this article discusses an instance where Cheney chose to promote irrigation flow to farming and ranching communities in Oregon rather than protect endangered salmon on the Klamath river; the river that the irrigation canals channel off of. His reasons obviously stem from political motives in many cases but that's not the ethical implication that I want to address. Rather, I want to discuss the certain market failure implications on both sides of this matter.

First, let's look at the negative externalities associated with accomodating ranchers and farmers. If you accomodate the ranchers, that means largely draining the river and most certainly killing large numbers of Salmon. It is necessity that we discuss the fact the negative externality does not land on the fish! That is to say we should not consider the interests of the fish in deciding whether or not there is an externality. The externality, on the other hand, is going to affect the people that have decided that fish have some level of value to society, be it intrinsic, monetary, etc. Therefore those PEOPLE will be harmed because they will no longer have the pretty little salmon to look at or do whatever they want to with. By choosing to give farmers water rather than protect water levels on the Klamath, a negative externality will almost certainly be imposed on those who value the fish over farms.

Next we look at the negative externalities from the farmers' and ranchers' perpective were they to have not recieved water in the name of protecting Salmon. If, in the name of protecting the environment, water was granted to the people who value the lives of the salmon, then farmers and ranchers of that region would have most certainly lost large amounts of revenue as their already hurting growing season would have nearly come to a halt. Additionally, consumers of the goods produced from farming and ranching in that region will now be stuck with greater shortages and higher prices. So there is a negative externality or externalities on this side of the coin as well.

I think it's important to point out two things in discussing the rights and wrongs of this issue. First, we have to continually keep in mind that when evaluating externalities, we have to evaluate HUMAN harm or HUMAN gain because humans are the active members of society... not fish. Everthing non-human is merely a resource to society. So to say that there was a negative externality imposed on the fish would have been entirely false.

Additionally, I think there needs to be some level of discernment when judging whether or not to promote economic interests over environmental concerns. I would recommend that some sort of hierarchy be developed in order to evaluate this. For example, if this choice was whether or not to protect salmon over building a brand new Hilton, then I would probably have a problem with choosing luxury over the future of environmental well being. However, this was farmers and ranchers producing and selling food and basic necessities to society. I don't understand what environmentalists would have us do on this issue. Eventually, population growth requires larger amounts of food to accomodate a society. And in growing food distribution, it may have to come at the cost of some environmental characteristics.

So we've established that either way you look at it, a negative externality WILL be imposed on someone. So much for pareto optimality. Personally, I think the right decision was made to protect the water resources ranchers and farmers use for their well being. This whole issue goes back to the valuing of human interests versus animal interests. By protecting the livelihood of the salmon in the Klamath both producers and consumers would have been harmed due to the lack of water.

Sunday, October 28, 2007

Take the Rocks over Oil Prices

The last time OPEC met, Sept 11th, they sought to regain there authority over there market, so they agreed to increase production by 500,000 barrels a day starting November 1st. However, even with the announcement that there was to be an increase in production, prices still rose on the day of the announcement. Since, this meeting oil prices have continued to climb, and there are two very good reasons for this, a weakening dollar, and because OPEC is a cartel. This essay will thus, discuss the reasons behind for the recent surge in oil prices, starting first with the reasons behind the weakening of the U.S. dollar.
The U.S. status in the world economy is being shaken as the value of the dollar continues to fall in the wake of enormous trade deficits and a nationwide housing recession. Recently, the International Monetary Fund Managing Director Rodrigo Rato predicted that there still is room for the dollar to weaken further. "As the IMF looks to a medium-term stability of currencies, we still see that the dollar is overvalued," he said. Other experts have also stated that the dollar could revive if U.S. domestic demand picks up again. However, they are pessimistic, predicting that it will be difficult for the dollar to regain its old glory.
It is clear to see know that the dollar is not likely to rebound anytime soon. But, why should a falling dollar contribute to rising prices? The reason is because world oil prices are quoted in dollars, and with a dollar that continues to weaken compared to a resource that continues to have an ever increasing demand, oil prices will continue to climb.
The second reason oil will continue to climb is because OPEC is a cartel. This oil cartel, which is earning extraordinary profits, will continue to do so because the willingness to pay remains constant and greatly exceeds the cost of production of the oil exporting countries and because they operate as a cartel they are able to charge monopolistic prices.
OPEC plans to meet again in November, but with prices currently at 88 dollars a barrel, it is not a stretch to think that oil prices soon reach 90 to 100 dollars a barrel. OPEC leadership has said that it is worried about the economic conditions in the world market, but they do nothing, and just keep getting richer. Prices could decrease however, if the boost in world production helps balance world supply or at the very least prices could level off, if the dollar was able to stabilize. But, with what the experts have said concerning the dollar and oil futures continuing to rise, it would be wiser to take the Rockies in seven, than to bet on oil prices stabilizing anytime soon.

"Save the Poudre"

I cant say that I'm exactly sure what criteria must be met to be designated Colorado's only "wild and scenic river" but it seems that the Cache la Poudre river is just that. The sad truth is that it loses its splendor and majesty as soon as it leaves the Poudre canyon with 90 percent of its water being diverted near Fort Collins for farming and local residents. With population forecast to expand and the looming possibility of drought there is a water district that wants to divert the remaining 10 percent of the river into two reservoirs.

The 40,000 acre-foot Galeton reservoir, located near Greeley, will be filled by waters from the South Platte River whilst the Glade Reservoir, located near Fort Collins, will have a 170,000 acre-foot capacity and will be filled by the Cache la Poudre. Water conservation authorities claim that these reservoirs are mandatory in order to preserve Colorado's existing agriculture. Water would be provided to 15 water districts on northern Colorado with the 40,000 acre feet contribution of the project. Twenty five thousand acres of farmland will also be preserved by the excess water.

Gary Wokner is an ecologist and a member of a group that opposes the use of Cache la Poudre water, cleverly named, "Save the Poudre." He contends that Colorado can meet its current and future water needs through "conservation and education, coupled with modest improvements in agricultural irrigation efficiency." The municipal planners disagree and state that conservation is not enough to combat Colorado's long term water shortage. It seems that these municipal planners are not taking into account all the economic effects of this kind of action. The local farmers would be well supplied by the entire flow of the Poudre but what of the local wildlife living in and around the river? Is the price of being prepared for supposed coming growth worth the environmental costs necessary? Should a river boasting credentials such as "Colorado's only wild and scenic river" be dammed up for the anticipated population boom of agriculture based communities such as Greeley? I think not but I'm sure the Poudre won't stand in the way of "progress."

Tuesday, October 23, 2007

Polluter Taxes

The Polluter Must Pay

The article by Meg Bortin of the International Herald Tribune discusses a poll that was conducted by the Tribune. According to the poll that was conducted in five European countries and the United States said they believed that industrial companies should be taxed according to the amount of pollution they produce. The idea behind the tax is that the “polluter must pay.”

Industry Reactions

A spokesperson at Corus, the European steel maker said they are committed to “minimizing the environmental impact of [their] operations through the adoption of sustainable practices and continuous improvement in environmental performance.” At Total, the French oil company, a spokesperson stated that they didn’t believe the industry was responsible for all emissions of greenhouse gases. Analysts believe that the poll results showed that the public wanted the responsibility for global warming to bear financial responsibility, even if the costs would be passed on to consumers.

Who is Responsible?

According to the article, “Asked who is responsible for global warming, respondents blamed themselves along with industrialists and politicians. Between 54 and 61 percent in the six countries said that industry, governments and people in general were all responsible.”

An Alternative to Taxes

Bortin notes that instead of taxing polluters, the European Union forces the industry to restrict carbon-dioxide emissions that contribute to global warming. “Companies may produce a certain amount of pollution and bear costs if they exceed that level: They must either pay to implement pollution-reduction measures or buy new allowances.”

Tax Everyone?

In keeping with the “polluter must pay” idea, should the participants also be taxed because they presumably drive cars? Automobiles are also responsible for emitting carbon-dioxide into the air. It is true that the participants took some responsibility for their part in pollution, however, the article did not mention that any of them volunteered to be taxed in the same manner they believe the industry’s who also create carbon-dioxide fumes are taxed.

Economic Efficiency/Cost-Benefit Analysis

Can it be said that it is efficient for the industry’s to be taxed, but not the participants of the poll who also pollute? If people were to be taxed for every type of pollution, than even infants who fill dirty diapers with noxious fumes should be taxed! This is not efficiency. One of the costs of taxing polluters is that the cost of goods and services would increase because installing, maintaining, and operating pollution control equipment would be passed on to the consumers in the form of higher prices (Titus 27). In addition, there would be higher costs associated with monitoring compliance with pollution taxes that result from regulations (Titus 27). The only benefit would be that their would not be as much contribution to carbon-dioxide emissions as their would be before the tax. In this case, the costs far exceed the benefit, therefore not allowing for economic efficiency.

Command-and-Control (CAC)

There is already a command-and-control in place in the United States regarding harmful emissions that contribute to global warming. The emission standard is a regulation that states how much an individual and their automobile can produce. The emission charge is a fee paid to the government. Isn’t this fee in a sense already a form of tax? According to the Chicago Study, CAC costs are estimated to be 14 times for expensive than is necessary (Titus 288). CAC are not cost effective nor efficient.

US Subsidy

Historically, US farmers have received subsidies to keep small farmers from going out of business by reimbursing them for losses incurred while the price of their particular crop is low. Does it make economic sense for the government to give money to farmers to compensate? Shouldn’t the market dictate the profits of these farmers?
It may make sense, in a time of crisis like the Dust Bowl, for the government to bail out a vital part of the economy. Yet when it becomes a regular occurrence, there is a major market failure. Even when the price of a particular crop is high, the farmers often receive government subsidies. Also, the farmers have fewer incentives to compete for consumers: it is economically rewarding for them when the market prices are LOW.

Environmental consequences

Subsidizing farmers also has a negative effect on the environment. The government allows farmers to drill for groundwater with no upfront cost to them. The farmers use this groundwater, with all of their straws in the same cup, competing to use the most out of the resource before it is used up by a competitor. If someone were given property rights to the valuable groundwater, the depletion may not be an issue. Many of the largest aquifers in the US are being exhausted at an alarming rate. However, the farmers in some of the driest states must use copious amounts of this water to grow “cash crops”, which are unsuitable for particular geographic areas.

Economic consequences

Recently, the crackdown on illegal workers has left many small and large farms unable to afford the costs of doing business in this economy, even with the subsidies. Many are buying land in Mexico to use similar workers legally, thereby bypassing this inconvenience. As a result, the US is growing more reliant on foreign food, and becoming much less self-sufficient. At the same time, farmers are still being subsidized at a greater rate. The system cannot hold itself up for long. Many foreign countries, such as Canada and the UK, are starting to look at the US’s subsidy program as being unfriendly and unfair.
The recent trend has been for the government to fund research into alternative fuel technologies. If we can find a crop, ethanol made from corn or sugar that replaces gasoline as a major fuel source, possibly our energy woes and our farming woes will be rectified. It is yet to be seen whether the free market will reimburse this ingenuity, or the farmers and technology will continued to be subsidized.

A city that is doing something with their trash

For many years now Seattle has had mandatory recycling , today 44% of their trash is recycled. Which is way above the national average of 30% of trash that is recycled. Their goal is to reach 60% by 2012 and 72% by 2025. Those numbers seem some what unrealistic to me if the national average does not also rise. How then can Seattle reach such large numbers? The answer to this question is quite simple. It's the law. On trash day they have three different containers outside their house waiting to be picked up; there are new laws are in place that might even add more containers. Seattle like many west coast cities are profiting from recycled goods. A big part of that is because of their location and ports; there has become a market for recycled paper predominantly in the Chinese market. Waste paper now sells for $90 a ton. I don't think that's too bad considering it used to be trash and now people are making money off it.
However, is Seattle an example for the rest of the country? My suspicion is that it is not. If it was than the numbers would be the same all over the country. Seattle succeeds because of the laws that are in place that force people to recycle. If those laws were not in place would people still recycle. Guess that someday Seattle will understand why the rest of the country does not recycle. Because we are not forced to.

Monday, October 08, 2007

Global Warming Politics

You might be interested in this story about Congressman Dingell's position on global warming policy.

Sunday, September 30, 2007

Chicago: between a rock and a stinky place

In Chicago, the projected greenhouse gas threat in the future is through the roof.

Governor Rod Blagojevich has various policies at hand to consider but all seem to come with high cost. Chicago's chief source for power is there huge coal reserves. Un fortunately, coal is one of the most polluting forms of electricity production. One considered policy for fixing this was to have the factories conain the emissions, rather than send them into the atmosphere. While this is possible, it would raise the cost of power to prohibitively high levels.

What he seems to be wanting to do is build newer coal factories that can constrain emissions more efficiently and cheaply. Going hand in hand with this, of course would be the mandate to reduce output on, or completely shutdown older, dirtier, less efficient factories.

If we have learned anything from the great Depression, it is that paying productive capital not to produce does not work.

What should happen is that we are looking for clean air which can either be classified as public good or a positive externality, either way the policy is the same. The cost of controlling the waste should be subsidized. That way producing more cleanly won't raise the prices. Since newer factories can clean more efficiently, they can "pocket" more of the subsidy. The innefficent older factories will naturally produce less then, for this reason as opposed to producing less for command and control reasons.

The subsidy would be paid by tax payers as a "fee" for enjoying the public good or the positive externality of a cleaner Chicago.

Leaders Weigh Emissions Fund

In a recent article published in the WSJ, leaders of developing and developed countries, met to discuss ways to lower emissions and reduce global warming. The Bush Administration believes that technology improvements would be the fastest way to lower carbon emissions yet at the same time it would expand U.S. equipment sales. The most important agenda is a plan to help fund developing nations with investments for upgrades in energy facilities. China is very interesting in gainingmosr funding as it will become the largest carbon emittor because of its coal power plants. Some at the conference believe that cap and trade emissions reduction program are the key to promoting more investments.

Cap-and-Trade Systems: How It Works
As stated by, "cap and trade systems draw on the power of the marketplace to reduce emissions in a cost-effective and flexible manner. In practice, cap-and-trade systems create a financial incentive for emission reductions by assigning a cost to polluting. First, an environmental regulator establishes a “cap” that limits emissions from a designated group of polluters, such as power plants, to a level lower than their current emissions. The emissions allowed under the new cap are then divided up into individual permits—usually equal to one ton of pollution—that represent the right to emit that amount."

"Because the emissions cap restricts the amount of pollution allowed, permits that give a company the right to pollute take on financial value. Companies are free to buy and sell permits in order to continue operating in the most profitable manner available to them. So, those that are able to reduce emissions at a low cost can sell their extra permits to companies facing high costs (which will generally prefer to buy permits rather than make costly reductions themselves)."

"A key advantage of a cap-and-trade system compared with other emission reduction strategies is that it gives companies flexibility in the manner in which they may achieve their emission targets. Another advantage is that it sets a clear limit on emissions. Traditional approaches often focus on emission rates or require the best available technology, but do not always require that specific environmental goals be met."

Apparently, intergrating incentives into policies can be an effective way to encourage a correct practice. Instead of trying combat or correct an established or encouraged and damaging practice, policies like the cap-and-trade system can encourage and reward for the correct or "right" behavior by an organization. At the same time, the organization may be able to establish lower operating costs by adopting new policies that align themselves with these rewarding environmental policies.

The Gas Guzzler Tax

The gas guzzler tax is something that has always fascinated me. If you go to the page that my article is linked too, you can view a table that shows how the gas guzzler tax changes with reduced fuel economy. Basically, if your vehicle gets 22.5 mpg or more you are not taxed, and the tax increases (at an increasing rate) until the sub-12.5 mpg category, where the tax is $7700. This is a feeble attempt to discourage people from buying fuel inefficient cars.

The problem with the gas guzzler tax lies in the design of the system itself. According to "The purpose of the Gas Guzzler Tax is to discourage the production and purchase of fuel inefficient vehicles." A corrective tax, such as this one, may actually discourage the purchase fuel inefficient vehicles, but only if it is applied in an appropriate manner. If you read the beginning of the description of the tax, it says that it only applies to cars, not trucks. This means that the average SUV and pick-up truck owners pay no gas guzzler tax. This is absurd because, realistically, these make up most of the fuel inefficient vehicles in the country. Most cars that guzzle gas are niche cars, such as sports cars, and ultra luxury cars. People that can afford these kinds of cars aren't really going to care about a gas guzzler tax. After all, if you are buying that $90,000 dodge viper (with a massive V-10), odds are you can afford to fill your gas tank, and pay the guzzler tax.

All in all the gas guzzler tax is a feeble attempt at the government trying to protect the environment. In order for this corrective tax to be effective it would have to apply to the majority of vehicles that actually guzzle gas!

Interalizing the Cost of Seconhand Smoke.

In a recent article posted on fox news, democrats have chosen to implement a 156 percent increase in the federal cigarette tax, raising the tax from 39 cents a pack to $1 dollar a pack. Some argue that such a tax increase only affects low-income people, because low-income people are more likely to smoke. But I think otherwise. This tax increase is another way of dealing with the everyday frustration that is air pollution. Air pollution caused by the millions of people in America and in this case the thousands in Colorado that pollute the air with their cigarette smoke.

The 156% tax increase is nothing more than an excise tax. For many, many years nonsmokers have been forced to sit, stand, eat dinner or in Colorado walk the streets dealing with secondhand smoke. Second hand smoke is nothing more than a negative externality (A consequence of an economic activity that is experienced by unrelated third parties) produced by smokers.

So what does a 156% tax increase have to do with secondhand smoke and nonsmokers? The tax allows smokers, low-income and smokers of a higher income, to internalize the cost of their air pollution, otherwise known as secondhand smoke. The $1 per pack tax is a shift towards efficiency. Because of the tax, the social cost of second hand smoke is moving steps closer to equaling the private cost of smoking. Efficiency!

The Tax Shift

The Tax Shift

An emerging methodology in the effort to encourage environmentally friendly business practices is the attempt to implement incentives in the tax code. Environmentalists want to modify the tax code in a way that would provide incentives by allowing participants to avoid taxation. The idea is that the current tax code is flawed as it allows for business to pass their pollution expenses on to the taxpayer. One example of this occurrence is the Exxon Valdez oil spill of 1989 in which millions of gallons were spilled in the Prince William Sound. Exxon paid a $1 billion settlement for the damages but the tax code allowed them to deduct the loss as a business expense, passing $250 million of the cleanup costs to the taxpayers. Other examples include the mining and timber industries ability to secure sizeable tax breaks for their specific practices and shift costs in the same manner as Exxon. The tax shift proposal seeks not to abolish these tax code practices but to reform it in a way that allows companies to enjoy tax benefits for their environmental awareness. Furthermore, tax shift ideals include a number of corrective taxes and emphasize the need for the government to act as a corrective state and heavily regulate pollution. This excerpt from the article reveals how much emphasis is placed on corrective taxation in the tax shift proposal.

“New and progressively-graduated taxes could shift 10 percent of the federal tax burden in the next 10 to 20 years. As defined by Alan Thein Durning and Yoram Bauman in their book Tax Shift, and by Redefining Progress in Tax Waste, Not Work, the levies could include: Carbon taxes to decrease the generation of greenhouse gases threatening worldwide climatic change. Governments could impose a tax--say, $50 per ton of carbon emissions--or combine a smaller tax with user fees or revenues from the sale of pollution permits;

Pollution taxes to reduce the contaminants flowing into our rivers and streams, filling our landfills and eroding the quality of our soil. There are an estimated 250 human-made chemicals harbored in the living tissue of the average American;

Point source taxes to reduce pollutants pouring forth from the outflow pipes and smokestacks of sewage treatment plants, factories and incinerators;

Traffic taxes in the form of tolls imposed strictly during rush-hour congestion periods, could promote the use of carpools and mass-transit, as well as flextime work hours;

Higher use fees for resources owned by the public, such as grazing or mining that occurs on public lands.

Tax incentives would be offered to invest in energy efficiency and technological improvements. For example, a system of new taxes and permits may dramatically reduce global warming gases and non-point source pollution, which is toxic runoff into rivers and streams. Taxes could be levied on development resulting in loss of biodiversity in wilderness areas. Other new taxes, some of which have already been proposed on the state level (see sidebar), are levies on carbon dioxide emissions and gasoline, taxes on pollutants, taxes on virgin materials and increased fees for using public resources.

Advocates of the tax shift have opted for the corrective route rather than embracing Coase’s ideals. Looking to tax breaks for environmentally conscious business practices and corrective taxes for polluting activities. Coase’s ideas of private resolution through negotiation seem to have been discarded entirely by the tax shift ideology. At the national level, and certainly when dealing with greed stricken corporate entities, it seems this method might be the best way to regulate pollution generated by big business. Private negotiation just might not work with Exxon Mobil and the small hotel down the river so why not try and provide Exxon with tax based incentives to avoid pollution? If the tax breaks are substantial, and I think they would have to be, I suspect that in the interest of profits they’ll make every attempt to procure them.
Jordan Ford

Sharing the Wealth
If We Shift the Tax Burden From Work to Waste, Everyone Benefits

by Brian Dunkiel, M. Jeff Hamond, and Jim Motavalli

Water is a dying resource

Water is an increasingly scare resource all over the world, thereby an excellent example of supply and demand, and conservation for future generations. Because water is scare, demand for the resource is increasing, driving up the price. Residents in Washington D.C. pat about $350 for approximately 480 cubic meters of water, whereas that same amount of water would cost approximately $1700 in Guatemala City. The price people pay for water is determined by transport costs, the total demand for the water, and price subsidies. An example of a transport cost is in China. China is constructing 3 canals to transfer water from the Yangtze River to Beijing and other growing northern provinces. Water markets exist in some portions of the world. Where these markets exist, it is evident how high the scarcity of water can be. For example, in India, water scarcity has encouraged farmers to profit by selling their water instead of the goods from farming. This promotes a rapid drop in the underground water tables which is a “back-up” resource of water. Because of the drop in the underground water tables, water is not being preserved for future generations in India. Water subsidies can be very large. For example, water revenues in Delhi are less than 20% of what it spends on water each year. Oftentimes, residents in urban slum areas have no access to municipal water and must purchase their water from private surveyors who bring the water in by truck. The price for this water is exceeding $1 per cubic meter. The poorest households in Uganda spend approximately 22% of their income on water, while those in El Salvador and Jamaica spend more than 10% of their income on water. Water subsidies also exist in California and Utah. The price of the water subsidies provides for a good example of the scarcity of water. One way to avoid the subsidy problem is to use a block rate pricing system where a low level of consumption is very cheap, while prices increase at higher levels of consumption. If there is a way to make the use of water more efficient, then it will be relatively inexpensive and will save water and energy.

-Erin Kelly