Posts Tagged ‘environment’

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Reason on energy: nuclear power and light bulbs

March 16, 2011

Lynne Kiesling

Two good articles on misguided government intervention and energy policy at Reason recommend themselves. Ron Bailey’s written a really excellent, clear, analysis of improved, safer reactor technology, and argues that the best response to the Fukushima accident is not a ban, but rather is innovation:

One hopeful possibility is that the Japanese crisis will spark the development and deployment of new and even safer nuclear power plants. Already, the Westinghouse division of Toshiba has developed and sold its passively safe AP1000 pressurized water reactor. …

One innovative approach to using nuclear energy to produce electricity safely is to develop thorium reactors. Thorium is a naturally occurring radioactive element, which, unlike certain isotopes of uranium, cannot sustain a nuclear chain reaction. However, thorium can be doped with enough uranium or plutonium to sustain such a reaction. Liquid fluoride thorium reactors (LFTR) have a lot to recommend them with regard to safety. Fueled by a molten mixture of thorium and uranium dissolved in fluoride salts of lithium and beryllium at atmospheric pressure, LFTRs cannot melt down (strictly speaking the fuel is already melted).

Ron accurately, in my view, argues that interventionist government energy policy is part of the reason why such technologies have had such a difficult time coming to market:

The main problem with energy supply systems is that for the last 100 years, governments have insisted on meddling with them, using subsidies, setting rates, and picking technologies. Consequently, entrepreneurs, consumers, and especially policymakers have no idea which power supply technologies actually provide the best balance between cost-effectiveness and safety. In any case, let’s hope that the current nuclear disaster will not substantially add to the terrible woes the Japanese must bear as a result of nature’s fickle cruelty.

Similarly, Jacob Sullum criticizes interventionist government energy policy for imposing the paternalist belief that individuals are not capable of making an intelligent decision about the costs, benefits, and tradeoffs involved in using either incandescent or compact fluorescent light bulbs. CFLs turn on too slowly, don’t work in dimmers, and don’t last long enough to make up for their higher cost … and yet, our government tells us that we have to use them because we are too short-sighted to include the environmental impact of incandescents in our decision-making? We should trust a bureaucracy that has mandated such an immature, inferior technology to make a better decision than we each can individually? Yeah, right.

I agree with Jacob when he concludes

I will be happy to use CFLs if and when their manufacturers get the kinks out, or LED bulbs when they become affordable. But I am not the only one who thinks we’re not there yet, judging from the Energy Department’s estimate that more than 80 percent of residential lights sockets were still occupied by incandescent bulbs last year.

By forcing this transition, the government is ignoring the preferences that most Americans have clearly expressed in the marketplace. Which explains why I cheered when I heard Paul declare: “You busybodies always want to do something to tell us how to live our lives better. Keep it to yourselves.”

Posted in Economics, Energy markets, Environmental policy | Tagged , , | 1 Comment »

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New York Times article advances public view of environmental issues surrounding hydrofracking

March 3, 2011

Michael Giberson

At first it seemed like just another newspaper article on the potential environmental dangers of fracking to produce natural gas from shale, but on second look there is something new in the New York Times article, “Regulation Lax as Gas Wells’ Tainted Water Hits Rivers.” Most such stories, and much of the public’s attention, have been focused on the possibility that a badly drilled well could taint groundwater. The new article reveals that disposal of the produced water recovered during fracking operations is likely the more important environmental concern. While produced water is (generally supposed to be) treated before being returned to waterways, some of the facilities used for treatment may not be capable of providing the services needed.

The web version of the story includes extensive related materials, including interactive maps, spreadsheets filled with data, and perhaps most significantly 1,113 pages of documents with annotations provided by the Times (described as the most significant documents out of more than 30,000 pages the Times reviewed for the project). The documents were collected via open records requests, obtained directly from regulators in the Marcellus shale region, or leaked to the Times by state or federal officials.

No doubt that a badly-drilled or poorly finished well can create problems, but the enviro-hype and associated docudrama film have insisted that this is the biggest problem. Probably not. The industry can reasonably point out that thousands and thousands of hydrofracking wells have been completed and of those many thousands only a handful have been linked to any kind of groundwater issue. In fact, as one of the documents points out, fracking has been used for years in Pennsylvania without a lot of controversy to produce coal-bed methane. The bigger hazards may be in produced waters downstream from drilling operations.

Some of the documents relied upon are several years old, and some reports are preliminary rather than final. There is much more to be learned, including – possibly – that the wastewater disposal problems are not as serious as the story suggested (or, of course, it could be worse).  Clearly, this newspaper article isn’t the end of the story, but it does the service of advancing the public’s understanding of the issue.

UPDATE, March 7: Fracking wastewater not causing radioactivity issues in Pennsylvia rivers

Posted in Energy markets, Environmental policy, Regulation | Tagged , | 3 Comments »

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Our next fear: peak rocks?

March 1, 2011

Lynne Kiesling

Economist and teacher extraordinaire Steve Horwitz has done a great video for Learn Liberty on the question “are we running out of resources?”

We’ve done our share of “peak oil” debunking here over the years, so it won’t surprise you that I find The Onion’s take on the question of running out of resources highly amusing:

Geologists: We may be slowly running out of rocks

Posted in Economics, Energy markets, Environmental policy | Tagged , , | Comments Off

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Bedbugs, public policy, and relative risk assessment

September 7, 2010

Lynne Kiesling

Over the past few weeks I’ve been paying some attention to the increasing, and spreading, bedbug infestations in the U.S. I’m not particularly squeamish, but bedbugs are rapacious colony-dwelling critters that can survive for a year without food, feast on the blood of sleeping animals (humans YUM YUM), and colonize easily in mattresses and box springs. They spread due to population density and mobility, and their small size and imperviousness to eradication means that even good hygiene is not enough to prevent infestation.

As infestations move out of hotels and apartment buildings in densely-populated areas like Manhattan and into schools and nursing homes across the country, more and more people are looking for effective ways to eradicate them, short of burning all of an infested person’s bedding and clothing (a decidedly medieval approach!). Pesticides that are currently legal are no longer effective, and techniques like steaming and freezing are not feasible for large items like mattresses and box springs.

In part, this wave of bedbug infestations is an unintended consequence of environmental regulations banning certain pesticides, particularly DDT, that used to be used on bedbugs and were quite effective. Over time, bedbugs have evolved resistance to the pesticides used since the DDT ban.

The bedbug resurgence illustrates the challenges of doing relative risk assessment in regulatory policy. I’ve painted a pretty disgusting, but accurate, picture of a bedbug infestation, but it’s also the case that pesticides have toxicity and duration effects, particularly on vulnerable populations like children and the elderly; however, I would make the normative claim that we want to protect children and the elderly from bedbug infestations too. Which harm is bigger: the harm from a bedbug infestation, or the harm from exposure to chemicals to eradicate the bedbugs?

The uniformity of our environmental regulations do not allow for such relative risk assessments, and the EPA makes the decision on our behalf that the harm from chemical exposure is bigger. What if they are wrong? From my perspective and with my preferences, they are wrong — I think the contagion and propagation effects in addition to the disgustingness of an infestation cranks up the cost of an infestation relative to the cost of a concentrated, careful application of chemicals to eradicate them. Others certainly assess those relative risks differently, because risk preferences are subjective and vary a lot from person to person and place to place. But a uniform, federal-level regulation does not admit for differential costs and benefits across people and places.

Jonathan Adler tackles some of these relative risk assessment issues in a post yesterday, but he focuses more on a specific issue of federalism:

Health officials in Ohio and several other states believe that the risks posed propoxur are outweighed by the severity of the bedbug problem.  The EPA disagrees.  The EPA has the legal authority to preempt state preferences, and is often obliged to under existing statutes, but should it?  Why should the EPA’s assessment of the relevant risk-risk trade-offs override those of the states? …

If local communities wish to strike a different risk balance than the feds, the EPA should not stand in their way.  It is one thing for the EPA to inform local choices, and help clarify the relevant health trade-offs, quite another to impose one set of health preferences on the nation as a whole.  If EPA’s resistance to propoxur was motivated by spillover concerns, such as potential groundwater pollution that could cross state lines, the federal rule would make sense.   But it is not and does not.  This is precisely the sort of environmental problem which state and local preferences should control.

Jonathan also mentions another unintended consequence of such uniform, stringent regulation on indoor pesticides: to deal with bedbug infestations, some people are resorting to pesticides meant for outdoor use, with deleterious health effects.

Sadly, I think Glenn Reynolds has a point when he observes that “The real lesson of the bedbug epidemic is this: Once, the government’s primary role was protecting us from things like that. Now its primary role is stopping us from fixing them.”

Posted in Economics, Environmental policy | Tagged , , | 5 Comments »

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Overfishing and the impending collapse of fisheries

June 9, 2010

Lynne Kiesling

Why is it so difficult, in terms of politics and transaction costs, to define and enforce property rights in fish? If we fail to do so, some important fish species are likely to go extinct due to overfishing, such as the bluefin tuna. Migratory fish like the bluefin pose the biggest policy challenges, and it’s difficult to implement a property rights policy like catch shares — the combination of the fish migration and the international, deep water fishing makes negotiation and policymaking difficult (plus in the case of tuna there’s regulatory capture — the NGO in the tuna fishing industry, ICCAT, routinely caves to Japan’s arguments not to reduce fishing limits).

The other day Alex Tabarrok wrote about fishery declines, highlighting the important and exciting research on catch shares of marine environmental economist Chris Costello. Alex’s post is full of useful and informative links, including a new Reason TV video on catch shares.

I always cover fisheries when I teach environmental economics, both because the economics are fascinating and difficult and because the more educated and aware we are of our policy failures, perhaps the more likely we are to actually implement better policy as we come to the brink of species extinction. I am not usually a “doom and gloom” girl, but this is one area where doom and gloom are warranted, unfortunately.

Posted in Economics, Environmental policy | Tagged , , , , | 1 Comment »

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Electricity generation, New Source Review, and waste

May 17, 2010

Lynne Kiesling

On Friday at Environmental Economics, Tim Haab wrote about the implications of New Source Review for innovation in a regulated industry, and how to represent it in the standard Pigouvian model (do go read the whole post, it’s very useful). The basic question is this: does the stifling of innovation that results from New Source Review regulations change the fundamental analysis of the question of pollution?

I have some quibbles with how Tim frames the “externality” question — in particular, I prefer the “markets don’t fail, they fail to exist” formulation of the fact that some uncompensated cost is present, rather than “market failure” — but his post makes a really important point with respect to New Source Review and the Pigouvian model:

The technological improvements resulting from removal of New Source Review may shift the private supply curve to the right, and may reduce the emissions per unit of output, but that doesn’t solve the fundamental externality problem.   So even though the technological improvements may reduce per unit emissions, emissions may actually increase from the decreased costs of producing electricity (decrease per unit emissions, but increased units). Regardless, with or without the NSR regulation, there will still be emissions and those emissions will remain unpriced (inefficiently) by the market. ‘

While I agree that existing regulations may have reduced the incentive for innovation, their existence doesn’t change the fundamental market failure–emissions are not rationed through prices.  For a market to work efficiently, ALL costs and benefits of production and consumption must be internalized.  In such cases, emissions will be efficiently rationed.

I take issue with a couple of these points. First, if the Pigouvian model is the correct way to model the pollution question, it is incorrect that “ALL costs and benefits of production and consumption must be internalized”. For an illustration of why this claim is not correct, ask yourself this question: how much do you pay your neighbors for the lovely flowers they plant in their front gardens, and if you did pay them, would that induce them to plant more flowers? Of course you don’t pay your neighbors for the external benefit you derive from their lovely gardens, and I think it’s a safe generalization that your neighbor-gardeners have more intense preferences over their gardening decisions than you do over their decisions. What does that imply? It implies that even if you did pay them as compensation to internalize your benefit, if your marginal benefit is small relative to theirs, your payment is unlikely to change their decision at the margin of how much gardening to do. In other words, the only uncompensated costs and benefits that are important for achieving the optimal level of abatement (of a cost) or increase (of a benefit) are the costs and benefits that are Pareto relevant, that would at the margin change the behavior of the relevant party.

This must be a pet issue for me because I’ve written about it before, with respect to inefficient energy efficiency consumer subsidies, with respect to externality accounting, and with respect to the fact that Alex Tabarrok got a flu shot because he wanted to get kissed.

As a coda: I do not think that the Pigouvian model is the correct model, because it ignores the reciprocal nature of costs; in other words, it ignores the fact that the pollution problem is a problem of conflicting uses of a scarce common-pool resources, and the people with those different uses are imposing costs on each other. The polluter is not the only one creating a cost.

Second, I think Tim’s right about his interpretation of NSR and the Pigouvian model, but I also think that the Pigou model of a per-unit tax on output from a polluting firm is not the best model to use to see the effects of NSR, unless the policy you are analyzing is a per-unit output tax. I think a fuller answer to his astute student also includes the following:

If the policy is an emissions tax (e.g., a per-ton tax on sulfur dioxide or greenhouse gases), then NSR regulation artificially keeps abatement costs higher than they would be in the presence of the technological innovation. Thus at the margin, the NSR regulation does affect the firm’s choice, and the amount of abatement/emissions, because if the tax rate is higher than the abatement cost, then the firm will choose to abate. Thus NSR means that less abatement takes place under an emissions tax, by keeping abatement costs higher.

If the policy is a tradeable permit system, then NSR regulation artificially keeps abatement costs higher than they would be in the presence of the technological innovation. A firm’s abatement costs determine its demand for permits in the permit market. Thus at the margin, the NSR regulation increases the firm’s willingness to pay for permits, and leads to higher costs of achieving the abatement/emissions target.

Posted in Economics, Electricity, Environmental policy | Tagged , , | 2 Comments »

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Pigou as public choice economist, not a Pigouvian

April 26, 2010

Lynne Kiesling

I was intrigued last week to read Bruce Yandle’s short piece in Regulation discussing Pigou and his ideas about taxation in the context of modern “Pigouvian” policy proposals. I recommend his essay highly; it communicates eloquently how Pigou’s ideas are currently being used as a justification for a variety of forms of taxation. Many of these tax proposals (bank taxes, gasoline taxes, salt taxes, sugary soda taxes) may be motivated by some political elite’s notion of what is “good for society”, but Yandle also makes clear that such proposals may instead be motivated by raising revenue.

Even more interestingly, Yandle does something that few current economists do — he reads Pigou’s original arguments. In them he finds something that I find intriguing (and although I have read large portions of Pigou’s original works, I was not aware of this):

As strange as it may seem, Pigou did not believe that government could improve human well being by fine-tuning behavior with taxes, subsidies, and regulation. His concern was grounded in what we today call Public Choice. He did not accept the notion that politicians, given constitutional constraints, would be capable of implementing an efficient and effective set of taxes and subsidies. Put simply, he did not believe the politicians could get the calculations right. Instead of making things better, the chances were just as good that things would be made worse. Instead of keeping faith with implementing a well-designed tax, the politicians’ interest would be deflected to writing loopholes for favored interest groups and finding ways to generate ever more revenue.

Yandle quotes Pigou from his seminal 1932 work The Economics of Welfare, Chapter XX, “Intervention By Public Authorities” (1932). Pigou’s discussion in this chapter is striking in how it presages modern public choice arguments, as Yandle indicates. Pigou is also making a clear argument for analyzing the performance of different institutions and what are the correct comparisons to make. Take, for example, this quote from p. 332, which immediately precedes the quote Yandle used in his essay:

[The case for government intervention] cannot become more than a prima facie one, until we have considered the qualifications, which governmental agencies may be expected to possess for intervening advantageously. It is not sufficient to contrast the imperfect adjustments of unfettered private enterprise with the best adjustment that economists in their studies can imagine.

Not only is Pigou making a public choice argument in this chapter; in this quote he is also making a point that Harold Demsetz would later term the “Nirvana fallacy” in “Information and Efficiency: Another Viewpoint” (1969). In the remainder of the chapter Pigou goes on to argue that early-20th-century improvements in voting access, in bureaucratic administration, and in communications technology made government interventions more appropriate in more situations than had been the case previously, with less voter engagement and a less productive bureaucracy. To do a true Demsetz-style non-Nirvana comparison, though, Pigou would have had to compare the effects of those changes on the productivity of markets and other institutions for private ordering, relative to their effects in public administration.

Still, I find this chapter of Pigou incredibly striking. It indicates Pigou’s willingness to admit, and to analyze, the effects of institutions on economic outcomes. Here he’s essentially saying that institutions matter, a position that his colleague John Maynard Keynes did not hold. Pigou’s argument is even more striking to me in light of my recent reading of Buchanan and Wagner’s Democracy in Deficit, which I mentioned a couple of weeks ago. Pigou’s analysis of government intervention seems to me to have more in common with Buchanan and Wagner’s argument, and their criticism of Keynes’ approach as institutionally sterile.

Pigou, Buchanan and Wagner, and the Yandle essay all give some substantial food for thought as we think through the range of very interventionist policy proposals being put forward right now. I also recommend Thom Lambert’s post at Truth on the Market about the Yandle essay, which is what prompted my musings here; he goes into more detail in discussing the Pigou-Coase comparisons.

Posted in Economics | Tagged , , , | 6 Comments »

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Jaguar proposes a luxury turbine hybrid vehicle

February 3, 2010

Lynne Kiesling

Yes, you saw that correctly, a turbine. According to Wired:

Jaguar Land Rover is working on the car with British gas turbine manufacturer Bladon Jets and electric motor manufacturer SR Drives. The Technology Strategy Board, which funds business development in the U.K., is underwriting the first serious attempt at a turbine car since Volvo built the Hybrid Environmental Concept in 1993. The goal, according to Bladon, is the “world’s first commercially viable – and environmentally friendly – gas turbine generator designed specifically for automotive applications.”

… But the Jag — like the Volvo — would use a miniature gas turbine only to generate juice for the electric motor. Bladon says its axial flow turbines are small, lightweight and run on anything from natural gas to biofuel. That, it says, makes them a great alternative to the conventional engines used in range-extended hybrids like the Chevrolet Volt.

That’s pretty cool! Previous turbine vehicles didn’t make it because they were noisy, so it will be interesting to see if this venture fares any better.

And I love that one of the commenters on the post told one of my favorite jokes:

Q: Why is it the British don’t make computers?

A: Because they haven’t found a way to make them leak oil yet.

When I was a kid my dad had a 1967 Jaguar XKE (burgundy, with black leather seats). I think it spent more time in the shop than on the road, but it was a gorgeous car.

Posted in Economics, How cool is this?, Technology | Tagged , , | 3 Comments »

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Fish populations surge in Oregon

January 22, 2010

Lynne Kiesling

Here’s a good piece of news from the fishery and common pool resource front: salmon and steelhead populations are dramatically larger in the Pacific Northwest than anticipated, and than they were last year.

… More than 680,000 Coho salmon returned to Oregon last year, double the number in 2007. The Coho run was so bountiful the ODFW called in volunteers to herd fish into hatchery pens. There were reports of creeks so choked with salmon, “you could literally walk across on the backs of Coho,” said Grant McOmie, outdoors correspondent for a television news team in Portland.

And ODFW forecasters expect more than half a million spring Chinook salmon to start swimming upstream in March, about two and half times 2009′s run, and nearly four times what came home in 2007. That would be the biggest spring Chinook run since 1938, when Oregon began keeping records of returning Pacific fish.

It is all part of a fish rebound no one expected. In 2007, one state office warned, “Populations of anadromous [or oceangoing] fish have declined dramatically all over the Pacific Northwest. Many populations of Chinook, Coho, chum and steelhead are at a tiny fraction of their historic levels.” The year before that, a naturalist in Seattle wrote: “It is hard to find the silver lining in a situation as dire as the collapse of wild salmon off the Oregon and California coasts.”

This is very good news. I don’t, though, think that we can declare victory in our challenging attempts to figure out how to govern the commons in fishing, which is extremely tricky and complex. In fact, I interpret this population surge as indicating just how complex a system a fishery is, where the set of interacting effects on fish populations is large — overfishing, pesticides, changes in glacial melting patterns, changes in ocean temperatures that affect how much plankton is available (and how nutritious it is), etc. etc. In such a complex system, flexible and adaptive institutions such as individual transferable quotas and catch shares can at least deal with the overfishing variable (earlier KP posts on fishing, ITQs, etc. are here).

Posted in Economics, Environmental policy | Tagged , , , | Comments Off

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Sarewitz/Thernstrom LA Times op-ed on leaked climate research documents

December 17, 2009

Lynne Kiesling

I am blissfully on vacation this week in Maui (biking, diving, snorkeling, swimming, and not spending time on the Internet), but did check in briefly this afternoon.

For those of you interested in keeping up with the “politicization of science” and bastardization of the scientific method aspect of it that angers me the most (and that I commented on in an earlier post), I recommend this op-ed in the LA Times from Daniel Sarewitz and Samuel Thernstrom. I don’t agree with their entire argument, but it’s an exceedingly valuable contribution, despite the dichotomous R/D, left/right red/blue framing that I dislike so much. Here’s an example from their piece that may catch your attention:

The real scandal illustrated by the e-mails is not that scientists tried to undermine peer review, fudge and conceal data, and torpedo competitors, but that scientists and advocates on both sides of the climate debate continue to claim political authority derived from a false ideal of pure science. This charade is a disservice to both science and democracy. To science, because the reality cannot live up to the myth; to democracy, because the difficult political choices created by the genuine but also uncertain threat of climate change are concealed by the scientific debate.

For further commentary on the Sarewitz/Thernstrom piece, I also recommend the comments from Jonathan Adler at the Volokh Conspiracy, environmental studies professor Roger Pielke Jr., and Ron Bailey at Reason.

Posted in Economics, Environmental policy | Tagged , , | 3 Comments »

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