Tag Archives: environment

Virginia Postrel on light bulbs

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Lynne Kiesling

If you have not caught Virginia Postrel in her new columnist gig at Bloomberg View, here’s a good chance, for Virginia’s column today is about U.S. federal light bulb regulation; both Mike and I have written about light bulb technology and the EISA 2007 “performance standard” that is leading to the disappearance of the 100-watt incandescent bulb from the market.

Virginia’s column addresses both the quality/aesthetics issues and the economic flaws of technology mandates, concluding that federal light bulb policy is not an efficient way to reduce electricity use. Instead, in bootlegger-and-baptist fashion:

… the activists offended by the public’s presumed wastefulness took a more direct approach. They joined forces with the big bulb producers, who had an interest in replacing low-margin commodities with high-margin specialty wares, and, with help from Congress and President George W. Bush, banned the bulbs people prefer.

It was an inside job. Neither ordinary consumers nor even organized interior designers had a say. Lawmakers buried the ban in the 300-plus pages of the 2007 energy bill, and very few talked about it in public. It was crony capitalism with a touch of green.

After a thorough discussion of the disappointing quality features of CFLs — poor light quality, lags in starting, shorter-than-advertised life spans (but not enough discussion of the lack of dimmability, which is my primary complaint), Virginia analyzes how this technology mandate fails to allow for consumer autonomy and choice in how to control and manage their own electricity use:

But banning light bulbs is one of the least efficient ways imaginable to attack those problems [air pollution or CO2 emissions]. A lamp using power from a clean source is treated the same as a lamp using power from a dirty source. A ban gives electricity producers no incentive to reduce emissions.

Nor does it allow households to make choices about how best to conserve electricity. A well-designed policy would allow different people to make different tradeoffs among different uses to produce the most happiness (“utility” in econ-speak) for a given amount of power. Maybe I want to burn a lot of incandescent bulbs but dry my clothes outdoors and keep the air conditioner off. Maybe I want to read by warm golden light instead of watching a giant plasma TV.

This. This is a large source of aggravation with regulation more generally, as well as a large source of the unintended consequences that inevitably accompany such regulation. The “government knows best” attitude that drills down too far and does not target the ultimate objective, which is reducing electricity use, both fails to deliver on its goal and is patronizing and condescending in the bargain. That’s a lose-lose policy … for everyone except for those big bulb producers who are the beneficiaries of this legislation.

Hydraulic fracturing panel discussion at AEI

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Michael Giberson

Kenneth Green hosted a panel discussion on the environmental consequences of hydraulic fracturing at the American Enterprise Institute. Panelists were: Ron Bailey of Reason Magazine, Mark Brownstein from the Environmental Defense Fund, Timothy Considine from the University of Wyoming, and Amy Mall of the Natural Resources Defense Council.

The video above is just a short sound bite by Ron Bailey, I couldn’t figure out how to embed the full video. Find the full video archived at the AEI website. Readers here who have followed the fracking posts will be familiar with many of the points discussed, but the video offers some sense of which environmental issues are currently seen as important.

The UK’s commitment to carbon reductions?

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Lynne Kiesling

I’ll be interested to see how the political, economic, and environmental consequences of this weekend’s new carbon approach in the UK unfolds; according to the Guardian (and the too-much BBC that I listen to):

Cabinet ministers have agreed a far-reaching, legally binding “green deal” that will commit the UK to two decades of drastic cuts in carbon emissions. The package will require sweeping changes to domestic life, transport and business and will place Britain at the forefront of the global battle against climate change.

The deal was hammered out after tense arguments between ministers who had disagreed over whether the ambitious plans to switch to more green energy were affordable. The row had pitted the energy secretary, Chris Huhne, who strongly backed the plans, against the chancellor, George Osborne, and the business secretary, Vince Cable, who were concerned about the cost and potential impact on the economy.

However, after the intervention of David Cameron, Huhne is now expected to tell parliament that agreement has been struck to back the plans in full up to 2027. He will tell MPs that the government will accept the recommendations of the independent Committee on Climate Change for a new carbon budget. The deal puts the UK ahead of any other state in terms of the legal commitments it is making in the battle to curb greenhouse gases.

Not surprisingly, reactions have been strong. Take the Telegraph’s outspoken James Delingpole, for example:

But if what it says is even half way true, then David Cameron has made the most unforgivably damaging decision of his entire political career. It will delay our economic recovery, lay waste the British countryside and cement Cameron’s reputation as a man driven not by principle (as, say, Margaret Thatcher and Winston Churchill were) but by a grubby, son-of-Blair urge to keep clinging on to power at no matter what cost to the country at large.

While I agree that it’s unwise to base expensive policy changes on inconclusive science and on a false belief in our ability to control outcomes in complex systems, that statement does seem a bit hyperbolic.

I think this is happening in the context of some other political machinations, and it may not play out exactly as reported in the Guardian. But since in some ways the UK is a bellwether of carbon policy, this should be interesting to watch — are renewables sufficiently economically and technologically developed to meet demand at prices that customers are willing to pay? Will retailers and customers in the UK be willing to explore/interested in exploring the combination of transactive digital technology and dynamic pricing that may modulate that demand relative to forecasts based on old technologies? Will this lead to the perpetuation of government subsidies of the sort that are currently being debated in the US?

New atmospheric research on contrails

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Lynne Kiesling

When I think about climate, greenhouse gases, carbon policy etc., I always worry about the certainty that people (typically politicians) want to attach to models (actually, that statement holds for macroeconomic models too, for the same reasons). The global climate is an incredibly complex system, comprising many individual agents and local systems that interact and lead to non-deterministic outcomes (thus the complexity, at least in part). In trying to understand such complex systems we construct models of their behavior. Even the best models are abstractions from some of the details of reality (as statistician George Box said, all models are wrong but some are useful).

Regarding climate, I’ve thought that the most with respect to clouds, and many different ways that clouds can affect climate. Capturing the effects of clouds in a model is difficult because there are so many variables — height, water vapor, etc. — and clouds have different effects depending on those variables and their interactions.

Thus I read with great interest at Ars Technica today about a new research study published in Nature Reports: Climate Change on the atmospheric effects of airplane contrails. Separate from any effects of the emissions from the combustion of jet fuel, the formation of contrails due to the production of water vapor as a by-product of burning jet fuel may itself contribute to greenhouse effects by increasing water vapor in the troposphere. According to the abstract:

An important but poorly understood component of this forcing is caused by ‘contrail cirrus’—a type of cloud that consist of young line-shaped contrails and the older irregularly shaped contrails that arise from them. Here we use a global climate model that captures the whole life cycle of these man-made clouds to simulate their global coverage, as well as the changes in natural cloudiness that they induce. We show that the radiative forcing associated with contrail cirrus as a whole is about nine times larger than that from line-shaped contrails alone. We also find that contrail cirrus cause a significant decrease in natural cloudiness, which partly offsets their warming effect. Nevertheless, net radiative forcing due to contrail cirrus remains the largest single radiative-forcing component associated with aviation.

While I remain cautious in drawing inferences from models of such complex systems, I think research like this at least gives us some insights into the dynamics of how a local system like cloud formation works; in particular, the “substitution” that occurs with the reduction in natural cirrus formation was something I always wondered about. Worth reading.

Reason on energy: nuclear power and light bulbs

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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.”

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

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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

Our next fear: peak rocks?

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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

Bedbugs, public policy, and relative risk assessment

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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.”

Overfishing and the impending collapse of fisheries

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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.

Electricity generation, New Source Review, and waste

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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.