environmental-economics

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I am here at the site of the Democratic National Convention for social, economic, and environmental justice, and that no small exclusive group of people can make decisions which threaten the health and lives of millions

“Higher temperatures result in riper grapes with elevated sugar concentrations, higher potential alcohol levels, and lower acidity.”

How will climate change and adjusting weather patterns affect the wine industry?

Image credit: Blue grapes by Roberto Verzo. CC-BY-2.0 via Flickr.

americanprogress.org
The Government Should Begin to Measure America’s Powerful Outdoor Economy

“The economic arguments for protecting public lands and waters are so deeply rooted in history and society that they are second nature to most Americans today. Public opinion research commissioned by The Colorado College in 2013 found that more than 9 in 10 Westerners see national parks, national forests, wildlife refuges, and other public lands as essential to the economic prosperity of their state. A growing body of research shows that proximity to parks, trails, and outdoor spaces is among the most prominent factors that businesses and workers consider when choosing where to locate. Consumers are bombarded with ads from health insurance companies that encourage them to get outdoors to improve their health and to cut medical costs. The evolving uses of the outdoors have even affected American fashion, with outdoor gear now so ubiquitous that companies such as The North Face and Patagonia have become global brands. Indeed, the outdoor recreation industry currently supports 6.1 million jobs in the United States. According to reports commissioned and published by the industries themselves, U.S. outdoor recreation accounts for more direct jobs than oil, natural gas, and mining combined.”

Spot-on issue brief from the folks at Center for American Progress.  Check it out.

The source of [sustainable] wealth is the functional ecosystems. The products and services that we derive from those are derivatives [i.e come from the ecosystem]. It’s impossible for the derivatives to be more valuable than the source. And yet, in our economy now, as it stands, the products and services have monetary value but the source–the functional ecosystems–are zero.
—  John Liu on Ecosystem Restoration [ca. 42.38]
Divestment

I have to write a blog post for my school’s divestment website and I decided I would post it here first as a test run. This is the rough draft version so bear with me! Maybe I will edit this post after I have the final version.

An Economics Major’s Perspective

When I tell people I am studying both economics and environmental studies, they usually raise an eyebrow. Economics and the environment don’t really go together like macaroni and cheese. But both of them are crucial to solving the climate crisis. As it stands, many environmental activists know the facts and science behind climate change, but do not have a firm grasp on economics; likewise many economists know their models and how to calculate the most efficient outcome, but they might not understand the environmental problems. So I am here studying at Northeastern, trying to bridge this gap between economists and environmentalists, and solve environmental problems in a way that benefits everyone. When first heard about Divestment, it made sense to me from a moral and environmental perspective. Most of the time when I try to explain divestment to someone, I find myself answering the question “Why should we divest?” with the environmental reasons first. I do this because the economics behind divestment can seem complicated if you have never taken a course in economics before, while the environmental impacts of fossil fuels are more well-known. Well I decided to take what I have learned so far in my economics classes and apply it to divestment to give everyone a better idea of the economic principals behind pollution, why the fossil fuel companies are so rich, and why we have not yet switched over to renewable energy.

            So one common concern people have with Divestment is, “Our endowment is just a drop in the well for the fossil fuel companies. Divesting will not make a difference”. Well – they are party right. Divesting our endowment alone will not shut down Exxon Mobil. Why are these fossil fuel companies so rich, that divesting millions of dollars wont even make a dent in their daily operations? The first reason is pretty obvious; our society is set up in a way that makes it very difficult to stop using fossil fuels. In economics we call this term path dependence. Our highways, electric cables, bus systems, gas pipes, etc. are all billions of dollars worth on infrastructure that we have already put down to accommodate fossil fuel use. Another reason that the fossil fuel companies are making so much money is because fossil fuels are so “cheap”. Yes I just put cheap in quotation marks because they are not actually cheap!! When you go to the grocery store to buy a can of soda what are you really paying for? You are paying for the aluminum that makes up the can, the carbonated water and chemicals that are inside, the workers wages that helped to make the coke, and the cost of the capital (the factories and machieneary) that helped to make the coke, and some extra money for profit. You also pay a 5-cent deposit to help encourage recycling.  Now think about what you pay for when you fill your car with gas. You are paying for the same four things, in economics we call these the factors of production; land ( all the land that oil companies own for their headquarters, drilling sites, etc.) labor (the petroleum engineers, geologists, oil rig workers), capital (oil rigs, pipes, trucks) and entrepreneurship (profit). And all that totals to about 4$ a gallon or whatever it is now a days. But wait- is that really all that you are paying for? What about the eight-year-old girl in China who was the first to be diagnosed with lung cancer due to pollution? What about the victims of hurricane sandy whose homes and memories were destroyed? What about all of the people who will be displaced when the sea level rises a few feet? There are so many negative externalities that occur as a result of burning fossil fuels. And the oil companies are not the ones paying the price. The people are paying this price. In economics we draw graphs and models for everything and this is no exception.

 

Source: http://ingrimayne.com/econ/resouceProblems/FreeRes2.html

We can think about this graph in relation to the oil market. On the X axis, is the quantity of oil produced, on the Y axis is the price of oil. Right now, oil companies are producing at the point where the demand = supply (for them) this is represented where the blue line intersects the green line. However, this is not an efficient quantity because there are so many extra costs to society that are not calculated in the price you see at the pump.  If you were to draw another supply cure to reflect these costs, it would be higher. In the case of oil it would be much higher! As you can see at the new intersection, marginal cost to society is equal to demand, this is the quantity that should be produced. The more costly a product is to society, the less quantity should be supplied. However, as long as business continues as usual firms will continue to produce at q1.

If a company produces a product that causes chemical waste, the company must pay to have that waste disposed of properly, and they pass this on to consumers in the form of higher prices. However, fossil fuel companies’ continue to sell gasoline at a “cheap” price and the total cost to society is not reflected in the market price – if it was I am sure gas would be so expensive that we would change over to clean energy quickly.

Next I am going to talk about the transition from fossil fuels to clean energy! I have another graph for you, this one will be easier to understand after reading my last paragraph.

 

 

So this is another graph showing the cost of relying on certain energy sources. I just made this myself as an example and I did not calculate tons of data to get these curves so disclaimer: this graph is not accurate! But it will explain the concept. Consider the starting point on the graph to be the present. So as you can see, the cost of using oil for fuel right now is very low and the cost of using renewable energy is very high. This is because of the things I mentioned earlier, mainly path dependence, the fact that oil companies have oil in their reserves, and the cost of producing this oil is artificially low. However, as time goes on and their reserves begin to dwindle, carbon taxes get introduced etc. the cost of fossil fuels will only get higher. There might be another form of fuel that will be slightly cheaper than fossil fuels (such as natural gas) that is still increasing in price because it is finite. However once more technology is developed and put in place, the cost of renewable energy will decrease. Fun fact! I studied abroad in Iceland this summer and they have already reached this point. Although their geothermal power plants cost a LOT of money originally, now hot water and home heat is so cheap.

So  time to bring this all back to divestment! I am going to mention path dependence one more time. One of the reasons we are still so path dependent on fossil fuels when other countries have begun to switch their infrastructure is because of the lobbying power the big fossil fuel companies have. They spoke a bit about this at the divestment panel at the Boston Public Library on November 18th. Is divestment the best option? No. But because of how powerful the fossil fuel companies are, the only way we can really being the change is to take away their power. And their power lies in their money. So for every dollar we have invested in fossil fuels we add to the power of fossil fuel companies and make it harder for America to transition to renewable energy. 

Environmental Innovation: Reclaiming Entrepreneurialism

Of course the discourse on innovation and entrepreneurship has been owned for so long by the right and centre right we almost don’t question it any more. So the rhetoric goes, innovation is a consequence of competitive forces, entrepreneurship is only possible in a society that rewards the risk taking behaviours of individuals with a higher chance of profit for their reward. But environmental innovation is often overlooked, unless accompanied by photos of airships, new jet-liners or spectacular images of as yet unaccomplished technology. 

Keep reading

I recently started work on a big project about the Snowy Hydro Scheme in NSW - the structures, the landscapes and environments, the recreation, towns etc. It’s one of the civil engineering wonders of the world and has had huge impacts on the modern history of Australia - economic, cultural, environmental, recreationally etc. This is a large undertaking that will require many visits to the Snowy Mountains during different seasons. It’s very much in its infant stages but thought I’d start sharing some of the images here.

This image of a tree in Lake Eucembene was taken at Old Adaminaby, a settlement that was relocated a few miles up the road due to the valley being flooded to create Lake Eucumbene.

vimeo

“Conventional economics is a form of brain damage.” - David Suzuki

Watch on sincecombahee.tumblr.com

Does there have to be a tradeoff between environmental justice and economics? Majora Carter, president of the Majora Carter Group, talks to Melissa Harris-Perry about the complicated challenge of creating opportunity and protecting the environment as an activist caught in the middle.