Jason Barton

Professional Information and Energy News

Archive for the ‘externalities’ tag

Fracking in Colorado

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Ugh, this is such a tough issue.

On one hand, there are substantial benefits from the oil and gas brought out by this process, as well as the jobs and revenues that come with them. On the other, we need the long term vision that will protect human and environmental health and the discipline to ensure both of them.

Particularly in places like Weld County, which is Colorado’s biggest agricultural producer and home to many proposed and existing fracking sites, we see the tangible positives and negatives of fracking, and are hearing from citizens who fall on both the pro- and anti-fracking sides of the debate. In agricultural communities the health of soil and water is important not just for the immediate implications to human health, but also for the long term implications for the health and safety of the food we grow, and the livelihoods of the people who depend on selling that food.

I’ve said on this site before that it is the job of government to internalize the externalities, to create a regulatory framework that ensures industry activities do not have negative impacts on the communities where they operate. This framework must include proactive measures motivating companies to guard against problems, as well as reactive measures that force organizations to pay those external costs of clean up and damages if there are  problems.

The important issue raised in the article below is that companies have worked to avoid making the payments even when they are found to be at fault, causing local citizens to question the statewide framework and seek to implement policies on local levels.

The upsides are that Colorado citizens are learning the details of these issues, making our voices heard from different perspectives, and forcing government and corporations to listen and take action. Keep at it, y’all.

By Bruce Finley
The Denver Post

Denver metro cities digging in before oil and gas drills do

COMMERCE CITY — Even in this bastion of industry that hosts a refinery, residents are imploring their elected leaders to protect them from oil and gas drilling planned within city limits.

“This is where we live, where we made our investments of our lives. It’s not about money,” Kristi Douglas said Thursday during a working-group forum, the latest of dozens of city and county meetings in Front Range communities.

[…]

Colorado’s State Land Board hit the brakes on a controversial metro-Denver drilling project after learning that ConocoPhillips is embroiled in a lawsuit for failing to pay the state $152 million for cleanup of leaky underground gas tanks.

[…]

“The state has the experience and the infrastructure to effectively and responsibly regulate oil and gas development,” Colorado Department of Natural Resources spokesman Todd Hartman said. “A healthy industry is important to our state’s economy, and a mosaic of regulatory approaches across cities and counties is not conducive to clear and predictable rules that mark efficient and effective government.”

[…]

But the board delayed a decision after it learned another state agency is suing Conoco in a dispute over past cleanups of contamination at 354 sites of leaking underground gas tanks.
[…]
“We need to get the state General Assembly involved. We need to get some things, like setbacks, addressed,” Benson said. “Yes, we welcome industry here. But you’ve got to protect the health and safety of your people.”
Read the complete article here.

Real People Show the Need to Internalize the Externalities

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If the devastation of the Gulf oil spill is too abstract, as it is for many of us, this story places faces and immediacy on the tragedy. The women discussed here have already lost their husbands and are now in danger of further losing their ability to make ends meet, as soon as the end of this month, this of all months. Yet executives and policy makers bicker over who’s responsible.

If BP and the other companies that operated the well were not fully prepared to pay the costs, then they should not have ventured after the benefits.

To put it unemotionally, the pain these women are experiencing is an externality. The job of government is not to distort the market, letting these firms profit at the expense of third parties, but to ensure that these companies are free to pursue their profits while ensuring that they must pay the costs, internal and external, direct and indirect, associated with their business.

Ah, it’s so simple, no?

  • DECEMBER 16, 2010, 12:08 P.M. ET

Widows Push Congress to Act on Gulf-Spill Measure

By DIONNE SEARCEY

Two widows of men killed in the Gulf of Mexico explosion that led to the largest offshore oil spill in U.S. history say they fear Congress is losing interest in passing a measure soon that would allow them to seek damages in court for the tragedy.

Under current law, families of anyone killed at sea—rather than on land—are banned from receiving damages for loss of care and comfort. Congress is considering a measure that would change the law for families of workers who died in the BP PLC explosion.

Read the entire article here.

Written by Jason

December 16th, 2010 at 11:54 pm

External Costs to be Paid by Consumers and Producers rather than Governments or Taxpayers

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Interesting. The people in Maine have gone some way towards internalizing externalities–the costs associated with a good that are paid by neither producers nor consumers, but by involuntary third parties. The world’s largest modular carpet manufacturer, Interface, and their CEO and founder, Ray Anderson, have taken similar steps, but on their own, rather than mandated by government, to reclaim their carpets, recycling the materials and reusing them within their own factories. As an intelligent business man and also someone who cares about the environment, Anderson saw this as a win-win situation, gathering materials at low cost when going to deliver new products to buyers, and converting what would otherwise be waste into new inputs.

This process, what they’ve here called Extended Producer Responsibility (ERP), has been called ‘cradle to cradle’ thinking, and is, hopefully, gaining favor. It mimics ecological systems in which there is no such thing as waste, only materials and energy constantly cycling through a closed system.  William McDonough & Michael Braungart wrote a book that has been a sort of seminal text on the subject. They argue, as do many economists, that our present industrial system is doomed for failure in the way we think of inputs and outputs, with little regard for where those inputs are coming from, and where they go when we’re finished with them.

For instance, landfills are an expensive, unhealthy use for land. Taxpayers bear the costs. Now, at least in Maine, producers will bear more of those costs, presumably passing them on to the consumers, forcing all of us to rethink supply chains and how we treat waste. The plan has much potential.

A trick is to make this a market-driven process, rather that one hindered by excessive government bureaucracy. Then again, policies that ensure costs are paid by consumers and producers, rather than by taxpayers (who may not even be using the products) and governments, this seems to me to be sound conservative politics.

Governments oblige manufacturers to take back used goods for disposal

Mar 31st 2010 | NEW YORK | From The Economist print edition

FOR seasoned shoppers, “buyer’s remorse” is a familiar feeling. “Seller’s remorse” may also become common soon, as ever more governments order manufacturers to assume the cost of disposing of their products after consumers are done with them. Until recently, most laws on “extended producer responsibility” (EPR) or “product stewardship” applied only to specific types of goods, such as car tyres or electronics. But in late March Maine, following the lead of several Canadian provinces, became the first American state to enact a blanket EPR law, which could in principle cover any product.

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Governments also hope that EPR laws will encourage firms to rethink the way they make products, designing them for longevity and recyclability rather than for the landfill.

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This worries businesses, few of which are eager to pick up the bill for waste disposal. Some business associations, such as the California Chamber of Commerce, have denounced EPR bills as “job killers”. They point out that the increased costs are ultimately borne by consumers. But that does not worry supporters of EPR, who argue that the price of a product should reflect its full “life-cycle” costs, including disposal, rather than simply leaving taxpayers to make up the difference. Moreover, unless manufacturers are forced to bear the costs, they will have no incentive to make their wares easy to dispose of.

[…]

Not all companies are mourning, however. Some manufacturers and retailers have voluntarily rolled out collection programmes in states that do not require them. Hewlett-Packard, a technology firm, claims to design its products with ease of recycling in mind—cradle-to-cradle, as the jargon has it. Staples, which sells office supplies, and Home Depot, a home-improvement retailer, both offer national take-back programmes in their stores for such items as computer monitors, compact fluorescent light bulbs and batteries. Such programmes may enhance customer loyalty, particularly among environmentally conscious consumers.

Read the entire article here.

Why farms may be the new forests

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Yet another Economist article that falls right in line with my PhD dissertation. One of us might be on to something.

Healthy ecosystems, such as forests, on or bordering agricultural land helps water and nutrient cycling, reducing the need for irrigation and chemical fertilizers. The enhanced biodiversity also acts as natural resistance to pests. The trick is paying farmers to keep forests on their land, compensating them for the loss of revenues from the crops that would have been planted on that land. These forests perform ecosystem services that greatly benefit society as a whole, economically and in terms of human and ecological health. Paying farmers helps to internalize those positive externalities.

Dec 30th 2009
From The Economist print edition

In the war against climate change, peasants are in the front line

 Into battle in the eco-war

FOR people who see stopping deforestation as the quickest climate-change win, Copenhagen seemed a success. Although there is still work to be done on the initiative known as REDD (Reducing Emissions from Deforestation and Forest Degradation), the deal struck in Copenhagen made it into a real thing, not just an idea. The notion of reducing net deforestation to zero was not explicitly mentioned, but it looks much more credible than it did two years ago.

As well as giving heart to the protectors of trees, this outcome is encouraging for people whose focus is not on forests but on fields. Climate and agriculture matter to each other in several ways. On the downside, farming is a cause of deforestation, and also emits greenhouse gases in its own right—perhaps 14% of the global total. On the upside, agriculture can also dispose of heat-trapping gases, by increasing the carbon content of soils.

Read the entire article here.

Written by Jason

December 31st, 2009 at 12:06 pm