Category Archives: Enviromental Policy

Agriculture will be the most pressing issue of our time

Below is a great TED talk that brings some awareness to what seems will be the most pressing issue of our time (in 10-30 years) as it is the prime contributor to our rapid resource depletion and increased risk of cataclysmic climate change.

I feel that economics is best for sorting out this problem. How best to get others to eat less in the more developed nations when high food costs prohibit people’s decision to over-consume. The same could be said of high costs of oil and decreased driving habits. Many pricing distortions that the modern economies experience directly impact the relatively cheap pricing of food; specifically water, fuel, and choice of production. (corn subsidies)

Although as much as economics has a benefit, there is a cost. Producers will be focused on maximizing gains by irrationally increasing output. (a la tragedy of the commons) This will drive already poorly productive agricultural producers to expand their output into valuable biodiversity resources such as the rain-forest.

The best solution IMO, would be to end the developed worlds price distortions in combination with aggressive conservation policies for the developing world that would limit our total % of land used for agriculture and offer appropriate support to help current fertile land gains to reach 90-100% of its maximum productive capacity.

The two should limit over-consumption while also promoting increased productivity.

Internalizing Externalities: How to clean up the BP oil spill the right way

The Environmental Economics blog has been covering the oil spill really well, so I suggest heading to their blog and keeping up with it. They just posted a video on a way to help soak up the oil in the gulf:

How cost effective would this be?

Just from eyeballing the video, let’s say a pound of hay and can soak up a pound of oil.   How many pounds of oil is being spewed by BP’s mishap?  According to the NYtimes, 5,000 barrels per day seems to be the rate.  At 5,000 barrels per day, that amounts to 210,000 gallons of oil.  At 7 pounds of crude per gallon, (give or take) your looking at  1.47 million pounds of oil being dumped per day.  Now, price of hay varies depending on amount, type and time of year.  Given some googling on the internet, hay can run from $0.02 to $0.10 dollars per pound.    Let’s say it can get as a bad as $0.50 per pound.  In that case, it would cost around $29,400 to $147,000 to $735,000 pounds, given the price of hay.  Add in the labor that would be needed to disperse the hay and then clean it up plus the equipment and manufacturing and you would have a pretty pricey cleanup.  But compared to the alternative, some say the clean-up will total $12.5 billion for BP.  In addition, using hay is more enviromentally friendly than the alternative AND it can be implemented now.

So, what would be the total cost if the hay solution was implemented? Assume it would take a month tops to absorb all the oil. Note once the oil is absorbed in the hay, environmental damage is limited – basically because oil doesn’t have to be cleaned from anything else.  Note that the alternative chemical dispersant not being used won’t have to harm the environment.  Note that the oily hay can be retrieved and then either burned for energy or maybe even refined so that the oil is turned back into a usable source.  Not counting capital and labor, the input prices would cost: $882,000 to $4.41 million to $22 million per month. That’s it.

Worst case for the year: $264 million < $12.5 billion

How much more could the thousands of shrimp boats cost to implement it and the seaweed rakes to clean the stuff up on the beach? Certainly not more than what many have projected, even if a traditional, yet smaller clean-up will be implemented.   Even if the $12.5 billion figure is taking into account ALL costs such as the lost product and actual equipment cleanup, variably hay would be cheaper and much easier to implement given community wide mobilization.

Yes, I know this analysis is too generalized and is not taking into consideration many factors such as… blah, blah, blah.  The point is this: If BP or the government won’t stand up, then the local community will, dat’s who!*

*Apologies for the very terrible impression of how Cajun people act.  For more information, please visit stuffcajunpeoplelike.com.

The End of Cheap Coal

One of the reasons why the push for Cap and Trade was a good idea was it would not only internalize the cost of carbon emissions, but it would also raise the price of energy created from coal.   With higher prices for kilowatt per hour from coal energy, cleaner energy sources would become competitive.  Currently, cleaner energy sources can barely compete with coal, with exceptions of course.  But if legislation wasn’t going to push up the price of burning coal, then in the long-term, rising international demand would.  That time is now.

In 2009, China has ceased to export coal and has now began to import it.  According to the financial times, in 1993 the same happened to oil.  China’s oil imports exceeded what was being imported and the consequence was a climb in the average oil price, all too well known thanks to oil spiking at $150 a barrel in 2008.  China had been using more oil than it could produce in order to fuel its large amount of economic growth, and oil wasn’t the only commodity.

China isn’t the only player.  India as well as the emerging markets have offered its heavy share of the demand, tipping trade balances toward imports and helping to drive up commodity prices for oil and building materials.   The same is expected for coal.

This is good news for America, which contains the largest coal reserves in the world.  This is also good news for the coal industry, as it will be able to profit from an uptick in prices.

This is not so good for the coal power industry, especially in America.  While the coal industry will benefit in developing nations who have already increased the capacity to burn coal for energy and produce steel from coke, the developed world already faces pressures for pursuing greener technologies instead of burning coal.  And the coal power industry should be scared: the only thing keeping them from not succumbing to the powers of green energy is price, which is now soon to change.  With coal prices higher translating into higher per kilowatt hour energy costs that begin to be on par with greener technologies, the coal power industry will have a tough fight.

Green technologies already have the leg up of being green and renewable.  Obama’s recent moves to push for nuclear energy, which would already be competitive given Obama’s plan, and the ARRA’s subsidizing of renewable resources like wind and solar significantly put the government against the coal power industry.

The government’s backing of renewable energy certainly distorts what the market wants when providing energy, but a needed distortion nonetheless.  The only hope for the coal industry is to level the playing field by either removing green energy subsidies (not likely) or becoming green it self.  The industry’s only hope is going for clean coal. And now, it doesn’t have the luxury of waiting anymore.

Before one says that clean coal isn’t viable, I disagree.  It is possible, given recent developments in innvoation.  I blogged recently about Thomas Friedman’s catch about clean coal:

If you combine CO2 with seawater, or any kind of briny water, you produce CaCO3, calcium carbonate. That is not only the stuff of corals. It is also the same white, pasty goop that appears on your shower head from hard (calcium-rich) water. At its demonstration plant near Santa Cruz, Calif., Calera has developed a process that takes CO2 emissions from a coal- or gas-fired power plant and sprays seawater into it and naturally converts most of the CO2 into calcium carbonate, which is then spray-dried into cement or shaped into little pellets that can be used as concrete aggregates for building walls or highways — instead of letting the CO2 emissions go into the atmosphere and produce climate change.

If this can scale, it would eliminate the need for expensive carbon-sequestration facilities planned to be built alongside coal-fired power plants — and it might actually make the heretofore specious notion of “clean coal” a possibility.

With coal prices expected to rise, you can bet this will scale. With clean coal on the horizon, subsidizing greener technologies won’t be needed anymore or vice versa, coal won’t be dirty anymore. Either way, whether a Cap and Trade bill , favorable legislation towards green technologies or the sheer power of the market was going to force it, switching towards less CO2 intensive energy was inevitable. Now, about those mountain tops…

Recycle your cell-phone, its worth a fortune!

Here is why you shouldn’t just throw away your cell-phone, but recycle it! Some say to do it for the environment’s benefit. Save energy this, prevent waste that. But I think a true ecopreneur would look at this statement

For every 1 million cell phones recycled, 75 pounds of gold, 772 pounds of silver, 33 pounds of palladium and 35,274 pounds of copper are recovered.

That’s 75 pounds of Gold X 16 ounces X $1133.600 per ounce which = $1.35 million. 772 pounds of silver x 16 ounces x $18.1 per ounce = $223,571.  33 pounds of palladium x 16 ounces x $501 per ounce = $264,528.  35,274 pounds of copper per ounce x $3.5748 per ounce = $126.10

Total = $1.8 million dollars for every 1 million cell phones.

Yeah, OK, that only amounts to $1.80 per cell phone but imagine bringing economies to scale and legally require citizens to dispose of e-waste to specific collection centers and wallah! A viable business opportunity.  Don’t agree? Multiply $1.8 x 276.6 million cell phones in the U.S.  That’s around $500 million dollars in recycling revenue, and that is only from cell-phones! Imagine what other e-waste would yield…

PS:  $1.8 * 4.1 billion cell phones in the world = $7.4 billion. Yeah, that’s right. $7.4 billion dollars. For cell-phone e-waste alone. Is any CEO right now reading this?

Oh yeah, we get to save the environment too. Forgot to mention that.

Indecision on climate bill dampening economic recovery?

So says Obama. From Real Time Economics:

Senior Obama administration officials say the nation’s economic recovery could stall if Congress doesn’t pass a climate bill this year.

The officials warn that investors are so uncertain about the future cost of emitting greenhouse gases that they are sitting on capital rather than pouring it into “clean” technology, new power plants or energy-intensive manufacturing.

The administration has for months been moving away from advocating climate legislation primarily as an environmental issue and toward a jobs-creation argument. But the comments are a marked shift to a stronger rhetoric: fears of prolonging the recession. The White House says spurring “clean,” or low-greenhouse-gas-emitting energy, can help lay the foundation for the 21st-century U.S. economy.

“Right now there’s a lot of money on the sidelines,” said Energy Secretary Steven Chu. “Capital on hold means investments not being made, investments not being made means jobs not being created,” he said at an Export-Import Bank conference last week.

Companies that could capitalize on a carbon-constrained economy, such as General Electric Co., Alstom SA, Areva, Babcock & Wilcox, a unit of McDermott International, Siemens AG, Chesapeake Energy Corp. and First Solar Inc., say policy clarity will focus investment. So do emitting businesses that will need to adapt, such as American Electric Power Co. and BP PLC.

Ambiguity, however, breeds risk, which begets financiers’ reluctance.

It is an interesting argument. Financial decisions makers will always delay their decisions until some certainty can be had.  But, I don’t think indecision is hampering recovery. I think it is only limiting the potential for growth in clean energy. Nothing should change the outlook for conventional energy because climate change legislation’s aim is to not reduce the amount of conventional energy but reduce carbon. Financial decision makers regarding conventional energy should be much savvier when facing this uncertainty because the room for change is available post investment.  Unless congress is going to enact climate legislation that will completely cripple the conventional energy industry, (it won’t) carbon will be priced should be priced where alternative energy will become competitive.  There is no metric for pricing carbon at it’s value. (Pigovian tax)  Politics determines it.  Cap and trade is the best mechanism for private investment to determine the actual cost of carbon.

What the issue here is, investors wishing to take advantage of more growth in clean energy are waiting on congress to make clean energy more competitive.  So, while indecision is not hampering recovery, it certainly is hampering growth.  And given this comment:

“People need to realize this is a global market for our capital,” GE’s Walsh said. “Our money is going to go where we see long-term certainty … and if Europe has a better framework, that’s where our money’s going to go,” he said.

I would have to say that a climate bill is not an issue of environmentalism anymore. Its about helping new industries compete with a global mindset that may have more forward thinking politicians than America does. So maybe I should retract my comment: Indecision with climate change legislation isn’t hampering our recovery; its hampering our competitiveness with the rest of the world in clean energy.

Waste products aftermarket: partIII – e-waste in the developing world

The UN  released  a report today detailing the dangers of e-waste in the developing world. (here) This issue isn’t new, but it is good that the UN is starting to realize how important it is to start dealing with this.   Not many of us know where our digital trash goes, but it mostly goes to the developing world.  The issue with this is that because of the valuable components within the waste, many of the poorest have taken the initiative, at the risk of their health, to disassemble the waste in order to obtain these valuable components and sell them.  Some grim details include:

Most of the recycling of electronic waste in developing countries such as China and India is done by inefficient and unregulated backyard operators. The environmentally harmful practice of heating electronic circuit boards over coal-fired grills to leach out gold is widespread in both countries.

The laborious task of doing this is often menial, tedious and most importantly, hazardous to one’s health, making it incredibly dangerous. But when weighing the option between eating and not, some will step up to take the risk and rummage through our e-waste for a few valuable components.

This issue was first brought to light after watching this incredible documentary called Manufacturing Landscapes. It has vivid images of the lifestyle that some Chinese have in taking part to profit from this, and it will either leave you shocked, fascinated or just downright disgusted.

A more deeper  look into the e-waste problem was documented by PBS’s Frontline.  The piece was entitled “Your Digital Trash.” It looks at some of the broad ramifications of e-waste that isn’t entirely environmental.  The most interesting part of this program was towards the end.  It dealt with an enterprising  social entrepreneur from India who built a business by investing in capital machinery that made the separation of parts for e-waste much more productive and less-hazardous to workers.  He hired workers at competitive wages to disassemble and collect the valuable materials from e-waste, all while ensuring a safe work environment.  Those valuable materials, most notably gold, would be then melted down in jewelery and sold on the street for a profit.  Right now the business is only small-scale, but there is potential, especially if India fashions a new law to ban digital dumps.

Before leading into the last segment of the program, the report focuses on a dealer who fills up empty container ships on the way back from the United States after delivering imports, and because the e-waste is loaded at little to no cost, sells them to digital dumps where they are taken apart irresponsibly. His quote certainly resonates when asked about environmental damage:

“I can only say one thing, if you want to do it environmentally, you have to pay. They have to invest in machinery, labor, everything. It isn’t worth it to pay so much money.”

I point this out because this is the real crux of the issue. Our e-waste is being sent to the developing world because residents who have a low-marginal product of labor are willing to take the risk and low pay in order to get the very small amount of value out of this waste. It shows how necessary legislation is needed in order to circumvent this, and jump start the proper investment where our Indian entrepreneur doesn’t need to fashion the valuable metals into jewelery, but is able to sell recycled waste on an open market. If it is possible to do this at Total Reclaim in Oregon, where labor costs are high and able to be sustainable through government support, imagine the type of value the developing world could get by investing in an industry dealing with e-waste responsibly. It will take some time before commodity prices will get to the point when it is profitable to invest in this type of business, but for now, legal intervention is the best way to jump start this industry so that it can innovate and build economies of scale and become a fixture of the industrial ecological web.

Waste products aftermarket: part II

Production line at Total Reclaim

Production line at Total Reclaim

After reading an article from Oregon Live, (here) I have become really excited about my belief in a future market that I have entitled as a “Waste products aftermarket.”  For a more detailed account, please see my recent posts on a theoretical framework and part I.

The article details the efforts of a recycling business called Total Reclaim located in Alaska, Oregon and Washington.    The primary business of Total Reclaim is through the recycling of e-waste products such as TVs and computer monitors.  Among other services, they recycle other durables that have been thrown away including refrigerators and HVACs.

A video here explains their production process in detail:

Notice towards the end of the video the on-site production process of plastic pellets.  Not only is this a finished product that can go back into new electronics, it adds value to something that otherwise would have gone into a landfill.  There is money to be made there.  Your taking a product worth nothing and processing it into a product worth something.

The primary driver for their business in e-waste is thanks to support from state legislatures.  In all three states that Total Reclaim operates, it is illegal to throw away your e-waste in traditional land fills. (i.e. throw them out onto the curb for trash pickup)  The only legal way to discard e-waste in these states is to bring them to a licensed recycling center such as Total  Reclaim.  For a fee that varies depending on what you bring in, they will recycle your e-waste.

The fee is an important factor to consider.  If there was no ban on curbside e-waste, what would the price be then? Right now, the cost to recycle e-waste can average (give or take) $50.  The ban obviously forces people to demand Total Reclaim services (explains their 30% growth) which can push the price for recycling down.  Thanks to the legislation, the price for e-waste recycling has fallen.  In addition, legislators are looking to eliminate the deferred cost of waste management and instead make the cost upfront by forcing manufacturers to offer a rebate so that the cost of recycling of the device is already factored in the purchase price.  This will lead to more downward pressures on the price of recycling.

Already you can see a viable business opportunity and a large amount of growth given the partnership that Total Reclaim has with the public.   Akin to the beginnings of the railroad and telephone industry, with waste product aftermarkets in its infancy, government support should help nurture growth.  Continued public support, (like the manufacture rebate program) expanding coverage to outer areas of the state, (or even lobbying to change legislation in other states…or better, federally) and the discovering and implementation of new technologies in order to offer more products and services could mean that Total Reclaim is one of the leading companies that could make this into a viable and profitable opportunity that is focused on sustainable business practices and providing value for environmental safety and conservation.