26 Feb 2017

The hidden costs behind our screens

Nastasia writes*

Social media and online networking platforms such as Facebook are often praised for having lowered the transactions costs of communication and its implications, and because they have done it ‘for free’! However, is that really so? – According to E. Dolan, “there ain’t no such a thing as a free lunch”. Just because something of value doesn’t have a market price, it doesn’t mean that it comes at no cost.

The benefits for ‘ordinary’ users are somewhat intuitive: simplified worldwide connectivity, real-time information sharing, commonality of interest, etc. However, it’s somewhat counter-intuitive to assume that founders of online giants like Facebook and Google have such astronomic net worth if the latter were truly ‘free’.

Admittedly, most ‘ordinary’ users are knowledgeable of being exposed to the commercial uses of the giants every time an ad distractingly pops on their screen. Thus, the giants are making profits by charging whomever is willing to pay for advertising their product. Assuming basic marketing knowledge, it follows that entrepreneurs must somehow segment their market. This is when the giants who are storing each user’s personal details and tracking their online activities come into play, selling the stored information. Psychometrics further filter the information, create profiles and allow entrepreneurs to target the society accordingly. By now, media consumers have engaged in using online platforms in exchange for their personal information and being continuously polluted by ads. Is that a violation of UN’s Human Rights? Yes.

On top of infringing the right to privacy, the exchange also promotes conspicuous consumption, which fuels horizontal comparison that spreads epidemically throughout the social web, generating anxiety, low self-esteem, narcissism, time fragmentation, decline in close relationships, and the related mental health issues including addiction to social media. All these “FOMO”-driven, and all contribute to the erosion of social capital. R. Putnam claims that the latter undermines democracy, which up until now has been viewed as the foundation of the welfare state. The outcome is intuitive. Moreover, political interests too, are nowadays employing media to target their consumers. Recent research has shown that Facebook-stored data were sold to political interest groups that used it to influence the outcome of the US presidential elections.

Even though such costs are somewhat reflected in the prices that interest groups pay for obtaining data, they are clearly not equitably distributed; the ‘pollutees’ are not compensated. The benefits are restricted to small groups free riding at the expense of the negative externalities borne by the rest of the society.

Bottom Line Social media and related platforms are not intrinsically ‘bad’, but their commercial and political priorities may result in benefits to the few at the expense of many. It is therefore a matter of social well-being to trace such costs regardless of their nature, and to look for ways to correct them. This is challenging, since the interests and the policies serve other purposes. This suggests that a neutral third party enforcer is a somewhat utopian concept, and therefore it is perhaps a matter of initiating collective action and looking for equally efficient means of communication less the associated negative externalities caused by private interests. Social media is a good servant but a bad master, and it becomes the society’s master when the latter fails to find interest-free or fully priced alternatives to it.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

Cattle herds, a symbol of destruction or wealth?

Joeri writes*

Did you ever pass a McDonalds during your daily run and think to yourself "Never ever will I get one of those burgers", only finding yourself two days later eating a full big Mac menu? Or, did you ever watch a tv commercial about chickens getting stuffed in a battery cage thinking "I will never buy cheap meat again!", but paying for broiler chicken meat the next day because "you're also just a student". Well, you are not the only one! Actually, this logic of thought contributes to deforestation of the Amazon rainforest.

In the 1970s two cultural groups migrated to Acre in the Amazon, the colonist, and the ranchers. The ranchers, mostly rich Brazilian elites, were driven to Acre by economic incentives such a cheap land subsidies, which they used for their cattle ranches. The colonists, poor citizens of overcrowded regions in Brazil, were placed in Acre via a government initiative to create agriculture settlements in the Amazon rainforest. These two groups, both in need of land, clashed with the a third group that settled in Acre around 1900, who were the rubber tappers. The rubber tappers earned a living by extracting products from the rainforest such as rubber and the Brazilian nut, an activity also called extractivism.

The problems emerged primarily due to property rights, granted by the Brazilian government, to the ranchers. These rights enabled the ranchers to convert big parcels of land into pasture land for their cattle herds. The rubber-tappers who were dependent on products produced by the rainforest lost considerable amounts of their income. This resulted in both protest and disdain towards the cattle of the ranchers. Cattle became a symbol of Amazon deforestation and the rubber tappers were given the title of saviors of the rainforest, by the international community. Due to increasing pressure from both the international community and the rubber tappers in 1990, the Brazilian government decided to establish RESEX regions for the rubber-tappers, where only a 10% amount of cutting was allowed.

However, this victory by the natives could not be celebrated for long. Shortly after the government cut rubber subsidies, which propped up the prices for years, rubber tapping was no longer an economically valuable way of living. As a result, it became barely possible to sustain a livelihood solely on extractivism, and rubber tappers started working on the cattle ranches. This shifted paradigm surrounding cattle and made the good into a symbol of wealth. Rubber-tappers themselves deforested so they could maintain cattle herds increasing unsustainable use of the Amazon but ensuring themselves an income.

Bottom Line Although you might disdain McDonald's, the benefits (easy dinner, close by, no cooking) of eating there can outweigh the costs (costs of the burger, the high amount of calories, environmental issues). On the one hand, the benefits of cattle production became greater such as cheap land subsidies, cattle that can be used as saving for later, and cattle being a symbol of wealth. While on the other hand, costs of extractivism became too high for rubber-tappers due to the cut on rubber subsidies and environmental regulations. This resulted in rubber-tappers converting to unsustainable cattle production and an increase of Amazon deforestation.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

25 Feb 2017

Have we learned nothing? The space race continues…

Joanna writes*

The launch of the Soviet Satellite Sputnik in 1957 started a race to space between the United States of America and the former USSR that ended with the first joint mission, the Apollo-Soyez project. While the Apollo-Soyez project has remained the only space collaboration for another twenty years, it has resulted in an unprecedented international collaboration known as the International Space Station (ISS). With the increase in aircrafts and satellites in the orbit came a challenge that no one had expected: debris.

Space debris, or orbital debris, are artificial (man-made) objects in the earth’s orbit which usually have no more function. The debris consists of non-functional spacecrafts, abandoned launch vehicle stages, mission-related debris and fragmentation debris. However, the non-traceable debris is the most dangerous to spacecrafts and satellites. Current estimates trace approximately 500,000 pieces of debris in the orbit of the earth. The speed of the debris, which can be up to 17,500 mph, makes it possible for very small pieces to cause serious damage.

Space, by definition, is a common pool good because it is non-excludable and rival. It is rival because too much consumption leads to negative externalities such as congestion and orbital debris. It is a valuable resource to many countries as it provides services for global communication, remote sensing, and national and international security as well as opportunities for research. The cleaning of the earth’s orbit is effectively a collective action problem. Ostrom’s tactics on how to solve collective action problems, however, primarily work on a local scale rather than a global one, let alone one that exceeds the boundaries of our globe. Joan Johnson-Freese, and Brian Weeden articulate that space law was primarily written during the cold war, making it outdated and ineffective. They examine the extent to which Ostrom’s model can be applied to space and state that it can be used primarily to identify gaps in the current governance. The next step is taken by Natalie Pusey who presses the need for an international treaty “that would make spacecraft operators liable for debris-caused damage to property, and that would require reasonable debris-mitigation measures to be taken for every mission.” At the moment, the European Space Agency (ESA) has a clean space program that promotes an eco-friendly approach to space activities. This includes “adopting greener industrial materials, processes and technologies.” In short: In short: the conservation of the orbital environment to allow continuous use.

Fact is, however, that with the growing interest in space as a key global resource, there are a growing number of countries interested in taking advantage of this resource. This leads to an emerging ‘space race’ with countries wanting to utilize this resource in any way possible. The next step, believe it or not, is space (eco)tourism.
“Up there, hovering above Earth with my orbital perspective, I came to believe that the answer to why our world still faces so many critical problems - in spite of the ample technology and resources we have at our disposal - lies primarily in our inability to effectively collaborate on a global scale.” Ron Garan, former NASA Astronaut
Bottom Line: The space race allegedly stopped in 1975 but in reality, it has just opened up new ways of exploring space as a resource to be utilized by as many countries that have the means to access it.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

Indonesia's palm oil: the other side

Imane writes:*

Imagine you planned a trip to Jakarta and are all excited about the pleasant temperatures of Indonesia. You try Googling ‘Jakarta’ and you see impressive skylines. You try again, but this time you add ‘haze’ to it. Suddenly, Jakarta became a lot less interesting and the comfortable temperatures do not matter as much anymore. You probably do remember the large media coverage of the expanding forest fires in 2015, caused by the unsustainable use of palm oil fields, but did not realize what environmental impact this actually had. While being the world’s largest supplier of palm oil, Indonesia has been struggling with the negative externalities of this strongly demanded commodity. The government has been put in the spotlights, while being accused not to take action in order to correct for the externalities. But what could and should the government do?

Whereas Friedrich Hayek would argue that the market will solve for the externalities, few people think the Indonesian government should not take action. The benefits of supplying and exporting palm oil are quite clear: it has contributed 4.5% to Indonesia’s GDP in 2010, and was nearly 7% of total export value. However, these benefits are not as equally divided over the cost bearers. Besides the regular costs that are calculated into the price of palm oil, negative externalities often fall upon other people that do not enjoy these benefits. Such negative externalities can be the damage to surrounding lands, the health implications from breathing the smoke, and the well-known haze: an environmental pollution that refers to the accumulation of small particles in the air, usually resulting from human activities such as deliberate forest burnings (Othman, 2006). Moreover, the Indonesian people are not the only ones who bear the costs: neighboring countries bear many of the environmental costs as well. In 2015, Malaysia had to close their schools for a few days because of the dangerous smoke that came from Indonesia. This example shows the far-extending externalities of burning forests to increase the yield of palm oil, while the benefits and costs are far from distributed fairly.

The demand for palm oil has been increasing over the years, which is why it is attractive to Indonesian palm oil producers to continue their production, as long as their benefits outshine the costs. However, the government could redistribute the burdens by increasing the tax for palm oil producers in order to increase their costs. This will allow the price of palm oil to go up, which will lead to less demand, less usage and therefore less negative externalities. Moreover, the money raised from this behavioral tax could be used to cover the externality costs. Another option could be the implementation and enforcement of stricter rules that will prevent as many negative externalities as possible. The ASEAN (Association of South East Asian Nations) has formulated a Regional Haze Action Plan (RHAP), but due to game theoretical perspectives, this plan has not been successful. It is therefore a challenge to recommend either governmental or market solutions to correct for the negative externalities of palm oil in Indonesia, but by distributing the benefits and costs as fairly as possible, possible solutions could be approached.

Bottom Line: The government of Indonesia should correct for the negative externalities of burning palm oil fields. Increasing tax or implementing stricter rules should allow the benefits and costs to be distributed more fairly.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

24 Feb 2017

Friday party!


Knew that was going to happen.

Green tradeoffs: renewable energy vs. biodiversity

Mike writes*

One of the most persistent issues in modern environmental culture is the threat of climate change and its unrelenting effect on ecosystems and biodiversity worldwide. One of the main drivers of climate change is fossil fuels. Their extraction has led to significant anthropogenic loss and the continued degradation and fragmentation of habitats. A large fraction of species around the globe face increased extinction risk under projected climate change during the 21st century [pdf]. Climate change and biodiversity loss embody the environmental challenges faced on a global scale.

Limiting the magnitude and effects of climate change has triggered a shift towards an emphasis on the rapid, large-scale expansion of low and zero carbon renewable energy sources. A term that has come to development throughout the late 20th century is that of a ‘Green Economy’ [pdf]. As an economic system, it aims to improve human welfare and social equity, focusing on significantly reducing environmental risks and ecological scarcity. Driven by public and private investments, its aim is to offset the continued increase in energy demand via two key strategies: investing in natural capital and increasing energy and resource efficiency. The former is a major strategy for economic sectors that depend on biological resources, whilst the latter is vital to reducing resource intensity and environmental impacts of economic sectors that are dependent on the transformation of natural capital.

Looking towards the future, the large-scale implementation of renewable energy is a fundamental intervention towards greening the economy, given its potential to mitigate climate change and save fossil fuel energy. In the course of the next decade, there’s bound to be an increase in both quantity and size of proposed renewable energy projects. The European Union has promoted the use of renewable energy via several directives, aiming to meet 20% of its total energy through renewable sources by 2020 [pdf]. The main drivers of this expansion have been for economic development, energy security, and conserving biodiversity, as renewable energy pathways are often considered environmentally benign due to their role in combating climate change.

However, despite climate change being one of the greatest drivers for biodiversity loss [pdf], the interplay between ‘Green’ energy and biodiversity has demonstrated that some renewable energy pathways can have major impacts on biodiversity, having been directly and indirectly associated with all five drivers of ecosystem change and biodiversity loss. It’s not simply about birds colliding with wind turbines; it’s the major modification of habitats that severely impacts biodiversity. Solar energy requires large amounts of land alteration resulting in habitat fragmentation [pdf], wind power disrupts migrations patterns, and hydropower can result in a major alteration of water flow regimes.

Whilst the mechanisms differ within the pathways and environmental contexts in which they operate, it is clear that the development of renewable energy can have several biodiversity tradeoffs. I believe that these must be taken into consideration when developing policies that can promote renewable energy, if economic growth is to be attained. Though harnessing the potential for renewable energy is of vital importance towards mitigating the effects of climate change, the conservation of biodiversity outweighs the large-scale development of renewable energy sources.

Bottom Line Employing technology and energy sources aimed at mitigating climate change - one of the main drivers of biodiversity loss - would not be logical if these go against the primary aims for which they were created. Consequently, this will require further consideration of the potentially adverse effects that these developments can have, and this will have a considerable role in determining the scale and pace of renewable energy development.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

Will China's eco-cities be effective?

Muhammad writes*

Most of the inhabitants of our planet are aware that China is the factory of the world. It therefore does not seem strange to assume that their mass production has affected their country, not only in terms of economy in which we witness an increasing consumer society, but also with greenhouse gas emissions and local pollution in their cities. As the world’s biggest emitter of greenhouse gases and consumer of as much coal as the rest of the world combined, China must desperately find alternatives for their current situation of having a coal based energy system. In its frantic chase to reach western modernisation, by urbanising and wanting to rise economically, constant chunks of the country have crumbled down into ecological wastelands.

The air people breathe is deadly, the water is not drinkable, the soil is poisonous, the water levels are in constant threat of being sucked dry, rivers and lakes are on the verge of disappearing if they have not already, and cities in themselves are becoming heat islands. In fact, between the years 2000 and 2005, coal consumption increased by 75% [pdf] and air pollution emissions have remained constant or in some instances have increased. It seems evident that such a system is not sustainable, in terms increasing healthcare demands and decreasing environmental conditions.

As an attempt to resolve the problems driven from their current energy system, China have started a project that aims to build eco-cities nation wide. These eco-cities are essentially the most environmentally friendly urban schemes an architect could design. A principal feature is that these cities fully operate on solar energy since all housing operations as well as public infrastructures have solar panels attached to them. It all sounds great, but after reviewing the practicalities of this action plan, one begs to differ. A certain Anna-Karin Gronroos states that “building something from scratch and calling it an ecocity isn’t the solution either”. She is essentially suggesting that there are costs to creating such environmentally friendly cities, and that the creation will have negative and counter intuitive externalities. One has to agree with Anna, especially given the fact that these cities will only be accessible by a certain percentage of the population simply because “they are just too small, too remote, too class-exclusive and expensive”. Therefore, due to the fact that these cities can only host individuals with a certain level of socioeconomic status, we have to reject the claim that these cities would be providing "free power" and have to view this project as a long term investment from the governing body aimed towards the middle and upper class.

Bottom Line China’s amazing recent economic performance has been fuelled by urban industrial growth that is being outweighed by environmental costs. Eco-cities are a fancy and flashy attempt to solve their issues, but constructing them nationwide simply does not seem tangible as it would not be tackling the bigger problem of population growth and income inequality.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

23 Feb 2017

Unwrapping the problem of plastic packaging

Corneill writes*

Packaging is frighteningly annoying. Just the other day, I had the most maddening tussle with the plastic packaging surrounding the cardboard box which housed my newly purchased tea bags – neither my nails nor a Swiss army knife provided any help in opening it, at which point I speared the box with the biggest knife I could find and tore the entire thing open. However, I couldn’t help but (eventually) shift the blame to myself as I could have bought tea which was packaged in one cardboard box, instead of a smidgen of leaves wrapped in paper inside a cardboard box covered with plastic, which in retrospect seems to be a little bit excessive. But just how excessive has plastic packaging become in our society, and how much of it is going to waste?

Plastic packaging is not only the main adversary in keeping me away from my tea, but is also a worldwide environmental problem. Currently, 5.35 trillion pieces of plastic debris is present in the world’s oceans with more than 269 thousand tonnes of this floating on the surface. Data from the United Nations Environmental Programme suggests that global plastic consumption has risen from 5.5 million tons in the 1950s to 110 million tons in 2009. This is a worrying trend, as plastic packaging wreaks havoc on our both our bodies and our environment. These include and are not limited to: compounds being absorbed by humans which have been found to have adverse health effects, injuring or poisoning wildlife, (in the ocean) serving as mini transportation devices for invasive species and leaching harmful chemicals in landfills that spread into groundwater. Furthermore, plastic pollution is decreasing in size - research is showing that micro-plastic particles are becoming more prevalent in both the air and our oceans worldwide, which has additional harmful effects.

Given that plastics can only be recycled once before it loses its useful properties, how should we replace and phase out this seemingly essential component of our modern lives? Does the solution lie in biodegradable plastics? Could this long-touted plastic substitute which totally biodegrades in the environment be the solution?

If only this were the case. Apart from companies often misleading consumers into believing that the plastic they use is totally biodegradable, one of the risks associated with these biodegradable plastics is that if they are broken down in an oxygen-free environment (such as a landfill) methane will be produced. This is 23 times worse than carbon dioxide as a greenhouse gas. Moreover, a lot of plastics labelled biodegradable, such as shopping bags, will only break down in temperatures of 50 degrees Celsius. This temperature will not be found in the ocean, where a significant amount of plastic pollution ends up. Since they are also not buoyant, these plastics will sink and thus not be exposed to UV radiation, which is a key component in helping them biodegrade. Combined with the notion that littering can be a large cultural and behavioural problem, it may not be a great idea to create products biodegradable which may make issue of littering even worse, as people might think that it is acceptable now that they will harm the environment less.

Whilst well-intentioned, perhaps it is erroneous to focus on finding ways in which throwing away products becomes easier in the name of helping the environment. However, at this point, with the lack of viable substitutes which could be implemented on a global scale being available anytime soon, it may be a temporary solution which reduces the impact our consumption driven lives have on the environment, which can only be a good thing.

Bottom Line Plastic packaging is a huge global environmental problem, with numerous harmful effects on humans and the environment, and biodegradable plastics are currently not a good enough solution to fix this in the long run.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

Live together to live better

I heard about this initiative for housing students and the elderly side-by-side in the past, but this article just reminded me of one such program (it's still going on its small scale).

The "gains from trade" in this situation is that students get a rent-free room in exchange for spending 30 hours per month in volunteering to spend time with their elderly neighbors. The neighbors get the benefit of daily company and interaction that's far better for their mental health than occasional visits from care staff or family. The bonus from these interactions is that both young and old people learn more about the reality of their counterparts. Here's a TEDx talk by one of the students:

Bottom Line: Humans evolved in extended families that made it easy to exchange care for knowledge (and vice versa), and there's no reason why that should not be the preferred way of growing, aging and living.

Guilty Pleasure: Offsetting Travel Emissions

Martine writes*

For some people, air travel is a source of joy, entertainment, holiday-feelings or business-activities. However, this type of transportation also creates environmental pollution and contributes to climate change through its greenhouse gas (GHG) emissions, which is less joyful. Keeping in mind the recently adopted Paris Agreement [pdf] where the United Nations decided to cut GHG emissions and keep global warming under 2°C, we might need to rethink our traveling behavior.

In an ideal world, people would be able to enjoy air travel while at the same time avoiding consequential environmental damage. Environmentally-conscious travelers will quickly point to the option to compensate for the environmental damage by offsetting their flight’s GHG emissions, of which carbon (CO2) is one. An organization, for example GreenSeat, will reduce the same amount of CO2-emissions elsewhere to get your carbon footprint to zero. A one-way flight from Amsterdam to Australia emits 11.200 tons of CO2 and can be compensated by donating 9.24 euros to renewable energy projects in Uganda, India or Cambodia. It’s cheap and feels like the right thing to do, so shouldn’t we all do this?

Before giving away the answer, I’ll first quickly explain the theory behind offsetting and the UN’s promise to keep global warming under 2°C. Please bear with me, our environment is at stake.

To keep their promise, the UN will need to invest billions of dollars to lower their CO2-emissions with at least 26 GtCO2 per year [pdf]. The price to abate 1 ton of CO2 depends on the country where the investment goes to, its phase of economic and social development and the already existing energy structures. For this reason, the ‘price’ of CO2 differs per country and industry, ranging between US$1.3 and US$524 per ton CO2. Intuitively, it is best to capture the cheapest forms of abatement first, the so-called ‘low-hanging fruits’, followed by other increasingly expensive ways to reduce emissions. In economic terms, this is called ‘diminishing marginal returns’, or ‘increasing marginal costs’. Figure 1 shows the costs of abatement and the reduced GtCO2 per year. You can see that some measures, like building insulation, are more efficient to reduce CO2 emissions than other higher cost abatement measures, like forestation or biodiesel.

Figure 1: Global Cost Curve for Greenhouse Gas Abatement (Enkvist, Nauclér and Rosander, 2007)

Of course, GreenSeat also knows this, and to keep the travel-offsetting price the cheapest possible for their environmentally-conscious consumers, they will invest in abatement at the low end of the curve in figure 1. And this is exactly the problem with flight-offsetting that I want to point out. Even though GreenSeat does reduce CO2-emissions with their investments, they do not contribute to the 26 GtCO2 per year reduction that is needed to keep global warming under 2°C, because their consumers emit the same amount of CO2 to the atmosphere during the flight that they bought the CO2-offset for. My biggest concern with this is that in the meantime, GreenSeat (or any other travel-offset organization/company) takes away the low-hanging fruits, the cheapest forms of abatement, while not solving the climate change problem. As the marginal costs of CO2 reduction increases, it will be even more difficult to invest efficiently to tackle global warming. Offsetting carbon emissions may be cheap and feels like the right thing to do, but environmentally-conscious travelers would do better by not traveling by plane at all.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

22 Feb 2017

What are the real costs of shale gas production?

Jan writes*

After the inauguration of Donald Trump the White House announced the new administration’s America First Energy Plan to foster the exploitation of shale oil and gas. The embracement of this ‘revolution’ would ‘bring jobs and prosperity to millions of Americans.’ The revenues from this cheap energy would then be used to increase public investment and boost the economy.

It is often argued that shale gas has not only contributed to low US gas prices but that its environmental footprint is also much cleaner compared to traditional fossil fuels. The problem with these assertions is that they either ignore or understate the environmental impact of methane emissions which escape to the atmosphere in the course of extracting and delivering shale gas. According to a recent study US methane emissions have increased by roughly 30 percent over the past 15 years. Although the authors are reluctant to link this increase directly to a particular source they do note that it coincides with the rise of shale gas production and other studies seem to confirm this notion.

These estimates are much higher compared to the official numbers reported by the U.S. Environmental Protection Agency (EPA). One reason for this disparity is the fact that the EPA relies mostly on numbers reported by the gas industry and is not allowed on most sites in order to conduct its own measurements. This selection bias might explain why official numbers on methane emissions are much lower than those published by researchers who rely on measurements taken in the atmosphere.

The problem with methane is that its environmental impact is much more drastic in the short-term compared to carbon dioxide. According to a report [pdf] published by the IPCC in 2013, the global warming potential of methane is 86 over a 20-year period and 34 over a century. In other words, methane traps 86 times more heat in its first 20 years after having escaped to the atmosphere compared to carbon dioxide. That means that even if comparatively little amounts of methane are leaked its immediate impact on climate change is relatively large.

It therefore needs to be assumed, that any potential environmental benefits that shale gas might have since it partly replaces traditional fossil fuels are offset by the devastating short-term impact of methane on climate change. In order to determine the exact methane leakage percentage in the shale gas production, independent inspectors need to be allowed to access any operator’s site. Further, politicians and society have to understand that current gas prices do not reflect the true costs of shale gas production since the gas industry is allowed to dump part of its production costs on the whole society - for free!

Trump might be right that shale gas production keeps gas prices low and creates new jobs but if costs outweigh benefits, then the whole undertaking is inefficient and you are doing more harm than good. This is basic economics. He should understand that, especially as a businessman.

Bottom Line Methane, which is leaked in the course of producing shale gas, has a much bigger environmental footprint compared to carbon dioxide. This externality needs to be taken into account when politicians favour shale gas over conventional gas due to the supposedly low production costs of shale gas.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

Links of interest

  1. I am a migrant to the Netherlands, as I plan to stay here. An "expat" is someone who intends to return to their home country, but it's also a racially-tinged word that separates white folks from darker folks.
  2. Journalism may have missed Brexit and Trump b/c it was focussed on details rather than the big picture. These guys are trying to make up for that mistake.
  3. Use — and Abuse — of Science in Water Resource Policy and Management
  4. Life under Trump as America's demagogue dictator and the replacement of the American liberal order with competing great powers (whoops, a world war!),* due to America losing its identity
  5. A Polish version of On the Road, set in Ukraine
  6. The founder of a clothing brand explains why "the real price" for jeans is $245
  7. Finland is paying the unemployed a basic income that will NOT go away if they get jobs
  8. The Dutch started tracking sea levels in 1683. Related: The Dutch will partner with Japan and UNEP to run a Global Centre of Excellence on Climate Adaptation
  9. "Why the elites always rule" -- the insightful work of a brilliant economist
  10. A Romanian in Amsterdam explains why it's so hard for her to go "home" (I feel the same about SF/the US).

* I have to say that I think that America's decline as a liberal (freedom for individuals) started after 2000 *or* after 1932. After some recovery under Obama, Trump has kicked it in the head.

The cost of dirty money in the London property market

Lisa writes*

In 2016, the UK was titled the most corrupt state in the world according to a world-renowned Mafia expert, Roberto Saviano. These accusations were not centred upon corruption in the public sector, but instead it was the private sector that harboured the most corrupt activity. Transparency International revealed that the London property market, in particular, hosts an environment which attracts money launderers due to secrecy laws surrounding the real owners of property owned by overseas companies.

Around 36,000 London properties owned by overseas companies “were bought via secrecy jurisdictions, such as those named in the Panama Papers.” The majority of these properties have little or no data on their real owners which means that they could be linked to Politically Exposed Persons (PEPs) – people who have the greatest risk of being corrupt. Although most properties are purchased legitimately, “there is little doubt that some have been bought using the proceeds of embezzlement or other crimes”. For example in 2012 James Ibori, a former governor of Nigeria's Delta State, was imprisoned in London for 13 years due to “money laundering and fraud offences involving up to £150m from the Nigerian public purse”. The majority of this money was laundered through buying property in London. In addition, the Panama Papers revealed that a member of Gaddafi’s inner circle owns a multi-million pound portfolio of property in Scotland and London.

One major cost, noted by the National Crime Agency, is that due to the scale of the situation London house prices have become “artificially boosted”. This results in a market failure due to incomplete information of the buyer’s honesty about the origins of the money used to buy property. When prices of a good or service rise artificially it creates negative pecuniary externalities for other potential buyers who may not be able to afford the good at it’s higher price. Pecuniary externalities differ from "real" externalities (such as those from pollution) because they act through prices rather than real resource effects. In the aforementioned example, homebuyers further down the property ladder experience negative pecuniary externalities which may make it difficult for them to get onto the property ladder. Since 2007 “the average asking price for a 3-bedroom apartment in London has increased by over 300,000 pounds”. In addition, demand for high-end properties from money launderers, due to the fact that they can legitimise more money by investing in a higher-priced property, creates incentives for property developers to build more luxurious house “rather than concentrating on the homes London genuinely needs.” As a result, many of these luxurious properties become “ghost mansions” (properties that remain unoccupied as their only use is to conceal the illegal origins of money) – there are reportedly 700 of these in London and are worth an estimated 3 billion pounds. Land is already vastly scarce in London which makes it difficult to fathom the wastefulness of the land that these “ghost mansions” sit on.

Bottom Line The embezzlement of dirty money into the London property market has distorted prices of property by raising them artificially.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

21 Feb 2017

The Human Scale -- the review

My girlfriend is really busy leading study tours and working with organizations devoted to understanding and improving urban sustainability (her site is Sustainable Amsterdam; here's her TEDx on "cities for people or cars"), so we talk a LOT about cities, the commons, community, etc.

We just watched "The Human Scale," a Danish film exploring how Jan Gehl and other "human-centric" urban planners are pushing for cities that work better for people instead of cars or real estate developers. You can watch the film on Vimeo here.

Although we may be seeing articles and discussions about revitalizing cities through a biased perspective (we left Vancouver to return to Amsterdam when we decided that Vancouver was too car-centric), it seems like there is more attention on these matters these days.

Mr Money Mustache -- a blogger with millions of followers -- just wrote a post talking about how car-centric cities are wasting $trillions on projects that don't improve our lives.

These discussions matter in an age of populists promising to "Make [country x] great again" via infrastructure projects because more cement is only likely to result in worse cities for the next 100 years. Cities change slowly (a reason that Amsterdam is so great, after surviving an attempt to cover it with overpasses), so it's urgent that new developments depart from the unsustainable (and inhuman) pattern of deadly driving, parking and sprawl.

These decisions also matter when it comes to climate change, as cities built around hard infrastructure are less adaptable and thus more expensive to "fix" when climate change impacts alter the attraction of places or outpace their urban forms.

Bottom Line: I give this film FIVE STARS for showing how we can build and live on a human scale, i.e., small-scale, flexible and attuned to natural flows and changes.

20 Feb 2017

Monday funnies

This experiment kinda happened, but the metaphor is certainly based in reality:

"An experimenter puts 5 monkeys in a large cage. High up at the top of the cage, well beyond the reach of the monkeys, is a bunch of bananas. Underneath the bananas is a ladder.

The monkeys immediately spot the bananas and one begins to climb the ladder. As he does, however, the experimenter sprays him with a stream of cold water. Then, he proceeds to spray each of the other monkeys.

The monkey on the ladder scrambles off. And all 5 sit for a time on the floor, wet, cold, and bewildered. Soon, though, the temptation of the bananas is too great, and another monkey begins to climb the ladder. Again, the experimenter sprays the ambitious monkey with cold water and all the other monkeys as well. When a third monkey tries to climb the ladder, the other monkeys, wanting to avoid the cold spray, pull him off the ladder and beat him.

Now one monkey is removed and a new monkey is introduced to the cage. Spotting the bananas, he naively begins to climb the ladder. The other monkeys pull him off and beat him.

Here’s where it gets interesting. The experimenter removes a second one of the original monkeys from the cage and replaces him with a new monkey. Again, the new monkey begins to climb the ladder and, again, the other monkeys pull him off and beat him – including the monkey who had never been sprayed.

By the end of the experiment, none of the original monkeys were left and yet, despite none of them ever experiencing the cold, wet, spray, they had all learned never to try and go for the bananas.

The metaphor and the lessons that apply to work are clear. Despite the exhortations from management to be innovative and collaborative, cold water is poured on people and their ideas whenever someone tries something new. Or, perhaps worse, the other employees suppress innovation, and learned helplessness spreads throughout the firm."

H/T to RM