Monday, 9 July 2012

Environmental Economics: Conclusion (Part 6)

Often, articles will be conclusions with a few supporting facts that will often sway the reader. I find this problematic for two reasons. First, the reader does not have the chance to fully understand the topic because no background is given. Secondly, the reader doesn't really have an opportunity to disagree with the writer's conclusion if the reader has little to no knowledge of the topic.

This is the reason I decided to write five lengthy articles before this one. A full summary on  Genetic Engineering , Energy , Water Management , Land Degradation and Conservation has been given allowing the reader, should they read the previous articles, the full opportunity to disagree with my conclusions. On a related note, I often wonder if voter's in democratic countries should take some sort of basic test on a range of subjects ensuring limited knowledge to make a half educated vote. Personal thoughts aside, let's get to the thesis of this conclusion.

Environmental issues are often related to each other, and like this the economic success of a country is heavily linked to the environment for a variety of reasons. Notice I said linked, and not correlated. Look at genetic engineering; its effect on health of not only people but farmers who sell their product on the open market. Additionally,  genetic engineering affects conservation efforts as organic species are polluted by manufactured genes through evolutionary processes. This changes the ecosystem and could have an effect on the forest industry; a gene that destroys trees somehow infects a forest and begins to kill trees could destroy the company that harvests and sells the timber. That forest becomes desolate full of rotting, stale wood and a fire winds up destroying it degrading the land and for use and turning it into a useless plot. The dependants of the forest turn to another area to maintain their lives which doubles the load on that area's environment. The water supply now has an additional load to carry in terms of agricultural and human consumption purposes.

This all began with one gene mutation.

Although the example is obviously overtly an exaggeration, the point being stressed is the idea of the butterfly effect, or a chain reaction. With that in mind, arguing that policies need to be looked at from a far more holistic approach rather than segregated is appropriate.

First, we need to put some numbers in place in order to properly quantify these issues. Remember, these numbers are simply hypothesis’ put together from a variety of sources, but proper sources I might add.

Obviously, one may expect a correlation between rising consumption and production of genetically modified food, and cancer rates. Below is a graph showing the average growth rate of HT Soy, HT Cotton, Bt Cotton, Bt Corn, and Ht Corn as a percentage of total agricultural production in the US. This I compare to rates of cancer mortality per 100 000.

Interestingly, there is no correlation; in fact they dissociate each other. If you research the subject, some studies have suggested that the GE Soy may prevent colon cancer, which is one of the weights I used in the graph. Again, I cut out the weights and did a direct comparison between the growth of genetically modified soy production and colon/rectum cancer. The results if anything show that the rise of production of genetically modified soy correlates to decreasing colon cancer deaths. Again, these graphs do not take into account many variables such as increased research, better medical treatment, or environmental factors. 

However, the economical mind comes into play. Looking at spending in terms of health care in the United States is a pretty solid indicator. First, to ensure that the rise in health care spending in the United States is not simply due to population growth, the first graph I will show is between those two statistics. Again, from 2000 – 2009.

As seen, the population in the United States hasn’t changed much in comparison to spending.  The population in the US grew from roughly 275 million people to 300 million, while the percentage of GDP spending that was health related grew from 4.72% to 7.1%. Remember, this is before what is known in the United States as Obamacare will come into play, and Obama’s plan will see health care costs continue to increase.  

The rise in obesity in the States has been rather large, and although I do not have a graph for it, it is estimated that currently 130 million Americans are considered overweight or obese and cost society $117 billion. This includes doctor visits, medication and hospital care. Obesity is related to high blood pressure, high cholesterol, and cancer. It is also interesting to note that a study conducted at Monsanto Laboratories (a large GE producer) reported here that the evidence their products contributed to obesity was quite strong. In fact, an increase of around 3.7% of body weight was found along with the liver growing by 11%. The study tested GMO corn against rats.

With soy and corn to be in most consumer food products, I did an average growth of agricultural production verse health spending.

As shown, a correlation between the two is found. With studies showing some negative effects from GMO foods, and with these correlations between spending and healthcare, it is a possibility that increased consumption of GMO foods does contribute to overall health spending due to negative health effects. However, as shown before cancer mortality rates do not correlate at all with GMO food growth. Remember, these are cancer mortality rates not incident rates, so it could be the fact that better patient care and increased research has lowered the mortality rate.

Even if GMO’s account for a 30% of increased health costs, the question policy makers must ask is it worth that cost in terms of providing cheaper food.

GMO foods are only part of the equation. Energy production can often play a part in the health of the local population. This can be seen in Alberta, where the commonly named Oil Sands are being used to extract bitumen or synthetic oil. As stated here, Alberta has commissioned a group to report whether the oil sands can be linked to an increase in cancer, as the wildlife certainly has. Tumours in fish are rising around Lake Athabasca, and interestingly droughts are occurring more often.

Although the Oil industry is quite innovative, there are certain issues that have not been solved. First, one barrel of bitumen requires 2 – 4 barrels of freshwater for extraction and upgrade, while mining processes use 12 barrels of water to produce one barrel of bitumen in surface mining which 70% of said water is recycled. In 2011, annual water consumption for mining, in situ and upgrader operations was 170 million cubic meters. Remembering that 70% of human water usage is agricultural use, a link to agriculture can be made.
By comparing bitumen production verse Edmonton precipitation over the last 13 years, a correlation appears in which with rising production of bitumen, there seems to be less annual precipitation. 

A similar design when comparing synthetic crude production against precipitation appears, although not as clear.

Now, one may think that there would then be a strong correlation between crop yields in Alberta and oil production – however that is not the case. Although I only have the crop yields from 2004 until 2009, the yields have stayed within a range of 26 300 000 tonnes to 300 000 000 tonnes. As shown below, any correlation is pretty much non-existent.

I cannot relate precipitation to crop yield as I only have Edmonton precipitation data, not for the entire province. However, it is curious that crop yield has seemingly been less affected than it should be from oil production. Although currently the prairies are dry, the crop yield this year should be fine.

Two issues arise that could be the reason behind this curiosity. First, using Edmonton rainfall is not representative of the entire province, and using another city or the province may produce a different graph. Second, the rise in GMO seeds could play an effect in ensuring agriculture success even in dry conditions, as many GMO agricultural products are made to be less affected by droughts.

Now, as stated before here the problem with switching from fossil fuels is not only cost, but also technological problems and an unpredictable environmental effect. Wind power is relatively expensive to maintain, requires quite a bit of starting capital to create one windmill, is problematic technologically, and has been linked to health problems such as Wind Turbine Syndrome. Solar Power has a 30 year shelf life, and the chemicals used in creation are fairly toxic causing environmental concerns, and this is not mentioning the low level of efficiency. Nuclear Power has a very expensive initial cost, and the radiation issue will constantly be a threat. So, the world will most likely still with burning fossil fuels to produce energy for the foreseeable future.  

Again, it is very easy to see how all these issues relate. Energy policy in terms of oil production affects water management in terms of precipitation correlations or problematic tailing ponds. This issue roles into land degradation as droughts deteriorate land to an unusable state, and also touches GMO foods as less water could cause farmers to use genetically modified drought resistant seeds.  Conservation is touched by all of these issues, as genetically modified organisms can interrupt an ecosystem and potentially hurt a species, or the destruction of water resources having a long term effect on any environment.

Placing a price tag on conservation, water management or land degradation is almost impossible. To exemplify this, let’s combine the issues of GMO’s, land degradation and water management.  A farmer decides to use irrigation for his crops and diverts the ground water for his crops. The farmer uses GMO’s to have better control over pests and cut maintenance costs. The non-organic plants drain the soil of nutrients while the diverted water eventually contributes to degrading of the land (if the irrigation is not done properly). Thus, the farmer destroys his land in an effort to cut short term costs, but eventually faces higher long term production costs as the land deteriorates over time – which sees his selling price rise in an effort to profit. 

Less land that can be used for agriculture doesn’t necessarily mean higher food prices in the short term. With government subsidization, and short term fixes, food prices are not a good index for measuring agricultural problems.

Interestingly, to solve these problems many techniques can be employed. Using crop rotation, organic seeds, a drip system instead of irrigation, and the land can be used sustainably to product a regular crop for years to come.

As shown in the previous articles, economically quantifying these issues has been attempted through systems such as natural capital, or using environmental assessments to understand the impact that a certain industry can have on a property. The problem is we’re not entirely sure, there is far too many variables that are not understood on our planet.


Environmental issues need to be looked at from a more wholesome perspective in order to adequately solve problems.  As I have repeatedly stated throughout this conclusion, there is a far greater chain reaction when looking at environmental issues than other topics. One domino will hit another. To prevent this, policy makers should try looking at the first domino. That is, consult a panel of specialists in specific fields in the environment, and do not rely on simple general knowledge of the environment when making a decision. Seeing how everything relates and how one decision can cause three more problems should be a key thought when developing an environmental policy.

I will also stress the importance of ensuring the difference between preservation and conservation. We preserve museum artifacts; we conserve the environment – which is a resource. Often, political powers will be swayed by environmental groups that have little understanding of that concept, and problematic policy will occur. This can be seen in Ontario under Dalton McGuinty, as the forestry industry has been cut in half, coal plants shut down while money spent on expensive less efficient green energy, and conservation laws often end up problematic as species become overpopulated when they should be controlled.

With these points in mind, the following is what this report shall suggest. Use a combination of fossil fuels (mainly coal), existing hydroelectric plants, and nuclear plants to drive energy production. Then introduce a green energy fund of $50 million, which will be run by private individuals who have technological, entrepreneurial and business experience. This fund will give capital to inventors who create the best ideas in terms of renewable energies. In order to prevent the disaster in the United States (Solyndra and others), these companies will be groomed slowly to replace nuclear plants as they are shut down due to their shelf life. Additionally, garbage collection into landfills should be ended, and replace with incinerators. Garbage can be loosely looked at as a renewable resource, and should not be forgotten.

New construction should be considering attempting to create sustainable buildings, and a think tank to develop a code for buildings that produce their own energy and are more efficient should be created. I am well aware of LEED certification, but this think tank would be more concerned for structures to produce their own energy through solar shingles, geothermal power, or utilizing the wind.This cannot be an immediate process, but a long term goal that should be planned out along the scope of 15 years. This will limit the effects on the construction economy.

A board will be created of water management specialists, land degradation specialists, all types of energy specialists, conservation experts and representatives from the GMO industry to offer opinions on different policies, and outline how one law will have an effect on various sectors. This will allow a new policy to be molded to minimize problems and maximize benefits. This board should be as nonpartisan as possible, and political affiliations should be shunned, especially lobbyist connections. Additionally, this board will be seen as something like the judiciary, separate from government and have limited veto power on certain policies.

A sub segment of this board will engage economists and conservationist authorities to place a value on land, and determine whether the land in question for development serves better economically for environmental or modernization purposes. This is in line with the system of natural capital that has already been referenced.

Concerning water management, specifically in Canada greater care should be taken in regards to limiting the destruction of water resources. Already water management is being improved upon drastically by oil producers, so I see a bright future in terms of the oil sands management. Globally, drip systems should replace irrigation systems as they are far more efficient. Water should not be privatized, but rather a public/entrepreneur partnership should be created. Using crowdsourcing, water utilities can offer rewards for the best ideas. Additionally, improvement upon water infrastructure will have to occur.

I fully believe an open source library should be created for Genetically Modified Organisms, so fresh eyes can view the structures and offer new ideas. More restrictions should be placed on GMO producers. I think an outright ban is ridiculous, research should continue. The problem is the commercialization of something like this can see greed cause problematic decisions made that only are positive in terms of profit – but negative elsewhere. The industry should be audited regularly, and to be honest it would make a lot of sense to see the GMO industry as entirely not for profit. The reasoning is research into these products affects the entire world, and should be used fairly carefully to ensure the negative effects that have been discussed here are minimized.

In terms of conservation and land degradation, these two concepts relate pretty closely together. Creation of a natural capital system to rate land in economic terms should assist in the mitigation of both problems.

As seen through numerous examples, all environmental issues should be looked at holistically. They are all interrelated and have an economic impact even though it is difficult to quantify. In order to necessarily create proper environmental and economic policies, experts from both fields should work together to properly create policies that can ensure a sustainable future. 


Daniel Arrizza said...

Thanks for the post Alex. Here are some thoughts:

- I do think that the environment has intrinsic value and that a purely resource oriented viewpoint will lead to mismanagement. We can conserve what we know, but preservation allows a respect for the complexity of nature, so much of which we do not know or understand.

- The idea of an environmental branch of government is pretty cool. I like. A non-profit GMO industry would be interesting. This is even more warranted once human GM capabilities become more within our reach.

- I would suggest a much larger fund than $50 million for energy investment as energy projects are quite capital intensive as well as vital to our future.

Alex said...

The reason I said $50 million is to ease in companies. The problem when much larger numbers are involved is mishaps like Solyndra are created. This way, less corporations are interested and more individuals with entrepreneurial spirit. In my experience, those are the ones who will drive green innovation - not large corporations engaging in the misappropriation of funds.

Thanks for the feedback though.

Anonymous said...

Why was your thread on HFBoards deleted? I gave you a good response.

Alex said...

^Not sure. I would like to see it though - I guess the mods didn't like.

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