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.

Recommendation

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. 

Read More

Environmental Economics: Conservation (Part 5)

When I was a kid, I was forced by my parents to work in the garden. As a result of this, I learned the basics of farming while at the same time grew an appreciation for nature. The forest that backs on to my property today will often be occupied by me zipping through on my ATV, polluting the peace with the noise of an internal combustion engine.  I am not much of a hunter as I am not very patient, but I have taken some courses and received a few licenses. I will say this; most hunters have a far, far better understanding of conversation than many self-titled environmentalists. Why? Their sport and livelihood depends on species conservation.  

Conservation is often in the news for the wrong reasons. For example, the seal hunt was popularized simply because the animals were cute to stick on TV and clubbing them to death simply seemed wrong. Although many types of conservation exist, the definition for discussion will be of focusing on maintenance of the natural world’s ecosystem through seeing the continual existence of key actors. Basically, conservation is a form of long term planning. Exemplifying this is the Fishing Industry. Conserving fish through capping the amount of fish that can be caught in a certain area ensures that fish can reproduce and fishermen will have fish to catch for the following year.  One of the better definitions of conservation was stated by Carl F. Jordan who stated “Biological conservation as being a philosophy of managing the environment in a manner that does not despoil, exhaust or extinguish”.

The world has been slowly looking at conserving and enacting long term plans on it. For example, 10% of the world is somehow legally protected like National Parks such as Yosmite. As modernization increases, the need to protect and ensure the survival of the world’s resources also increases. Conservation biologists study migration patterns, specie demographics, population sizes, mating rituals and habitat needs to assess conservation needs.  A report entitled “Species coextinctions and the biodiversity crisis” (2004) boldly forecasted 50% of the world’s species will be gone in the next 50 years. Although unlikely, it is important to take this prediction seriously and commit resources to conservation. Not for Profit (NPO) agencies as well as government funded researchers are working hard to ensure this prediction does not materialize.

Conservation is not  a new thought, in fact it is an ancient one. Plato, Buddhism, Hinduism, Islam have all advocated for it. In fact, God ordered Moses to not farm land every seventh year. It was actually the Europeans who considered conservation a pagan activity as they embraced modern development. The US actually led the way with John Muir founding the Sierra Club in 1892, or Theodore Roosevelt establishing protected national forests. The Endangered Species Act led the way for protection plans for species across the world. In 1992 the Convention on Biological Diversity in Rio planned the Cartagena Protocol (enforceable in 2004) to protect species from modified organisms resulting from genetic engineering.   The Convention ensured that countries prepare National Biodiversity Strategies and Action Plans.  The Society for the Environment and the Institute of Ecology and Environmental Management are two organizations professionalizing conservation.

It is estimated somewhere between 3.6m and 111.7m species exist, while only 1% of species have been studied beyond simple naming. Basically, these statistics conclude that there is a lot more work to be done. Organizations such as the International Union for the Conservation of Nature are composed of a number of scientists around the world to monitor the changing environment and report these changes by quantifying it.  Interestingly, a system entitled natural capital uses accounting to set a value to an ecosystem before development. Economists and Conservations collaborate to set a certain value to an area before the concrete begins to pour. It is assessed whether a certain land has more value to the global economy as a natural ecosystem providing a steady stream of resources, or as a skyscraper.

Valuing conservation is difficult, but definitely valuable. For example honeybees provide around 10 – 18 billion dollars’ worth of services annually while the continued conservation of forests ensure that the forestry industry will always exist. Conservation is directly tied to the economy.

However, all over the world conservation methods are being attacked. The ivory stock provided by elephants is dwindling by illegal poaching. Fires such as those in Colorado wipe out entire ecosystems and cause environmental carnage. The Prime Minister of Cambodia has just allowed four companies to develop 86 400 acres of land in national protected parks. Due to environmentalists pushing for greener energy, Brazil is planning to develop 30 dams in the Amazon, which causes quite a bit more methane to be released than a traditional gas powered plant as I discussed  here . Shockingly, forest activist Jose Claudio was killed for criticizing illegal logging in Para, a state in Brazil that is suffering from mass deforestation. Greenpeace reported that deforestation in India is being driven by the demand for Palm Oil.  Adding to this is the increasingly risk of mass fires in the Amazon due to the expansion of roads, and people migrating to urban areas – while a new study published by Science claims that 10% of global carbon emissions are a result of deforestation.

However, plans are being made to promote conservation. The US Forest Service, Rwanda, Brazil and Central American groups have pledges to restore 45 million acres of native forests. Google Earth is planning on adding a live update deforestation alert system to reveal to the world how much forest is actually being destroyed. The United Kingdom has created a law ensuring all London Stock Exchange companies disclose greenhouse gas emissions by 2013, while the Western Ghats of India have been recently declared a UNESCO world heritage site as it is considered one of the world’s richest biodiversity ecosystems.

With more support globally, conservation methods such as this are rising. The antics of organizations such as PETA (mainly the American branch) or Greenpeace that make the news often takes away from the real issues at hand. Real analytical thinking regarding the data available shows that conservation is an economical idea, as resources need to be maintained for harvesting and collection if the world is to continue advancing the living standards of the common person. Often, environmental policies that restrict harvesting do not understand that conservation is not preservation. For example, if you do not cut down trees they will die after a certain period (rot from the inside) and be of no economical use.

The environment is not a museum full of dusty artifacts. It is a living ecosystem full of complex parts that must be monitored to ensure longevity. Environmental policy should reflect this reality, and allow resources to be harvested responsibly. 

Read More

Environmental Economics: Land Degradation (Part 4)

Imagine traditional societal food supply chains became disrupted through an energy or water crisis, and individuals have decided to grow their own food. However, one looks at their patch of land and realizes something – nothing is going to grow in this area. Depressing thought; people could not have the last resort option of growing their own food. This is a consequence of land degradation, and unfortunately the issue hasn’t been featured too much in the main stream media.

Land degradation is a fairly large international problem, spawning from countries around the world attempting to fast track their developmental pace into a modern society without properly analyzing environmental affects. Defined as the reduction of biological/economic productivity of land is reduced due to manmade processes, the US Department of Agriculture estimates 40% of the earth’s surface is at risk of desertification or already a desert. Basically land degradation is a disturbance to the land that can cause land becoming undesirable who could include soil erosion, deterioration of chemical or biological properties of soil or long term loss of natural vegetation*.

To be honest, not a lot is actually known about land degradation as no developing country has created a department or process to monitor national land degradation. Most of the data used is obtained from experts, field experiments and case studies or land use trends which are used to extrapolate conclusions. The GLASOD study is most likely the most influential study, as 250 experts contribute their assessments. Continuing from the 1940s, GLASOD suggests 560 million hectares of farmland has been degraded (38% of total farmland, while permanent loss due to human activity is estimated to be .3-.5% of the world’s total farmland per year (around 5 million hectares per year).  Due to increased population and hence increased demand for food, the FAO has hypothesized that most arable land expansion will occur in developing countries resulting in tropical forest destruction. Again, in the short term it will appear the cheapest financial option, in the long term the effects could result in large problems.

The Canadian International Development Agency attempts to combat land degradation with sustainable land management. This is done through proper training, education and investments in technical assistance and equipment. Interestingly, CIDA reports that soil conservation practices and responsible environmental practices have reversed effects of low soil productivity of 70% of cropped land in the last 25 years.  The responsible environmental practices referred to consist of maximization of vegetation to prevent soil erosion, replacement of nutrients and preventing the accumulation of harmful substances within the soil.

Governments have used several policies over the years that could hasten land degradation. Subsidization of economic ventures that increase land deterioration while taxing activities that prevent can be seen in many countries around the world.  Sugar Cane import quotas in the United States caused farmland expansion in the Floridian everglades, or heavy Brazilian ethanol subsidization. It is interesting to note that ethanol subsidization has been politically driven to attract the green vote, while practically it has caused far more problems than good. An interesting article can be found here, which explores the political link of environmental policies.

Continuing on, government subsidization for these crops increases economic incentive to destroy land for agriculture commercialization. Political minds may point to these socialistic policies as the source to blame. However, capitalistic market failures can also be seen as a reason behind land degradation. Since landowners profit from exhausting their land through production of items in demand, often landowners will act in the short term and forgo the environmental impact of short term thinking. Additionally, there is little liquidity available in current credit markets to fund conservation friendly farming ventures, and little interest due to the high initial investment. The problem is misinformation as the latter is a false assumption. It has been shown that improving “the functioning of financial markets will facilitate land conserving investments, but may also increase total agriculture investment, leading to expansion of cultivated area” **. Basically, investing in conservation friendly projects has a solid net return both financially and environmentally.

New technologies will also aid in preventing land degradation, as new practices could replenish land and reduce the cost that commercial agriculture on the land. Interestingly, from 1985 – 1995 Thailand saw a 17% reduction of the agricultural labour force as higher labour productivity resulted in the retirement of areas of agricultural land. Basically, investment in proper technology (and I stress proper) will improve productivity of land and decrease the need to allow for more land clearing.

Adding to this, many countries have attempted to establish land zoning, or laws restricting the growth of land degradation. In Ontario the Green Zone is an example of this, and the largest of these programs is actually in China, as the government’s Sloping Land Conversion program targeted an increase of China’s forested area by at least 10% by 2010. These projects are again inhibited by lack of incentive.

However, recently land degradation has seen some promising preventative actions. Recently in Rio de Janerio at the UN Conference on Sustainable Development, 100 world leaders agreed to attempt to slow the increase of land degradation and improve the policy making tools at their disposal. Luc Gnacadja stated that “By 2020 the demand for food is likely to increase by 50%, and by 45% for energy and 30% for water. Each of these demands will claim more land. This will lead to more deforestation unless we commit to restore degraded land”. Commitment from countries is nice, but as seen from precedent it is less likely that most countries follow through on their promises.

A strong case study for land degradation can be seen in Australia which is the world’s driest continent. Agriculture occupies 60% of the total land, and livestock grazing is the most extensive use of land. As droughts and variable rainfall have a large affect on agriculture, Australia has initialized stronger environmental advocacy to prevent future disaster. Programs to create formal resource reserves, protection of land, provide security to wood resources and determine what sustainable wood harvesting levels are, and heavy investment in environmental monitoring has seem some success. A host of case studies can be found here.

To reiterate: deforestation, urbanization, pollution, irrigation, agricultural mining of nutrients cause land degradation. Stressors are erosion by wind/water, salination and alkalinization, destruction of soil structure and removal of organic matter from the soil. These problems have a heavy economic effect in the world, as it is strongly correlates with long term sustainability of current practices.

Again, understanding of this issue is paramount to developing proper policy. Land degradation is affected by irrigation, which is largely seen as a partial solution to water management. Seeing that one solution to one problem could cause another is the reasoning for a holistic understanding of the environment and the realization that the earth is truly an ecosystem that can be compared to dominoes. When one domino falls, it will hit another. The key is to prevent the first domino from falling, instead of attempting to prevent the fifth one from tumbling.

*(the UN 1996 conference to combat desertification can be credited for this definition)

** http://www.aae.wisc.edu/coxhead/papers/CCC-April7.pdf

Read More

Environmental Economics: Water Management (Part 3)

Years ago when I was a kid I always wanted a pool. I loved swimming, and figured my life would be brilliant if I could simply step outside and jump into some water. What little Alex forgot was pool maintenance. From ensuring no algae growth to the chlorination of the water causing little Alex to feel tired upon exiting of the pool, little Alex had his eyes set on the benefits without weighing the consequences of acquiring a pool.  Little Alex also had a secret fantasy of throwing his dog into the pool and watch him swim – but that’s another story.

 However, little Alex was a highly intelligent individual who decided a little research might help. So he wrote in stone that he would write an article on Water Management one day.

That anecdote has nothing to do with this topic except it includes water. Water Management is increasingly becoming more of a concern internationally as the concept of Water Wars becomes more and more of a possibility. Of the water resources on Earth, 3% is not salty. Of that 3%, 66% is locked up in glaciers and ice caps. So 1% of the world’s water is left for human use. However, 20% of this water is remote and inaccessible – so 0.8% of the world’s total water is used for human activities. 

Agriculture uses 70% of the world’s usable water, while approximately 2.8 billion people live in areas where there either is not physically enough water to meet demand or areas where there is lack of human investment or capacity to meet water demand.  Problematically, 50% of the world’s population now are urbanized which has led to traditional water resources being polluted with urban waste water. As a result, farmers who sell their crops to cities often use polluted water. Heavy metals, antibiotics, oestrogens and other elements may be present in the water which in turn affects the food consumed by urban dwellers. Sometimes, irrigation of crops are contaminated with bacteria or viruses which can lead to diarrhoea or cholera outbreaks.

Usually, pollution of water resources occurs near cities or areas where urban sprawl is present. Noted is the fact that other areas such as karstic aquifers located in the mountains of Europe have a high level of clean water, not affected by industrialization of the modern age.

Specific examples of water management can be located anywhere in the world. In Canada, the participants in the oil industry have a heavy hand in water management. It can take between 1.4 – 4 litres of water to extra a litre of synthetic crude while 4 million litres to bring a gas well into production. Additionally, fracking uses a large amount of water as the head of Shell stated that shale gas development could use twice as much water, as traditional production of gas.  Interestingly, the Canada West foundation released a report showing water issues are becoming an issue in the West, as droughts are appearing to be “more severe and more frequent”.

In the United States, a report was released comparing water rates. Interestingly, the cities in rain scarce areas have lower residential water rates, but a higher level of use.  Per capita water use is declining in most of the cities surveyed in the Circle of Blue report. Additionally, it is estimated by the EPA that $335 billion will be needed to repair America’s water infrastructure to ensure adequate supply.  It is hypothesized that since the demand for water has fallen, price will rise (as it already has) as revenue is based on per use.

With a large population, India is no stranger to water management problems.  There have been reports of wells drying out and states fighting with each other over supply. Rajendra K. Pachauri is the Director of the Energy and Resources Institute of India had an interesting comment regarding water privatization. He believes that water efficiency will only increase once the private sector becomes far more involved.  Simply put, politicians “need to change people’s mindsets. Everyone in this country [India] thinks access to water is a God-given right. It’s a scarce resource which has to be treated as such and, like everything else, come with a price attached”.  However a UN report from 2006 on Human Development states that privatization of water resources leads to reduced access for the poor around the world as prices rise.  For example, New Yorkers pay around 65 cents a cubic meter for water while Colombians pay around $5.50.  Londoners will pay around $1.50. However, this may also have to do with stronger infrastructure in the Western areas just listed.

The UN Report report highlighted several facts. First, 12% of the world’s population uses 85% of the water. Corporations around the world that own or operation water systems serve only 7% of the world’s population while over 400 million children have no access to safe water and 1.4 million children die each year from lack of access to safe water. 

With the world’s population increasing, more efficient means of water distribution will need to be found.  Ideas such as monitoring irrigation performance and improving models, developing water reuse systems and better information management systems/technologies for sewage and water networks are all solutions that companies such as CSIRO in Australia advocates for. 

  

Read More

Environmental Economics: Energy Production (Part 2)

Flip on a light, turn on your computer, and google ‘alexonomics’ while turning on your electric massage chair. What do all these activities require? Energy.

Energy production is one of the largest issues facing government policy creators today. It is no secret that more energy is being used currently than ever before historically, and that trend is expected to continue unless something is done to curb the estimated 2.3% energy consumption growth per year.  Right now many countries are looking at greener sources of energy and funding development through subsidization and other incentives.  Although some of these programs have seen unfortunate outcomes (such as Solyndra in the USA), it is generally a good idea to invest in cleaner sources of energy.  

There are two types of energy sources, renewable and non-renewable. Renewable energy does not run out, while non-renewable has a lifespan.  Non-renewable energy includes fossil fuels and nuclear energy while renewable can include tidal, geothermal, biomass or traditional renewable resources such as wind, solar or hydro power. Renewable sources account for around 20% of global electricity, with around 75% of that number coming from hydroelectricity.

Nuclear energy has been derided around the globe as of late; the Japanse tsunami really gave the entire nuclear industry terrible publicity as I have discussed earlier. Currently, nuclear power occurs from the process of nuclear fission. Using uranium rods atoms are split releasing energy which generates steam and turns the turbines to generate electricity. This process generates spent fuel rods which are radioactive and stored in concrete casks. Cold fusion has been deemed to replace nuclear fission, a process that expels far less radioactive and uses deuterium as a fuel. Again, extended information can be found on my past post regarding nuclear activities.

Fossil fuels have long been the popular method of electricity generation. Coal, petroleum, natural gas, crude oil, shale and tar sands are all fossil fuels used to generate electricity. Currently, oil reserves are estimated to give the world around 40 years of production, while natural gas and coal are estimated to be around for another century (both numbers fluctuate depending on the source). Peak Oil theory relies on a model developed by M. King Hubbert whom accurately predicted American oil production would peak around 1965 – 1970. Peak oil optimists suggest the production decline will begin in 2020, while pessimists suggest the peak of oil production has already, or about to occur. The International Energy Agency states that conventional crude production already peaked in 2006.

Environmentalists are quite opposed to the energy that most likely powers their latte machines.  The main reason is the pollution fossil fuels are attributed with. Combustion of fossil fuels produces nitrogen oxides, sulfur oxide, volatile organic compounds and heavy metals while 90% of greenhouse gases apparently come from fossil fuel combustion.

Let me explain something for a second. The Greenhouse Effect is a scientific natural occurring event, and is often associated as an evil. There is a layer of greenhouse gases (H₂O, CO₂, CH₄, N₂O, and O₃) which absorb and emit electromagnetic radiation which mostly comes from the sun. Without this layer, the earth would be a whole lot colder. The reason this effect is mentioned is fossil fuels emit greenhouse gases, and as we used more fossil fuels, a thicker layer is formed in the atmosphere while causes the earth to become warmer than it should naturally be.

Back to why fossil fuels are evil. Environment Canada states that electricity generation contributes to smog, and acid rain. Radioactive material is also released into the atmosphere from fossil fuel burning. To quantify that statement, it is estimated that in 1982 American energy production released 155 times as much radioactivity into the atmosphere as the Three Mile incident.

However, lately coal has been on the rebound as it has increased 6% last year and now accounts for 30% of all energy consumption. Also, many of the coal electricity plants exceed EPA standards. As it is a cheap and plentiful fuel, the main challenge in burning coal is ensuring less of an environmental impact – which the industry has apparently been succeeding in doing.

Extraction of fossil fuels is probably the most newsworthy item in terms of environmental impact. From the BP oil spill (4.2 million barrels dumped into the Gulf of Mexico) to the large empty lakes in Alberta left over from the oil sands, these images can be quite disturbing. Fossil fuel incidents around the United States can be found here.

It is no secret that pumping oil from the ocean or open pit mining can be troublesome to the environment, but new methods such as oil (bituminous) sand extraction or fracking are raising concerns. Oil sands are defined as having a mixture of sand, clay, water and petroleum bundled together and is naturally occurring – to put it simplistically. To extract cold flow, cyclic steam stimulation, solvent extraction, THAI, CHOPS and other methods have been tried. To explain all these methods would take quite a while, so if interested please research. However, the environmental concerns boil down to destruction of land, air pollution, water management, marine life destruction, and public health problems. In August of 2011, the Albertan government initiated a study to link higher rates of cancer to the oil sands. In terms of animal life, moose have been found to have 17-33 times the acceptable level of arsenic in their system (2006) while Lake Athabasca has apparently seen a rise in deformities and tumours in fish. Water Management may be the largest concern, as (according to Greenpeace –so heavily biased) the oil sands use around 349 million cubic meters annually of water – and end up in tailings ponds.

So the solution to all these problems is renewable energy. Let’s break down each resource one by one.

First, wind power simply is hoisting a windmill, and allowing the wind to turn the turbines to charge a battery. Wind power is growing 21% annually, with the Walney Wind Farm in the Irish Sea being the largest wind farm in the world.  Turbines see operation and maintenance costs of 20-35% of total yearly costs. As I don’t want to get too much into it, a great reference is this source.  Concerns over wind power is the high cost of initial investment (which has fallen drastically due to new technologies), and noise/aesthetic complaints.

Photovoltaic (PV) cells are used to convert light energy supplied by the sun to electricity at the atomic level. Basically, the sunlight hits the solar cell (created from silicon) carrying energy which is converted into electrical current by the wires attached. A cell is divided into the glass, encapsulant, crystalline cells, encapsulant, back sheet, junction box, and the frame/rail holding it all together. The main issues with solar power is the cost, low level of efficiency and constant maintenance/replacement costs. However, solar farms have a higher level of efficiency as although as a single unit a cell is not very efficient, many more cells are.  Also, the chemicals used in the creation of solar panels are quite, well dirty. Arsenic, cadmium telluride, hexafluoroethane, and poluvinyl fluoride are used in the creation. According the 2009 report from the Silicon Valley Toxic’s Coaltion the harm from these chemicals are accrued at the alpha and omega of a cell’s life. The toxins that manufacturers expose their workers to are quite harmful and if solar panels are not disposed of properly, the environmental impact is quite lethal. For example the backsheet of a cell is made from polyvinyl fluoride which contains lead, chromium, cadmium, selenium, arsenic and antimony. However, companies such as BioSolar are attempting to alleviate the environmental impact by creating a backsheet that will degrade without causing contamination of the environment.  Financially, BioSolar has lost $2.6 million since 2006.

Companies are attempting to solve this issue with programs like First Solar’s recycling program. Researchers are working on developing organic cells made from nontoxic chemicals, however they are very inefficient.  

Hydroelectric power is damming rivers and using their energy to turn turbines, and thus create electricity. Quebec has quite the industry surrounding this resource. Interestingly, a study with a dam in the Amazon shows that the dam created a 3.6 times larger greenhouse effect per kWh than burning oil for energy production. This is caused by flooding river valleys, and the ensuing decaying organic material releasing large amounts of methane. Currently, underwater turbines are being researched for development.

Biomass and Geothermal production are two other energy sources that are not as talked about. Biomass production involves capturing the methane from decomposing methane and burned to produce electricity. Ethanol fuel is widely known, although the subsidization of the process used to create it has been blamed for rising food costs. Geothermal power is about harnessing the heat produced from the earth. One well is drilled into the ground to extract ground water and the other well injects that water into the ground. Hot rocks heated by the earth warm the water which causes steams, and turns the turbines to produce electricity. Natural geothermal energy from geysers, volcanoes, hot springs or steam vents also can occur. Iceland is a good example. Although a great example of a renewable resource, geothermal energy is quite expensive.

Again, I will tie this up in my fifth and final post of this series in terms of economics. Below is a chart showing the decommission, production and construction costs of electrical production per kilowatt-hour.  

Click here to view the website of the creators of this graph!

Energy production will continually be an ongoing debate as countries gravitate between cost, feasibility and of course the different lobbyist groups attempting to spin the government’s direction toward one source or another. A great example of this is ethanol, which is heavily subsidized due to the green lobby. However this has caused many farmers to cash in by growing corn for the sole purpose of creating ethanol, which some economists attribute to the growing cost of food. Additionally, it is arguable that these subsidies have little to no return environmentally as ethanol does very little to alleviate the environmental damage of fossil fuels – even in the present massive production. Brazil, currently, is another large producer of ethanol.

Most importantly, to make decisions regarding energy production an understanding is needed of the different options available – and how these options work. I encourage any policy maker to fully understand the non-renewable and renewable energy industries before drafting any energy policy.

Global energy statistics can be found here (yes it’s BP so biased).

Read More

Environmental Economics: Genetic Engineering (Part 1)

It is now June 2012, marking the one year anniversary of my blog. First, thank you to all my readers and commenter’s – and also the good folks who link me from different sites.

To mark this anniversary, I’m going to attempt to give a thorough view on how environmental and economical policies are conflicting, and how new policies should be created for the most productive result. This will be long, but I believe it should provide a solid insight into what most people believe are completely different issues, are actually very much intertwined. As a result of the length of this topic, I am breaking it into 5 different posts. This will be the first. The sixth and final post will tie all the policies together and attempt to explain their economic impact.

It’s actually amazing how many environmental issues are real problems on the planet, yet their severity and significance is misrepresented through popular media mediums. Obviously everyone has heard of climate change and nuclear issues, or even animal extinction. Yet, there are far more intense problems that the world will have to solve that will heavily affect economic activity around the world. Genetic Engineering, Energy Production, Water Management, Conservation, Land Degradation, and just simple waste will all be issues with a growing population. This first post will deal exclusively with genetic engineering.

The reasoning behind genetic engineering is pretty simple. Due to an increase in the world’s population, an increase of the world’s food supply will have to occur. To obtain this, plants and animals are genetically changed to maximize production. The Green Revolution is the prime example of this.  Currently, GE products can be found everywhere. GE plants and animals have the ability to produce different elements needed for drugs far cheaper than organic production. For example, antithrombin is produced in genetically engineered goats (called pharming) while bacteria specifically made to create insulin has been around since 1982. Yes, this comes straight from Wikipedia, yet I wanted to give some context. The process is rather simple. Identify the gene you wish to add to a host, isolate the gene, construct a new gene (add any elements to make the gene stronger, work properly), and target the selected part of the host you wish to change. Then watch the transformation of the host, and confirm regeneration with selectable markers within the transformed cells. As I am not a scientist, this process could probably be explained better – so any corrections are welcome.

The main selling point for genetically produced materials is cost, as it seems to be cheaper to create substances that are more likely to accomplish one’s goal. However, a large amount of risks seem to have been forgotten. For example, Dr. Pusztai’s research reports that GE potatoes are poisonous to mammals. Basically, DNA found in the snowdrop plant and the Cauliflower Mosaic Virus (CaMv) are used in GE potatoes and when tested against organic (regular) potatoes, rats fed the GE potatoes had a severe viral infection caused by the CaMv. The same CaMv gene is spliced into almost all GE foods and crops.

This is not the only example of problems. Monsanto is probably the largest GE producer on the planet, and one of their products is rBGH which was approved by the FDA in 1994. This product forces cows to improve milk production by using 400-500% higher levels of Insulin-Like Growth Factor (IGF-1) in cows. It was warned by the US Congressional Watchdog agency, the GAO to not approve IGF-1 as it could cause a public health problem (specifically breast, prostate and colon cancer). The EU and Canada both banned rBGH, but continues to be injected into 10% of all US Dairy Cows.

These are both specific problems, but GE products have macro problems as well. Genetic Pollution is when GE plants and animals interact with their environment and spread the genes. Think of it like this, when an insect pollinates a genetically altered plant, and then pollinates an organic plant – they pollute the organic plant with GE material. The EU doesn’t believe that genetic pollution can be controlled and are currently looking into the issue. In agreement with evolutionary theories, once released from the lab GE products can reproduce, migrate and mutate and the outcome is unpredictable.

Besides this, other macro problems are the potential creation of superweeds and superpests, or pests and weeds that are resistant to herbicides and pesticides. This means stronger pesticides will be used to control which most likely will be more toxic, and these toxic chemicals will find their way into the human food supply. One GE soil microorganism entitled Klebsiella planticola destroys key soil nutrients needed for proper growth of food, while lab tests has suggests that the common boll worm will evolve into a super pest immune to Bt sprays and other environmentally friendly biopesticides.

Don’t get me wrong, genetically engineering plants for greater chances of growth and stronger crops is a good idea. However, doing it ethically and with careful consideration is a must. If the genome is stable, genetic modification is not harmful. Additionally, genetic modification does not have to be about pesticide resistance. In many cases, large corporations such as Monsanto create the very pesticides they claim their plants are protected against.  Remember, Monsanto and other GE providers are corporations – pro profit. For example, Monsanto could lose billions of dollars from a court ruling in Brazil.  Basically a consortium of farmers argued the GM soya given to the farmers by Monsanto is “highly contaminating” (Batista da Silveira) in terms of attempting to differentiate between organic and GM soya. To explain the situation further, the reason for purchasing the Monsanto products is the farmers can spray roundup (herbicide glyphosate) for weed control without affecting their crop which are created by Monsanto to be roundup resistant. Monsanto collects royalties from the farmers for these seeds, and now may be forced to return these same royalties.

Relating this back to economics is simple; it’s our food supply. Prince Charles summed it up best when stating: “what we should be talking about is food security not food production”. He’s partly correct. Ensuring our food supply is not contaminated for generations due to corporations attempting to monopolize food production is a tough battle. However, maximizing food production efficiency will always be a topic of discussion. Maximizing efficiency is always on the mind of our capitalistic society. Sure, for the short term genetic engineered crops perform marvelously. However, when long term use of the product can cause different diseases and become the origin of more problems than society could ever anticipate, this is when GE production of food should be re-analyzed. The cost of health and environmental problems that GE products are linked to are too great to be ignored.

One of the best ideas I have read to solve the commercialization of DNA coding is creating an open source library for different plants. This would eliminate the monopoly that corporations have on GE production and allow far more minds to place their input into the creation of stronger more durable plants. Ideally, this is a great idea, practically it would almost never work due to the powerful GE lobbyist groups who would do anything to prevent this open source library from occurring. Patenting products is a key part of GE corporation's business model, and adding more freedom and transparency to their products would be very difficult to legislate into law. 

Regulation of GE products has been increased drastically over the last few years, which is good. The EU leads the way, while other countries are developing stronger policies. The age old saying of "we are what we eat" can be applied to this situation, and rightly so. GE production should not be abolished, yet the community should be far wearier of the potential outcome of their actions. 

*A good list of GE companies can be found here: http://www.biofortified.org/resources/genetic-engineering-companies/

Read More