Are the models used to evaluate the costs and benefit of natural mineral extraction reliable? Do they accurately account for the most important benefits and costs communities are likely to experience during a process like fracking?
In Sara Lynn Hess’s 2014 thesis, Extracting the Economic Benefits of Natural Resources in the Marcellus Shale Region, she highlights the key challenges associated with valuing the impacts and products of shale extraction. Focusing on West Virginia and Pennsylvania, Sara compares the benefits of resource extraction with their capture and distribution costs. In addition, she develops a simple framework that communities can use to assess whether their utility companies and regulators are focusing on the “right” costs and benefits prior to allowing drilling to begin.
In her case studies of Virginia and Pennsylvania, Sara illuminates the natural resource curse, wherein areas rich in resources often fail to realize the economic and social gains associated with extraction while bearing substantial immediate costs. Both Virginia and Pennsylvania have experienced severe environmental damages while realizing limited economic booms. Both states have approached shale gas mining with the hope of limiting damage and ensuring the sustainability of the natural gas industry. However, Sara’s analysis shows that uncertainties abound, both in terms of the long term commitments of the companies involved and in the ability of regulators to limit environmental damage. To learn more about these uncertainties read Sara’s thesis, here.
The great variety of services that natural systems provide is rarely recognized. From water filtration to flood prevention to carbon sequestration, these ecosystem services are crucial to supporting both natural and human life. The cost of preserving these services is often far eclipsed by the cost of replacing them mechanically should they be lost, a point that is rarely appreciate economic markets. What can be done to correct this and ensure that natural systems continue to provide their much-needed benefits?
In his dissertation, Tijs van Maasakkers (PhD ’13) examines one solution that has been eagerly advanced in environmental circles: the ecosystem services marketplace. Similar to other environmental markets like carbon cap and trade schemes, ecosystem services markets are based on the idea that a developer who is likely to damage the ability of natural systems to provide their full benefits would have to pay for improvements elsewhere to offset these impact. In an early example, increases in water temperatures in Oregon’s Tualatin River threatened the survival of a number of local salmon species, a problem often corrected at great expense mechanically by chilling wastewater before releasing it. Instead, the local water utility opted to offer incentives to local landowners to plant shade trees along the river’s banks, cooling the river naturally, effectively, and at a lower cost.
If implemented well, ecosystem services markets could allow for continued economic progress without sacrificing natural systems. But, as Tijs shows in his study of efforts to create ecosystem services markets in the Willamette River basin and in the Chesapeake Bay, such markets are difficult to develop and face three important structural obstacles.
First, people care deeply about particular places, and tend not to view the services that are provided in one place as transferrable to another. Second, metrics that account for ecosystem services are not yet consistent, comprehensive, and universally accepted. Third, it has been difficult to establish a consensus among effected stakeholders about what these markets should look like.
These obstacles limit the potential of ecosystem services markets, and if they cannot be addressed, it is difficult to imagine how markets can be scaled up. Read more about the promises and pitfalls of ecosystem service marketplaces in Tijs’ dissertation.
Increasing energy efficiency is a popular notion. It garners support from environmentalists to economists to every person who pays a utility bill. But when it comes to retrofits, more homeowners are benefiting from energy efficiency than renters. Patrick Coleman (MCP 2011) thinks this a problem worth looking into.
To do this, Patrick analyzed local city ordinances that aim to enhance the energy efficiency of rental properties in California, Wisconsin, Vermont, and Texas. He found that the barriers to energy efficiency improvements are significant, but the potential in rental housing looms large. The lack of information, fragmentation of housing and energy markets, and misaligned incentives, however, challenge retrofits. Also, the diversity of property owners, from individuals to multinational corporations, presents policymakers and program administrators with varied motivations and interests and makes coordination of resources extremely difficult.
Despite this, Coleman found that well-designed ordinances can 1) establish a minimum standard of energy efficiency in rental properties, 2) enable energy efficiency program administrators to focus their attention beyond basic measures to deeper retrofits, and 3) facilitate the valuation of energy efficiency in housing markets.
Coleman recommends partnerships between local governments, community-based organizations, and utility companies to motivate better energy efficiency in rental units. You can read more by checking out Patrick’s thesis.