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What Ever Happened With Colony Collapse Disorder?

There has been plenty of bad news about bees lately. In 2006, beekeepers reported the mysterious disappearance of abnormal numbers of honeybees from their hives over the winter. The affliction, now known as Colony Collapse Disorder, has gripped the attention of the media—and perhaps for good reason. Honeybees are responsible not only for the honey in your cupboard, but also the pollination of many of the crops produced in North America.

If you were to rely on media reports alone, you might be inclined to believe that honeybees and honey are now in short supply. Based on the recent documentaries about Colony Collapse Disorder, you might believe that crops are at risk of going unpollinated and that we are heading towards a different “silent spring”—one in which the familiar springtime buzzing of the bee is no more.

Yet, somehow, the honey is in the cupboard and farmers across the country are still able to supply food to stock our shelves, all with little or no economic impact from CCD. How can this be?

As two prominent agricultural economists, Walter Thurman and Randal Rucker, discuss in a new PERC Policy Series, the market response of beekeepers provided a solution to the problem. Despite early predictions that CCD would cause billions of dollars of direct loss in crop production, beekeepers reacted so swiftly that virtually no changes were detected by consumers. While overcoming the difficulties of CCD has been no easy matter, beekeepers have proven themselves adept at navigating such changing market conditions.

“The state of the honey bee population – numbers, vitality, and economic output – are the products of not just the impact of disease but also the economic decisions made by beekeepers and farmers,” writes Rucker and Thurman.

You can read the latest PERC Policy Series here.

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Happy Holidays and Merry Christmas!

  ‘Tis The Season

When PERC opened its doors in 1980, free market environmentalism (FME) was considered an oxymoron; environmentalists saw markets as an enemy, not an ally. Now, thanks to PERC, the largest and oldest think-tank focusing on market solutions to environmental problems, FME is being tried and tested around the world. In Africa, private land owners are protecting rhinos from poaching; in the Caribbean an alumnus of PERC’s Enviropreneur Institute (PEI) is working to help replant and regenerate dying coral reefs; and in the Gulf of Mexico, the Environmental Defense Fund has joined PERC in campaigning for property rights solutions to overfishing.

At 45°N and 4,820 feet elevation, PERC needs your help to keep its dedicated PERC staff warm this winter season!  Your tax-deductible gift will help fund innovative research, convene conferences, publish the results in PERC Reports and other venues, and add to the growing number of environmentalists implementing PERC’s ideas.

Here are some specific things that your donation to PERC can accomplish:

  • $25 will cover the cost of producing and distributing PERC Reports to one reader for one year;
  • $100 will pay for printing and distributing a PERC Case Study to 100 people;
  • $2,000 will provide a scholarship for a student to participate in PERC’s summer programs;
  • $5,000 will pay for a Lone Mountain Fellowship, which brings a professor to visit PERC;
  • $15,000 will give an environmental entrepreneur an opportunity to attend PEI and learn to apply FME to their work.

I assure you that your tax-deductible contribution will promote environmental quality with less government and more individual freedom. Now is the moment when improving the environment by utilizing property rights and markets rather than big government can truly benefit America as the nation works to deal with its fiscal crisis.

Sincerely,

Terry L. Anderson

Executive Director

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Can New Mexico turn blue into green?

By Chris Corbin

Tomorrow morning, I will board a plane for the 2011 American Water Resources Association Conference in Albuquerque, New Mexico. At this event, I will present my vision for turning blue into green through water marketing to both the conference and the local Business Water Task Force.

An example of this vision was highlighted in an Ecosystem Marketplace article published last week: Can his Water Bank help Montana Solve its Water Troubles?

While at this conference, I intend to tweet the highlights (in my eyes) from @loticwater with the hashtag #AWRA2011.

It should be a fun one in the world of water; I hope to see you there.

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A Prize for Ocean Cleanup

Last month, the X-Prize Foundation announced the winners of the Wendy Schmidt Oil Cleanup Challenge.  The challenge was created to spur the development of more effective oil spill cleanup methods.  Specifically, the challenge offered $1.4 million in prizes for the development of removing oil from the ocean’s surface.  The aim was to double the industry’s best oil recovery rate in controlled conditions.  The winning team, Elastec/American Marine, demonstrated an oil recovery rate more than three times the industry’s previous best and was awarded the top prize of $1 million.

This is another example of how technology inducement prizes can spur the development of valuable technologies, and further evidence that such prizes are far more cost-effective than ex ante R&D grants or government investments in speculative ventures like Solyndra.  The latter may be more politically popular, but prizes would be a better use of taxpayer dollars.  As I’ve argued at length, if we’re serious about problems like global climate change, we should invest more in prizes and less in conventional approaches to government-sponsored R&D.

(Thanks to Roger Meiners for the pointer.)

Originally posted at The Volokh Conspiracy.

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Catch Share Fisheries at Work in the World’s Poorest Countries

By Jingjie Chu

Fencing Fisheries in Namibia and Beyond strengthens the case that rights-based fishery management works and a well-designed catch share system customized to the local culture and history will work even in underdeveloped countries. The development stage should not be a hindrance. On the contrary, there is an urgent need to use rights-based fishery management to help improve productivity and enhance sustainability in the fishery sector.

Chu is a 2011 Enviropreneur Institute Fellow and a natural resource economist with The World Bank Group, Africa Region. The above is Chu’s personal view, which may not represent the view of the World Bank.

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8 reasons why water is not the next gold

By Chris Corbin

I’ve noticed an increasing trend in what I call “Water is the Next Gold” articles. On some level, I couldn’t agree more – hence, my career choice. Although, as someone actively engaged in the western water market, I can easily name 8 reasons why water is not the next gold.

1. Gold is simple. Water is complex. Surface water vs. groundwater, simultaneous and interdependent use, just scratch the surface of this complex resource. The only constant with water is change.

2. Gold is safe. Water rights come with inherent risk, due to the uncertain validity of the invested asset.

3. Gold markets don’t include adjudication. Water markets include adjudication.

4. Gold markets have low transactions costs. Water markets have high transaction costs. Water transactions are plagued by third party effects and the tragedy of the anticommons.

5. Gold has many buyer and many sellers. This is not yet the case in the water market, but the supply and demand of water in the West makes this a strong possibility in the future.

6. Gold markets are efficient. Regulatory bottlenecks challenge the efficiency of water transactions.

7. Gold has clearly defined prices. Water lacks clearly defined prices. For example, tell me how much water is worth.

8. The gold market isn’t polarized. Some people believe water should never be traded. Even though I disagree with these people, their opinion still exists.

With that said, I strongly believe investing in Western water rights is a wonderful idea, it’s just not the next gold.

Chris Corbin is the founder of Lotic LLC — a water rights marketing and management company, and a PERC Enviropreneur Institute alum. He blogs at Living in Actively Moving Water.

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Return on Investment

PERC recently acquired ownership of some valuable real estate in the Florida Keys. To the staff’s disappointment, it was not winter office space. Instead, we adopted a piece of Staghorn coral transplanted by the Coral Restoration Foundation. The property is a gift from the 2011 Enviropreneur Institute Fellows.

Restoring Florida’s coral reefs is the mission of the Coral Restoration Foundation. By planting nursery-grown brood stock in restoration sites, this organization is helping reverse the impacts of hurricanes, boat landings, and nutrient loading.

Brett Howell, 2011 PEI alum, is spearheading an effort to create a market-based approach to coral reef restoration. If you’d like to adopt some transplanted coral, visit this site.

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Q&A with Michael Higuera on Enviropreneurship and Land Conservation

This summer PERC welcomed sixteen conservationists from around the world for its 11th annual Enviropreneur Institute. The program works with environmental entrepreneurs, or enviropreneurs, who seek a better understanding of how business and economic principles can be applied to environmental problems. For two weeks, participants have the opportunity to interact with leading experts in the field of free market environmentalism, including those who have researched and applied markets and property rights in their environmental work.

Michael Higuera of The Nature Conservancy attended this year’s program. He works for TNC in Boulder, Colorado, where he protects land through conservation transactions across the state. Michael began his career practicing transactional law in Denver, but discovered that finding solutions and bringing people together resonated with him more than the process of litigation. We thank him for answering our questions. For more of PERC’s Q&A series, see the Q&A archives.

Q: What types of conservation transactions are you currently facilitating?

A: I am primarily responsible for obtaining conservation easements on large ranches (over 10,000 acres) in eastern Colorado in order to preserve shortgrass prairie and protect native bird and wildlife species.  These transactions are funded by private donations, landowner donations, and public funds from sources such as the lottery, the Division of Wildlife, and federal programs.  In addition to that responsibility, I am working with a small group of people to determine ways to bring private capital into our conservation work and land transactions.  We have been exploring ways to engage the private sector in acquiring properties with significant biodiversity value and are considering using an investment vehicle such as a real estate investment fund. The fund would manage the properties for a profit while also protecting their biodiversity by placing a conservation easement on the land.  The sale of the conservation easement would help the fund acquire the property at a lower basis thereby increasing the operating return on its investment.  Similarly, my project at PERC’s PEI program sought to find ways to work with oil companies to manage drilling operations in an environmentally sensitive manner.  The common element between the real estate fund and the oil company ideas is finding market-based incentives that make it attractive for those ventures to promote conservation on their properties.

Q: What might some incentives be for the companies to conserve land tracts used in part for drilling?

A:  We cannot use a conservation easement to address drilling for oil because mineral rights are very different than surface rights which can be protected by easements, but my idea was inspired by the success of the conservation easement as way to facilitate the acquisition of property rights that are valuable to TNC’s mission to protect biodiversity.  The crux of my project at PEI was exploring ways to create incentives for oil companies to work with conservation organizations like TNC to plan their projects to avoid sensitive areas and minimize impacts.  The most ambitious way to do that would be for companies to create a product that is differentiated in the marketplace from others by the way in which it was extracted.  We certainly see this in the organic food market, fair trade certifications, and in the forestry markets.  Unlike the conservation easement model that relies in part on public funding and tax incentives, this model would rely on the consumer to pay for the conservation benefits.

A conservation drilling plan would provide protections for biodiversity. which is a win for TNC and others who value nature.  It could also be a win for the oil company by allowing them to differentiate their product, increase market share, and command a premium at the pump.  Consumers who want to be part of the solution would win too.

Q. You’ve discussed the possibility of an eventual fourth pump at gas stations nationwide.  What would this new “conservation gasoline” be, and how would it work?

A:  The fourth pump is really the home run for this idea and represents something that I think needs to happen in conservation more generally.  It represents a way to empower consumers with choices.  If conservation is important to people, then people need to step up and vote with their dollars.  Part of the reason that I have come to this conclusion is because I have more faith in people’s ability to make change through the market than at the ballot box.  The lobbying efforts of the oil industry have proven pretty effective at limiting new regulations.  Consumer demand and pressure at companies such as Walmart (that’s now carrying organic food and taking steps to be energy efficient) have resulted in some amazing changes that I do not think could have originated from a legislative process.  Another reason this kind of consumer or market-generated conservation has the potential to be so powerful is because it creates self-funded conservation that does not rely on public funding and, if it is successful, it ends up being replicated by competitors who see that it creates value.  This kind of domino effect is where you really end up having change happen on its own and at scale.  This will also become more important as we enter a time period of less and less government spending in response to the budget crisis.

Q. What challenges lie ahead in creating market incentives for oil companies to conserve land?

A:  There are a lot of challenges but the fun thing about working at an organization like TNC is that the possibilities for results at scale are what drive and inspire us, not the hurdles that lie ahead.  I think that the primary challenges are building a cooperative relationship with an industry that has not seen it in its interest to proactively work to promote conservation.  Another key challenge will be developing a market for this type of product in a market space that did not previously exist.  It will be critically important to create a market that has a mechanism to assure consumers that their dollars are making a difference on the ground and really advancing conservation while at the same time that mechanism needs to be user friendly for the oil companies.

Q: What did you take away from PERC’s Enviropreneur Institute that will help you with developing your project?  

A:  I came away from PERC with a fresh way of looking at problems and new tools for doing so.  Additionally, I forged relationships with a great network of people who renewed my enthusiasm for my work and with whom I hope to collaborate in the future.  I think PERC also helped deepen my understanding of markets, incentives, and property rights as a way to advance conservation.

For more from Michael Higuera, see his earlier post “What does it mean to be an environmentalist?

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Perspectives on lionfish and marine parks in Mexico’s Yucatán Peninsula

by Brett Howell, 2011 PERC Enviropreneur Institute alum

I have just returned from a 10-day trip to the Yucatán Peninsula in Mexico where I visited Cozumel, Playa del Carmen, and Cancun. When I planned the SCUBA trip, I expected it be a relaxing vacation. However, ever since starting to work on market-based solutions to invasive lionfish, I just could not help but turn a “vacation” into a hands-on research project.

Unfortunately, invasive lionfish have become a prevalent species in Cozumel. According to my divemaster, who works for the company Dive Paradise, local dive operators have bonded together informally to begin addressing the lionfish invasion. Divemasters carry simple spear systems with them on each dive. When a lionfish is spotted, it is killed. Of the 25-30 dives I completed, lionfish were seen on about 10 of the dives, only in the shallower reef areas (45-60 feet). After it is speared, a lionfish’s spines are cut off and the fish is fed to eels or other fish. “Tourists” are not supposed to shoot the lionfish, for fear of someone being stung in the process, but our divemaster let one of the people on our boat, Eric, try his hand at the lionfish management process. According to Eric, the success of a shot really relies on the equipment being used. One spear he tried had a guidance mechanism to shoot the spear straight, whereas the other did not. Of the lionfish Eric went after, he successfully killed about half of them.

One afternoon our divemaster wanted the lionfish for dinner, so he kept approximately five of them for later feasting. While I was impressed with his interest in eating the fish, despite potential ciguatera concerns (a foodborne illness from eating certain reef fishes), I was very disappointed when he would not kill a lionfish that I found. His response was that he knew that the lionfish would be there the next time he went to the dive site, and he wanted the fish to get a little bigger so there was more meat for him to eat. This is part of the challenge with trying to get people to target lionfish; we do not want people to wait to harvest invasive lionfish in the hope that they will get bigger. The process of a lionfish growing means that it has eaten more of the critical reef species that we are trying to protect.

By far the most creative capture of a lionfish was a young lionfish that I found while on a night dive. Divemasters do not usually carry spears at night, so we ended up collecting the fish using one glove, a dive knife, and a plastic bag. The divemaster did the collecting. After killing the lionfish, he attempted to find an eel to feed it to, something he was unsuccessful in doing before we had to surface due to low air.  [Read more…]

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Central Planning and the Wallow Fire

by Paul Schwennesen

Prometheus, mankind’s great advocate and insubordinate pilferer of flame, must be perplexed by the goings-on in fire-riven Arizona. The towering columns of smoke have gone, but the forest conflagration has left behind half a million charred acres and more than a few smoldering resentments. Primary among these resentments is a question over management of public forest resources: who should decide how we avoid or at least mitigate such a calamity in the future? It is of course ironic; Marx claimed Prometheus as the figurehead of the communal mystique, and no asset is more communally owned than America’s western forests. Not surprisingly, these forests are a prime example of the tragic consequences of collective ownership and central management.

In addition to our famed cactus down south, Arizona harbors around seven billion cubic feet of live timber and the world’s largest stand of ponderosa pine. The Apache-Sitgreaves National Forest lies on 2.63 million acres of this stand. Each year, solar energy and carbon are converted into nearly twenty-four million cubic feet of timber on national forest land. This resource is impressive and aesthetic, drawing sun-scorched tourists by the busload.

It also draws “managers” by the score. Aldo Leopold embarked on his first Forest Service assignment here in 1909, just a few miles from Bear Wallow. Ever since, the forest has been managed in the public domain by well-educated and better-intentioned technocrats charged with maximizing the public good. Under a complicated rubric of “multi-use,” the Forest Service attempts to harvest the sustainable yield of the resource (it is, after all, under the Department of Agriculture). Timber, livestock grazing, and hunting permits are just a few of the “extractive” uses they are charged with upholding. Habitat protection, endangered species management, and increasing recreational demands are a large and growing slice of the resource allocation pie.

The extraordinarily difficult job of balancing these competing demands is precisely the sort of thing that bureaucracies are bad at handling. As Malcolm Gladwell notes, these kinds of complex problems are not puzzles (which more information and better education can help solve), but mysteries (in which more information and better education tends to confuse). In the late-1980s, for instance, timber harvesting off national forest land came to a nearly complete halt as a result of court injunctions precipitated in the Pacific Northwest. Litigation by environmentally conscious lobbying groups, specifically over concerns of habitat destruction for endangered species, made large-scale timber harvest a thing of the past. Grazing permits likewise encountered a dramatic decline for similar reasons. Combined with an aggressive thirty-year campaign of actively putting out all fires (is there any more iconic mascot than Smoky the Bear?), these actions led predictably to a dramatic increase in forest-density and ground cover.

Forest density and ground cover is called “habitat” by the green contingent, “fuel-load” by their brown compatriots. And, of course, there is an element of truth in each view, often masking personal preferences and economic agendas. But the point is this: the kind of see-sawing policy shifts which encouraged dramatic, perhaps unsustainable, increases in extractive uses in the early 1980s was followed by dramatic, perhaps unconscionable, reductions in these uses a decade later. These market-insulated policy shifts were not based on good information (which markets are extraordinarily good at projecting), but on politics and the relative power of lobbying those in control. The short-term increases in forest habitat resulting from reduced extraction charged the pan for the tremendous blazes we have encountered in the past decade.

This past May, one of the sun-scorched tourists started a blaze that subsequently burned more acreage than any other single event in state history. Two and a half billion board feet of timber are estimated to have gone up in a whiff of carbon and particulate pollution this summer. Five hundred nineteen thousand, three hundred and nineteen acres of prime habitat, prime camping, prime hunting, and prime timber disappeared in an ecological blink of an eye. Before us lie the smoking remnants of command-and-control planning gone predictably awry.

“Well,” you say, “forests burn periodically, it’s a natural and proper consequence of growth.” If only it were that simple. Fire is indeed a natural ecological force, particularly in the brittle ecosystems of the semi-arid west. But size matters. Half-million acre infernos are almost certainly not typical of the “natural” order of things.   [Read more…]

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The costs and benefits of the word ‘externality’: what I learned at PERC

by Andrew Balthrop, a PhD student in economics at Georgia State University and 2011 PERC Graduate Fellow.

Until this summer, the way I thought about externalities was pretty abstract: an externality was where one agent affected another agent’s utility without compensation. The solution was to get a social planner to tell each agent what to do, and society would be better off for it. I had never thought too deeply about why the two agents could not settle the problem themselves, or about the institutions that might help address the problem. It was merely an optimization problem with two possible solutions.

For most of the summer, I didn’t get why everyone at PERC hated the term. Often times a point was made that went something like, “If this is really a problem, why haven’t people dealt with it?”  I took that point as an assumption that the economy must always and everywhere be in equilibrium; I thought the senior researchers were ignoring the most amazing thing about the economy: its dynamism. People do get rich with new discoveries, the landscape is ever shifting, and if you don’t adapt, you get left behind.  But I will come back to this point.

What changed my view–what put me in my place as a graduate student–was listening to the senior fellows at PERC talk about Ronald Coase. I must sheepishly admit that what I had taken from Coase was only the first three pages of “The Problem of Social Cost.” I was exactly what the fellows railed against. My take away was that externalities were reciprocal, and that if “transactions costs” were low, and property rights clear, agents would achieve the efficient outcome. But I assumed the point of the paper was that  transactions costs were not low, and that property rights were not clear, and that is why you have to study Baumol and Oates. I didn’t understand that the court cases were a way to make property rights clear and transactions costs low–that the courts were a solution. I left that seminar with my mind blown, and a little embarrassed.

How I should have been interpreting the comment of “If this is a real problem, why haven’t people dealt with it?” is actually, “You are talking in abstractions here. The real world is not a blackboard problem, and people are not hapless. If this is a problem, there must be specific institutional friction(s) preventing agents from solving it. Tell me specifically what that is, or you have not understood the situation.” This is why PERC researchers don’t say externality. Or spillover.

My own research focuses on the extent to which neighboring oil producers interfere with each other’s production. While at PERC I learned that merely quantifying this production interference was not sufficient to demonstrate a true externality. In order to do good research on the subject of oil and natural gas production, I would have to know the institutional environment inside and out. Inter-well communication isn’t enough to assure an externality; it is only a physics problem and people solve those all the time. For there to be an externality, something else has to be going wrong. For me to use the term, I need to identify specifically what that something else is, whether it is a peculiarity to oil production or oil law that makes contracting difficult, a regulation that incentivizes perverse behavior, or something else. And once I identify this problem specifically, there isn’t much reason to use the term “externality.”

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Is clean water for fracking the next cleantech opportunity?

Lynne Kiesling at Knowledge Problem has an interesting post that might be of interest to enviropreneurs. She picks up on a recent article that suggests clean water for fracking is the next hot cleantech sector:

“In an interview this week with VantagePoint Capital Partner and Founder Alan Salzman, he told me that he sees technology that can help solve the clean water issue for fracking as an upcoming hot area for investment. “We think the limiting factor for gas fracking is water. We’re not gas people, and we’re not oil people. But we are water people,” said Salzman…

A company called ABSMaterials has been working on the problem of cleaning liquids involved with fracking. The company uses sand-like particles to absorb chemicals, and the company says it can remove 99 percent of oil and grease from water in fracking fluid, and another 90 percent of the toxic chemicals like benzene and xylenes.”

This video shows one of their products in action. As Lynne notes, this project and others are being funded in part by the Department of Energy. Her concluding discussion asks good questions:

“If fracking really is here to stay and growing, as Mike has discussed extensively, are these research subsidies necessary to induce innovation in water cleaning technologies? If so, on what basis? Is there a Coase problem here — does legal precedent fail to define legal liability sufficiently to clarify the profits attached to the water cleaning? Or, if that’s not the case, is the water cleaning insufficiently valuable to be worth doing? That hypothesis is consistent with the argument that fracking does not actually create a lot of water supply damage. But if that’s the case, then why subsidize the research — isn’t that a waste of taxpayer funding on research that isn’t likely to be valuable enough to be worth pursuing?”

Mike Giberson, also at Knowledge Problem, has been providing diligent and extensive analysis of fracking and energy markets more broadly from a market perspective, much of which can be found here.