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The Endangered Species Act and Federalism

A new book from RFF Press features a chapter by PERC scholars Terry Anderson and Reed Watson. The Endangered Species Act and Federalism, edited by Buzz Thompson and Kaush Arha, explores the role of states and local governments in protecting biodiversity in the United States.

Anderson and Watson’s chapter provides an economic assessment of environmental federalism, focusing on the transaction costs of species management at various levels of government authority. The text is now available from RFF Press.

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I told you so!

A useful principle in business is not to throw good money after bad trying to salvage a mistake. Evergreen Solar has pulled its own plug, filing for bankruptcy. The company had been seen as a shining example of the new industry that would emerge to produce clean energy (although there is nothing clean about the production of solar panels), but it could not make it.

The company fired its employees and moved production to China. 800 “green jobs” gone—another blow to the planned economy the Obama Administration promises will restore prosperity. The company owes creditors about a half-billion dollars. It took benefits from Massachusetts that the state claims total $58 million.

The demand for solar panels has fallen as assorted governments have cut subsidies. They are required for most installations, unless you live off-the-grid in the hills of New Mexico.

In our book, The False Promise of Green Energy, my coauthors and I point out the horrible economics of most of the highly-touted “clean” energy sources. They collapse without on-going direct subsidies, as with Evergreen Solar, or indirect subsidies in the form of forced purchase of their output by electricity producers. Similar things are happening in Europe as the cash crunch is making governments back away from their state-imposed green energy boondoggles that run up prices, punish consumers, and drive away businesses.

Gloating accomplished, let me note that this is no different than all the other central planners and their schemes of economic progress based on corporate welfare. The conservative saint of the day, Governor Rick Perry from my state of Texas, has been involved in this foolishness like most other governors.

The scheme means taxing citizens and existing businesses to hand out gifts to newbies in the guise of “economic development.” One little bundle was given to Cabela’s, the big sporting goods store, so we might enjoy its presence in DFW. No doubt it otherwise would have bypassed this market of 6 million consumers. Some years ago, the good governor handed millions to WaMu so it might grace the state with its presence. Was there a shortage of banks in Texas? Did we need a major bad-loan operator to enter the state due to a mortgage shortage?

The Evergreen Solar fiasco is just one of many such bits of foolishness. When politicians plan economic development, “green” or not, we get what they force us to pay for.

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Forest Service Timber Harvests: Not What They Used To Be

After more than one thousand miles by jet, 40 minutes by float plane, one hour driving, a hike, and a row we arrive to our destination: a 12 x 14 foot cabin in remote Alaska on Prince of Wales Island. We had the lake nearly to ourselves. A few loons, beautiful cutthroat trout, and some spawning salmon did join us. But what is that I hear? A chain saw? The sound gave me pause. It was not desired nor expected but understood. I, like all Americans, use a lot of wood and paper products.

I appreciate a good timber harvest for restoration, forest management, and wood production. We were on the Tongass National Forest, which is the largest national forest in the nation. Over the last several decades timber sales on the Tongass have plummeted from over two billion board feet to around 100 million board feet. I don’t know which is better, likely something in between. What disturbs me is that the amount cut is determined more by politics than sustainable forestry, however you want to define it. (I think of sustainable forestry being defined as ensuring a continuous timber supply but even if it is wildlife that you want to ‘sustain,’ that is not the goal of current management.)

The national forests were set aside to provide a continuous supply of timber and water for productive use. National Forest timber harvest peaked in 1987 when harvest provided about 17 percent of U.S. timber production:

During the peak of timber harvest for the Forest Service, more than half the annual timber growth was harvested and used for timber products, the mortality rate was about 32 percent. In 2007, only 12 percent of national forest growing stock was removed from the forest and mortality increased to 57 percent.

More and more national forest timber is left in the forest where insects and disease are taking hold. The result is lower valued timber and increased wildfire.

Originally appeared at Environmental Trends.

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EPA Budget Cuts: Reducing Bureaucracy, Not Environmental Quality

With the battle over the debt heating up in Congress, the EPA has once again become the target of budget cutters in Washington. A plan by House Republicans to reduce funding for the agency has been called an “environmental disaster” and a “declaration of war” on environmental protections. But the question no one is asking is what effect the EPA’s budget has on measured environmental quality. Do increased EPA budgets result in direct improvements in environment quality, or does it simply increase the size and scope of the agency? Could budget cutting reduce bureaucracy without reducing environmental quality?

Consider the figure above, which shows that since 1980, the EPA’s budget (adjusted for inflation) has remained relatively flat, yet air quality continually improved. Ambient concentrations of nitrogen dioxide have declined by 51%, sulfur dioxide by 76%, carbon monoxide by 80%, and lead by 93% (data here). Moreover, as Joel Schwartz described in PERC Reports, fine particulate levels have declined by 42% and peak ozone levels have fallen 30% as well. Such data suggest that increasing the EPA’s budget, as the Obama administration has proposed, will only increase bureaucracy, not air quality.

Since the EPA sets national air quality standards, the agency decides when its own job is finished. Despite such improvements, the EPA has never declared the air safe and continues to push for more funding, more workers, and more regulations. If lawmakers are looking for an agency in which to cut spending without causing harm to the environment, the EPA is a great place to start.

This post was co-authored with Shawn Regan.

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40 Years on the Regulatory Commons

Don’t miss PERC senior fellow Bruce Yandle’s article in the latest issue of Regulation magazine.

With 40 years of accumulated executive order wisdom to draw on and knowledge tapped from turning out some 2.5 million pages of Federal Register rules since 1970, President Obama looked the Leviathan in the eye and called for a review that will “root out regulations that conflict, that are not worth the cost, or that are just plain dumb.”

In a world where everything can be regulated, requiring agencies to act on better benefit-cost analysis is a wonderfully important idea and requiring retrospective reviews of mossy rules is to be celebrated. But as good as they are, those ideas and others in EO 13563 do not take account of our regulation driven capitalism and the incentives playing throughout it.

In short, “EO 13563 gives commands to an army of regulators who operate as if they are external to the economy they seek to fix, while in fact they are a part of it.” Read more here.

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PERC Reports is hot off the press

The foundation of PERC has always been high-quality academic research rooted in the principles of property rights and markets. It was this focus on research that led to Terry Anderson and Donald Leal’s influential 1990 book Free Market Environmentalism—the first comprehensive argument for “rethinking the way we think” about the environment.

With the third edition of the book forthcoming, PERC recently held a workshop to tackle the hard questions for free market environmentalism. This workshop paired long-time PERC scholars with younger scholars who came to ask the tough questions. As one might imagine, this pairing led to heated debate at times, but overall it enhanced the experience around the conference table. This special issue highlights some of the papers presented.

PERC welcomes open and informed discussion, and the pages of our new summer edition of PERC Reports serve as such a forum. The articles are more academic in tone than our typical pieces—think full-bodied Bordeaux rather than Pinot Noir—but we found them enlightening and hope you do as well.

SPENCER BANZHAF suggests that cap-and-trade is “the free market based approach to complex multilateral problems like climate change.” Free market environmentalists, he argues, should applaud this approach over more costly government regulation while working to push free-market ideals further into policy.

Free market environmentalists do not usually look to government as part of the solution to environmental problems. But when they do, governance by the smallest entity possible is the preferred choice. SARAH ANDERSON challenges this claim by asking, is smaller always better?

CHARLES KOLSTAD goes broad to explore both “The Promise and Problems of Free Market Environmentalism.” Free market environmentalism has a lot to offer for problems pertaining to natural resource allocation, but according to Kolstad, “the case for FME is weaker when dealing with environmental goods, such as providing clean air.”

JONATHAN ADLER dives deeper into the pollution problem by evaluating the common law as a free market solution. He suggests that it is time for free market environmentalists to reconsider what made the common law attractive in the first place, and develop new ideas to “resolve pollution problems while respecting property rights and facilitating market exchange.”

To stir up a little more controversy in the pages of PERC Reports, we’ve included JAMIE WORKMAN’S “Impressions” of the wolf saga. Could the political conflict over wolf recovery efforts be resolved via economics? Let the bidding begin.

Also be sure to read G. TRACY MEHAN’s review of Marc Reisner’s book Cadillac Desert: The American West and Its Disappearing Water, published 25 years ago. This is a classic of American conservation literature and is still illuminating important lessons in the political economy of limited resources

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Why California may not have to close its parks

ABC’s Radio International interviewed PERC’s very own Laura Huggins last week about the planned closure of 70 state parks in California later this year. Rather than close the parks, Laura recommends turning over operations and management to private companies through leasing arrangements. Listen here.

For more, see a list of the planned park closures [PDF] or Laura’s earlier post over at High Country News.

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Closed to Raise Revenues

The threat of park closures is part of the state budget crunch package. Just over one-third (36 percent) of the average state park system is funded by state general funds, a slightly larger share (39 percent) is park generated, and the remainder is often from special funds dedicated for park use (see here).  Because park funding is typically a lower priority than many other state funded projects, such as schools, hospitals, and social services, when state budgets are tight, park budgets are on the chopping block.

The 2007-08 financial crisis brought many states to their knees as tax revenues declined and state welfare expenditures increased. The budget shortfalls resulted in the threat of park closures in many states including Arizona, California, Florida, Georgia, Idaho, Kentucky, New York, Oklahoma, and Washington. Some of the parks in these systems have been temporarily closed and services decreased in others.

Closures can temporarily help state agencies address budget shortfalls. But the number of parks threatened greatly exceeds the number of parks actually closed. Often, as recently occurred in Florida, the threat itself is sufficient to motivate politicians and bureaucrats to find the funds necessary to continue park operations. Known as the Washington Monument strategy, the threat of closing a popular park unit can arouse enough constituent uproar to cause politicians to restore, and sometimes even increase, park appropriations.

In California, park closure threats were declared in 2005, 2009, 2010, and now again in 2011 (PDF of proposed closures). According to Roy Stearns, California State Parks Deputy Director, a California park has never been closed for “budget reduction reasons.” In 2005, park fees were raised to prevent closure. For the 48 parks threatened in 2009 and 200 in 2010, funds were restored and some services reduced. The chopping block currently has 70 parks slated for closure.  The likelihood of closing these parks is slim but it has garnered lots of attention.

Managing parks according to the waxing and waning of state budgets and political whim is reactionary. It does not provide good stewardship to help maintain the areas for their unique features and the public enjoyment. It is time for a new model to fund state parks.

Originally posted at Environmental Trends.

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A Closer Look at State Park Budgets

Most state park systems are largely dependent upon general fund appropriations, which are supported by tax dollars, and dedicated funds for operating and capital expenditures. When state budgets are tight these funds are often swept away from parks to help fund other state priorities. The threat of park closures and cuts in park services are a common result.

Park user fees constitute 39 percent of the average state park system budget. These park generated revenues have increased over time but are short of fully funding parks and leaves them susceptible to the waxing and waning of budgets and political management.

Another option is private leasing of public parks. When private managers lease the right to provide recreation they typically pay the government a rental fee for land use, a commission on revenues earned, and pay the management expenses. The lessee must provide the visitor with a valued experience at an affordable price to ensure return visits. Private management of public land units through leasing is proving to be a win–win option.

Originally posted at Environmental Trends.

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A Political List

In a new deal with environmentalists, the Obama administration has agreed to work through a backlog list of species that require additional study to determine if they should be given protection under the Endangered Species Act.  Some of these species were proposed for protection in 1973 when the Act was passed. Nearly 40 years later, the fate of some species is still not determined.

The setback is because the Fish and Wildlife Service, the agency responsible to evaluate species for protection, is flooded with lawsuits by groups hoping to force designation of certain species.  The resources required to evaluate the status of a species, however, are limited.

In recent years, the lawsuits have been setting the agenda. According to the Deputy Interior Secretary, David Hayes, “[p]riorities are being set by plaintiffs and courts instead of by wildlife professionals, by litigation instead of science.”

In order for the Obama deal to be successful, all parties proposing species for listing under the Act have to be on board – an unlikely scenario. In fact, it appears that many groups are more interested in the number of species being listed than their need for listing. An administration’s effectiveness of species protection is often based on the annual average number of species protected per year. Until now, Obama has been labeled ‘lame’ with only 30 species per year compared to Clinton’s 65. This target has nothing to do with science or the number of species at risk. The target has everything to do with politics and the power of influence.

Originally posted on Environmental Trends.

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Same Old Song and Dance Over CA Parks

Once again California is threatening to close state parks. Seventy (out of 270) parks are on the chopping block this time around (see an interactive map of the planned closures). The plan is to place the parks in “caretaker status,” which means gates would be closed and people would not be allowed to enter.

What a dismal idea from a state known for its entrepreneurial energy.

There are a few ideas being tossed around to keep parks open but they lack luster. There was Proposition 21, the regressive car tax that was rejected by voters last year. Now there is Senate Bill 356, which would require the state to give counties and cities a chance to take over operations of closed state parks in their areas. And there are plenty of statements such as those by State Assemblyman Jared Huffman (D-San Rafael) who said that park closures were inevitable, but that he would work to allow nonprofits to take over park operations in appropriate situations.

Why is this outcome inevitable and why only consider nonprofits? As Harris Kenny recently wrote in the Orange County Register:

There are private companies out there that will see California’s parks wasting away and envision a way to bring them back to life. Some facilities, like Tecopa Hot Springs County Park in Death Valley, operate under whole-park concession agreements, a remnant of California’s once-innovative past where the state leased some parks to private companies….Under these lease agreements, recreation companies manage and maintain the parks. The government can set any quality and maintenance standards it desires and hold the private company accountable to them with a performance-based contract.

Other states are already moving to protect their parks through lease agreements. Last year, Arizona asked private companies to present creative proposals on how they would enhance operations at state parks. The state is currently reviewing ideas submitted by six companies.

One of these companies is Recreation Resource Management, which offered to lease six Arizona state parks targeted for closure amid budget cuts. The company proposed to collect the same visitor fees the state charges today, while taking the operations and maintenance costs of these parks off the state’s books. Moreover, the concessionaire would pay the state an annual lease payment based on a percentage of the fees collected. The state would retain full ownership of the land, and the company would be subject to strict state controls on operations, visitor fees, and maintenance. As Leonard Gilroy wrote in PERC Reports last year, “the private sector is offering to take over the operations and management of cash-strapped Arizona state parks, keeping them open at no cost to the state.”

When the federal government threatened to close the gates to the Presidio due to budget constraints in the mid-1990s, Californians didn’t just stand by and let it happen. People got creative and pushed for the Presidio Trust. This innovative idea included separating the management of the Presidio from politics, with the goal of self-sufficiency providing  an incentive to earn revenue. The revenue earned, primarily by leasing properties, then goes toward operating the park, preserving its natural and cultural resources, and ensuring its long-term care.

The Presido Trust arrangement has not been without road bumps, but the point is the Presido is still open and is one of the most stunning urban parks in the nation. Rather than simply closing parks, bureaucrats in Sacramento should step aside and let creative entrepreneurs and private companies do what they do best—produce products (e.g. parks) that people want.

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Playing Chicken with the Department of Ag

by Paul Schwennesen

Josh is a Mennonite friend who happens, by the grace of native talent and a powerful work ethic, to produce magnificent chickens. Raised on green growing pasture, they are never medicated, never fed artificial supplements or genetically selected to grow abnormally fast. They develop rich golden fat and a deep flavor; characteristics that have been more or less lost in modern, streamlined, highly efficient poultry production. Not surprisingly, Josh’s chickens are in high demand among food cognoscenti and fine restaurants.

A couple of years ago, I began bringing Josh’s chickens to my farmers’ market stand to market alongside our equally popular grassfed beef. Josh and I, in a classic entrepreneurial endeavor, have made these wholesome chickens available to happy, discerning customers who would otherwise be unable to justify a three hour commute to buy a bird for dinner.

Josh processes his chickens on his farm under a legal exemption allowing him to avoid industrial (and expensive) processing plants. Each chicken he produces is clearly labeled as to origin, method of production, added ingredients (none), as well as citing the statute, which allows him to do these things unmolested.

Last weekend he was informed by the Food Safety Inspection Service, the regulatory arm of the USDA, that he faced a “situation.” They had discovered a chink in the otherwise protective “non-molestation” statute. Because he is marketing chickens to an intermediary (me), his product is therefore rendered illegal and he must desist. In a disturbing addendum, the inspector also let slip that the USDA would be “willing and free of charge” to take over inspection of his facilities, and that they would be “more than happy to help him get going,” presumably in the chicken business.

The same authority willing to allow a company to distribute (and I’m not making this up) neon-green sugar drink with the word “sweetener” (in quotes) on the ingredient list believes that customers cannot be trusted to buy a natural chicken from a reputable farmer.

Perhaps this is just the fickle vagary, the marginalia of an otherwise appropriate regulatory regime.  But I’m afraid this situation represents a deeper, metastasized, problem.  The late Mr. Jefferson, that “intellectual voluptuary” according to his Big Government nemeses, explained that government’s only purpose is to secure natural rights.  Governments, he believed, exist to protect life, liberty, property and little else.  It’s probably archaic of me to wish for a return to such a limited view, but I can’t help it.  The kind of absurd oversight now considered standard practice feel fundamentally unjust. It would be wonderful to live in a world where selling a chicken wasn’t rife with official allegations or burdened with state prohibitions.