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Q & A with Godwin Nnanna on the Niger Delta and Pollution

Godwin Nnanna is the investigations editor for Business Day, Nigeria’s leading financial daily based in Lagos. He has been a journalist since 1997 and has won a number of international and local journalism awards for his writings. Godwin has spent the last week at PERC as a Media Fellow, exploring free market environmentalism and property rights.  His research at PERC focuses on the Niger Delta and the persistent issue of gas flares and oil pollution.

Q: What is a gas flare? How frequently do they occur?

A: Gas flaring is essentially the burning of the gas that comes with the crude oil that we make gasoline from.  It is often the cheapest and easiest thing to do to associated gas during exploration, but obviously not the best thing to do. In the oil producing region of Nigeria this is a common practice despite the fact that we have had laws against it for over three decades.   In most oil producing communities in the delta, the flare tunnels are quite ubiquitous endlessly pumping out huge toxic flames into the air.  You see them everywhere exploration activities take place, some on farmlands, others right behind the houses of the villagers.  Some are laid on the ground, others mounted like huge Olympic torches.  To think that this has been the order for over 40 years is worrisome, very worrisome indeed.

Last October, I did a story after visiting the region titled ‘Legacy of waste’ chronicling how a nation with the world’s sixth largest gas deposit continues to waste such a huge economic product because of a lack of genuine commitment on the part of the stakeholders.

Shell, the leading explorer in the region records that there are about 110 flare locations in the region.  I don’t know how true that is.  All I can say is that there are enough to make Nigeria the worst culprit among OPEC nations.

Q: What are some of the associated risks of gas flares? How much gas is lost every year?

A: They have very terrible health implications for the communities.  You see all kinds of strange ailments when you visit these places.  You observe people with all kinds of tumor, bronchitis, respiratory and eye problems.

Figures vary but estimates are that Nigeria loses between $3 to $10 billion annually to this act.  Again, I am not sure of the figures, but imagine what $5 billion could do for the economy of the Niger Delta suppose that’s the figure.  The price of gas has been on the rise and yet we continue to waste such an important energy source in a country where many people cook with firewood and where electricity is hard to come by.

Q: Gas flares were outlawed in 1979, and yet they continue to occur. Why is this?

A: Weak institutions, corruption.  We are not saying over-regulate, we are simply saying ensure that basic environmental standards are conformed with.  There are global best practices and it makes good business sense to conform to them.  I’ve been reading two books since my arrival here.  One of them is Why Nations Fail by two Cambridge professors, one from MIT and the other from Harvard.  As I read that book, I reflect on Nigeria.  The authors alluded to the fact that the key distinguisher between prosperous nations and poor ones are institutions.  Where institutions are weak, poverty is endemic.  Obviously, the argument of these professors won’t be surprising to anyone who knows the Nigerian situation.

Q: How does the Nigerian federal government control resources?

A: The revenue from oil goes to the central government from where it is shared.  The center retains a portion while the rest is shared among the 36 states that make up Nigeria.  The oil producing states get slightly more because of a derivation formula that gives them an additional 13% for the oil produced from their communities.  This has been a subject of huge debate over the years in Nigeria.  While the oil producing states want more, others states are saying “no, what you have is enough”.

Q: What are the effects of this centralized control?

A: One of the biggest injuries oil has inflicted on the Nigerian system is that it has created a large dependency culture.  Most of the states do nothing but wait for monthly allocation from Abuja. Same with the local governments.  This has crippled innovation and the results are obvious in the huge unemployment and poverty rates in these states.

Nigeria was not always this way.  In the 50s and 60s when oil wasn’t much in the scheme of things, the regions thrived on the basis of their agricultural strengths.  Each region had its comparative advantage and there was deliberate effort to build on it.  You might have heard of the Kano groundnut pyramid in the north, and the cocoa and palm oil production in western and eastern Nigeria respectively.  These regions were economically strong on the basis of what they produced.  Today, except perhaps for Lagos, I doubt if there is any state that can survive without oil money. No prosperous nation anywhere in the world that I know or have read about operates such a monolithic economy.

Q: How can these gas flares be put to better use? What will need to occur to turn this pollution into economic prosperity?

A: We must reduce the flares drastically if they cannot be entirely stopped.  I read a BBC report recently that went by the title ‘Nigerian gas profit up in smoke’.  There is a huge energy deficit in the country and it is time genuine commitments are made to solve that problem.

Power is the key to stimulating entrepreneurship.  At the moment we are a ‘generator generation’.  Every average Nigerian, as a matter of necessity, makes an investment into a generator no matter how small.  So we have the biggest market for generators.  Visit any place in Lagos and you’ll see a block of four flats with at least four generating plants.  Some households have 2 or 3. It is not so even in some smaller countries in the region.  I lived in Accra, Ghana for almost 5 years without needing to buy a generator, but in Lagos, everyone owns one.  You can achieve real economic development this way.

Nigerians are very entrepreneurial; all they yearn for is basic infrastructure.  This presents a challenge as well as a huge investment opportunity.  We’ve seen in states like Lagos, attempts to forge public-private partnerships in infrastructure development.  That needs to be expanded.  Such opening up is required in many other sectors.  One of our challenges is that we have so much government yet so much less of the basics that that institution ought to do partly because of too many leakages.

Q: What have you taken away from your time at PERC?

A: I think what strikes me about PERC is the philosophy I see at work here.  Here is a group of people who essentially see opportunities in places where many out there see huge problems.  I have been covering the environment for a while and the widely held perspective out there is that economic growth and the environment  don’t go together.  PERC thinks differently.   I had a chance to speak with Dino Falaschetti and I like his perspectives on one of his papers “Growth is Green,” which in many ways is an expansion of the concept of free market environmentalism for which PERC is known.   This is a thought pattern that isn’t common.  The other thing quite fascinating is the warmness of the people here.  It’s remarkably amazing.

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Growth is Green

“Economic growth is green,” says Dino Falaschetti, PERC’s new executive director. Growth occurs only when markets are allowed to work to move goods and services from low-productivity uses to high-productivity uses. “Making more with less is conservation. Making more with less is sustainable,” adds Falaschetti. “When environmental policy puts growth at risk, it is brown, not green.”

So why is environmental policy often at odds with economic opportunity? Falaschetti will explore this question and present the case for free market environmentalism at FreedomFest on Thursday, July 12th.

The costs of transacting over environmental services can be considerable, opening the door for policy makers (and even some economists) to push for a more centralized direction of resources. As Paul Krugman wrote in 2010:

When there are “negative externalities” — costs that economic actors impose on others without paying a price for their actions — any presumption that the market economy, left to its own devices, will do the right thing goes out the window. So what should we do? Environmental economics is all about answering that question.

But, as Falaschetti will show, environmental economics is not, as professor Krugman argues, all about answering that question. Instead, the very premise of the argument is flawed. As Nobel laureate Ronald Coase explained, the fundamental problem for law and economics is not “negative externalities,” but rather transaction costs. While these costs can be considerable for environmental services, it’s not accurate to say markets fail. After all, we don’t say markets fail when transportation is costly. So why do so when transacting is costly?

Markets don’t fail. The political-legal services that are necessary for economic efficiency fail.

Going to FreedomFest? Check out Dino Falaschetti’s speech on Thursday, July 12th at 2:30 PM, and follow PERC on Twitter.

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What in the world is a ZEC?

Written by Dylan Brewer, PERC Summer Intern

Québec’s zones d’exploitation contrôlée (ZECs) are one of the best kept secrets of conservation. Created in 1978 with the Ministère des Ressources naturelles et de la Faune’s (MRNF) launch of “Opération gestion faune,” ZECs are non-profit organizations in charge of managing wildlife resources. Each zone is headed by supervisors elected by paying members. In 1991, Terry Anderson and Donald Leal’s book Free Market Environmentalism looked at ZECs, praising their pricing system as “instrumental in maintaining high quality recreation.” Today, as the program nears its 35th year, ZECs are thriving and now serve more than 250,000 visitors per year.

When ZECs were started in 1978, each zone was charged with managing hunting and fishing within a certain domain. Prior to ZECs, public lands were managed by private clubs. The main criticism of the club system was that it was too restrictive on community involvement — many of the clubs were controlled by non-Canadians and non-residents, and poaching was widespread. The ZEC program began with the instrumental requirement that each ZEC obtain the necessary resources to cover their costs. Because the ZECs must be self-sustaining, there is an incentive to charge a reasonable and profitable price to users. Further, managers are incentivized to protect the flora and fauna of the area as a future revenue stream.

In 1982, the Fédération Québécoise des Gestionnaires de Zecs (FQGZ) was created to represent the ZECs before Québec’s provincial government. With this structure in place, the program grew without major change until 1999 when the FQGZ proposed to the MRNF that ZECs be given the opportunity to manage recreation beyond fishing and hunting. Following the MRNF’s approval of the proposal, activities offered by ZECs have expanded to include camping, hiking, and other activities. This expansion can be attributed to the requirement that ZECs generate their own funds. Recognizing demand for new goods, managers are able to change their business model rather than remain “frozen in time” like other government programs.

Over the course of 35 years, ZECs have been able to both make a profit as well as preserve wildlife. The question now is how to implement this system outside of Québec. While ZECs do not rely heavily on cultural norms unique to Quebec, the Québécios have had a history of paying to access recreational land. In the United States, new fees would be a barrier to the program at the local level, but giving locals the ultimate control of pricing and services may sidestep the problem.

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Professor Ostrom Will Be Missed

The mood at PERC is somber this morning due to the news of the loss of an extraordinary woman. Elinor Ostrom was the first woman to receive the Nobel Prize in Economics.

Ostrom received the 2009 Nobel Prize in Economic Sciences for her groundbreaking research demonstrating that ordinary people are capable of creating rules and institutions that allow for the sustainable and equitable management of shared resources. She shared the prize with Oliver Williamson, a University of California economist.

The recipient of numerous international awards and honorary degrees, Ostrom was selected in April as one of the Time 100 for 2012, Time magazine’s annual list of the world’s 100 most influential people. In May, the IU Board of Trustees renamed the Workshop in Political Theory and Policy Analysis to honor Elinor Ostrom and her husband and colleague, Vincent Ostrom, who founded the center in 1973.

Ostrom’s work on Governing The Commons certainly influenced PERC early on. Donald Leal, for example, wrote Community-Run Fisheries: Preventing the Tragedy of the Commons in 1996. Leal highlights her groundbreaking research focusing on the factors that induce a community of users to cooperate and defend their rights to steward a resource.

No doubt her contributions will continue to shed light on free market environmentalism. “Calling on Communities” is a chapter inspired by Ostrom’s research and will appear in the forthcoming edition of Free Market Environmentalism.

She is survived by her husband and by an international extended family of colleagues, collaborators, staff and friends who worked closely with her during an extraordinary 50-year career. Read more here.

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Aquanomics: Water Markets and the Environment

The increasing scarcity of water around the world prompts heated debate over the effectiveness of conservation efforts and policy initiatives.

Is water becoming increasingly scarce? If recent usage trends continue, many people believe that shortages are inevitable. Aquanomics, edited by B. Delworth Gardner and  PERC Senior Fellow Randy Simmons, comprehensively examines a full range of water problems. Authors, including PERC Fellows Brandon Scarborough and P.J. Hill, reveal measures that should be implemented to avoid the onset of possible “water crises.” These policies include establishing secure and transferable private water rights and extending these rights to uses that traditionally have not been allowed, including altering in-stream flows and ecosystem operations. The authors argue that such policies will help maximize water quantity and quality even if water becomes scarcer and more valuable.

Mark Twain once quipped, “Whiskey is for drinkin’, water is for fightin’ over.” However, the authors of Aquanomics now provide proven solutions to such potential conflicts by establishing the validity of market-based approaches.

Buy Aquanomics here from The Independent Institute.

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Earth Day Reflections

Many would argue the modern environmental movement was catapulted into fame 50 years ago by Rachel Carson’s seminal book Silent Spring. Although it is now rarely read outside of the classroom, it remains one the most highly cited works of environmental writing. However, in Silent Spring at 50: Reflections on an Environmental Classic, Roger E. Meiners and Andrew P. Morriss reanalyze Carson’s science and question its influence on environmental thought.

As Laura Huggins notes in an op-ed in The Washington Times, “[Carson’s] caution that we should be wary of misuse of pesticides is praiseworthy, but there were major oversights in her work – errors that have played a role in shaping environmental policies that have cost millions of lives and dollars.”

In Forbes, Stanford University’s Hoover Institution Fellow Henry Miller remarks that Carson exploited her reputation as a popular nature writer to legitimize an unfounded scientific treatise. “Carson’s proselytizing and advocacy led to the virtual banning of DDT and to restrictions on other chemical pesticides in spite of the fact that Silent Spring was replete with gross misrepresentations and scholarship so atrocious that if Carson were an academic, she would be guilty of egregious academic misconduct.”

Soon after Silent Spring was released, Carson was accused of alarmism and ignoring the science of the day. These facets, of course, have been forgotten in the Earth Day craze. Meiners and Morriss, on the other hand, offer a clear perspective on her work and conclude that Carson’s celebrated scholarship was, at best, sloppy, and, at worst, an intentional deceit. As Huggins suggests, “Thanks to human ingenuity, we are much healthier and wealthier in 2012 than in 1962, and the birds are still singing – all real reasons to celebrate.”

As the United States celebrates another Earth Day, PERC Scholars call for science and reason, not more emotionally charged rhetoric.

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Scourge: Illegal Aliens in our Midst

Federal and local government spending on invasive flora and fauna amounts to almost $3 billion annually. That’s over three times the $830 million in actual damages caused by these non-natives. As the battle against invasive species mounts, PERC Enviropreneur Institute alum Paul Schwennesen, asks, “might our fascination with biotic menace be somewhat overblown?”

As a rancher in the Southwest, Schwennesen has seen his fair share of invasive species. Instead of upsetting the “delicate” natural balance of his land, however, he argues the Salt Cedar and Buffelgrass, amongst other non-natives, are a part of a fluid and dynamic equilibrium defined by competing and cooperating species.

Schwennesen notes that the helicopter-borne chemical raids employed to fight the intruders may be worse than the disease and calls for a reevaluation of nature’s natural processes:

Ralph Waldo Emerson famously declared weeds to be “plants whose virtues had yet to be discovered.” I have to agree. The frantic hand-wringing that accompanies most descriptions of “invasives” betrays a glaring lack of faith in the resilience of our natural world. More to point, perhaps, is the curiously rare recognition that life, in its perennial pursuit to fill vacuums, generally creates abundance and profusion. Attempts to artificially prevent this usually cost more than the supposed damage to be mitigated.

Read the full article here in the Huffington Post.

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Solving New Zealand Biodiversity Decline, One Possum Pelt at a Time

The invasive possum, or paihamu, now occupies more than 99 percent of New Zealand. Introduced from Australia in 1837 from British immigrants hoping to kick start the fur industry, 50 to 70 million possums are now wreaking havoc on the ecology of the island nation. Without any natural predators, the possums eat 20,000 tons of vegetation nightly, destroy native forests and rare bird habitats, and keep homeowners awake at night with their endless shrieks.

Considered a “noxious pest” by the New Zealand government, NZ$70 million taxpayer dollars are spent annually in an attempt to control the possum. Most of the money is spent aerially spreading toxic poison, sodium fluoroacetate (1080), which indiscriminately kills other animals. While not only inhumane and ecologically maladroit, these efforts have had little success.

A group of trappers, manufacturers, and industry people have come together to reinvigorate the possum pelt market. Where the government has failed, the market is stepping in to solve the ecological and animal welfare issues, while returning value to New Zealanders in the form of jobs and more money in the tax coffers.

Manufactures such as Goodnature have created pragmatic solutions for exterminating the possum. Their device delivers a fatal blow to the head by a CO2 powered piston, eliminating the need for any nasty toxins.  Especially when combined with merino wool and silk, the pelts from these possums can then be used in a range of ultra-soft, lightweight garments. PERC Enviropreneur Institute Alumna Teresa Platt (’07) and her associate Chrys Hutchings have both found ways to capitalize on the possum pelt in ecologically sustainable ways, once again proving market-based solutions can work to protect the environment.

Read the full article here in the latest issue of PERC Reports.

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The 10,000 Mile Diet

Publishers Weekly recommends The Locavore’s Dilemma: In Praise of the 10,000 Mile Diet, co-authored by former PERC fellows Pierre Desrochers and Hiroko Shimizu, as a book to watch for in 2012.

Check out Shimizu’s piece in  PERC Reports where she outlines three myths about eating local.

  • Myth 1: Eating locally produced food reduces our environmental impact.
  • Myth 2: Local food is inherently safer.
  • Myth 3: Local food promotes economic growth and social justice.

“In short, the best way to reduce the carbon footprint of agricultural production is to produce food where it can be done most efficiently and to engage in international trade. Selecting food based on its affordability, availability, and quality is a better way to help the planet than focusing on food miles.”

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Just Say No to Embalming

In this two minute video the Insitute for Justice points out the injustice of the Government making entrepreneurs “do useless things for no reason?”

Verlin Stoll has built a successful business because he offers low-cost funerals while providing high-quality service.  His business is one of the few funeral homes that benefits low-income families who cannot afford the big funeral-home companies.  Stoll wants to expand his business,  but Minnesota refuses to let him build a second funeral home unless he builds a $30,000 embalming room that he will never use. Stoll and the Insitute for Justice are fighting back.

There are other reasons to think about avoiding embalming fluid writes Joe Sehee, founder of the Green Burial Council and PERC Enviropreneur alum. In “Green Burial: It’s Only Natural” Sehee writes:

In the United States, deathcare has become a $15 billion industry—and a wasteful and toxic one at that. Each year we bury:

—Enough embalming fluid (now made up of formaldehyde, a known carcinogen according to the World Heath Organization) to fill eight Olympic-size pools;

—More steel (in coffins alone) than was used to build the Golden Gate Bridge; and

—So much reinforced concrete that we could construct a two-lane highway from New York to Detroit.

Joe Sehee, Karen Eller, and others have been successfully promoting green burial around the country. You may laugh and think this sounds like just another eco-trend, but it is the way most of humanity has cared for its dead for thousands of years. The idea calls for returning to the earth without the use of non-biodegradable toxins or materials. As Sehee asks, “remember that ashes to ashes thing?”

Green burial is not a new concept, what is new is that it is being done in conjunction with restoration planning and conservation management techniques, providing a new tool for protecting endangered habitat at a time when innovative, market-based solutions are needed.

In the end, economic viability and ecological sustainability are capable of co-existence “and that may be what it’s going to take to make ‘ashes to ashes, dust to dust’ once again meaningful,” says Sehee.

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Urbanization for Population and the Planet

National Geographic recently launched its “Seven Billion Special Series“–a year-long series on global population. I hesitantly read the first article expecting more of the same old gloom and doom but “The City Solution”  offers a refreshing take on why economists and environmentalists can embrace cities.

With Earth’s population headed toward nine or ten billion, dense citites are looking more like a cure–the best hope for lifting people out of poverty without wrecking the planet, writes Robert Kunzig.

Harvard economist Edward Glaeser supports this point of view in his new book, Triumph of the City where he writes, “There’s no such thing as a poor urbanized country; there’s no such thing as a rich rural country.” Poor people flock to cities, according to Glaeser, because there is more money and cities produce more because “the absence of space between people” makes it cheaper to move goods, people, and ideas. Moreover, city dwellers tread lightly:

Their roads, sewers, and power lines are shorter. Their apartments take less energy to heat and cool…and they drive less.

The fear of urbanization has not been good for cities, countries, or for the planet. The author suggests that it is a mistake to see urbanization as evil rather than as an inevitable part of development. People (and planners) should no longer look at cities as tumors “but as concentrations of human energy…to be tapped.”

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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