Monday, January 08, 2007

How do we resolve environmental disputes?

A lot of environmental disputes are conflicts over resources and, underlying them, are conflicts over values – which of two things is more important.

A browse through environmental news stories this morning gives a number of examples.
In the US, the Fish and Wildlife Service has granted approval under the Endangered Species Act for a windfarm to operate even though it is expected to wipe out 5% of the global population of the critically endangered Puerto Rican Nightjar (story via NeoCommons).

Here, the conflict is between providing energy in a way that doesn’t worsen climate change and between protecting a critically endangered bird. (It’s the same conflict that Australia has recently grappled with.)

In NSW, the State opposition has called for national parks to be opened up for grazing to help farmers during the current drought.

Here, a land use conflict is at its core a conflict between income for struggling rural communities and the protection of fragile, rare and / or biologically important ecosystems.

And at a national level, the federal opposition states that, if elected, it will buy irrigation licences on the water market to improve river health. Farmer groups oppose this idea, as it will raise the price of water entitlements and mean less water used for agricultural production. Again, this is a conflict between using water to boost farm incomes or to improve the health of river ecosystems.

I’m just as interested in the processes and methods we use to resolve these conflicts as I am in the issues underlying the conflicts. My interest in economics stems from the fact that I think it provides a particularly useful set of tools for resolving resource use conflicts.

One of the powerful aspects of market systems is they allow us to resolve disputes by comparing apples and oranges. What is more important? Reducing carbon dioxide emissions by x megatonnes per year (by building a windfarm) or protecting y hundred critically endangered birds (by not building a windfarm). These are analogous to the disputes that markets resolve every day.

Should our society invest more money in IT, pharmaceuticals, agriculture, resources or manufacturing? This is a decision that no-one could hope to make – and no-one has to make because millions of individuals make their own decisions about where to invest their money and labour. Some new land is released in western Sydney. What should we build there? How many houses, how many shopping centres, how many factories, how many schools and hospitals? Well, governments make some of these decisions and guide or restrict others, but mostly these decisions are made by households and businesses. Would we be better using the Hunter Valley for coal mining, wine production or cattle? Well, mostly miners, farmers and grape growers can decide for themselves which land they’re prepared to buy.

Of course the trouble with our bird and windfarm problem is that the Puerto Rican windjar can’t buy up the land to protect their homes. Nor realistically can the residents and wildlife of places around the world particularly affected by climate change each pitch in a bit of cash to buy the land for the windfarm. Someone has to make a value call here: what is worth more? X megatonnes carbon dioxide or y hundred Puerto Rican Nightjars?

But we should always be on the lookout for tools that will make this decision easier, that will avoid what are essentially arbitrary value calls like this. Can we delve deeper?

I don’t know much about the background of this US case, but in a similar Australian conflict last year there was a simple solution. In that case, a proposed windfarm would kill, on average, one bird every 100 or so years. In a global population of only 150 birds, the federal Environment Minister decided that impact was too high and refused to let the windfarm go ahead. However, the birds can be bred in captivity relatively cheaply and then successfully reintroduced into the wild. A condition that the windfarm pay for a breeding program suddenly changes the equation from the unresolvable "Which is worth more: one bird saved versus x megatonnes of emissions saved?" to "Which is worth more: one bird saved versus 20 birds bred and reintroduced and x megatonnes of emissions saved?" – a question that is much easier to answer.

Of course, many or most environmental conflicts do come down to conflicts over values that can’t be sidestepped. But when we can sidestep them, we should. Requiring developers to fund measures that counteract the negative environmental impacts of their developments, where practical, means that government decision-makers don't need to make invidious jobs-versus-environment value judgements.


Kevin said...

I agree that economics is a good tool to compare disparate options. One often hears from the more radical eco-fringes that the current economic framework needs to be abolished or something equally dramatic in order to put environmental concerns in their rightful place. Although these criticisms to have a point, economics, or rather the free market, offers a very good tool for showing us what we value. The pricing system is a good proxy for people's "hidden" wants/desires. The challenge is to properly account for all the elements in our analysis, thereby reducing - or maybe eliminating - externalities.

Laura said...

Sorry for nitpicking like this but the estimation for Orange Bellied Parrots killed by the Bald Hills Wind Farm was more in the range of one bird every 600-1000 years, not 100. Hence the ridiculous nature of Ian Campbell's political decision.

You present an interesting discussion about values and resources, though.

David Jeffery said...

Yeah, I think The Australian used the figure of one every thousand years. When I ran the numbers from the report that the Minister relied on I got one every 109 years as a likely worst case. But my arithmetic has never been my strong point.

Either way, it's a trade-off that could easily have been avoided as the cost of a breeding program to return a pair a year to the wild is, relative to the dollars involved in windfarms, very modest.

Laura said...

Additionally, other wind farms with less of a risk to the parrot (still very insignificant) have been approved. I'm expecting Mr. Campbell to get rolled in the next parliamentary reshuffle after this debacle :)

Anonymous said...

Ch. 15 of Environmental Economics and Natural Resource Management (Anderson) has a good survey of economic tools used to resolve environmental diputes, including Adjusted Winner and Sincerety Rule techniques.

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