Friday, February 17, 2012

James K. Boyce challenges environmental protection / economics "tradeoff"

By Barry Pegg*

Appropriation -- also known as "defending the commons" or environmental justice -- is one way to build natural assets, according to Dr. James K. Boyce, who presented "Environment vs. Economics" at Michigan Tech on Jan. 11, 2012. (Photos and videos by Allan Baker for Keweenaw Now)

HOUGHTON -- James K. Boyce, Professor of Economics and Director of the Program on Development, Peace-building, and the Environment in the Political Economy Research Institute at the University of Massachusetts, Amherst, spoke to an audience estimated at 160 on "Environment vs. Economics" in Hesterberg Hall of Michigan Tech's Forestry building on Wednesday evening, Jan. 11, 2012. (Dr. Boyce was visiting family in Houghton).

Dr. James K. Boyce, left, gave this lecture during a visit with his parents, Jim Boyce, second from left, and Alice Boyce (not pictured) of Houghton. Also pictured here (from left) are Rev. Sydney Morris of the Keweenaw Unitarian Universalist Fellowship (KUUF), one of the sponsors of the lecture; facilitator Joan Chadde of the Lake Superior Stewardship Initiative, also a sponsor; and Carol Ekstrom of KUUF.

Dr. Boyce's lecture dealt with whether environmental protection and economic growth are mutually exclusive, as the conventional wisdom has it. Specifically, he presented evidence to show that local efforts and enlightened government policies can in fact enhance natural resources and reduce poverty as well.



In his introduction Dr. Boyce challenges the idea of a tradeoff between environmental protection and economic well being. (Video by Allan Baker for Keweenaw Now)

There are four ways to build natural assets, according to Boyce: investment, i.e., adding value; redistribution, i.e. democratizing access, as has often been done with land tenure; internalization, i.e., capturing benefits; and appropriation, i.e., defending the commons, as in preventing resources like the atmosphere (where there are no property rights) from being overburdened with waste.

(Click here for a video clip presenting the four ways to build natural assets.)

Two examples of investment are found in projects carried out by local people: mangrove restoration in Mexico and soil banking in Brazil.

In the first of these, after mangrove forests on the water's edge, which had been preventing erosion and providing habitat for aquatic species, were destroyed by Hurricane Pauline in 1997, locals worked together to replant them.

Soil banking in Brazil is an example of the creation of an anthropogenic (man-made) resource investment. When crops are burned in "slash-and-char" agriculture, a rich dark earth (terra preta in Portuguese) is deposited, providing fertile soil for crops in former jungle areas whose tall growth usually means that all the nutrition is aboveground. This shows that agriculture, depending how agriculture is carried on, is not necessarily an extractive process.



Dr. James K. Boyce explains soil banking in the Amazon region -- an example of man-made resource investment.

An example of an investment in a "commons" is to be found on the west coast of India, where the fish-stocks on which residents depend were being trawled up by factory ships from Taiwan or Norway, appropriating a commons on which the local fishing depended. In desperation, Kerala fishermen dumped concrete rubble in the water to interfere with the foreigners' nets.

They discovered a bonus: the rubble became artificial reefs which increased the fish population by a large margin, adding value to the unprotected resource. In New Jersey, trolley-cars have been dropped for similar purposes.

Very significant redistributions, or "democratizations of access," regarding land tenure –- with the slogan,"land to the tiller" -- led to economic growth in East Asia after the reforms of Gen. MacArthur (Japan) and Chairman Mao Zedong (China). Redistribution can also take other forms: Indigenous Amazonian rubber-tappers, rather than going under when their jungle was scheduled to be cleared for agriculture, were made residents of an "extractive reserve" that allowed these traditional people to harvest their assets sustainably. It is hoped that Peruvian copper sources can be mined in such a way that residents of the mining locations can get a share of the benefits instead of merely inheriting the damage.



Examples of redistributions or "democratizations of access" include land reform, sustainable rubber harvest and Peruvian communities' demands for rights over their mineral resources.

Internalization (the capturing of benefits) can be seen in El Salvador. There, local farmers can get rewarded for terracing the river banks to prevent erosion, or making other improvements in the agricultural infrastructure. Certified organic "Bird Friendly" coffee is shade-grown in Costa Rica, and consumers are willing to support the effort with premium prices for the superior product while helping preserve soil and wildlife. And the Forest Stewardship Council, founded in Oaxaca, Mexico, certifies the sustainability of timber -- another product which benefits producers, consumers, and the environment.

Another progressive sustainability development in Mexico is in situ conservation of genetic diversity in such crops as "heirloom" corn. Programs could be developed to reward farmers who preserve the gene pool from being lost to monoculture. Government and agribusiness policies currently pressure the farmers to grow cash crops like the hybrid corn grown in the rest of the world, whose breeds are vulnerable to disease.



Dr. Boyce points out the need to reward farmers for conserving crop diversity and protecting human food security for the future.

Appropriation (defending the commons) has become well-known to the public as "environmental justice," that is, defending the immediate environment of those who inhabit areas made dangerous by toxins in their air or water table. In most of the world, this is legal because nobody owns the water table or the air; and thus manufacturers of, say, throwaway plastic water-bottles in Port Arthur, Texas, are effectively claiming ownership of the local atmosphere as a place to stow their toxic effluent, while the cost is applied to their workers (and other local residents) in higher-than-average cancer rates. The establishment of rights (in this case, the rights of breathers) to what has previously been treated as a dumpsite appears to be the only just solution.



Dr. Boyce demonstrates how appropriation, or defending the commons, includes environmental justice, international carbon rights and national carbon rights.

Broadly, there are two approaches to defending commons such as air, water, and sites for our dangerous or simply unwanted byproducts. Demand-side policies modifying user behavior may be instituted, for example via investments in using energy efficiently or renewably. Development of mass transit is another example where policy influences consumer demand for vehicles with the associated pollution.

Supply-side policies, affecting the provision of energy or of an effluent sink, might be cap-and permit systems, where toxin-creators buy a permit to emit so many tons of gas or ash, or taxation of emissions. Just because it’s legal to pollute doesn’t mean it ought to be free.

Supply-side policies are important because in the short run they provide immediate reductions in carbon emissions; and in the long-run they provide incentives that in turn will induce demand-side changes.

So, which kind of supply-side policies would be more effective: caps or taxes? The two are very similar. Caps determine quantity and let the price adjust, and taxes determine price and let quantity adjust. When getting the quantity right is the most important objective, there is a case for preferring a cap.

Where would a cap-and-permit system for carbon emissions be applied: upstream (producers of energy), or downstream, i.e. tailpipe (or gas-exhaust, gas-stove, or power utility smokestack)?

Upstream capping would mean that permits would be applied wherever fossil fuels enter the economy, e.g. at ports, pipelines, or natural gas well-heads. There are approximately 2000 energy firms nationwide in the U.S., so administrative costs would be lower.

The price of supply-side policies would have to be paid in higher prices for fossil fuels, where inelastic demand would cause a very substantial rise in prices. For example, a 7 percent reduction in quantity of fossil fuels permitted in the U.S. would trigger roughly a 23 percent increase in price -- and a 7 percent reduction in quantity is just the beginning of what is needed to transition to a clean energy economy.

The effect of such a supply-side carbon cap is of course that the cost would be passed through to consumers. There are two ways we would pay: via direct purchases for energy, such as gas and electricity, and via the extra cost we would pay for goods and services which themselves use fossil fuel energy to do business. Direct and indirect costs could add up to $200bn per year. In absolute dollar amounts, lower-income families spend less on energy via both of these routes than higher-income families, but as a share of their income they spend relatively more. This is what economists call a "regressive" impact.

(Click here for a video clip on the costs to consumers.)

Dr. Boyce suggested three possible answers to the question of who will get the money that consumers pay in higher prices: "cap-and-giveaway," "cap-and-spend," and "cap-and-dividend."

In "cap-and-giveaway," free permits are issued to fossil fuel corporations. This means windfall profits for fossil fuel companies, which ultimately are shared amongst households in proportion to their ownership of corporate stocks.

A second alternative is "cap-and-spend," where government auctions permits to fossil fuel suppliers, and the revenues are retained by government. Revenues are then used as government sees fit -- perhaps to fund public investment, to fund other expenditures, or to cut taxes (and if so, whose?)

Finally, there is the alternative Dr. Boyce prefers: "cap-and-dividend," proposed in Congress as the Carbon Limits and Energy for American Renewal (CLEAR) Act by Sens. Maria Cantwell (D-WA) and Susan Collins (R-ME). In this system, based on the principle of equal rights to the atmospheric "commons," permits would be auctioned to fossil fuel suppliers and revenues recycled to the public as equal per-person dividends. It is an example of a "feebate" system, with fees paid according to use, and rebates received by all according to equal ownership.



The "cap and dividend" system is based on the principle of equal rights to the atmospheric "commons."

Such a cap-and-dividend policy, if carried out, would have the following net impact on family incomes in the USA: Lowest 20 percent income, 14.8 percent increase; 2nd 20 percent income, 3.9 percent increase; 3rd 20 percent income, 0.8 percent increase; 4th 20 percent income, 0.95 percent decrease; Top 20 percent income, 2.4 percent decrease.

Cap-and-dividend creates long-run incentives for efficiency and alternative energy; asserts the principle of common ownership of nature’s wealth; curbs global warming, starting now; protects the real incomes of the majority; and creates progressive redistribution of income, Boyce concludes.

Dr. James K. Boyce fields questions from the audience at the end of his Jan. 11, 2012, presentation on "Environment vs. Economics" in Hesterberg Hall of Michigan Tech's Forestry building.

In response to a question, Dr. Boyce pointed out that, in the International Framework Convention on Climate Change, ratified by the U.S. Senate and signed by President Bush in 1992, the principles of "common but differentiated responsibilities and respective capacities" were accepted, meaning that the wealthier countries that caused most of the damage, and have more capability of remediation, should take the lead.

(Click here for a video clip of Boyce's reply to a question on national and international climate agreements.)

(Click here for Boyce's answer to a question on whether small businesses are disadvantaged by auctioning permits.)

For more information: Boyce, James K. and Matthew Riddle. Cap and Dividend: How to Curb Global Warming While Protecting the Incomes of American Families, Amherst, MA: Political Economy Research Institute, Working Paper No. 150, November 2007. Available on line at http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_101-150/WP150.pdf.

James K. Boyce is the author of Reclaiming Nature: Environmental Justice and Ecological Restoration (2007) and The Political Economy of the Environment (2002). His current work focuses on strategies for combining poverty reduction with environmental protection, and the economics of war and peace.

This lecture was sponsored by Lake Superior Stewardship Initiative, Michigan Tech Center for Water and Society, Keweenaw Unitarian Universalist Fellowship, and Keweenaw Land Trust.

*Editor's Note: Visiting author Barry Pegg is a retired Michigan Tech Professor of English (Humanities Dept.) and a member of the Keweenaw Unitarian Universalist Fellowship.

1 comment:

Kate said...

Excellent article! Thanks for continuing to cover these important issues.