Categories
Economics Environment Politics & government

[939] Of climate change and global warming are market failures

From time to time, somebody will point it out to me that libertarianism and environmentalism have opposing ideas in them. Perhaps.

I however manage to merge the two philosophies together because I understand market failure (as well as externality). The concept of market failure is what many libertarians refuse to accept despite the economics behind it. I’d be damned if I ignore market failure and call myself a graduate of economics. I reached to this conclusion when I first encountered tragedy of the commons as an economics undergraduate.

I’m a classical liberal in the sense that I’ll accept market solutions as superior to government solutions as long as market failures are absent, in most cases.

A few days ago, British economist Nicholas Stern published the Stern Review on the Economics of Climate Change:

The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response.

This independent Review was commissioned by the Chancellor of the Exchequer, reporting to both the Chancellor and to the Prime Minister, as a contribution to assessing the evidence and building understanding of the economics of climate change.

The Review first examines the evidence on the economic impacts of climate change itself, and explores the economics of stabilising greenhouse gases in the atmosphere. The second half of the Review considers the complex policy challenges involved in managing the transition to a low-carbon economy and in ensuring that societies can adapt to the consequences of climate change that can no longer be avoided.

The Review takes an international perspective. Climate change is global in its causes and consequences, and international collective action will be critical in driving an effective, efficient and equitable response on the scale required. This response will require deeper international co-operation in many areas – most notably in creating price signals and markets for carbon, spurring technology research, development and deployment, and promoting adaptation, particularly for developing countries.

Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen. The economic analysis must therefore be global, deal with long time horizons, have the economics of risk and uncertainty at centre stage, and examine the possibility of major, non-marginal change. To meet these requirements, the Review draws on ideas and techniques from most of the important areas of economics, including many recent advance, including many recent advances.

Climate change and global warming induced by human are forms of market failure and externality, as with many other environmental problems.

Categories
Environment

[918] Of 10 most polluted places on Earth by the Blacksmith Institute

The Blacksmith Institute today comes up with a list of 10 most polluted places on Earth:

NEW YORK (Reuters) – A Russian city where chemical weapons were once manufactured and a town in Zambia’s copper mining belt are among the 10 most polluted places on Earth, a U.S. environmental group said on Wednesday.

The list was compiled by the New York-based nonprofit group the Blacksmith Institute, which said the world’s pollution is sickening up to 1 billion people.

The 10 places were chosen by a board of experts from more than 35 nominated sites which in turn were filtered by the same board from a list of 300 sites. The full list is available at the group’s website. While no Southeast Asia country is listed in the top ten list, two Filipino sites were nominated. The two sites are Mount Diwalwal and Marilao; both were caused by mineral extraction activities. Yes, no Kuala Lumpur despite the fact the air quality hit 108 in the Air Pollution Index yesterday.

In the top ten list itself, most of them come from former Soviet state members.

On top of the list is Chernobyl, Ukraine. Of course, that relates to the 1986 nuclear meltdown disaster. Years ago, I highlighted a site that has pictures of the ghost town. Please do re-read that entry. The report is here.

Second is Dzerzhinsk, Russia. The area is Russian chemical manufacturing center. Not just that, it was the production center of chemical weapon. Much of the waste from the manufacturing operation was improperly disposed of and it affected the air, the land and the water badly. Read the full report here.

The next site is Bajos de Haina, Dominican Republic. Source of pollution: smelter. The area is highly comtaminated with lead. More here.

Fourth is Kawbe, Zambia. Cause: mineral mining. Located in an area called Copperbelt, it was on of Zambia’s major source of income. All minerals like cadmium, lead and zinc were heavily mined by the British during colonial period. The detail is available here.

Fifth is La Oroya, Peru. Cause: Mining and smelting activities. Read it up here.

Linfen of People’s Republic of China is sixth. The cause of pollution: the thriving coal industry. Do I have to say “read it here” this time?

Seventh is Maaluu-Suu, Kyrgyzstan. There was a uranium plant here and the waste was placed here. Also, the area played a very vital role in the production of the first Soviet nuclear bomb. Here!

Eighth is Norilsk, Russia. It’s the site of the largest nickel-copper-palladium deposits in the world according to Wikipedia. How polluted the area is? Well, I quote the report:

…the snow is black, the air tastes of sulfur…

Also, interestingly, Norilsk is off limit to foreigners:

Since November 2001, Norilsk has been shut to foreigners, one of 90 “closed towns” in Russia where Soviet-levels of secrecy persist.

On the nine rung is Ranipet, India. Source: tannery. As you might have guessed, it’s here.

The final entry is Rudnaya Pristan, Russia. The source here also concerns lead mining. Read it here.

There you go. Five of the top ten places are in former Soviet territories.

Categories
Environment

[916] Of takeover of Nanyang Press and possible benefit for Rimbunan Hijau

So, a company related to Rimbunan Hijau through its chairman, Hiew King Tiong, has taken over 20% stake of Nanyang group from MCA:

PETALING JAYA: Rimbunan Hijau group founder and chairman Tan Sri Tiong Hiew King has taken control of Nanyang Press Holdings Bhd through his private company, Ezywood Options Sdn Bhd.

Ezywood Options paid RM64.7mil to acquire Huaren Management Sdn Bhd’s 21.02% stake in the Chinese newspaper at RM4.20 per share on Oct 9.

Ezywood Options now owns 44.76% of Nanyang and will be required to extend a mandatory takeover offer for the remaining shares of Nanyang it does not already own.

Now, it’s easier for Rimbunan Hijau to prevent news of its illegal, unsustainable and unethical timber harvesting activities in Papua New Guinea from reaching the Malaysian public, especially Chinese Malaysians.

While that happens, The Australian reports that the logging company is hiring specialists to repair its image:

WHAT do you do when your logging company can’t shake off continuing negative publicity about illegal logging and human rights abuses, generated by a never-ending series of reports by international financial institutions, aid donors, journalists and non-government organisations?

If you are multinational logger Rimbunan Hijau, you call in a team of Australian spin doctors to give the company a makeover.

Rimbunan Hijau, a company controlled by Malaysian billionaire Hiew King Tiong, dominates forestry in Papua New Guinea. The company and its subsidiaries run five of PNG’s 12 largest logging projects, the country’s biggest sawmill and its only veneer plant. So when evidence continues to show most logging in PNG is illegal and unsustainable, fingers inevitably start pointing at Rimbunan Hijau.

Is this a pure coincidence, or a calculated move instead?

Another project violates a forest reserve without an Environment Impact Assessment:

PANGKOR: A company building an organic farm-cum-resort near Teluk Dalam is felling trees and levelling hills without an Environmental Impact Assessment report.

A visit by the New Straits Times to the 0.75ha tract of land at the North Pangkor Forest Reserve found excavators being used to level hills which were at least 30m high.

Trees felled in the area were chain-sawed into beams and used to build several structures there, while a pond was dug to pump out groundwater flowing along a water channel.

There is work going on to build a make-shift jetty on the beach using boulders, timber and sand from the forest reserve.

Is the Department of the Environment too weak for anything that many ignore the department altogether with impunity?

Categories
Environment

[915] Of one real solution to the haze problem

Last Sunday in the NST, I read an article that relates to the haze which we are currently experiencing. Unlike most articles which suggest nothing to solve this environmental problem, this particular article highlights a real solution. The solution is simple, cheap and long term in nature; it involves aiding the locals of Kalimantan and Sumatra to reduce the chances for nature to catch fire:

…a million hectares of peat forest was cleared for padi over a decade ago.

At the time, thousands of kilometres of canals were dug to keep the soil drained in the rainy season and irrigated during the dry.

But the peatland stood high above the adjacent rivers, so the canals only sucked them dry. The soils were not suitable for padi and drainage left the parched peat highly flammable.

In the El Nino-driven dry season of 1997-1998, this tinderbox went up in flames and enveloped the region in a shroud of haze.

The site was abandoned but continued to burn periodically through years of inaction, hitting Sarawak particularly hard.

Then three years ago, Malaysian non-governmental organisation Global Environment Centre (GEC), and Wetlands International Indonesia, began talking to locals about blocking off the canals.

The canals were so wide that each could fit a giant IMAX screen between its peaty walls, with space to spare. Together, they were draining millions of cubic metres of water from the area.

“All the experts said we’d need machines to block canals wider than two metres,” said GEC director Faizal Parish.

“If we had listened, all our money would have been spent on excavators.”

Instead they sat down with locals from the nearest villages, hardy and resourceful people, who’d carved out a life in this desolate corner of Borneo with few amenities.

The groups picked their brains for ideas and brought civil engineers into the talks with local communities and government agencies.

Project partners Wildlife Habitat Canada and Indonesia’s Forest Protection and Nature Conservation directorate were also involved.

And here was born the plan — to block the canals by hand using local techniques.

Each block consisted of three log walls to be built across the canal by a clever use of a lever system and the force of human weight.

Each wall would be 3.3 metres away from the next. The spaces between them were filled with sandbags to staunch the flow of water.

Construction of each block took 50 people, three months and countless trips on narrow boats lugging 25,000 sandbags to the site.

In total, seven blocks were rammed into place along two main canals and a smaller one.

The blocks have since raised the water level in the peatland.

There have been no fires in the area and the forest has started to recover. Locals are fishing in the blocked-off sections of the canal.

The project has protected a site roughly the size of Singapore from fires. As big as that seems, it is only a twentieth of the vast Mega Rice Project.

Instead of feeling frustrated and disappointed, it’s wise for the Malaysian and Singaporean governments to fund this project.

Categories
Economics Environment

[912] Of legalizing turtle eggs collection

A Terengganu state official earlier was quoted saying that the state government plans to legalize the collection of turtle eggs through the issuance of permit. An article at the BBC says environmentalists are calling the plan as plain crazy. I’m unsure what to think of the plan.

I recognize the fact that a ban more often than not isn’t a solution. A ban usually has an unintended consequence; it creates perverse incentive:

“Banning the sale of eggs will not solve the problem as it could encourage poaching and the high price for the eggs could worsen the problem.

“The next best thing to do is to license the egg sellers to control the number of eggs that can be sold each season. We will look into this seriously.”

In short, the issuance of permit would theoretically lower the prices of the eggs and discourage eggs trading in the black market.

While it’s good to know that the official knows his economics, like what I’ve said earlier, I’m unsure where I stand on this issue.

For the policy to be successful, prices have to be lowered to a point where trading in the black market is unattractive. Assuming constant demand, the only way to do that is to increase supply. The permit system does exactly that; it increases legal supply from zero to some positive figure.

I’d only support the policy in a specific way. That is, the ultimate goal of permit allocation is the survival of the species. Please refer to the graph that I’ve prepared below:

Some rights reserved.

Currently, it’s clear that the turtle population is in between point 0 and A. Given that, I’d support the issuance of permit if the harvest rate — in this case, the number of permits issued — is below the growth rate. I’d disagree to the issuance of permit if the harvest rate is above the growth rate.

The reason behind my opinion is apparent in the graph. Assuming the growth rate is in between 0A and the harvest rate is A, such practice would drive the species into extinction. This is because the harvest rate is greater than the growth rate. In effect, there’s a negative net growth. If the growth rate is in between AB while the harvest rate is A, that would enable the species to recover as well as accommodate for human consumption.

Just to explain the graph further, point 0, A and C are the equilibrium points. 0 of course is extinction point while both A and C are where harvest and growth rates are equal to each other.

I wonder though how large an increase in supply do we need to make black market trading unattractive. If the increase is too big and eventually forces harvest rate to be greater than the growth rate, this would be a foolish policy.