Tag: "natural resources"

The Troubling Murkiness of Sustainability

What does the phrase “sustainable development” mean to you? Your answer is particularly important, because our government is asking us to make many sacrifices to our personal freedoms in its name. We need to know if it is all worthwhile. Consider the following:

Where did this phrase originate? The United Nations World Commission on Environment and Development (also known as the Brundtland commission) first coined the phrase in a report published back in 1987, and it has since taken on a life of its own ever since.

The Environment Protection Agency (EPA) uses this definition: “Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations.”

What is required for promoting sustainability? Setting aside the notion of “productive harmony” between humans and nature (whatever that means), finding the best way to fulfill the resource demands of both our present and future generations certainly sounds appealing.

Yet, based on the hue and cry for greater regulation over energy production and natural resource use in our economy, it appears that the voluntary interaction between people engaged in production and exchange in the private marketplace is an unsustainable system that has been found wanting.

Is there a better alternative than voluntary exchange? It is assumed by many that abandoning the marketplace and embracing a democratically designed regulatory process for allocating our nation’s resources will create a superior balance to this intergenerational tug-of-war over alternative resource uses.

However, in two earlier articles appearing in this blog, I give many reasons why we cannot presume that a centralized and involuntary approach toward managing our nation’s resources — even through a democratic process — will necessarily create a more sustainable outcome to the private marketplace.

Why? The same misalignment of incentives and imbalance of influence over resource use decisions that critics claim corrupt the market process are also quite prevalent in any democratic process that directs public resource use. But there are still other issues with relying on public policy to effectively deliver sustainable development.

What are the costs and benefits of sustainable development practices? Whenever the voluntary interactions between people are curtailed, they bear the lost benefits that could have been enjoyed by both parties had they been free to continue their activity. These costs are real and can only be revealed by those who willingly abandon this activity. Like the homeowner who relinquishes her house title to a buyer willing to pay the right price, the true value that is lost from this forgone activity is revealed only when a person receives sufficient payment to voluntarily stop the activity.

Even when market activities do not impose any burdens on third parties (like pollution), restricting human freedoms in the name of sustainability is usually justified by the claim that benefits need be preserved for future generations to enjoy. Yet, these benefits can only be accurately measured by those who voluntarily pay to preserve them for others to consume. Like the ratio of income that parents save for their children’s college education, the value of these future benefits is revealed only when each person voluntarily pays a price sufficient to acquire them for someone else.

This all implies that if our federal agencies claim to know the true costs that are borne by everyone who is forced to abandon their beneficial activities, or to know the true value of benefits that are funded by many people today but reserved for future generations to enjoy, then our democratic government suffers from a hubris that Friedrich von Hayek termed “the fatal conceit.”

Hayek understood that only the voluntary, decentralized interactions of millions of individuals in the marketplace can create the spontaneous and orderly outcomes that incorporate the greatest amount of cost and benefit information that could possibly be considered in order to create the best possible outcomes for the greatest number of people in society.

One of the reasons we value freedom so highly is that we instinctively know that nobody else can manage our own lives to produce as much joy as we can obtain by freely making our own decisions. Indeed, the concept of sustainable development has been applied with great rhetorical fervor to just about everything we find valuable in society — except the joy from exercising our personal liberty.

Which brings us back to our initial query: Is sustainable development — at least as it is being promised and delivered by our federal bureaucracy — worth the price that we are being asked to pay? How would you know?

Europe’s Necessary Energy Dependence Switch

Now is the time for the United States to break the Middle East and Russian dominance of global energy supply. Providing our energy resources to Europe would break the old global energy system and bring Europe geopolitically closer to the United States. The National Review’s “Marshall Plan for Energy”, explains that the U.S. has the resources and the timing is right assist in economic and political stability in Europe through energy resources.

Over one-third of Europe’s oil and natural gas comes from Russia and other countries of the former Soviet Union.

  • Imports from Russia have grown 10 percent in the past decade, while imports from elsewhere of LNG (the liquefied form of natural gas) have fallen 50 percent.
  • Shipping 2 million barrels of American oil to Europe per day would cut the E.U.’s dependence on Russian petroleum in half.
  • Sending just over 2 trillion cubic feet of America’s natural gas to Europe annually would halve the E.U.’s reliance on Russia’s gas pipelines, many of which cross Ukraine.
  • U.S. oil production is the fastest growing in the world and has risen by 3 million barrels per day in just four years.
  • U.S. natural-gas production has jumped by 4 trillion cubic feet per year over the past four years, also entirely on private and state lands.

Creating Reliance on U.S. Energy

The world that exists today is one of open barriers, and intertwined economies that become necessary in foreign policy. The more entwined economies get the more resistance there is for justifying conflict with each other. It just gets too expensive. It is one of the reasons that a conflict with China is not very realistic despite what some media outlets may say. The best way to accomplish this is through trade of a good, and the U.S. is producing the most sought after good of all, energy. Many countries around the world are recognizing the need for U.S. energy, and Chile just became the latest.

Where many Latin American countries such as Brazil and Venezuela are rich in natural resources, Chile is actually the poorest boasting a measly 150 billion barrels of oil and 3.46 billion cubic feet of Light Natural Gas (LNG). In order to cover for the shortfall the country is turning to light natural gas, and the United States to fill the gap. In the 1990’s the primary provider of LNG for Chile was Argentina and was delivered through a pipeline. Due to domestic shortages in Argentina, Chile had to change its reliance to countries that were further away such as Qatar, Yemen, and Equatorial Guinea.

By creating lasting economic relationships with the Americas, the U.S can help meet their energy needs. In addition to energy requirements, Latin American Counties such as Chile are also making changes to its environmental regulation that resembles the policy of the United States.

central and south american nat gas

LNG is proven to provide a tremendous amount of benefits when comparing to coal and oil. LNG is cheaper than oil, and produces little to no carbon dioxide emissions which have come under fire lately in the U.S. government. While the process of fracking does leak the greenhouse gas methane the amount of leakage varies from 2 to 8 percent. According to a study by the Recorder, if methane leakage is 2 percent then after 55 years the amount of carbon reduced compared to coal use is a staggering 55 percent! While 8 percent leakage of methane still produces a benefit of 17 percent reduction over a course of 100 years. This brings up an extremely interesting scenario; can the U.S. cut the reduction of the planet’s carbon dioxide levels from exporting LNG?

global carbon dioxide emissions

Many in the U.S. continue to go on and on about solar and wind energy, when the facts are simple. The technologies cost billions in research still, do not provide the power that existing energies do, and increase costs for consumers. Even worse to imagine is that these problems are in the U.S. Where we have the most advanced technology in the world, rational thinking would prove that other countries around the world will continue to use both coal and oil.

That is where natural gas exportation comes in. By allowing exports of natural gas, and increasing relations with several countries that have high carbon dioxide emissions, we can curb emissions through the free market. It is a fairly easy thing to accomplish within the government as well. The country would be able to sell cheap, affordable clean energy, and reduce emissions while increasing quality of life in developing countries. It is past the time of easing economic regulations; in order to create prosperity in these countries it must be done utilizing free trade.

The U.S. is at an amazing time in its history where unemployment has hit a 6 year low and 200,000 jobs are being created monthly due to our spur in energy innovation. Markets around have a pressing need for our own labor capital and energy resources. It is time to meet that need.

Profiling Environmentalism (Part 3)

In “Profiling Environmentalism,” Tanner Davis wrote in this blog that we should all support environmentalists that he labeled the Bright Greens: optimistic folks who exhibit a strong faith that technological innovations and entrepreneurship will help create prosperity with an ever cleaner ecological footprint.

In “Profiling Environmentalism 2,” I followed that these “Brights” understand how economic development is necessary for creating ecological innovations in technology. However, any virtuous cycles between economic progress and ecological innovations requires: 1) that demand for environmental quality increases with prosperity, and 2) that institutions in society must reward entrepreneurial activity that makes environmental quality effective and affordable.

I also noted that Bruce Yandle, et. al. reviewed the sizable literature relating a nation’s prosperity to its environmental quality. They state that while such a link has yet to be proven empirically, studies failed to control for how a nation’s political and economic institutions may affect the development of innovations that promote “green” productivity.

Could enviro-entrepreneurship and innovation be either encouraged or discouraged by a nation’s economic institutions? Would protecting private property rights, upholding the rule of law, and maintaining low levels of government intrusion by excessive regulations and taxation influence the pathway that a nation chooses to pursue its prosperity?

Fortunately, measures of these institutions are collected over 150 countries in the world, and then are aggregated into a country-specific metric called the Economic Freedom of the World (EFW) index. The EFW index, created by Jim Gwartney and Bob Lawson, is published annually by the Fraser Institute.

The freest countries in 2014 include Hong Kong, Singapore, New Zealand, and Switzerland. While Canada is #8 and Australia is #10, the U.S. is only #17. The least economically free countries include Venezuela, Myanmar, Republic of Congo and Zimbabwe.

When a nation’s economy works to feed, clothe, shelter and educate its citizens, this economic activity will impact the environment through air and water pollution, greenhouse gas emissions and depletion of its supplies of natural resources. We can track these measures for each country using the World Bank’s “World Development Indicators” dataset. But the question is: what economic institutions promote the “greenest” pursuit of prosperity and leave the smallest ecological footprint possible?

Figure 1 and Figure 2 represent data from all the nations for which EFW index values and the ecological variables were available. These countries are sorted into quartiles according to their EFW index value, from the least free to the freest countries. Clearly, the level of air and water pollution that is emitted per dollar of GDP produced is LOWER in those nations that pursue free enterprise prosperity with greater economic freedoms.



Likewise, Figure 3 shows that economically freer countries emit FEWER greenhouse gasses per dollar of GDP produced. Further, energy consumed by the vast majority of countries is produced by burning non-renewable resources like coal, natural gas and oil. This means those countries with a lower consumption rate per dollar GDP are practicing a more sustainable growth path towards prosperity. Figure 4 shows that the energy consumed to make a dollar of GDP is LOWER in nations with more economic freedom.

CO2 emitted

energy use

The smallest ecological impact per dollar of economic activity does not appear to arise from the planned economies of socialism or communism. Greater environmental quality and sustainable growth paths to prosperity appear to be more prevalent in countries where the invisible hand is free to “guide” individuals to produce and exchange their products and services in a decentralized market system — established and preserved with greater economic freedoms.

Let’s all be “Bright” about creating our future.

The Limited Attention Span of our Federal Government

If you will indulge me, I feel like waxing philosophic about the impact that the many redistributive economic policies being promoted by the Obama Administration will likely have on our nation’s environment and natural resource management. Consider the many ways our federal government is redistributing incomes to help the “poor” in American society:

The list goes on, but I won’t test your patience here. The bottom line is that the federal government is trying its very best to increase the cost of hiring unskilled labor while making the returns to becoming a skilled laborer much slimmer.

Further, the Fed has undertaken the largest Open Market Operations program in history, just to keep market interest rates at abnormally low levels. This action boosts business investment in physical capital, which is often justified as an attempt to increase GDP and employment (in the short run at least). However, this action also makes buying physical capital cheaper while unskilled labor is becoming ever more expensive to hire.

Even Bill Gates can do the economic math. Businesses will use more capital and hire less labor to produce our nation’s goods and services. They will invest more on technological innovation and less on developing industry-specific human capital. Nobel Laureate Gary Becker (who, sadly, passed away just recently) recognized that about 80% of the income differentials observed between skilled and unskilled labor in our economy are related to the economic returns to technological innovations. In other words, investing in capital and technology favors the skilled worker, not the unskilled worker.

In the past, middle class workers largely rose from the ranks of low-paying but skills-enhancing starter jobs to acquire the meaningful, industry-specific skills and valuable work experience that landed them their current, middle-income job. As these starter jobs disappear and the middle class slowly dwindles in number over time, there will be increasing calls for ever more income redistribution to rectify the gap between rich and poor — all in the name promoting equity.

Which brings us back to the quality of our environment and managing our nation’s natural resources. How will Congress respond to calls for redirecting funding to preserve our national parks and forests when entitlement programs for the growing ranks of low-income people are competing for the same federal dollars? How will scientific and economic criticism of federal lands use policy compete for scarce media time when ever more Congressional hearings will be held to consider ways to help the plight of America’s disappearing middle class? How will stories of federal bureaucratic bungling of natural resource management, or stories about innovative, market-based proposals for efficient and equitable natural resource uses, be able to compete for media attention that is stretched thin with stories of capitalism’s “failure” to maintain the middle class?

It seems clear to me that we are mindlessly following the voice of the “wizard” who can be seen busily pulling all the bureaucratic strings and pushing all the media buttons behind the grand curtain of government. Do we not see that he is feverishly trying to fix problems that he does not even realize are the result of his very own machinations?

Sigh… Excuse me, but I think I need an adult beverage…

How The West Was Won – By The Feds

Well sometimes feels like we never won it when so much of our land and resources are under the direct control of the U.S. government and tribal authorities. If you take a look at the American “west”, you will see a very big difference from the other half of the country in terms of land owned by the government and land that is “free” to own by the public.

The federal government owns approximately 29% of the land area in the United States, more than 653 million acres. The U.S. General Services Administration’s report on Federal Real Property Profile, 2004 shows how much land the government owns in each state. The top 10 federally owned states:

  • Nevada 85%
  • Alaska 69%
  • Utah 57%
  • Oregon 53%
  • Idaho 50%
  • Arizona 48%
  • California 45%
  • Wyoming 42%
  • New Mexico 42%
  • Colorado 37%

Out of the top 10 states (all are in the American “west”), the federal government owns 505 million acres or 77% of the total land area owned in the United States by the federal government.

The White House acknowledges the fact that not only is the United States government the largest property owner in the country, but also a major source of government waste because of this fact. Efforts to make much of this property available to the public for purchase have been minimal. The White House Federal Excess Properties site shows the federal government’s effort in selling off properties.

The Federal Government is the biggest property owner in the United States, and billions of taxpayer dollars are wasted each year on government properties that are no longer needed. The President has proposed an independent Civilian Property Realignment Board to help the Federal Government cut through red tape and competing stakeholder interests to sell or get rid of property it no longer needs. Over time, this could save taxpayers billions of dollars and help to reduce the deficit.

This map shows just the tip of the iceberg in terms of opportunities for downsizing the Federal real estate portfolio. Under the President’s proposal, more properties, in some cases with significant market value, would be added to this map and dealt with more quickly and effectively than they are today.

President Obama and Vice President Biden launched the Campaign to Cut Waste to eliminate misspent tax dollars in every agency and department across the Federal Government. Getting properties like those highlighted below off our books is a key first step in this effort.

The Civilian Property Realignment Board was cancelled by congress and a very painful and slow process for eliminating this waste is still in place.

Before any agency sells a surplus property, it is required by federal law to ensure that no other U.S. agency wants it. It must then offer a right of first refusal to state and local governments as well as nonprofits. Buildings must be assessed as potential homeless shelters and reviewed for environmental contamination and historic significance.

All of these federally owned properties have the potential to be transferred to state/local governments or to private interests. Benefits could include:

  • less government waste of resources and taxpayer dollars
  • increased efficiency of remaining federal properties
  • greater use of agriculture, energy and natural resources for private use

The bipartisan Federal Real Property Asset Management Reform Act of 2013 is intended to expedite the sale of federal property that is underutilized. A greater effort in this direction is very obvious and needed.

Critical Minerals Policy Act – NCPA Letter

The letter to Senators Landrieu and Murkowski from the NCPA:

The problem of Chinese dominance in the rare earths market cannot be overstated, given the United States’ — and in fact, the globe’s — significant reliance on rare earths for practically all modern technology. Computers, calculators, flat screen televisions, wind turbines, fuel cells, LED lights, electric car batteries — not to mention defense weapons, medical equipment, and even cancer drugs — all require rare earths to operate. The world’s demand for these minerals is only increasing. A disruption in supply could be incredibly problematic, and China has already cut its rare earths export quota significantly.

The United States need not, however, be reliant on other countries for our rare earths’ needs. Despite its production dominance, China holds only 36 percent of the globe’s rare earths reserves, while the United States actually has 13 percent of the world’s supply. Our problem is not a lack of minerals, but an unnecessarily cumbersome permitting process marked by confusion and duplication. As the 2013 report from Behre Dolbear on where not to invest in mining noted, “Permitting delays are the most significant risk to mining projects in the United States.”

The letter continues…


Hoard and Use Some Resources, Export the Rest

President Obama’s administration approved expanding natural gas exports back in 2011 and 2013. Cheniere Energy Inc’s Sabine Pass facility will begin exporting to countries in 2015, Freeport LNG in 2017 at up to 1.4 billion cubic feet a day of liquefied natural gas and Cameron LNG, LLC has been added this year to export up to 1.7 billion cubic feet a day.

The United States has an abundant amount of natural resources that we are not using and may never use if technology keeps improving our energy consumption. A recent technological advancement, fracking, increased the volume of a number of our energy sources such as natural gas and oil. In a recent NCPA issue brief, the clear advantage fracking is for America’s energy needs are explained:

Just 15 years ago, analysts predicted America had only 60 years of natural gas supplies available at then current rates of use. Today, natural gas consumption is much higher, and fracking has increased estimated reserves to 100 years or more.

The Strategic Petroleum Reserve (SPR) that can hold up to 727 million barrels of crude oil only. Refined oil reserves do not exist in the United States. If our existing refineries went offline, we would have to import refined petroleum products. This defeats the purpose of having an “emergency” stockpile of petroleum reserves. What good is the oil if you cannot use it? There should be a Strategic Refined Petroleum Reserve (SRPR) of at least equal in size for real emergencies.

We have an abundant amount of natural resources that we are not using and may never use. Resources like our natural gas and oil are very valuable and can be easily exported. We would then boost our nation’s economy and have the money needed to improve the technology at a faster rate making our energy use more efficient.

The Critical Minerals Policy Act

The Senate Energy & Natural Resources Committee held a hearing on January 28th about Senator Lisa Murkowski’s bill, the Critical Minerals Policy Act. Here’s a brief summary: