Mixed signals: market incentives, recycling, and the price spike of 1995

Environmental economics assumes that reliance on price signals, adjusted for externalities, normally leads to efficient solutions to environmental problems. We explore a limiting case, when market volatility created ‘mixed signals’: prices of waste paper and other recycled materials were suddenly extremely high in 1994–1995, then plummeted back to traditional low levels in 1996. These rapid reversals resulted in substantial economic and political costs. A review of academic and business literature suggests six possible explanations for abrupt price spikes. An econometric analysis of the prices of wood pulp and waste paper shows that factor which explained price changes in 1983–1993 contribute very little to understanding the subsequent price spike. From the econometric analysis and from other sources, we conclude that speculation must have played a major role in the price spike, perhaps in combination with modest effects from changes in government policy and in export demand. If speculatively driven price spikes can disrupt an environmentally important industry such as recycling, what is the appropriate role for public policy? When price volatility is sufficiently disruptive, then measures to control or stabilize prices, rather than interfering with the market, might help to make it more efficient.     

WATER EXCHANGES: TOOLS TO BEAT EL NIÑO CLIMATE VARIABILITY IN IRRIGATED AGRICULTURE1

ABSTRACT: Using a case study of the Yakima River Valley in Washington State, this paper shows that relatively simple tools can be used to forecast the impact of the El Niño phenomenon on water supplies to irrigated agriculture, that this information could be used to estimate the significantly shifted probability distribution of water shortages in irrigated agriculture during El Niño episodes, and that these shifted probabilities can be used to estimate the value of exchanges of water between crops to relieve some of the adverse consequences of such shortages under western water law. Further, recently devised water‐trading tools, while not completely free under western water law to respond to forecasted El Niño episodes (ocean circulation patterns), are currently being employed during declared drought to reduce the devastating effects of water shortages in junior water districts on high valued perennial crops. Additional institutional flexibility is needed to take full advantage of climate forecasting, but even current tools clearly could prove useful in controlling the effects of climate variability in irrigated agriculture. Analysis shows the significant benefit of temporarily transferring or renting water rights from low‐value to high‐value crops, based on El Niño forecasts.     

Consumer Exit, Voice, and Loyalty: Indicative, Legitimation, and Regulatory Role in Agricultural and Food Ethics

Disputes over agriculture and foodproduction have occurred against a background ofdisputed authority with regard to governments,experts, and single issue pressure groups. Consumershave intervened in quite significant ways with manyaltering their buying patterns. The conventionalassessment of consumer ``preferences' throughaggregated purchases fails to reflect the ethicalnature of significant numbers of purchase decisions.Nevertheless, consumers seem to offer a wider basis onwhich to consider ethical issues. The author proposesthat a valuable inclusion of consumer opinion in thedebates would require a move away from neo-classicaleconomics and the selective inclusion of consumeropinion to unravel the complexity of (aggregated)consumer behavior. It is argued that Hirschman'sframework of ``exit, voice, and loyalty' is a moreappropriate tool for the understanding of ethics infood consumption.     

Co-creating an alternative: the moral economy of participating in farmers’ markets

Growing dissatisfaction with the globalised food system, articulated on the behalf of both producers and consumers, has caused a variety of public debates surrounding the ethics of food production and consumption to become increasingly visible in society over the last two decades. Simultaneously, farmers’ markets (FMs) and other forms of direct marketing have experienced a noteworthy increase in participants, indicating an emerging demand for an alternative to conventional food networks, alternatives that are often perceived as providing a more just and moral relationship to food production and consumption. This study examines consumer and producer motivations for participation in FMs and opinions towards conventional and alternative agriculture in order to elucidate what (if any) values and morals are shared among producers and consumers. This study draws upon the theoretical framework of moral economy to understand whether these shared values suggest FM participants are working to co-create an alternative economy based on “moral” principles such as fairness, justice, and reciprocity. This mixed-methods study consists of consumer surveys (N?=?377) and semi-structured interviews with producers (N?=?17) from five FMs in the state of Delaware. The results suggest that producer and consumer motivations to participate in FMs, particularly a shared emphasis on social value, are indicative of a sense of moral economy. However, this moral economy is complicated by tension towards consumers and the alternative food movement more generally expressed on behalf of producers.     

Benefit‐Cost Analysis of Integrated Water Resource Management: Accounting for Interdependence in the Yakima Basin Integrated Plan

Integrated water resource management (IWRM) requires accounting for many interrelated facets of water systems, water uses and stakeholders, and water management activities. The consequence is that project analysis must account for the nonseparability among the component parts of IWRM plans. This article presents a benefit‐cost (B‐C) analysis of a set of projects included in the Yakima Basin Integrated Plan proposed for the Yakima Basin in south‐central Washington State. The analysis accounts for interdependence among proposed water storage projects and between water storage and water market development in the context of historical and more adverse projected future climate scenarios. Focusing on irrigation benefits from storage, we show that the value of a given proposed storage project is lower when other proposed storage projects in the basin are implemented, and when water markets are functioning effectively. We find that none of the water storage projects satisfy a B‐C criterion, and that assuring proposed instream flow augmentation is less expensive by purchasing senior diversion rights than relying on new storage to provide it.     

Incommensurability and property rights in the natural environment

Cost–benefit analysis has been criticised on the grounds that it cannot compute the value of environmental goods whose value constitutively defies monetary valuation. Two forms of incommensurability make monetary valuation problematic: constitutive incommensurability and quantitative incommensurability. These pose a threat only to shadow pricing, and not the formation of prices in an actual market. Where property rights to environmental goods are appropriately assigned, the prices that form reflect the actual uses persons put them to, given their value commitments. In a real market, the formation of prices does not depend upon the assignment of cardinal values via monetary valuation; rather, the formation of prices is a side effect of the way in which environmental goods are used. A property right gives one the right to reject terms of exchange one deems inappropriate. Where sale of an environmental good is deemed inappropriate, it is kept out of the cash nexus. Incommensurability therefore precludes cost–benefit analysis, but not markets in environmental goods where property rights are appropriately allocated.     

Environmental and economic analysis of switchgrass production for water quality improvement in northeast Kansas

The primary objectives of this research were to determine SWAT model predicted reductions in four water quality indicators (sediment yield, surface runoff, nitrate nitrogen (NO(3)-N) in surface runoff, and edge-of-field erosion) associated with producing switchgrass (Panicum virgatum) on cropland in the Delaware basin in northeast Kansas, and evaluate switchgrass break-even prices. The magnitude of potential switchgrass water quality payments based on using switchgrass as an alternative energy source was also estimated. SWAT model simulations showed that between 527,000 and 1.27 million metric tons (Mg) of switchgrass could be produced annually across the basin depending upon nitrogen (N) fertilizer application levels (0-224 kg N ha(-1)). The predicted reductions in sediment yield, surface runoff, NO(3)-N in surface runoff, and edge-of-field erosion as a result of switchgrass plantings were 99, 55, 34, and 98%, respectively. The average annual cost per hectare for switchgrass ranged from about 190 US dollars with no N applied to around 345 US dollars at 224 kg N ha(-1) applied. Edge-of-field break-even price per Mg ranged from around 41 US dollars with no N applied to slightly less than 25 US dollars at 224 kg N ha(-1) applied. A majority of the switchgrass produced had an edge-of-field break-even price of 30 Mg(-1) US dollars or less. Savings of at least 50% in each of the four water quality indicators could be attained for an edge-of-field break-even price of 22-27.49 US dollars Mg(-1).     

Managing Fleet Capacity Effectively Under Second-Hand Market Redistribution

Fishing capacity management policies have been traditionally implemented at national level with national targets for capacity reduction. More recently, capacity management policies have increasingly targeted specific fisheries. French fisheries spatially vary along the French coastline and are associated to specific regions. Capacity management policies, however, ignore the capital mobility associated with second-hand vessel trade between regions. This is not an issue for national policies but could limit the effectiveness of regional capacity management policies. A gravity model and a random-effect Poisson regression model are used to analyze the determinants and spatial extent of the second-hand market in France. This study is based on panel data from the French Atlantic Ocean between 1992 and 2009. The trade flows between trading partners is found to increase with their sizes and to be spatially concentrated. Despite the low trade flows between regions, a net impact analysis shows that fishing capacity is redistributed by the second-hand market to regions on the Channel and Aquitaine from central regions. National capacity management policies (constructions/destructions) have induced a net decrease in regional fleet capacity with varying magnitude across regions. Unless there is a change of policy instruments or their scale of implementation, the operation of the second-hand market decreases the effectiveness of regional capacity management policies in regions on the Channel and Aquitaine.     

The underutilization of street markets as a source of food security indicators in famine early warning systems: a case study of Ethiopia

Famine Early Warning Systems (EWS) are reliant on data aggregated from multiple sources. Consequently, they are often insensitive to localized changes in food security status, leading to delayed response or interventions. While price and infrastructural data are often gathered, this case study suggests that local street markets and vendor knowledge are underutilized. Few efforts have been made to monitor systematically the street markets as an indicator of local stressors. Findings from Ethiopia show that knowledge generated by expanding food security indicators in this sector can be used in combination with EWS to facilitate earlier intervention in, or to monitor more effectively, on-going humanitarian crises. Indicators developed from this study are accurate, cost effective, and sensitive to local climatic and food stressors.     

The Climate Value of Cycling

The reduction of CO₂ emissions constitutes one of the largest challenges of the current era. Sustainable transportation, and especially cycling, can contribute to the mitigation of CO₂ emissions since cycling possesses an intrinsic zero‐emission value. Few studies have been conducted that appraise the CO₂ reduction potential of cycling. Opportunity costs enable the estimation of avoided CO₂ emissions resulting from bicycle trips. The methodology developed in this research allows the attribution of a climate value to cycling by substituting bicycle trips with their most likely alternative transportation modes and calculating the resulting additional CO₂ emissions. The methodology uses data on the current modal shares of cycling mobility, the competition of cycling with other transportation modes, and CO₂ emission factors to calculate the climate value of cycling. When it is assumed that the avoided CO₂ emissions of cycling mobility could be traded on financial carbon markets, the climate value of cycling represents a monetary value. Application of the methodology to the case of Bogotá, Colombia — a city with a current bicycle modal share of 3.3% on a total of 10 million daily trips — results in a climate value of cycling of 55,115 tons of CO₂ per year, corresponding to an economic value of between 1 and 7 million US dollars when traded on the carbon market.