Natural Resource Policies (Chs. 8, 9)

1. Natural Resource Policies (Chs. 8, 9) • Land policy • Water policy • Environmental policy • Energy policy

2. In natural resource policy areas, the need for policy intervention results from “market failure”. Debates center on market-based solutions vs. government regulatory action. There are fundamentally three general approaches: market allocation, regulations, and incentives.

3. Land policy • Land use • Agricultural (concern is domestic and global food needs) • Residential (concern is urban sprawl) • Recreation (concern is for amenity use) • Sustainability • Soil conservation • Fragile lands

4. Land use policy tools • Let markets work • Zoning laws • Govt. purchase of land • Subsidies to move land to other uses (e.g., CRP) • Regulations on use (e.g., sodbuster & swampbuster cross-compliance)

5. Sustainability (previously labeled “soil conservation”) • Long-standing portion of ag. Policy • Examples of tools/programs • Cost sharing (terraces, brush control) • Soil Bank in 1950s • Conservation Compliance in commodity programs (1985) • “Sodbuster” & “swampbuster” provisions (prevent conversion of erodible land-1985) • CRP (1985)—erosion control; shifted to wetlands preservation in 1995.

6. Agencies/organizations concerned with sustainability • USDA • U.S. Forest Service • NRCS • U.S. Dept. of the Interior • Bureau of Land Mgmt. • U.S. Parks & Wildlife Service • EPA • RFF

7. Water Policy • Quantity—availability & allocation among ag., industrial, & commercial/household (municipal) uses • Quality—pollution or degredation of common property • Non-point source pollution of surface & ground water from chemicals & animal wastes

8. Water policy is primarily state-level policy (water law/ownership varies with states) • At natl. level, mostly legal disputes between states • Some federal subsidization of interstate water projects (dams, canals, servicing navigable waterways); environmental regulations have limited these. • At internatl. level, differences are handled with treaties, agreements

9. Water policy tools (connected to water rights) • Allocations—priorities often based on “reasonable use” • Regulations—common in water pollution control • Subsidies—for water projects and pollution cleanup • User charges—price on usage • International treaties • Water markets—connected to ownership

10. Environmental Policy • Led by EPA (est. 1972), but many other agencies/depts. Involved • Most environmental impacts constitute externalities—imposing costs on others. • Often viewed as having 2 main components: • Municipal & industrial wastes • Agricultural wastes

11. Environmental issues • Water quality—ag. issues are • Pesticides • Animal wastes • Soil erosion • Air quality—ag. issues are • Pesticides • Animal waste odor • Wind erosion • Global warming

12. Environmental Policy Implementation • Numerous federal, state, & local agencies/groups • Federal (most prominent)—e.g., EPA, USDA • State—e.g., TCEQ, TDA, Tx. Parks & Wildlife, water districts • Local—e.g., parks depts., zoning depts., county soil conservation committees

13. Environmental policy tools • Penalties—fines, user charges, taxes • Regulations—prohibiting practices, prescribing practices, required performance, cross compliance • Subsidies • Develop markets (requires property rights)

14. Developing markets (Woodward reading) • Why resort to creating markets? • Resource allocation efficiency • Requirements • Govt. must assign property rights (right for a given amount of emissions, no more) • Permits can be traded (transferrable rights) • Right ensured by govt.

15. Once a level of environmental quality is defined, trading of emissions rights leads to that result at the least pollution control cost. • It requires that government • Determine quality level and assign rights • Enforce standards and trading rules (These markets will not evolve on their own because there are no prior-defined property rights)

16. Role of economics in environmental policy debate (Loomis reading) • Problem arises with the trade-off between things whose values are established by society (via markets) and things whose values are not established (e.g., environmental amenities) • Economics can provide means of estimating non-market values so that comparisons are valid.

17. Non-market valuation • Techniques involve implicit values and/or simulated markets—willingness to pay • Hedonic estimation techniques—statistical estimation from data on amenities • Travel cost method—look at how far people will travel and how much it costs them • Contingent valuation—survey households on how much they would pay for different amounts of something

18. Energy policy • Relatively recent direct influence on ag. sector—ethanol and biodiesel • Ethanol subsidy since 1978 (now $.51 per gallon as tax exemption) • Biodiesel subsidy since 2005 (tax exemption)

19. Effects on ag. sector • Changes price relationships among commodities • Changes land use patterns and quantities of various commodities produced • Affects trade flows of commodities (and petroleum) • Affects consumer prices of food (and energy)