Back in January the Indy ran a story on the life and times of battery farmed chickens. As you might expect it didn’t make pleasant reading.

Now following the campaign against battery chickens The Independent reports an complete sell out of free range chickens in the UK.

Figures suggest that in 2007 the sale of battery farmed chickens fell by alomst 10 million birds whilst consumers bought 4.4 million more free range.

This is the consumer voting with their wallets and this is how it should be: a change in individual consciousness.

It’s also interesting the overall sales fell by nearly 5% suggesting that some consumers turned away from chicken altogether.  Again this is an outcome of raised awareness.

It just demonstrates what can be done when the consumer shifts.  

It’s good that the water debate is starting to take more shape. In the main we have struggled with the idea that we should pay for it and how to construct proper markets around it. Some places meter water and some don’t but as we know it’s hard to manage a resource if you can’t measure it use.

So it’s refreshing to see a piece in The Press  on the need for a water market to be constructed to provide an efficient allocation of this precious resource. As I’ve discussed many times, a resource with no price will be treated as if it is free. For many people water is free and always has been but now there are competing claims on water. In New Zealand this is primarily from agriculture with huge demands for irrigation from the dairy industry, which converts water into milk on an enormous scale.

Initial objections are alway around the issue that water is a necessity for life and should therefore be free.  Well so is food and shelter and they aren’t. We have lived with the false notion that water will always be plentiful and is a constant renewable resource. Tell that to Australian farmers who have suffered a 5 year drought in many areas. Water availability is subject to climatic variation and to overuse. Just look at the state of NZ rivers and lakes which are well known to have experienced a serious decline in quality over the last 20 years of intensive farming.

It’s fairly simple to make sure people are allocated a fair supply of free water to assuage those who believe they shouldn’t pay for it but anything above a basic amount should be paid for just like our energy.

It’s only through the pain of payment that we really focus our efforts on conservation, efficiency and alternatives.

It’s time we got on with this whilst we still have water to charge for.

I wasn’t going to bother with this really. Who needs another dose of reality? But there is an interesting story here.

The Greens have come out with a story about a buried chapter in this report. They claim that Chapter 13 was pulled due to a very negative slant on the dairy industry. It pointed to dairy as the “largest cause of environmental decline” in New Zealand. Anyone who likes to swim in their local stream, river or lake could attest to that.

The dairy industry is also one of the biggest earners for the country. There you have it. New Zealand is no more immune to political lobbying than any other country except its pretty transparent. It’s hard to keep anything a secret here.

The Greens propose that this report come under the auspices of the Parliamentary Commissioner of the Environment rather than the government.

Yes to that!  The government simply cannot be trusted to be objective. Yes it’s a sad statement to make but that’s the way it is until we get a more distributed form of democracy and power.

If you can’t sleep then here is the link to the various reports.

Leo Hickman, a Guardian columnist, published an interesting book called “Final Call – In search of the True Cost of our Holidays”. Its reviewed here and I’ve made a few comments on it.

Eco tourism is all the rage these days and rightly so. We should always consider the impact of where we go and what we do. But as consumers of goods, services and exotic holidays we expect the price to reflect the cost of what we are paying for. If it doesn’t is that our fault or problem?

Well that’s where the consideration or “ethics” of your decision comes into play. I’m in favour of travel as it expands the mind. body and soul. It allows us to gain a different and newer perspective on the world. But do we dare look beneath the surface as Leo has done?

I’m reminded of the excellent Stephen Frears film “Dirty Pretty Things” about the  immigrant workers who keep London going at night whilst people sleep easy. Crap working conditions for service staff are nothing new so why should it be any different on holiday?

What should happen is that people get paid proper wages and work in decent conditions. Then it’s up to them whether to take a job or not. Madeleine Bunting deals with this issue quite well in her book “Willing Slaves” which also looks at the guest worker phenomenon.

My interest is more in the environmental sphere. Simply put we should be paying the Trucost of our activities. How we get that is a bit trickier but doable.  I’ve looked at this before and having been to the UK recently its clear that this issue is center stage.

We must move quickly to connect external environmental costs with the pricing mechanism. Once a cost has been calculated (carbon, nitrogen runoff, water) then that cost gets added in at the point of extraction, abstraction or manufacture. The EC (external cost) flows back to an Environmental Contingency Fund where it sits (in sovereign bonds) until it can be put towards paying for the exact cost that was incurred, whether that is planting some forests to sequester carbon, cleaning a river or fencing land or implementing new water management processes.

As much as we would like it to be, it isn’t (as yet) an exact science. But it will alert consumers to the true cost of the good and allow them to make more accurate purchasing decisions.

Then maybe we can actually enjoy our holiday instead of worrying about how much damage we’re doing to “the planet”.

The energy debate continues to go in circles. Usually its starts with the renewable sector heavyweights: wind and solar. The free and usually reliable inputs of wind and sun are very attractive. The technology is improving and, in the case of solar energy, the transmission mechanism is close at hand.

One company in the US has actually started a rental program for solar heating. I like this idea because capital cost is a problem for many people. Energy as a service is a good business model.

Solar is a great option because you can localise it. Hopefully the technology will continue t to improve.

Wind has its drawbacks due to the requirements of location and serious land mass. But again it suits some places better than others. But how about small wind turbines on every roof?

Little and often i say. Every little bit counts.

Biomass is the latest technology on the block, a small step up from chucking wood in the burner which is very popular and cheap in New Zealand. We can grow a lot of wood down here. The biomass and biofuel solution reveal a problem in our approach.

It doesn’t have to be one or the other. It can be both/and. It’s clear now there is no one solution that is way better than another. Let the market continue to work it out. And this brings me to the main point which is that we must have a properly priced energy market.

This is going to require a major change. I have long banged on about pricing in environmental costs at source and whilst Trucost is doing great work in that area there is a long way to go.

So how could this work? Well here are a few examples:

Carbon

Let’s say we have established a price for “carbon”,this being a proxy for externalities caused in the combustion of fossil fuels. The most efficient way to alert the market to this cost is to price it in at source ie where the fossil fuel is sold wholesale. This would be the global oil, gas or coal exchanges.

In my paper, Climate Control, i argued for the establishment of a World Energy Agency, where all fossil fuels were sold through. Simply add on the price of carbon and leave it at that. As a one point global process it would be very simple and then that price information would flow out across the world. End of story.

But there are two issues here:

One is that we are trying to stop carbon quantities breaching certain levels. The price elasticity of fossil fuel consumption may hinder this somewhat as consumers of oil products are slow to change demand in response to price.

The second issue is interesting. What happens to that money? Who does it belong to? As a charge being levied by the WEA it has no soveriegn recipient. So i propose this “charge” goes into a Global Environmental Contingency Fund (GECF). I want to make clear this is not a tax, it is a cost. It is therefore directly related to an expense which is in this case the use or environmental services.

Let’s stop using the word tax. It’s incorrect and draws attention from the fact that we are simply paying for a service we are using.

So how could the GECF work? I have to give that some more thought but the rough idea is that it would hold those funds in bonds (sovereign) or could lend them out at low interest to fund projects that have a positive environmental benefit. This is the tricky bit. But let’s sit with the first piece. The money comes in and sits in bonds. That’s it. So it’s not being spent on projects of a dubious outcome. As the title implies its a Contingency Fund. We don’t know for sure what will happen in the future. The money can be repaid if required by discounting the price of fossil fuels if it turns out that the cost has turned out to be lower.

It’s a hard one to get right on  a global level but worth a look.

Agriculture

In New Zealand we have trouble with dairy farming, a highly profitable business which has seen huge swathes of land converted from other activities to supporting cows. The externalities of this business are numerous but center around water pollution through fertilizer run off into streams and down into the water table as well as cows crapping all over the place..oh yes and the methane burps.

Here it would be simpler. A charge would be applied per head of cattle and immediately be applied to cleaning up that pollution at source. Why should the taxpayer pick up this tab. Its a cost for the consumer to bear and if the consumer doesn’t like the slightly higher price then the producer will quickly alter his habits.

The moral of this  story is simple: We need to know the true cost of our global economic activity. Then as consumers we can respond appropriately.

Trying to say which energy source is better than another is simply guesswork.

I have just spent the last 3 days at the NZ Association of Economists annual jamboree in Christchurch. It was well worth the time as it was a good opportunity to meet economists working in a wide range of areas and sub disciplines.

There were plenty of interesting papers on monetary policy, forecasting, environmental economics, migration, work and of course the housing market. There was a good mix of age and gender which added to the energy.

The keynote speakers were interesting with talks as diverse as climate change and the economics of sexual harassment.

The paper on Climate Change from Warwick McKibben is worth a look and the paper from Motu on Nutrient Trading provides a micro view of how trading in externalities might work at the local level. The work on allocating and trading pollution permits dovetails nicely with the work from Peter Barnes on reclaiming the commons and allocating rights to pollute which can be traded.

The general feeling on the housing market is that the boom is coming to an end but that it has been justified by low interest rates and the ability to ringfence losses from geared rental properties. I should add to this that migration and willingness to pay higher prices than locals has also contributed to the excessive rise in house prices. The banks have played their part in happily lending the required amounts and no doubt will be the first ones to notice any pullback from investors. This seems to have already started.

I would like to have seen some papers on behavioural economics as i think that is starting to build as an interesting field alongside new wave areas like neuroeconomics.

Economist is a dirty word in NZ due to the long hangover from the economic revolution of the 80s but i can report they are a good bunch….really