Wednesday, April 20, 2011

The Tortoise vs. the Solar Panel

Forget the hare, the tortoise faces a new foe in the arena called the Mojave Desert.  The people of California are in a deep discussion about this topic and when in doubt the experts are called in. With my deep wisdom about the desert and about the tortoise, I have been asked to participate in this San Francisco radio show.    While I may not know much here, this won't stop me.  I do have opinions.

Fortunately, economics offers some insights.

Point #1:  There is no "free lunch".  Scarce land should be allocated to its highest and best use.  A rational planner will compare the present value of the green power that will be generated from carpeting the Mojave Desert with solar panels.  Such green power will mean that California will need to generate less electricity using natural gas and this should reduce our greenhouse gas emissions.  We need to calculate the total tons of annual reduced GHG emissions and we need to multiply this by the price per ton of carbon dioxide avoided.  Where should this number come from? Should we use $35 per ton like in the Stern Report?

Point #2:  If tortoises lose their habitat, how much damage is caused? How do we price the priceless?  This discussion will be identical to the discussion of how much damage did the Exxon Valdez Oil Spill cause to the Prince William Sound in Alaska and how much damage did the BP Oil Spill cause to the Gulf of Mexico?  When non-market goods (i.e tortoises) suffer due to economic activity, how do we impute a cost measured in $ to this?    Why are economists so tacky and insist on measuring the costs in $?  We can only compare benefits (measured in $) to costs if they are in the same units (i.e $). You can measure each in slices of pizza but the units of comparison must be the same.

Point #3:  Can a "King Solomon" find a win-win here?  In this case, I will talk about mitigation banking. and the potential for offsetting the damage caused by the introduction of solar panels.