One of the best examples of how economics and the environment go hand-in-hand is the way the free market constantly pushes to reduce use of scarce resources. Plastic bottles are a good example of this trend.
Frequently I've highlighted what Nestle calls its "eco-shape" bottle, which uses "30 percent" less plastic. The purpose is quite clear -- less plastic means less weight to transport and fewer resources to pay for. Now the Coca-Cola Company, who bottles Dasani water among a number of other products, is introducing the latest version of this trend.
Called the plantbottle, Coca-Cola uses plant-based ethylene, made from sugar cane, to replace the 30 percent of a standard PET (polyethylene terephalate) plastic bottle that comes from petroleum-based ethylene with ethanol. The bottle is the same in the end but changes the materials from which it is produced. What I found so interesting about the presentation Coke made those of us who attended their Seattle presentation was how explicit they were about the role economics plays in ensuring this works. Coke didn't simply take this step in the hopes it works out, they understand that for this to be environmentally sustainable in the long run it also needs to be economically sustainable.
For instance, it was important to them that the plastic be the same as current recyclable plastic. If the bottles were different it could contaminate current recycling systems, making it more difficult to recycle. They noted that Coke is a major recycler in their own right (Coca-Cola Recycling LLC is an actual subsidiary) and that making it more difficult to recycle is counterproductive.
Second, while they say that the bottle costs more to produce today, they expect the cost to go down as the supply chain improves. It also insulates them, to some extent, from the cost volatility of petroleum.
I asked if they saw an impact on their market share by promoting the plantbottle. They have only just launched it in Denmark and are doing so now on the West Coast and in BC for the Olympics, so they don't have any market-share numbers yet. As we've seen with other "green" products, it can be a way to reach a certain type of consumer that businesses covet -- those who have disposable income and are willing to spend it to buy ideological amenities, like greenness.
Coke did a life-cycle analysis of the effect of the bottle as well to ensure that they weren't simply trading one environmental impact (use of petroleum products and CO2 emission) for another (pollution or deforestation). They found that the bottle was no worse in any area they tested and better in a few key areas. These types of analyses can be misleading and I think it is better to put a price on environmental impact. Putting a price on impact would add an incentive to reduce impact. Their analysis, however, is thoughtful and is more than many who make environmental claims are doing.
They also indicated that some of the claims being made by others sound good but may not be good for the environment. For instance, they noted that "100% recycled" bottles may not be better for the environment due to all of the design and other compromises that need to be made to get to that level. Again, price is a better metric than arbitrary standards because price is reflective of the amount of energy and materials put into a product.
PlantBottle is a good example of the principle that businesses are more creative and effective at promoting environmental sustainability than politically-motivated policymakers and government workers. Those from government agencies who attended the event could only raise concerns about the label, the logo, etc. and finished by asking Coke for money to support their agency's efforts. It dramatized the reality that government is behind in efforts to make real environmental improvements and is primarily involved in trying to grab the coattails of those who are making real improvements.
Kevin Wallace has been working behind the scenes for about a year on the light rail alignment through downtown Bellevue. In November, Kevin was elected to the city council and his effort is taking center stage in where Sound Transit will build tracks.
Sound Transit officials are mulling over several alignment options and have selected a preferred alternative to study further in an EIS. But as Kevin points out, there are many significant problems with it, including
Long term construction impacts
Increases in traffic congestion
Environmental impacts, especially building an elevated rail structure right through the middle of the Mercer Slough
Sound Transit's preferred alternative also requires a lot of commercial property condemnation and presents noise issues to several residential neighborhoods.
So Kevin commissioned a study to find a less intrusive and cheaper alternative. His plan is called the Vision Line and reduces and eliminates most of the issues created by Sound Transit's option. It is also much cheaper.
I had the opportunity to hear Kevin's presentation this morning and he said something that really caught my attention. Sound Transit's preferred alignment through Bellevue violates about 54 tenets of the city's Comprehensive Plan. His plan only infringes on two.
State Auditor Brian Sonntag this morning issued a report highlighting the status of performance audit recommendations made to date. According to the report:
"From February 2007 through June 30, 2009, performance audits identified nearly $3.6 billion in cost savings, unnecessary expenditures and economic benefits.
Some recommendations have a financial impact, such as past costs that were questionable or avoidable, those with future cost savings and recommendations with future revenue opportunities. The figure below is focused on recommendations with future revenue opportunities or future cost savings that can be realized when the recommendations are implemented.
We made 214 recommendations with future cost savings or revenue opportunities; 67 percent of those recommendations have been fully or part!
ially implemented or are in progress, as shown below.
Most state agencies do not track the cost of their products and services or any realized cost savings from performance audits. They are, however, encouraged to track the cost of participating in performance audits.
We followed up with the following governments to obtain their estimates of the net cost savings they were able to achieve by implementing our recommendations."
Third District Congressman Brian Baird has announced that he will retire from Congress next year. Certainly people will begin assessing his tenure on the issues of import to them. As for some key environmental issues, I appreciated his intellectual honesty.
The emblematic moment of his intellectual and scientific honesty was his willingness to take on an incomplete and misleading article about salvage logging that appeared in Science. The piece, written by a Masters candidate at Oregon State University, argued that salvage logging after a fire did more damage to the forest than leaving the area alone. The article was quickly seized upon by environmental groups, touted in Congress and used as a tool in the effort to end post-fire logging.
Despite the fact that many in his own party were breathlessly waving the report around, he challenged its science head on and even held a hearing. He demanded the data behind the study. Interestingly, the authors refused to provide it. We wrote at the time:
Despite saying their purpose was to influence the discussion of his bill, the authors refused to release their data to Congressman Baird. The authors did not say there was not enough time to collect the data, only that they were not required to. This not only violates a key tenet of scientific inquiry, but is an ironic suppression of their own data.
In the end, the authors backed off their conclusions, admitting they were incomplete and ultimately did not apply to most salvage projects.
This isn't the only time Baird expressed an intellectually honest opinion about an environmental issue that contradicted the party line. The environment will be much better off when there is more honesty about environmental issues -- highlighting those things that don't work and being willing to follow the science where it leads even when it is uncomfortable. On more than one occasion, Baird did just that.
If right, it's this kind of data that challenges transit's "build it, and they will come" model. In economics, supply is a function of demand. This means a willingness to use a service must exist before a supply of that service is created. Boeing executives do not make 300 airplanes knowing they will only sell 100. Likewise, governments should not spend a disproportionate amount of taxes in low demand sectors, where the willingness to use the service does not justify the spending.
European transit systems provide a good contrasting example of how these economic concepts app!
ly. In Switzerland, transit is successful, not because of the amount of service or infrastructure, but because the country has certain demographic and economic characteristics that induce demand.
In other words, there is an existing market with a customer base and Swiss policymakers respond with proportional infrastructure investments. As a result, mode share, ridership and fare box recovery are high. In the United States, transit resources are distributed in just the opposite way.
Under the “build it, and they will come” theory, policymakers think that increasing the supply of transit will somehow create more public demand. This speculative model fails because most U.S. cities do not posses the economic or demographic characteristics that create enough voluntary consumers for public transit.
This doesn't mean public transit is bad. It just means using the economic principles of supply and demand shows that building excess transit capacit!
y before there is an equal amount of willingness to use it lea!
ds to an underperforming system. As a result, mode share, ridership and fare box recovery are low.
As is often the case, the reaction to a scandal is often more illuminating than the scandal. Such is the case with Climategate. We noted recently that former Washington state climatologist Phil Mote played semantic games trying to downplay the language of some of the e-mails. Now, Dr. Stephen Schneider of Stanford demonstrates another example of this.
The clip below shows a PR person attempting to stop Dr. Schneider from answering a question about the Climategate e-mails and the UN security tossing Phelim McAleer, who asked the question, despite the fact that he has valid credentials.
What is more interesting to me is what Dr. Schneider does say. At one point he says (or rather, spits out), "I don't make comments on redacted e-mails presented to me by people whose values I don't trust." Phelim notes quickly that everyone has confirmed that the e-mails, which are not redacted, are real.
I thought it was interesting that rather than arguing the science, Dr. Schneider goes immediately to "values" and discounts anything from people he doesn't trust. He represents himself as a scientist, but clearly his position is influenced tremendously by whether he shares the values of those who disagree with him. That isn't a scientific approach. That is the very definition of politics and it actually reinforces the claim that the Climategate e-mails show that many who claim to be making scientific judgments free of political influences are quick to turn to politics when it suits their purposes.
Also, University of Washington climate scientist Cliff Mass writes an excellent piece about the Climategate e-mails. The whole thing is worth reading. He addresses the "trick" that Mote tried to dismiss, noting that the approach used by the East Anglia scientists wasn't very scientific. Mass explains this:
In the famous "trick" email the east Anglia emails talk about replacing the proxy tree ring records with instrumental records for the past several decades (because the tree ring records disagreed with what the instrumental records were saying)--instead of just showing those records and noting the difficulty. Not quite open.
An honest approach to science means highlighting uncertainty where it exists and encouraging further research. Unfortunately, too many are trying to fill the knowledge gap with politics and values.
The State Auditor's Office this morning released a report titled "Opportunities for Washington." In a letter to citizens State Auditor Brian Sonntag wrote (in-part):
I am pleased to present to you "Opportunities for Washington," our performance review of state government operations. For such a time as this, state government has an opportunity and a need to significantly change how it does business. As Governor Gregoire and the Legislature deal with the state's difficult financial challenges, this review reflects our first such effort to help.
It contains ideas and recommendations to save money, to streamline government programs and functions and to provide better service to citizens. The review also identifies areas in which we can direct performance audits in the near future. Thos!
e audits are intended to identify actionable efficiencies.
Here are some of the report's conclusions:
Washington likely could increase revenue by several million dollars and bring unregistered businesses into the state tax system by conducting an amnesty program to collect delinquent debts.
The state could increase its collection of delinquent debts by more than $5 million in the first year by participating in a U.S. Treasury program in which government vendor payments are garnished to satisfy overdue tax obligations before the payments are made.
The Department of Social and Health Services could increase the amount of Medicaid pharmacy overpayments it recovers by expanding its small but effective audit program that consistently recovers more funds than it spends for audits.
State agencies could reduce printing costs and improve service by changing the Department of Printing business model to better respond to agency needs and to reflect 21st century advances in technology.
Washington could increase revenue from liquor sales and distribution by up to $350 million over five years beginning in fiscal year 2012 if it sold the state distribution center and auctioned licenses to sell liquor to private-sector businesses.
The report also makes several recommendations to improve and streamline the delivery of state Information Technology (IT) and lease management services.
Throughout the report, however, is this warning:
Many of the state employees whose jobs would be affected by the adoption of these options are represented by unions and covered by existing collective bargaining agreements. Management would be required to fulfill any bargaining obligations or contractual requirements if any of the options were adopted. The extent of the bargaining obligation would depend on the provisions of the option adopted. Also, the competitive contracting provisions of state law (RCW 41.06.142) could apply to any option under which the agency contracted out work that had been performed by state employees.
Right now the governor of the state of Maine, a non-charter school state, is drafting Innovation Schools legislation to allow schools there to have more autonomy over their budgets, curriculum, staff and scheduling than traditional public schools. States with charter schools or autonomous innovation schools are given 40 points out of 500 in the scoring system for the Race to the Top competition. Passing such legislation will significantly boost Maine's chances to win millions of dollars in the Race to the Top competition.
Innovation Schools, in contrast to many charter schools, retain a unionized teaching workforce. Schools applying for Innovation status must obtain the agreement of 60% of the members of a collective bargaining unit employed in the school.
Washington Policy Center has just released a Policy Note describing how Innovation School status allows a principal "to design and implement innovative practices in a wide variety of areas to improve student outcomes, and to obtain waivers from those policies that would otherwise present obstacles to such innovations" (quote from Colorado Department of Education).
Unfortunately, due to Washington's overly restrictive regulatory environment, principals in Washington State have almost no role in creating a high-quality program tailored to the needs of students. Instead, they are reduced to acting as regulators and enforcers.
Washington state's leaders should consider the Innovation School model to boost its chances in winning $250 million in Race to the Top funds.
Even if you don't closely follow transportation policy, this new study by Dr. Ron Utt of the Heritage Foundation is worth a read:
Surface Transportation Authorization Act (STAA), as currently written, would
dramatically change federal transportation policy by shifting resources from
cars to trolleys and buses; requiring a huge tax increase to fund these new
commitments; centralizing transportation decisions in Washington; requiring a
substantial increase in the numbers of state, local, and federal government
employees; and discouraging the private sector from investing in surface
The U.S. Small Business Administration is considering revising the definition of "small business." Currently, the SBA defines a small business as a firm with fewer than 500 employees.
The variations have changed a little in the 50+ years of the SBA, and the government agencies that predated the SBA. However, the 500 employee mark and $7 million or less in revenue hasn't changed since 1984.
The state of Washington loosely defines a small business as a firm with fewer than 20 employees or less than $3 million in annual gross revenue.
I have often wondered at why the SBA continues to categorize businesses with up to 500 employees as a small business. I much prefer the state's definition. I realize that one of the original reasons for this was to ensure a more level playing field for smaller firms to !
compete with large businesses for government contracts. But how many businesses do you know that are truly small businesses with 499 employees? Probably not too many.
But if you feel strongly that the SBA definition of a small business should change then make sure you chime in. They are accepting comments until December 21st.
Reactions to Governor Gregoire's proposed supplemental budget have been decidedly mixed. Beneficiaries of the programs identified for elimination have warned taxes should be raised instead of making the cuts. The majority of the state's newspaper editorial boards, however, warn that tax increases should be the last resort and state spending must be reformed first.
Geoffrey Canada's Promise Academy, a charter school which serves historically under-achieving children, has eliminated the 4th grade achievement gap in reading and math and substantially narrowed the 8th grade achievement gap.
How? First, he is free to control his budget and focus resources on achieving results. He is allowed to take donations from the private sector. He has created an Early Learning program for babies, toddlers and preschoolers which makes parents full partners in the education of their children, requiring intensive parent involvement and training. He holds teachers accountable for teaching children (those who fail are removed). He gives high school students $120 a month as a reward for good attendance and for doing their schoolwork. Everyone works longer and harder. They work Saturdays and take a shorter summer vacation.
Who is Geoffrey Canada? He is a genuine leader who takes an "all hands on deck" approach. He has been given the tools and freedom to succeed. Watch this Sixty Minutes special to see what could happen in Washington state if we put our principals, and our Geoffrey Canadas, in charge of their schools:
The Seattle Times is reporting that the City of Seattle has done a complete 180 regarding the City’s policies to use sand when ice forms on roads. The City is now using salt as part of a proactive approach, keeping streets free and clear of ice.
A point that the City’s new director of street maintenance, Monty Sedlak, seems to get. He told the Seattle Times that, “his former employer, suburban Arapahoe County south of Denver, switched to salt in 2001… ironically, that was for environmental reasons — flying sand created brown clouds over the valley.”
But perhaps most noteworthy of Sedlak’s comments came in response to a question about the department overusing the salt during this past week when dryer weather has prevailed. Sedlak replied:
“Frost did form on car windshields Thursday, a harbinger that pavement could freeze, too. The relatively low cost to spray brine is weighed against the enormous cost if the roads do ice, causing accidents and economic loss.”
The City’s new policy is not only good for the environment, but for businesses and taxpayers as well.