An Opinion on Sustainable Markets

It has been apparent for far too long that the condition of the environment has been rapidly deteriorating. Often, an impossibly difficult decision between environmental conservation and human growth has been presented as the only way forward. The creation of sustainably constructed markets fueled by robust, real-time communication and accurate data can help ease that formerly impossibly difficult decision.

A way that we can achieve this aim is by targeting the nearly inevitable problem of deadweight loss (DWL) that often results from deciding between environmental conservation and human growth. DWL is a term used to describe the negative effects from market inefficiency. DWL does no one any favors, and essentially acts as a drag on value, innovation and sustainable growth. There are innumerable ways to target DWL. For example, in energy markets, efficiency gains through the implementation of new technologies can become self-sustaining. In resource markets, waste can become a resource-base achieved through trash mining and recycling. In invasive species markets, the targeted invasive species can be harvested as an input to create value-added finished goods.

The globe is full of opportunities for the creation of immense real value. In many instances, the implementation of markets whose most likely equilibria (econ-speak: markets can have more than one point of equilibrium) result in win-win scenarios (econ-speak: nonzero positive sums) allow for increases in real value by eliminating wasteful DWL while adding more opportunities (econ-speak: potential possibilities) to the economy. The reduction of DWL, coupled with the creation of an expanded set of possibilities, can create massive positive feedback systems that optimize real value functions. These systems are far from perfect as of now; at least beginning wider-spread implementation can provide reasonable ways forward while helping to transform the economy into a sustainable, more humane, and more valuable one. Gaia Endeavors strives to provide environmentally-focused entrepreneurs ideas, a forum for discussion, and links. As such, please help by adding to the conversation and visit/add to the links below.

http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=deadweight+loss
http://www.eia.gov/consumption/
http://www.ers.usda.gov/Briefing/InvasiveSpecies/
http://www1.eere.energy.gov/industry/intensiveprocesses/pdfs/energy_use_loss_opportunities_analysis.pdf
http://www.nytimes.com/2011/07/10/science/earth/10fish.html?_r=1
http://www.iisgcp.org/newsroom/archive/102110.html
http://www.miyassushi.com/invasive.html
http://blog.seattlepi.com/environment/2008/08/06/why-mine-landfills-when-you-can-mine-trash/
http://www.businessweek.com/magazine/content/08_31/b4094036650513.htm
http://pubs.usgs.gov/fs/fs060-01/fs060-01.pdf
http://www.spiegel.de/international/business/0,1518,767178,00.html

Montana State-of-Mind

I am just back from an incredible 2+ weeks in beautiful Bozeman, Montana, at the Property & Environment Research Center’s Enviropreneur Institute (PEI). The experience was life- changing for me. Through the program I greatly advanced an idea I have been developing around self-financing marine conservation using markets, I was both physically refreshed and emotionally restored, and I made a lasting group of friends with both my peers and mentors at the program. Highlights for me included late-night conversations around the campfire, bocci ball and lectures at Ted Turner’s Flying D Ranch, epic barbeques, floating down the river, living in the Montana State University dorms, an impromptu graduation dinner in the wine cellar at Plonk in downtown Bozeman, bonding with my peers, and intense brainstorming sessions with mentors.

PEI 2011 culminated on Friday, July 8th, with “I have a dream” presentations during which each “enviropreneur” had seven minutes to describe his or her dream for the future of the project that had been developing during the program. These ideas ranged from applying property rights to coral reefs, to turning trees into pens to drive forest conservation (http://www.treeringpens.com/), to nutrient trading schemes, among others. Each of these presentations dealt with a Free Market Environmentalism (FME)-based concept. PERC’s version of FME is “dedicated to improving environmental quality through property rights and markets,” focusing on the creation of property rights to make markets work so that entrepreneurs can step in to solve environmental challenges.” FME is an idea that excites some people while raising red flags for others (e.g. can and should nature be turned into a market?).

While there are multiple perspectives on FME, PERC is not the only way to get involved in the discussion. All that is required is a group of people, either physically connected or tied through social media, willing to debate the pros and cons of various issues. For example, while the PEI 2011 Fellows are once again spread throughout the world, we will continue to have phone calls to discuss and advance our projects.

Even though PEI is now over and each of us is dealing with the first “reentry” week differently, I find myself in an exuberant mood despite the challenges. I look forward to seeing what impact the “FME” approach will have on my career and the places it will take me. With some strong perseverance and a bit of luck, I believe that all of the PEI 2011 Fellows will succeed at our endeavors. In honor of the” idea seeds” that PEI 2011 started, the class made a donation to the Coral Restoration Foundation so that a coral named “PEI 2011” could be placed into a nursery in the Florida Keys and eventually planted out on the reef to help seed other corals in Florida.

While some of the relationships and memories will inevitably fade as the weeks, months and years go by, the Montana state-of-mind that PERC helped create never will, at least for me.

Checkout the PEI program at http://www.perc.org/enviroprog/enviropreneur/camp/basics.php

and/or make a donation to help restore Florida’s reefs at http://coralrestoration.org/coralrn/catalog/index.php.

 

What does it mean to be an environmentalist?

Environmentalism is commonly thought of as a social movement. Social movements consist of a group of people with a common ideology who try together to achieve certain goals. Broadly speaking, environmentalists try to promote conservation and protection of the environment. I’ve identified myself with this movement since I was about fourteen years old. At some point I began to ask, “How can I best help protect the environment?” If I could wave a wand and get everyone to be an environmentalist, the problem would be a lot closer to being solved. Unfortunately, I have not found that wand yet.

When I was approached with an opportunity to work at The Nature Conservancy (TNC), I quickly realized that the organization’s emphasis on creating win-win solutions and avoiding confrontation was what had helped it become the largest and one of the most effective environmental organizations in the world. A hallmark of the organization has been using market transactions to create tangible results. For example, TNC has purchased conservation easements from ranchers permanently protecting important habitat from development and other threats. Ranchers often use that money to acquire more land allowing the next generation to stay on the ranch which helps agricultural communities remain viable while creating an incentive to protect the land. TNC is now pursuing similar win-win solutions such as coordinating payments from water users to protect important watersheds that are critical to providing clean drinking water.

TNC’s approach is alive and well at the Property and Environment Research Center’s Enviropreneur Institute this summer which I have been fortunate enough to attend. The participants are bright, ambitious “enviropreneurs” who are trying to create win-win solutions that will benefit the environment. There are some pretty innovative ideas like selling pens created from trees cut to enhance forest health and restoring coral reefs by tapping into the economic interests of people who make a living off of the marine environment. Some will succeed, many will fail, but more importantly a market promoting environmental protection is being developed. By appealing to peoples’ interests and letting them act on these incentives, I’m more hopeful than I’ve been in a long time that we will be able to succeed in protecting and restoring the environment.

Mike Higuera is a guest contributor to Gaia Endeavors, a 2011 PEI Fellow, and a conservationist at The Nature Conservancy.

Perspectives from the Property and Environment Research Center Enviropreneur Institute near Bozeman, Montana

Brett Howell is attending the Property and Environment Research Center Enviropreneur Institute (known as PEI) program taking place in the Bozeman, Montana area from June 25th to July 8th. Below we are posting some time-delayed blogs that Brett wrote while at Ted Turner’s remote Flying D Ranch where there was no internet access. In addition to reading Brett’s blogs, please follow his tweets @BrettWHowell which are being retweeted through @gaiaendeavors.

 

Ted Turner’s Flying D Ranch and Wolf Conservation

I’m sitting by a stream at Ted Turner’s Flying D Ranch as I ponder my first experiences with the Property and Environment Research Center (PERC) Enviropreneur Institute (known as PEI). I’ve been in Montana since Sunday, June 25th for PEI. We have an incredibly diverse group from across the US, Israel, the Galapagos, and South Africa. Each of us was selected through a highly competitive application process so that we could gain hands-on training in free-market environmentalism (FME). PERC’s version of FME is “dedicated to improving environmental quality through property rights and markets,” focusing on the creation of property rights to make markets work so that entrepreneurs can step in to solve environmental challenges.

On Monday, June 27th, we drove approximately 45 minutes from Bozeman to The Flying D Ranch, a 116,000 acre property that Ted Turner purchased 20 years ago. We are staying in rustic cabins alongside a small creek. From here we can see snow-covered peaks, beautiful green rolling hills, and perhaps most stunning, thousands of buffalo (also called bison).

This morning we heard from Danny Johnson, the Flying D’s ranch manger. I now know more about bison farming than I ever thought possible. Ted Turner, a name originally synonymous with CNN, is well known in Montana and throughout the US for his bison herds. He owns more than 54,000 head of bison throughout the US, approximately 5,600 of which are somewhere on the ranch where I’m currently sitting. Bison meat prices dropped in the mid 90s. To help create a market and drive demand, Ted’s Montana Grill was created to help introduce people to bison meat and provide a distribution channel through which his Turner’s meat could be sold.

Along with being a media entrepreneur and rancher, Turner is a committed conservationist. He controls more land holdings than the total size of Yellowstone National Park, and he has committed to putting conservation easements on every property he owns so that the natural state can be protected in perpetuity. Turner also supports a pack of 25 wolves (18 adults, 7 pups) that moved onto Flying D Ranch recently despite significant impacts on ranch operations. Turner’s decision to maintain wolves on his property is in sharp contrast to the wolf debate raging on public lands where farmers, hunters, environmentalists, and the park service, among others, are deliberating about the predators’ future in Montana.

The decision to allow wolves on the property has a clear impact on Flying D’s bottom line. For example, approximately 30 bison have been killed by wolves so far this year at Flying D Ranch, despite the fact that the wolves primarily feast on elk. Each bull bison sells for approximately $2,300. Elk hunting costs $14,500 for four and half days on Flying D Ranch. Given wolf impact on elk populations, the number of permitted elk hunters is being reduced to 24 from 30 for the upcoming season. Flying D has also hired a full-time wolf biologist to keep an eye on the pack.

The experience at Flying D Ranch has been an incredible opportunity to get out of the city and really connect with fellow PEI participants and see a model of FME at work. Our discussions are wide-ranging and truly inspiring!

Short Insights and Quotes from the first three days of PEI

  • There is no silver bullet yet for why biodiversity is important to markets
  • Property rights can help you create markets vs. moral persuasion
  • If you put a price on something, at what point are social norms holding us back from a market?
  • “But for analysis” – where would people be today, but for an incident that created the harm
  • Do fish have rights (e.g. under the US Endangered Species Act)?
  • Is a product that accounts for the cost of production externalities (e.g. polluting a stream) really a luxury good vs. the same product that is priced to ignore such externality costs?
  • “Sustainability is risk management”

Wildlife Tour on Flying D Ranch

The PEI Fellows woke up at 4:45am on Wednesday, June 29th, for an early morning tour of the Flying D Ranch. In three hours we had the incredible opportunity to see bear, moose, bald eagle, golden eagle, elk, white tail deer, coyote, beaver, and of course, farmed buffalo. At almost three times the size of my current home, the District of Columbia, the 116,000 acre ranch is a vast expanse that we barely began to explore on our drive.

Everything I learned about the Galapagos while in Montana from PEI Fellow Jorge Ramirez

I have always dreamed of SCUBA diving the Galapagos, a biologically diverse set of islands off the coast of Ecuador. The Galapagos became famous because of explorer and biologist Charles Darwin. I have read numerous articles about the islands, but I have not yet had the opportunity to visit them. A highly informative conversation with PEI Fellow Jorge Ramirez provided insights about his experience working with World Wildlife Fund (WWF) in the Galapagos. Some key points from the discussion are below.

  • Approximately 20,000 people live on the Galapagos. While there are four villages, one consists of only 200 people, so there are really only three main population centers on the island.
  • 400 people make their living through fishing. The three most important fisheries are sea cucumber, lobster and bony fish. Sea cucumber and lobster have both been overfished and are now degraded. Tuna and wahoo are also fished, but are less significant. All other marine species are protected through the Galapagos Marine Protected Area (MPA). Sea cucumbers are cooked into a sandwich-like patty which is sold for human consumption in Asia. Lobsters are eaten on the island and also exported.
  • Ten years ago a co-management scheme was put in place with fishing sector, tourism, science government and NGOs to develop a fisheries restoration plan. Since that time fisheries have degraded further, rather than recovering. Locals and government now want the government to take back exclusive control.
  • There are too many fishermen, but because of the close-knit community, no one wants to tell the other that they can no longer fish. Attempts to convert fishermen to tourism operators have failed because there are no more tourism operational licenses, and fishermen want to be just that, fishermen. Solutions, such as paying fishermen not to fish (an approach used elsewhere in the world to reduce fishing pressure) would likely not work because fishermen do not understand that such payments would be made with the intent of teaching them a new skill instead of a long-term handout.
  • Ecuador recently created a new constitution, which recognizes the rights of nature, called “Pachamama.” This is a first-ever recognition anywhere in the world that nature has tangible rights. Now, it is important to help Ecuador figure out how to create the rules that will implement these rights. Currently, justices do not have the necessary knowledge to be effective (e.g. the difference between a shark and a ray). Sea Shepherd Conservation Society and other NGOs are helping to educate Ecuadorian justices about how to implement the new structure.
  • Any Ecuadorian can claim that a company has violated the rules of nature. This creates the opportunity for unlimited claimants with uncertain rules.