Sathya Gopalakrishnan

Is the Shale Energy Boom a Bust for Nearby Residents? Evidence from Housing Values in Pennsylvania

Profitable extraction of previously inaccessible shale energy reserves has led to the rapid expansion of shale exploration across the United States. We present one of the first empirical studies to measure the impact of early shale exploration on surrounding homeowners using data from Washington County, Pennsylvania, from 2008 to mid 2010. We find that property values are negatively impacted by shale gas exploration activity, but this impact depends on the proximity and intensity of shale activity and is largely transitory. The negative effects are larger for households located close to major highways and sourced with private well water.

Climate adaptation and policy-induced inflation of coastal property value.

Human population density in the coastal zone and potential impacts of climate change underscore a growing conflict between coastal development and an encroaching shoreline. Rising sea-levels and increased storminess threaten to accelerate coastal erosion, while growing demand for coastal real estate encourages more spending to hold back the sea in spite of the shrinking federal budget for beach nourishment. As climatic drivers and federal policies for beach nourishment change, the evolution of coastline mitigation and property values is uncertain. We develop an empirically grounded, stochastic dynamic model coupling coastal property markets and shoreline evolution, including beach nourishment, and show that a large share of coastal property value reflects capitalized erosion control. The model is parameterized for coastal properties and physical forcing in North Carolina, U.S.A. and we conduct sensitivity analyses using property values spanning a wide range of sandy coastlines along the U.S. East Coast. The model shows that a sudden removal of federal nourishment subsidies, as has been proposed, could trigger a dramatic downward adjustment in coastal real estate, analogous to the bursting of a bubble. We find that the policy-induced inflation of property value grows with increased erosion from sea level rise or increased storminess, but the effect of background erosion is larger due to human behavioral feedbacks. Our results suggest that if nourishment is not a long-run strategy to manage eroding coastlines, a gradual removal is more likely to smooth the transition to more climate-resilient coastal communities.

Decentralized Management Hinders Coastal Climate Adaptation: The Spatial-dynamics of Beach Nourishment

Climate change threatens to alter coastline erosion patterns in space and time and coastal communities adapt to these threats with decentralized shoreline stabilization measures. We model interactions between two neighboring towns, and explore welfare implications of spatial-dynamic feedbacks in the coastal zone. When communities are adjacent, the community with a wider beach loses sand to the community with a narrower beach through alongshore sediment transport. Spatial-dynamic feedbacks create incentives for both communities to nourish less, resulting in lower long-run beach width and lower property values in both communities, a result that parallels the classic prisoner’s dilemma. Intensifying erosion—consistent with accelerating sea level rise—increases the losses from failure to coordinate. Higher erosion also increases inequality in the distribution of benefits across communities under spatially coordinated management. This disincentive to coordinate suggests the need for higher-level government intervention to address a traditionally local problem. We show that a spatially targeted subsidy can achieve the first best outcome, and explore conditions under which a second-best uniform subsidy leads to small or large losses.

Missing the Forest for the Trees: Balancing Shale Exploration and Conservation Goals Through Policy

Unconventional shale gas activity has presented both challenges and opportunities for conservation. The unique nature of horizontal drilling used in shale exploration allows for a reduction in the footprint of shale related activity in the landscape. However, the existing policies regulating shale activity across the Northeast, particularly in Pennsylvania, largely miss an opportunity to encourage such consolidation, which would result in substantial ecosystem conservation. Using satellite land cover data for the years 2006 and 2011 combined with data on shale drilling activity in Pennsylvania, we show that a consolidation of wells to underutilized well pads would have resulted in a forest conservation gain of over 112,838 acres between 2006 and 2015. While likely an overestimate, this suggests that small changes in policy such as a moving towards a quantity based market mechanism to regulate the number of well pads would result in substantial conservation gains.

Geoengineering Coastlines? From Accidental to Intentional

On developed coastlines, humans react to physical processes in coastal environments by stabilizing shorelines against chronic erosion and by taking measures to prevent destruction of coastal infrastructure during storms. While we are beginning to understand how physical processes affect human behavior, causality runs in the other direction as well. Over decades or longer, even localized anthropogenic shoreline manipulations influence large-scale patterns of coastline change as much as physical, climate-related forcing does. The long-range spatial and temporal spillovers of localized human actions in coastal environments, combined with widespread localized shoreline-stabilization and storm-protection efforts, amount to an unintentional geo-engineering of our coastlines. In essence, investments in coastal engineering fail to consider tradeoffs that can unfold over long temporal or large spatial scales. A more purposeful geo-engineering of coastlines requires a richer understanding of the two-way couplings between physical and human coastline dynamics, including efforts to reduce uncertainties in forecasting future scenarios for the coupled system. Steering toward preferred outcomes for our coastlines and coastal economies will involve coordination across local, state, and federal jurisdictions to mitigate spatial externalities that extend beyond local communities.

Climate Change Adaptation in Coastal Environments: Modeling Challenges for Resource and Environmental Economists

Analysis of coastal climate change adaptation requires combining environmental and resource economics with other disciplines. Sea level rise, ocean warming and acidification, and increased storminess threaten to alter or intensify biophysical coastal changes. Communities respond in ways that neither maximize total economic value nor apply the appropriate spatial scale of policy response. Focusing on coastline change, particularly in North Carolina, we synthesize modeling approaches and empirical studies to identify research that is needed to support coastal climate adaptation policy. Modeling coastlines as coupled human–natural systems explains historical patterns of coastline change, clarifies the need for empirical estimates, and provides a roadmap for interdisciplinary policy analysis. Despite the extensive literature on coastal amenities, hazards, and ex post policy evaluation, more empirical information is needed to parameterize coupled models of complex coastal environments facing climate change. Extending coupled models of coastal adaptation to incorporate spatial dynamics and market and nonmarket values highlights fundamental problems with current governance structures. We conclude that to maximize total economic value in the coastal zone, adaptation will require governance coordination across multiple levels, attention to intensive and extensive margins of adaptation, and trade-offs across market and nonmarket values. These findings echo recent advances in fisheries bioeconomics.

Prices and Quantities to Control Overfishing

Economists have long promoted fishery rationalization programs, but ITQs may fail to address the ecological consequences of fishing. Of particular concern is that economic incentives to harvest larger fish (due to size-dependent pricing or quota-induced discarding) can destabilize fish populations or lead to evolutionary changes. A substantial theoretical literature in economics has explored incentive problems in ITQ fisheries but has treated highgrading as part of the stock externality. We provide an alternative viewpoint in that the stock externality and the size-based incentives are two distinct externalities and thus require two distinct policy instruments. In this paper, we show that if managers know the price-by-size distribution and the size distribution of the population, total revenues and total catch (in weight) by vessel are sufficient statistics to design a schedule of revenue-neutral individualized landings taxes that eliminate the incentive to highgrade in an ITQ fishery. Landings taxes can be used to address the ecological consequences of fishing while using ITQs to address the open access stock externality.

The impact of intensity on perceived risk from unconventional shale gas development

The recent boom in the extraction of natural gas from subsurface shale deposits due to advances in hydraulic fracturing and horizontal drilling technologies has raised concern around environmental risks. Reliable measures of how residents view these risks are therefore a necessary first step in evaluating policies that regulate the industry through risk mitigation measures. We conduct a choice experiment targeting residents in an area of Ohio with significant shale drilling activity, and find that households are willing to pay to avoid high intensities of shale development and truck traffic. Our analysis presents new policy-relevant evidence of preferences associated with unconventional shale gas reserves, and highlights the tradeoffs between activity intensity at each site and the number of sites in aggregate.