Sheila M. Olmstead

Shale gas development impacts on surface water quality in Pennsylvania

Concern has been raised in the scientific literature about the environmental implications of extracting natural gas from deep shale formations, and published studies suggest that shale gas development may affect local groundwater quality. The potential for surface water quality degradation has been discussed in prior work, although no empirical analysis of this issue has been published. The potential for large-scale surface water quality degradation has affected regulatory approaches to shale gas development in some US states, despite the dearth of evidence. This paper conducts a large-scale examination of the extent to which shale gas development activities affect surface water quality. Focusing on the Marcellus Shale in Pennsylvania, we estimate the effect of shale gas wells and the release of treated shale gas waste by permitted treatment facilities on observed downstream concentrations of chloride (Cl−) and total suspended solids (TSS), controlling for other factors. Results suggest that (i) the treatment of shale gas waste by treatment plants in a watershed raises downstream Cl− concentrations but not TSS concentrations, and (ii) the presence of shale gas wells in a watershed raises downstream TSS concentrations but not Cl− concentrations. These results can inform future voluntary measures taken by shale gas operators and policy approaches taken by regulators to protect surface water quality as the scale of this economically important activity increases.

Comparing Price and Non-Price Approaches to Urban Water Conservation

Urban water conservation is typically achieved through prescriptive regulations, including the rationing of water for particular uses and requirements for the installation of particular technologies. A significant shift has occurred in pollution control regulations toward market-based policies in recent decades. We offer an analysis of the relative merits of market-based and prescriptive approaches to water conservation, where prices have rarely been used to allocate scarce supplies. The analysis emphasizes the emerging theoretical and empirical evidence that using prices to manage water demand is more cost-effective than implementing non-price conservation programs, similar to results for pollution control in earlier decades. Price-based approaches also have advantages in terms of monitoring and enforcement. In terms of predictability and equity, neither policy instrument has an inherent advantage over the other. As in any policy context, political considerations are important.

Risks and Risk Governance in Unconventional Shale Gas Development

A broad assessment is provided of the current state of knowledge regarding the risks associated with shale gas development and their governance. For the principal domains of risk, we identify observed and potential hazards and promising mitigation options to address them, characterizing current knowledge and research needs. Important unresolved research questions are identified for each area of risk; however, certain domains exhibit especially acute deficits of knowledge and attention, including integrated studies of public health, ecosystems, air quality, socioeconomic impacts on communities, and climate change. For these, current research and analysis are insufficient to either confirm or preclude important impacts. The rapidly evolving landscape of shale gas governance in the U.S. is also assessed, noting challenges and opportunities associated with the current decentralized (state-focused) system of regulation. We briefly review emerging approaches to shale gas governance in other nations, and consider new governance initiatives and options in the U.S. involving voluntary industry certification, comprehensive development plans, financial instruments, and possible future federal roles. In order to encompass the multiple relevant disciplines, address the complexities of the evolving shale gas system and reduce the many key uncertainties needed for improved management, a coordinated multiagency federal research effort will need to be implemented.

The Impacts of the 'Right to Know': Information Disclosure and the Violation of Drinking Water Standards

Information disclosure regulations are increasingly common, but their effects on the behavior of regulated firms are unclear. The 1996 Amendments to the Safe Drinking Water Act mandated that community drinking water suppliers issue to customers annual consumer confidence reports (CCRs), containing information on violations of drinking water regulations and on observed contaminant levels. We examine the impact of mandatory information provision on drinking water violations by 517 community water systems in the Commonwealth of Massachusetts from 1990-2003. Results suggest that larger utilities required to mail CCRs directly to customers reduced total violations by between 30 and 44% as a result of this policy, and reduced the more severe health violations by 40 to 57%.

The Economics of Managing Scarce Water Resources

This article surveys the literature on the economics of water scarcity and water demand. We examine demand estimation in diverted uses (urban, agricultural, and industrial), as well as the demand for instream uses such as recreation and habitat preservation. The article also assesses what is known about efficient water pricing, water allocation, and water trading within and across sectors. The literature examining the efficiency and distributional impacts of large water projects such as dams for irrigation and hydroelectric power is also discussed. Water conservation is examined from the perspective of efficiency and cost-effectiveness. We highlight water management issues to which economics has made important contributions, as well as areas where further research is needed.

Three Key Elements of Post-2012 International Climate Policy Architecture

This article describes three essential elements of an effective post-2012 international climate policy architecture: a framework to ensure that key industrialized and developing nations are involved in differentiated but meaningful ways, an emphasis on an extended time path for emissions targets, and the inclusion of flexible market-based policy instruments to keep costs down and facilitate international equity. This overall architecture is consistent with fundamental aspects of the science, economics, and politics of global climate change; addresses specific shortcomings of the Kyoto Protocol; and builds on the foundation of the United Nations Framework Convention on Climate Change.

An International Policy Architecture for the Post-Kyoto Era

In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change came into force, but without participation by the United States. Its impacts on emissions of greenhouse gases—including carbon dioxide (CO2), the primary anthropogenic driver of climate change—will be trivial; but scientific (Robert T. Watson, 2001) and economic (Charles D. Kolstad and Michael A. Toman, 2001) analyses point to the need for a credible international approach. Because the Kyoto Protocol’s ambitious targets apply only to the short term (2008–2012) and only to industrialized nations, the agreement will impose relatively high costs and generate only modest short-term benefits, while failing to provide a real solution (Joseph E. Aldy et al., 2003). For these reasons, most economists see the agreement as deeply flawed (Richard N. Cooper, 1998; David G. Victor, 2001; Warwick J. McKibbin and Peter J. Wilcoxen, 2002), although some see it as an acceptable first step (Axel Michaelowa, 2003). Virtually all agree, however, that the Protocol is not sufficient to the overall challenge. We describe the basic features of a postKyoto international global climate agreement, which addresses three crucial questions: who, when, and how. The respective elements are: first, a means to ensure that key nations—industrialized and developing—are involved; second, an emphasis on an extended time path of action (employing a cost-effective pattern over time); and third, inclusion of market-based policy instruments. I. Who—Expand Participation to Include All Key Countries

The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations

Rather than allowing water prices to reflect scarcity rents during periods of drought-induced excess demand, policy makers have mandated command-and-control approaches, like the curtailment of certain uses, primarily outdoor watering. Using unique panel data on residential end-uses of water, we examine the welfare implications of typical drought policies. Using price variation across and within markets, we identify end-use specific price elasticities. Our results suggest that current policies target water uses that households, themselves, are most willing to forgo. Nevertheless, we find that use restrictions have costly welfare implications, primarily due to household heterogeneity in willingness-to-pay for scarce water.

Markets and the environment

Markets and the Environment is a concise yet comprehensive introduction to a topic of central importance in understanding a wide range of environmental issues and policy approaches. It offers a clear overview of the fundamentals of environmental economics that will enable students and professionals to quickly grasp important concepts and to apply those concepts to real-world environmental problems. In addition, the book integrates normative, policy, and institutional issues at a principles level. The chapters examine: the benefits and costs of environmental protection; markets and market failure; natural resources as capital assets; and, sustainability and economic development. Markets and the Environment is the second volume in the Foundations of Contemporary Environmental Studies Series, edited by James Gustave Speth. The series presents concise guides to essential subjects in the environmental curriculum, incorporating a problem-based approach to teaching and learning.

Characterization and Analysis of Liquid Waste from Marcellus Shale Gas Development

Hydraulic fracturing of shale for gas production in Pennsylvania generates large quantities of wastewater, the composition of which has been inadequately characterized. We compiled a unique data set from state-required wastewater generator reports filed in 2009-2011. The resulting data set, comprising 160 samples of flowback, produced water, and drilling wastes, analyzed for 84 different chemicals, is the most comprehensive available to date for Marcellus Shale wastewater. We analyzed the data set using the Kaplan-Meier method to deal with the high prevalence of nondetects for some analytes, and compared wastewater characteristics with permitted effluent limits and ambient monitoring limits and capacity. Major-ion concentrations suggested that most wastewater samples originated from dilution of brines, although some of our samples were more concentrated than any Marcellus brines previously reported. One problematic aspect of this wastewater was the very high concentrations of soluble constituents such as chloride, which are poorly removed by wastewater treatment plants; the vast majority of samples exceeded relevant water quality thresholds, generally by 2-3 orders of magnitude. We also examine the capacity of regional regulatory monitoring to assess and control these risks.