California Proposition 4 would authorize the state of California to issue $10 billion in new bonded debt to pay for a variety of capital projects, including: 

• New water management facilities ($3.8 billion); 

• Forest management ($1.5 billion); 

• Management of coastal areas ($1.2 billion); 

• Land conservation ($1.2 billion); 

• Industrial wind turbines, transmission lines, and battery development ($850 million); 

• Public parks ($700 million); 

• Heat protection, disaster shelters, and local environmental projects ($450 million); and 

• Farmland and farmworker support, community gardens, soil health, and water conservation ($300 million). 

The measure stipulates that at least 10% of bond revenue be spent within communities where the median household income is less than 60% of the statewide average. At least 40% of bond revenue must be spent in communities where the median household income is less than 80% of the statewide average or in a “community that faces a disproportionately heightened risk or increased sensitivity to impacts of climate change.” 

Fiscal Impact 

The California Legislative Analyst’s Office reviewed the potential fiscal impact of Prop. 4 and determined that the cost of bond repayments would be about $400 million annually for the next 40 years. In other words, California taxpayers would repay $10 billion in principal and $6 billion in interest over the lifetime of the bond. 

Although the state of California is delinquent in publishing financial statements, its most recent statement—for the fiscal year ending June 30, 2022—reports the state had $103.7 billion in bonds outstanding. Legally separate component units, including the University of California and the California Housing Finance Agency, held an additional $30.6 billion in bonds outstanding. Total long-term obligations amounted to $280.9 billion. External auditors highlighted several significant problems with California’s accounting, but the reported value of bonded debt outstanding was not among the several issues auditors raised. 

Proponents’ Arguments 

There is no official campaign advancing Prop. 4, but it is supported by various environmental groups and labor unions. Supporters argue California will not be able to achieve its environmental goals without a dedicated funding source. In October 2020, Gov. Gavin Newsom issued an executive order announcing the 30×30 initiative, in which the state aims to acquire six million acres, including 500,000 coastal acres, from private owners as a conservation measure. “That’s really hard without funding,” says Sonoma Land Trust Public Policy Manager Ariana Rickard. 

Proponents also argue that climate change is disrupting Californians’ lives and that urgent response measures are needed. California State Director of the Environmental Defense Fund, Katelyn Roedner Sutter, says, “This is not a problem that can wait until it’s convenient to fund it in the budget.” 

State Assemblymember Lori Wilson (D-Suisun City), who sponsored the measure in the legislature, says she considered a bond measure focusing solely on agriculture but, after learning other lawmakers were considering bond questions dedicating money to other projects, decided that voters would not have an appetite for multiple bonds as they also deal with rising costs due to inflation. 

Opponents’ Arguments 

There is no official campaign opposing Prop. 4. The Howard Jarvis Taxpayers Association has opposed the bond question because state taxpayers would need to pay interest to bond purchasers. The association argues it would be more responsible to fund the underlying projects without issuing debt, saying, “These bonds will be paid by people decades from now that didn’t even get to vote for their authorization.” 

Discussion 

Prop. 4 would raise money for California to undertake a wide range of unspecified projects. Although tranches of this money would be dedicated to projects related to a specified purpose, the individual projects are not specified. The bond instead gives legislators discretion to allocate these funds to the projects they deem worthy. For instance, language in the bond measure says, “The sum of one billion two hundred million dollars ($1,200,000,000) shall be available, upon appropriation by the Legislature, for the protection of California’s biodiversity and to protect nature and restore landscape health to achieve California’s climate change goals.” 

This lack of a clear plan gives voters limited insight into how the bond proceeds will ultimately be used. California has an abysmal record of using such bonds to actually build projects. In 2015, California voters approved a $7.5 billion bond to build dams and water facilities. As of last year, not a single project had been built with those funds.  Over the last 30 years, voters have approved four initiatives to borrow nearly $9.7 billion for park and environmental projects that have built very little, saw most of the money spent on studies and agency budgets, and yet saddle state taxpayers with billions in debt.  

A concerning aspect of Prop. 4 is the stipulation that at least 40% of bond proceeds be spent either in communities where the median household income is less than 80% of the statewide average or communities that face a disproportionately heightened risk or sensitivity to climate change. Although voters might read this description and believe bond proceeds will be spent in ways that benefit low-income communities, lawmakers could satisfy this requirement by spending money exclusively in California’s wealthiest coastal communities on the basis that these communities are most sensitive to climate change. 

Land acquisition is specified as an approved use for up to $870 million in bond proceeds and could be used to meet Gov. Newsom’s land conservation goals. However, government ownership of land is not the only method of conserving the natural environment. Many private land owners can be conscientious conservationists, and there are many voluntary land conservationists in the U.S., like the Land Trust Alliance or The Nature Conservancy. Moreover, roughly 46% of California’s land area—48 million acres—is already owned by the federal government. Among these federal lands, 15 million acres are owned by the Bureau of Land Management, which holds lands in trust for conservation purposes. Further increasing government ownership also restricts the availability of land for private development—resulting in higher home prices and living costs. According to a recent report from the Legislative Analyst’s Office, California home prices already far exceed those in the rest of the country. 

Although opponents bemoan the interest cost associated with raising debt capital, this is a standard feature reflecting the time value of money. A dollar today is worth more than a dollar tomorrow for most people, and so interest rates simply reflect the price negotiated between borrowers and savers for using money today. Therefore, the cost of spending on the projects that would be funded by Prop. 4 would be identical in present-value terms regardless of whether it is financed out of the current budget or through a debt issuance. 

The post California Proposition 4 would fund conservation and energy through bonds appeared first on Reason Foundation.

However, this critical policy picture has begun to change. Over the last few years, the Overton Window has opened for this subject, meaning that reform of environmental litigation has become legitimate to discuss. (The Overton Window explains the boundaries of what policies are open—or not—to serious discussion about change.)

Over the past several years, several prominent mainstream centrist and liberal opinion leaders such as Ezra Klein of The New York Times and Matthew Yglesias, author of a popular Substack newsletter and Bloomberg column, have published work arguing that environmental litigation has gone too far, preventing needed energy, housing and transportation projects from being built, or delaying them for years and increasing their costs. 

A much-cited paper from the National Bureau of Economic Research identified “citizen voice” as being responsible for 25% of the increased cost of second-generation urban Interstates.

Staff writer Jerusalem Demsas had a piece in the April 2022 issue of The Atlantic headlined, “Community Impact Is Bad, Actually,” with the subheadline, “Angry neighborhood associations have the power to halt the construction of vital infrastructure. It doesn’t have to be this way.”

Empirical research began to quantify the impact of environmental litigation. Stanford researchers Michael Bennon and Devon Wilson, in a 2023 paper in Environmental Law Reporter, identified the frequency of litigation and length of the permit process for 171 large energy projects and 184 large transportation projects. Though only 14% of that large sample had been canceled, many were still in pre-development years after their final environmental impact statement, and those that were built years later cost significantly more.

In 2024, the Breakthrough Institute released a study of 387 National Environmental Policy Act (NEPA) cases subjected to post-EIS litigation. They found that about 80% of these projects were eventually allowed to proceed but suffered an average delay of 4.2 years, and six years were needed to clear 84% of the projects. The projects’ increased costs, which are substantial, were not documented in that report.

My 2024 Reason Foundation policy study, reviewed in the June issue of Public Works Financing, sought to make the case that there are two pressing needs to take advantage of this important growing consensus to reform environmental litigation laws. The first is to develop a menu of options for litigation reform. The second is to encourage the formation of a broad coalition to support a bipartisan reform agenda in the next Congress.

In my research, I discovered that the Bipartisan Policy Center in Washington, DC, has already done some serious work on potential environmental litigation reforms. In a set of workshops, they assessed a series of possible changes based on two criteria: how effective each would be if implemented and how politically difficult each would be. My report drew on that effort. 

I also discovered half a dozen university researchers, such as Eli Dourado of Utah State University and Mario Loyola of Florida International University. Each has suggested potential litigation reforms. Other research on litigation reform has come from places like the Institute for Progress and the Federalist Society’s Regulatory Transparency Project. Among the reform ideas are (1) limiting the kinds of entities that can litigate against an EIS or Environmental Assessment, (2) putting time limits on filing such suits, and (3) sending such suits directly to an appellate court or a specialized court on environmental appeals. 

Two other, more controversial, changes could be to rescind two executive orders: E.O. 11514, signed by President Richard Nixon, requiring public hearings and E.O. 11911, signed by President Jimmy Carter, which enabled the Council on Environmental Quality (CEQ) to issue regulations in addition to policy advice.

The other component needed for policy reforms to help improve our nation’s infrastructure would be assembling a large coalition supporting this endeavor. In 2023, the U.S. Chamber of Commerce submitted to Congress a joint letter calling for reform of the permitting process for energy and transportation projects. Signers included 96 national energy and transportation organizations, plus numerous state-specific business groups from 46 of the 50 states. The national organizations included the Business Roundtable, Edison Electric Institute, American Clean Power Association, Laborers’ International Union of North America, and North America Building Trade Unions.

Would the next Congress be interested in environmental litigation reform in 2025? At this juncture, we don’t know who will occupy the White House or which political party will control the Senate or the House of Representatives. To have any realistic chance of passing, environmental litigation reform must be bipartisan. To ensure broad support, the reforms should include transportation and energy infrastructure. That means getting Republicans to support energy projects and Democrats to support transportation projects. 

My policy paper identified a key bipartisan group in Congress: the House Problem Solvers Caucus, consisting of 62 members evenly split between Democrats and Republicans. For Republican support to include energy/environmental infrastructure in the reform, there is the Conservative Climate Caucus, with a membership of 81 Republican House members. In 2023, The Economist quoted Climate Caucus chair Mariannette Miller-Meeks (R-IA) as saying, “One of our top priorities is permitting.” 

There are no applicable Senate counterparts to these House caucuses, but in the Senate, several environmental reform measures have had bipartisan sponsors in recent years.

There is a significant need to reform the energy and transportation infrastructure permitting process, especially its heretofore neglected environmental litigation phase. All relevant policymakers and energy and transportation infrastructure interest groups should see the growing consensus on this issue as a critical policy priority for Congress in 2025.

A version of this column first appeared in Public Works Financing.

The post The growing bipartisan push to reform environmental litigation laws appeared first on Reason Foundation.

Water Resources Development Acts (WRDAs) are biennial pieces of federal legislation used to authorize the activities of several agencies and approve or disapprove major projects and appropriations in water resources. In the past, these bills have also served as platforms for reform. Oftentimes, the major stakeholders are the ones brought to testify before Congress in favor or against different provisions, but the range of those impacted varies. 

The House’s Water Resources Development Act of 2024 (WRDA 2024) has some promising provisions and long-overdue modernization efforts buried in the bill.

Section 107 of WRDA 2024 amends provisions originally established in WRDA 2007 that ordered the secretary of the Army to establish an electronic permit application review process. The updated guidance in WRDA 2024 expands the scope of this electronic process to include interagency coordination (when necessary) on applications and documents related to federal environmental reviews and provides that the secretary must establish an electronic means of tracking these documents and reviews. This long-overdue change could help streamline the overly cumbersome environmental review process and modernize the system for the digital age. 

Section 116 of the House bill, H.R. 8812, focuses on the beneficial use of dredged materials. These materials can sometimes be hazardous if left free-floating. For example, when dredged materials from Toledo on Lake Erie were dumped into open water it introduced phosphorus and nitrogen back into the lake. This led to a ban on open water dumping in Ohio, and the algal blooms caused by open dumping also created ecological challenges for the other areas bordering Lake Erie. But phosphorus (like what was dredged from Lake Erie) is a key component of agricultural fertilizer. Processing facilities were set up around Lake Erie for beneficial use, helping farmers and cutting down on the cost of shipping dredged material due to the facilities being near the lakeshore. 

Section 116 of the proposal builds on the lessons learned in Toledo. The Army secretary will be eligible to allow a non-federal entity (like a port or a dredging company on a contract) to use disposal facilities within federal jurisdictions for the dumping and reuse of dredged material if the facility’s owner has given permission and if there will be enough capacity in other facilities for federal dredging needs. The secretary can also levy fees to cover the costs of using the federal disposal facilities.

Section 111 of H.R. 8812 is a mixed bag. This section would change existing guidance for harbor deepening from 50 feet to 55 feet. This change may seem inconsequential, but it is most impactful for cost-sharing agreements for harbor deepening projects, as Tables 1 and 2 below illustrate.

Table 1: Cost Sharing Agreements by Depth Before H.R. 8812

Table 2: Cost Sharing Agreements By Depth If H.R. 8812 Is Passed

In short, a harbor requesting dredging to 51 feet would go from paying 50% of the dredging costs pre-H.R. 8812 to 25% if the bill passes. This change would insulate port authorities from internalizing the costs of their dredging requests and could result in spending down the Harbor Maintenance Trust Fund balance. If it is not removed from the bill, this change should have an end date to avoid spending more than the trust fund can sustain for a prolonged period.

The biggest downside of the House bill is the lack of substantial reform to funding and financing major projects on the inland waterways system, ports, and harbors. As I’ve detailed in-depth in a Reason Foundation policy report, the inland waterways system needs sustainable financial revitalization—not a simple cash injection to help buy down the backlog of projects. 

WRDA 2024 is the ideal time for long-term financing options to be brought to the inland waterways, capitalizing on reforms made in the 2014 edition of the WRDA. That legislation authorized the Army Corps of Engineers to oversee a public-private partnership pilot program in the waterways space, though it hasn’t seen much non-federal interest, especially for large-scale projects like lock construction and rehabilitation. These problems stem from the limitations of the pilot program itself, which bars direct private-sector participation. This prevents private firms from coming to the Army Corps with public-private partnership proposals, but Congress has chosen to leave the pilot program to languish.

Regrettably, the Senate’s version of WRDA 2024 (S. 4367) is equally reform-light. Congress has made some good changes in the latest version of WRDA 2024 but seems far too content with the status quo. The nation’s recurring issues with infrastructure funding will continue to plague waterborne transportation until they’re addressed directly, and taxpayers will continue to foot the bill for these modes of transportation, barring any long-term, fiscally responsible changes to these systems.

The post The Water Resources Development Act of 2024 has some promising reforms, and many missed opportunities appeared first on Reason Foundation.

Introduction

On behalf of Reason Foundation, I respectfully submit these comments in response to the Environmental Protection Agency’s (“EPA”) notice of opportunity for public hearing and comment on the California Air Resource Board’s (“CARB”) request for a Clean Air Act Section 209(e) authorization of its In-Use Locomotive Regulation.

By way of background, I am a senior transportation policy analyst at Reason Foundation and focus on matters related to transportation technology. I have testified before Congress on the interactions between freight rail technology and public policy. 

Reason Foundation is a national 501(c)(3) public policy research and education organization with expertise across a range of policy areas, including transportation. It is headquartered in Los Angeles, California.

This comment letter develops the following points:

1. CARB’s rule mandates unproven technology;
2. CARB’s rule would impose large costs;
3. CARB’s rule would reduce freight rail’s ability to compete with trucks; and
4. A modal shift from rail to truck would increase transportation sector emissions.

1. CARB’s Rule Mandates Unproven Technology

Under CARB’s In-Use Locomotive Regulation, freight railroads operating in California would be required by 2030 to adopt zero-emission locomotives for switching and industrial use and by 2035 for line-haul use (pages 5–6). The problem is no zero-emission freight locomotives have been shown to be commercially viable.

Currently, Progress Rail’s EMD SD40JR Joule battery-electric locomotive designed for switching and industrial use is undergoing a year-long test on the Pacific Harbor Line at the Ports of Los Angeles and Long Beach, with similar testing underway in Brazil. For line-haul operations, Wabtec’s FLXdrive battery-electric locomotive is scheduled to begin testing sometime in 2025 in Western Australia.

Whether these novel zero-emission locomotive technologies will prove to be sufficiently reliable and cost-effective to support future commercial operations is unknown. What is known is these technologies are not nearly mature enough to assume they will be commercially viable in time to meet CARB’s aggressive regulatory timeline. This has understandably led engineering expert Bill Schweber to ask about CARB’s In-Use Locomotive Regulation, “Is there a way to achieve it at an acceptable cost, disruption and time frame? And the ultimate question: Is the [zero-emission] gain here worth the many pain points?”

2. CARB’s Rule Would Impose Large Costs

In addition to the large costs associated with CARB’s mandate of unproven technology, the In-Use Locomotive Regulation would require early retirement of existing locomotives that do not meet Tier 4 standards (page 5). CARB also requires locomotive operators in California to establish and pay into a Spending Account, a restricted trust from which funds can only be expended for regulatory compliance purposes (pages 4–5). 

CARB estimates the In-Use Locomotive Regulation will impose compliance costs of $13.8 billion through 2050 (page 33), with annual costs exceeding $1 billion for several years. The rule does include a Hardship Extension that could delay compliance by up to three years for eligible small railroads, but CARB has accepted that smaller railroads reliant on older locomotives may be bankrupted by its rule and thereby cause communities to lose access to rail service (page 200).

3. CARB’s Rule Would Reduce Freight Rail’s Ability to Compete with Trucks

In its Final Statement of Reasons, CARB claims it “did not find empirical research that focused on the impact of regulatory costs on freight diversion or mode shifts from rail to trucks” (page 192). This mirrors an earlier claim contained in CARB’s Initial Statement of Reasons (page 31). However, CARB had, in fact, commissioned a 2016 study from the Rail Transportation and Engineering Center (RailTEC) at the University of Illinois at Urbana-Champaign, which found that a CARB-style locomotive rule 

is likely to result in: increased operating costs, delays and network disruption due to locomotive exchange; decreased locomotive utilization, increased locomotive fleet size and the capital cost of establishing extra regional alternative-technology locomotive maintenance, servicing and fueling facilities. According to the European experience, the net result of these outcomes will likely be a decrease in freight rail market share. (page xii) 

According to the latest Journal of Commerce Intermodal Savings Index, U.S. shippers could save 27% on annual intermodal rail contracts compared to truckload contracts in the fourth quarter of 2023. Some share of regulatory compliance costs will undoubtedly be borne by rail customers through higher rates. These added regulatory costs will reduce the price differential between rail and truck freight service and will in turn reduce rail’s competitive advantage, particularly in the markets in which it most aggressively competes with trucks.

4. A Modal Shift from Rail to Truck Would Increase Transportation Sector Emissions

According to EPA, when compared to freight rail, trucks produce approximately 10 times as much carbon dioxide (CO₂), more than three times as much fine particulate matter (PM_2.5), and two-and-a-half times as much nitrogen oxides (NO_X) per ton-mile. Table 1 provides a breakdown of pollutant emissions intensity by mode.

Table 1: U.S. Freight Transportation Emissions, Rail vs. Truck

CARB attempts to dismiss concerns about rail-truck modal shift by arguing that a separate truck emissions rule will significantly reduce the emissions of trucks operating in California, thereby negating the emissions increases associated with freight mode substitution. However, CARB’s methodology is simplistic and does not distinguish between truck-tractor types or how those various types are used in transportation. 

Even if CARB’s truck emissions regulations survive their present legal challenges, truck-tractors with sleeper cabs—particularly those of owner-operators registered out of state—will face delayed compliance deadlines. It is these trucks that are expected to disproportionately absorb line-haul rail movements. As the RailTEC study commissioned by CARB warns: 

The shift of freight from rail to truck reduces the emissions benefits of the alternative locomotive technologies. Technologies that showed emissions reductions before mode shift may show increases in emissions when the induced truck emissions are included in the calculations. (page 16)

Given that trucks emit far more pollutants than trains to move the same volume of freight, a modal shift from rail to truck would increase the air pollution emissions intensity of the transportation sector. CARB’s In-Use Locomotive Regulation, by reducing rail’s cost advantage to trucks, can thus be expected to increase total emissions—at least until zero-emission locomotives are developed and commercialized for line-haul service. Given that long-haul freight movements occur across state lines, CARB’s rule would also have the expected effect of increasing emissions in neighboring states.

Conclusion

CARB’s In-Use Locomotive Regulation mandates unproven technology and would impose large compliance costs. The resulting negative effect on intermodal freight transportation competition would likely increase nationwide emissions. For these reasons, EPA should deny CARB’s Section 209(e) authorization request.

Public Comments: EPA should deny a Clear Air Act waiver for California’s locomotive emissions regulation

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While the opening discussions were relevant to WRDA, future hearings ought to capitalize on the opportunity for reform and how to best address persistent issues that have arisen during the Corps’ stewardship of U.S. water resources.

Past Water Resources Development Acts were mentioned throughout the hearing, focusing on how the biennial legislation can help or hinder the Army Corps’ mission. For example, WRDA 2020’s provision allowing greater expenditures from the Harbor Maintenance Trust Fund was viewed as a good change, as I’ve written. These introductory discussions are common in initial hearings for a bill as massive as a reauthorization bill like WRDA.

Some questions also focused on the challenges faced by the U.S. Army Corps of Engineers when working on and prioritizing navigation projects throughout the country. Lt. General Scott Spellmon, commanding general and chief of engineers for USACE, noted that there are only 19 hopper dredgers (four operated by the Corps) in the U.S. fleet and 577 federal navigation channels across the country. Spellmon lamented scheduling problems with the dredging industry. Compare the situation with Europe: The four largest European dredging companies own upwards of 80 hopper dredgers. Given the limited dredging capacity the U.S. has, Spellmon said the Corps plans to focus on high-performance channels, i.e., those that carry the most freight. 

These capacity concerns have become more serious recently, especially given the drought-driven low water levels in the Mississippi River during the past two years, which has required constant dredging by USACE to keep the river navigable. Because there are few permanent solutions aside from emptying spillways and sustaining dredging throughout the season, it should be a top priority for the Corps to look for ways to expand dredging availability in the U.S., especially in times of low draft.

But any capacity constraints are artificial. International firms offer a cheaper and more financially sustainable way for the U.S. to undertake its future, increased dredging needs. Europe has much larger dredgers than the U.S. fleet. The largest dredger (by capacity) in the U.S. fleet is the Ellis Island, with 11,468 cubic meters of hopper capacity. For comparison, Boskalis, a European dredging firm, ordered a 31,000 cubic meter hopper dredge earlier this year. Likewise, European dredgers operate at cheaper rates than U.S. dredgers. 

But the Foreign Dredge Act of 1906, something I’ve also written about at length, prevents cheaper international dredgers from taking up contracts in the U.S. A waiver process in times of severe drought or crisis could help alleviate these capacity concerns and would likely face less of the political opposition full-scale repeal of the Foreign Dredge Act would incur.

But capacity is only one of the significant issues the Corps faces. The other, and a recurring mention during the hearing, is money.

Funding a civil works program like the one overseen by the Corps is an expensive endeavor. Locks, especially new commercially sized locks, are megaprojects in their own right. The existing dedicated fund that pays for a portion of these megaprojects is funded insufficiently by a gas tax and often takes multiple years to accumulate a sufficient balance to fund even a portion of major construction. 

Financing is often a better path to delivering these major, costly projects. It’s hard to produce the needed funds up-front from general fund appropriations. In these situations, leveraging financing is essential. To address this persistent funding problem, Congress should look at authorizing more ways for the Corps to finance projects in the newest iteration of the Water Resources Development Act. And in a past WRDA, Congress did.

The 2014 WRDA authorized the creation of a public-private partnership (P3) pilot program under the oversight of the Corps. Since then, the project has not had very much non-federal interest, especially for large-scale projects like new lock construction or major rehabilitation projects. This isn’t due to any shortcomings from P3s but mainly due to the limitations of the pilot program itself.

The pilot program does not allow for direct private-sector participation. Per the U.S. Army Corps of Engineers public-private partnership pilot program webpage: “The private sector developer is generally selected via a competitive procurement process and will work under the authority of the non-federal sponsor.”

This effectively bars the private firms from coming to the Corps and proposing public-private partnerships themselves, known in the P3 world as unsolicited proposals—a proposal sent in without being solicited by the entity managing the P3. The Association for the Improvement of American Infrastructure put it best: “Leaving open the possibility to learn of creative project concepts can be a difference maker for stakeholders.” 

The current approach limits the availability of private capital. While it is available at the direction of a local entity, full-scale private-sector participation ought to be enabled. Encouraging private investment in the country’s water resources could help alleviate capacity and funding issues. Ongoing megaprojects, like the Olmsted Locks and Dam on the Ohio River, have eaten up much of the available capital funding year-over-year. With project costs in the billions for the biggest lock rehabilitations and replacements, it seems unlikely that a state or municipal sponsor’s funding will be able to bridge the gap toward the financial delivery of these large-scale projects.

In upcoming Water Resources Development Act negotiations, Congress has plenty of opportunities to reform the U.S. Army Corps of Engineers and its funding mechanisms for the better.

Congress should look for ways to implement a waiver process for the Foreign Dredge Act of 1906. Cheaper, larger European dredgers could help alleviate capacity concerns and could be critical in keeping critical navigation channels like the Mississippi River open in times of drought.

As for new construction and refurbishment, the private sector’s capital remains largely untapped. The limited-scope public-private partnership program is sorely lacking on the private side and should be reformed and expanded.

The post Congress can spur private investment to improve ports, harbors and waterways appeared first on Reason Foundation.

Phosphorus is a critical component of modern, industrial-grade fertilizers. Phosphogypsum remains after phosphate rocks are dissolved and treated to make phosphoric acid for use in fertilizer. The process produces nearly five tons of phosphogypsum for every ton of phosphoric acid. Florida accounts for 80% of the current phosphorus capacity in the country, per the EPA. As a result, Florida has an abundance of phosphogypsum. 

This is an environmental concern because phosphate ores and phosphogypsum may contain significant quantities of radioactive metals. If improperly managed, these metals and their decay products can leach into aquifers and contaminate local water supplies. 

Today’s disposal method for these byproducts leaves much to be desired. Currently, the wastewater remaining from the chemical process is collected in special dump sites termed gypsum stacks or “gypstacks.” These stacks aren’t a foolproof storage method. When the stacks fail, they pose environmental and health threats.

In 2009, a sinkhole opened under a dump site in White Springs, Florida. In 2021, phosphogypsum leached through the lining of the stack requiring excess wastewater to be dumped in Tampa Bay. The only means of storing phosphogypsum has a history of failing (or nearly failing), and alternative uses for phosphogypsum are heavily restricted. 

However, it is possible to lower the risks associated with phosphogypsum to enable safe use in specific applications. A study originally published in the journal Heliyon examined how phosphogypsum can be used in roadways. While a few approaches can be taken to both strengthen phosphogypsum as a building component and lower the level of dangerous elements in it, ultimately, the chemical composition of phosphogypsum can vary based on geography. As such, there is no guaranteed one-size-fits-all approach for purification and pretreatment, and methods should be tailored to the specific chemical composition of any sample of phosphogypsum.

That said, these pretreatment methods could enable safe and efficient phosphogypsum use for various projects, such as roadways. If phosphogypsum is allowed in road construction, that would present a feasible way to reduce the size of the gypstacks in the state and the contamination risks associated with them. Because phosphogypsum is a waste product, it is relatively low cost, but it does have potential use as a supplementary material in the concrete slurry used to build roads.

A 1989 study from the University of Miami compared three roads constructed in Florida before the EPA’s ban on phosphogypsum in road construction. It found that Parrish Road, located in Polk County, constructed with phosphogypsum, had a cost per mile of $59,170 (in today’s dollars). This was much lower than the costs of Windy Hill Road and Tanner Road, also in Polk County, which cost $325,819 per mile and $247,713 per mile, respectively. The study also measured the environmental impact of the road and its construction. It determined that construction of the roadways posed “no measurable impact on the ambient groundwater.” Gamma radiation, which is extremely hazardous to life at high levels, was found to be within the normal range of the naturally occurring background radiation dose on the roadways. In addition, the study found “no significant changes” to radon exposure due to phosphogypsum use in the roadway.

A more recent 2019 study by the Fertilizer Institute, a national organization representing fertilizer producers, wholesalers and retailers, which has a vested interest in a repeal of the phosphogypsum construction ban, found equally promising results. The Fertilizer Institute’s study found that those involved in the construction and future users of a phosphogypsum-built roadway would not be exposed to any radiation levels above the EPA’s safety range. 

The Heliyon study likewise found that “applying [phosphogypsum] to road materials can significantly increase the reuse and consumption of [phosphogypsum] and reduce [phosphogypsum] stockpiles.” The authors noted that using phosphogypsum would require purification to avoid letting the more radioactive elements and heavy metal impurities lower its strength as a building material and keep it safe for construction workers and road users. The study also stressed phosphogypsum’s durability as a building material. Still, it ends by calling for more research into techniques to scale up purification processes to make use of phosphogypsum both safe and economically viable.

As it stands, Florida’s law may have little impact due to the EPA’s prohibition on the use of phosphogypsum. Further, Florida has failed to request a waiver for any specific demonstration projects. The EPA insists that Florida’s law cannot deviate from federal requirements and that the state would still need to apply for approval.

Setting aside Florida’s legislation and EPA’s current regulations, additional studies are needed to examine phosphogypsum’s role in road construction. Current research suggests using phosphogypsum in roadway construction benefits the environment and taxpayers. However, further research can help clarify the safety and environmental impacts of its use. Pursuant to Florida’s new law, the state should establish some test scenarios for demonstration and submit them for EPA approval.

The post Florida needs more research on phosphogypsum’s use in road construction appeared first on Reason Foundation.

On July 7, 2022, the Government Services Administration (GSA) put out an advance notice of proposed rulemaking asking its contractors who make or use single-use plastics to tell the GSA what they think about the Center for Biological Diversity’s proposal that they stop contracting for goods or services that use such materials.

In the notice, GSA poses a long list of questions about the scale and scope of single-use plastics used in goods and services they source through their providers and what it would cost those providers to go along with the plan to ditch the single-use plastics. The class of single-use plastics includes plastic drinking straws, plastic water bottles, plastic packaging materials, plastic grocery bags, plastic cutlery, and many other plastic items often treated as environmental villains of the moment. But it also includes things less commonly considered nuisances, even when found out of place as litter, such as single-use medical containers, products, and devices of many sorts, such as surgical masks.

The GSA appears to be acting on this issue due to the petitioning of the Center for Biological Diversity (CBD). This aggressive group describes itself as a conservation organization “dedicated to the protection of endangered species and wild places.” But in this case, what CBD requests the Government Services Administration to do would not improve global, national, local, or individual environmental health and safety. These proposed actions would, in all probability, most likely compromise those very things.

The Center for Biological Diversity argues that banning single-use plastics aligns with President Joe Biden’s Executive Order 14008, “Tackling the Climate Crisis at Home and Abroad,” which calls for federal agencies to align their activities with the president’s climate change agenda. The crux of CBD’s petition is on page 9:

In furtherance of its stated policy to purchase sustainable products, and in line with its directive to procure environmentally preferable and nonhazardous products, the GSA must issue a rule committing the federal government to reduce and eventually eliminate its procurement and acquisition of single-use disposable plastic products….

Petitioners request that the GSA revise its regulations to reduce and eventually eliminate the acquisition of single-use plastic bags, single-use plastic utensils and straws, beverage bottles, packaging, and other single-use food service items and personal care products.

These revisions should apply to the procurement of single-use plastics for federal government meetings, conferences, and events; food service facilities in leased and custodial buildings; and supplies for federal government operations. In addition, the new regulations should apply to all manners by which civilian executive agencies acquire goods and services, directly or indirectly, including through lease, procurement, contracting, and purchase orders.

We further request that the rulemaking contains exemptions for disability accommodations, disaster recovery, medical use, and personal protective equipment. GSA regulations must clarify that “single-use product” does not include medical products necessary for the protection of public health, or personal protective equipment, including masks, gloves, or face shields.

To give the CBD some credit where it is due, this last paragraph is refreshingly grounded in the reality of real-world tradeoffs—some of them, anyway. More such thinking would improve environmental policy considerably. But there does not appear to be much emphasis on the trade-offs of many problematic elements of CBD’s or GSA’s proposed approach to plastics.

Policy Problem One: First, do no harm (proximal)

Perhaps the first test of sound public policy is the same test used to determine sound medical policy, which is, as the Aesculapians like to say, primum non nocere, or first, do no harm.

It doesn’t take much reviewing of the research literature on the topic of plastic material substitutions to reveal that, in fact, plastic substitutes are usually worse for the environment than plastics, as well as worse for human health and safety. I have written about the downsides of plastics substitutions at some length. My recent piece here examines the Canadian context, where they’re even farther ahead of the United States in pursuing “zero plastic waste.”

So why are alternatives to single-use plastics worse for the environment? One of the biggest reasons for this is that the “reusables,” as I’ll call them, consume more energy over their life cycles than their single-use plastic alternatives. More energy in manufacturing, distribution, utilization, and disposal means greater environmental impacts coming out of the soil (oil production); going into the air (conventional pollutants and greenhouse gases); running off into the water, and going back into the land (landfilling).

The downsides with regard to human health involve something that should be top-of-mind for everyone in the post-Covid-19 pandemic landscape—biological contamination. Single-use products are more likely to be sterile when first used, and they are rarely used again in a context where sterility is essential.

The same is not true for durable plastic alternatives that see regular use involving the same activities where biological contamination is an issue: eating and contact with body fluids.

The research literature on the use of renewable bags is fairly solid on this issue and would extend to renewable alternatives to plastic packaging (for food and medicines, for example). Reusable materials are more likely to be contaminated on secondary and sequential use and are simply less safe.

It should be obvious, but this is one reason why single-use plastics were adopted over reusable materials in the first place, particularly in medical settings, but also with regard to food contamination and preservation.

Policy Problem Two: Also, First, do no harm (proximal-distal)

The second policy problem is the same as the first: The policy is likely to violate the idea of doing no harm—in this case, distally, through its impacts on the economy in which we all live and from whose productive powers we receive all the wonderful goods and services that give us our historically absurdly nurturing quality of life.

From the more proximal economic standpoint of impacts to the American economy specifically, the proposal to get GSA out of the business of participating in the market of single-use plastics can only be a net harm. America’s economy is a high-tech transformation and service economy. America specializes in a certain kind of material and energy transformation, which is the creation and use of advanced technologies, materials, and heaps and gobs of powered gizmos and gewgaws of every sort. That’s our thing. We’re not a nation of farmers anymore. We’re not “hewers of wood and haulers of water,” as some of our Canadian friends have been styled. We’re not a raw natural-resource economy where we just dig up materials found in our environment and trade in them.

We are increasingly a consumer goods and services economy that engages in a vast spectrum of activities requiring a vast spectrum of materials with which to provide those goods and services. And though manufacturing has shrunk as a share of US Gross Domestic Product, America still invents, makes, uses, invents new uses of, and, importantly, sells high-tech goods and services rendered with such goods, in high quantities, at high speed, to as big a market as we can reach.

And plastics have become a significant part of that over a short span of time–only about 60 years since early adoption in the US materials economy.

More distally still (but, to this biologist, no less compelling) is that this entire idea of rationing and restricting access to a useful material such as plastic is unwise from the higher-order perspective of humanity’s evolutionary niche. Unlike other animals, human beings evolved to use technology and energy to transform raw materials into things that let us survive in the places that we otherwise might not, which is most of the surface of the Earth, and compete against animals that would otherwise view us as a light snack, or perhaps a decent lunch. Our transformative capabilities also let us defend ourselves against other humans, some of whom might not have gotten the memo about “cooperation is a better strategy for mutual co-existence.”

This is obligatory stuff woven into human evolution. Humans need to make use of virtually all materials available to them (and need a lot more that are not yet created, like that catalyst that will split water with little energy input) in order to meet their evolutionary imperatives to survive. Banning plastics, arguably one of the singularly most useful materials ever available to homo sapiens (as easily shown through the eagerness with which it has been incorporated into the human materials ecosystem freely, without government compulsion), will needlessly—and obviously—set back humanity’s ability to prosper in a hostile universe.

Summary

The Government Services Administration’s proposal to remove single-use plastics from their supply and acquisition chains at the behest of the Center for Biological Diversity would be detrimental to environmental health and safety from the standpoint of humanity’s evolutionary imperatives, America’s social and economic imperatives, people’s individual imperatives and rights, and the protection of the environment itself, either locally or globally.

The GSA might feel obligated to act on the petition of the Center for Biological Diversity’s anti-plastic demands. However, sound public policy principles would suggest that, at the end of the day, the agency should not give the CBD what it wants. The Government Services Administration should not ban single-use plastics from its supply and acquisition chains. That could only do America more harm than good.

The post The government’s bad idea to stop using single-use plastics appeared first on Reason Foundation.

Manchin countered that, “for years, I’ve worked to fix our broken permitting system, and I know the (Biden) administration’s approach to permitting is dead wrong.″

Manchin called Thursday’s vote “a step in the right direction” but said the measure likely “is dead on arrival in the House. That’s why I fought so hard to secure a commitment (from Democratic leaders) on bipartisan permitting reform, which is the only way we’re going to actually fix this problem.″

Manchin thought he had bipartisan support for the permitting reform bill he refers to, but Senate Minority Leader Mitch McConnell (R-KY) whipped Republican votes against the bill, causing Manchin to pull it.  

While Manchin’s bill would’ve delivered some incremental progress on permitting, it was far from the thorough reforms needed. Over the past two years, we’ve seen a growing number of studies comparing the very high costs of major U.S. infrastructure projects with comparable projects in Europe and Japan. Like the United States, these countries also all have environmental laws that infrastructure projects must comply with, but studies show Italy and France can build new subways faster and for about half the costs per mile as U.S. subway projects. This suggests something is seriously wrong with America’s environmental review process.

A significant factor identified by researchers as driving the higher costs is the massive role of the “citizen voice” in the review process for U.S. projects. Frequently cited on this topic is a 2019 study by George Washington University’s Leah Brooks and Yale University’s Zachary Liscow, which sought to explain why the cost per mile of building U.S. Interstate highways tripled between the 1960s and 1980s. 

Citizen litigation to prevent or redesign highways came about not via the National Environmental Policy Act (NEPA) of 1970. The key factor was a 1971 Supreme Court ruling—Citizens to Protect Overland Park v. Volpe—that citizens could sue administrative agencies over environmental impacts. Brooks and Liscow estimate that citizen voice litigation is a significant factor in forcing expensive design and location changes that helped cause the tripling of per-mile costs in the United States.

A growing number of liberal and centrist critics have recently published articles lamenting the obstacles to needed infrastructure imposed by the “citizen voice” in this country. They include Ezra Klein in The New York Times, Jerusalem Demsas in The Atlantic, Matthew Yglesias in his Substack newsletter, and many others. 

Construction unions have also picked up on this problem, such as this comment by James T. Callahan, president of the International Union of Operating Engineers: 

“Since its modest beginnings, NEPA has evolved into a massive edifice, capable of destroying project after project, job after job, in virtually every sector of the economy. Dilatory strategies employed by project opponents frequently exploit provisions in NEPA, weighing down projects, frustrating communities, and raising costs to the point that many applicants, whether public or private, simply walk away.”

Sen. Manchin’s well-meaning bill pretty much ignored this major problem. It included a statute of limitations for court challenges, maximum timelines of two years for NEPA reviews, and an “improved process” for categorical exclusions under NEPA. But there was nothing that would overturn numerous court decisions that have empowered citizen litigation.

Another problem is that Manchin’s measure was limited to energy projects. Highway and mass transit projects are also generally subjected to endless citizen litigation. A more consequential bipartisan reform aimed at getting needed infrastructure projects approved more efficiently would have to include all infrastructure categories.

Another major problem was the bill’s reliance on “administrative earmarking.” Had the bill passed, it would have directed the president to “designate and periodically update a list of at least 25 high-priority energy infrastructure projects and prioritize permitting for these projects.” This would be a recipe for high-powered lobbying for projects that might fail a benefit/cost analysis but could offer lucrative contracts for companies and unions. Earmarking is earmarking, whether done by the legislative or executive branches of government, and it plays a harmful role in politicizing the infrastructure project selection process. 

The U.S. needs meaningful permitting reform. The country seems primed for a broad, centrist coalition that recognizes the need to build and modernize infrastructure and supports streamlining environmental reviews of energy and transportation projects. This potential coalition could include supporters of highway expansion in fast-growing states, mass transit projects in dense urban areas, wind and solar projects in blue states, and natural gas and nuclear projects in red states. 

Basic statutes such as the National Environmental Policy Act and the Clean Air Act would likely not be subject to change. Instead, the focus of the reform effort would be on curtailing the extent of citizen litigation, drawing on the lessons being learned by research done by entities like the New York University Marron Institute’s Transit Cost Project and similar work from the Eno Center for Transportation.

I am not aware of specific reform measures that would adequately address this problem, so considerable work must be done. Part of the answer might be challenging key court decisions that have empowered citizen litigation. An important element would be specific federal policy changes for Congress to enact.

A diverse group of research organizations, such as the American Enterprise Institute, Bipartisan Policy Center, Breakthrough Institute, Brookings Institution, Hoover Institution, and Reason Foundation, along with the above-noted Eno Center and Marron Institute, could play valuable roles in these types of issues. 

If reform proposals are developed, energy and transportation organizations should also mobilize to support legislation to implement the recommendations. In the transportation sector, I’m thinking of groups like the American Association of State Highway and Transportation Officials, the American Road and Transportation Builders Association, the Associated General Contractors, and others, along with construction trade organizations and other unions.

With infrastructure construction costs escalating at a much faster rate than the Consumer Price Index, there’s a real danger that the increased federal funding in the Infrastructure Investment and Jobs Act, also known as the bipartisan infrastructure bill of 2021, could fail to lead to much actual expansion of infrastructure—unless there is meaningful streamlining of the environmental, permitting and litigation process. 

While Sen. Manchin’s bill didn’t address many of the critical problems and ultimately failed, it is notable that there’s a growing coalition that recognizes that policy reforms are needed to address the excessive obstacles blocking key infrastructure projects. Centrists in both major political parties acknowledge that needless delays, bureaucracy, and litigation are increasing taxpayers’ costs and preventing the U.S. from modernizing and building 21^st-century energy projects, highways, mass transit, and more housing. Now, researchers and Congress need to develop substantive policy and legislative solutions to start removing obstacles and addressing them so the country can build the infrastructure it needs. 

A version of this column originally appeared in Public Works Financing.

The post Finding consensus on environmental and permitting reforms to build needed infrastructure appeared first on Reason Foundation.

Conditions are so bad that Rep. Bennie Thompson (D-MS) and Mississippi Gov. Tate Reeves (R), who agree on little else, agree that Jackson needs a new water operator. Gov. Reeves raised the possibility of water privatization at a recent  press conference:

“I’m open to all options. Privatization is on the table,” Reeves said.

 “Having a commission that oversees failed water systems as they have in many states is on the table… There have been even a number of city council members that I have seen over the last several weeks that have talked a lot about the need to hire outside contractors to come in and run different pieces of or the system as a whole.”

“I think you’re seeing more and more individuals recognize that the operations of city government in general, but particularly the operations of the water system… it ain’t Republican or Democrat or ideological, it’s about delivering a basic service to the people you represent,” he said.

Reeves and the state government will play a role in helping Jackson overcome its water problems. Still, the financial and productive capital required for such a large undertaking will likely need to come from the private sector. Long-term, Jackson’s water, sewer, and stormwater system need an estimated $2 billion to get them working again and back in compliance with the Environmental Protection Agency.

Jackson’s shaky finances and the dire shape of its water and sewer operations mean merely outsourcing maintenance, as Jackson Mayor Chokwe Antar Lumumba suggested as an alternative to privatization, would not solve the long-term water system replacement concerns, attract the needed capital investments to repair and rebuild, or truly address the city’s more extensive environmental compliance and staffing concerns.

While outsourcing would certainly help some of the day-to-day operations issues, Jackson would still be mostly on its own for getting itself back into compliance and finding the $2 billion needed for system repairs and upgrades. 

Jackson’s previous bad contracting experience with its water system should not prevent the city from seeking a long-term deal now. A few years into a 2013 water contract with Siemens to repair sewer infrastructure and upgrade billing and meter systems, Jackson filed a complaint in court against the company, claiming it was misled into the 15-year $90 million contract with promises of increased revenues that never materialized and work that was never done. Before going to trial, the parties agreed to a settlement equal to the original contract’s total amount, $90 million, paid to the city.

In the future, a well-written, long-term privatization contract can set clear benchmarks for the private company to meet and instill financial penalties for failing to do so. Any privatization contract should protect Jackson’s taxpayers, make it easy to hold the private water company accountable for meeting its commitments and avoid some of the problems from the Siemens deal. 

Six weeks without drinking water has drawn public attention to the government’s failures in Jackson and decades of failing to comply with EPA standards. For example, drinking water quality is partly ensured by monitoring the turbidity—cloudiness from impurities—of water samples taken from the system. A 2020 EPA inspection found that the turbidity monitoring equipment at one of Jackson’s two water treatment plants didn’t work because it hadn’t been calibrated in around three years, resulting in continuously inaccurate readings. And, in an example of how hard it will be for the city to fix all of its water problems itself: The technician position needed to perform water turbidity maintenance and monitoring is not filled right now. In fact, the job no longer exists in the city government at all.  

Additionally, the EPA found that when Jackson’s lead levels rose above acceptable limits, the city didn’t notify residents. The EPA report also noted that Jackson did not have a plan to remove lead service lines from its water system—something the city has been required to do but has been failing since 1992. 

Among other problems, the EPA report also discovered that filter membranes in water treatment facilities were not functioning and were damaged beyond repair, automated treatment systems were failing, and low staffing levels were a constant problem.

Jackson’s water problems are severe, and solving them won’t be inexpensive. Still, the right long-term partnership could help the city overcome its obstacles as cost-effectively as possible. Hiring capable partners legally bound to perform well would put Jackson on a path to bring its system into compliance and start reducing its backlog of maintenance and repairs.  

Without a privatization deal, Jackson’s water system will likely worsen. Procuring a multi-decade lease will undoubtedly be challenging, but without one, there is no path to address Jackson’s many water and sewer management problems fully.

The post Jackson’s boil advisory lifted, now must address long-term water problems  appeared first on Reason Foundation.

Arizona is dedicating $1 billion over the next three years to fund water rights acquisition, conveyance, and conservation efforts while allowing the water projects to be established through a wide variety of contracting and procurement methods. This substantial investment better equips Arizona to respond and adapt to the challenging demands of both its growing population and the dwindling availability of freshwater supplies, a move other Western states should watch with keen interest.

The Associated Press reports seven Western states relying on the Colorado River should expect more water cuts:

But those reductions represent just a fraction of the potential pain to come for the 40 million Americans in seven states that rely on the river. Because the states failed to meet a federal deadline to figure out how to cut their water use by at least 15%, they could see even deeper cuts that the government has said are needed to prevent reservoirs from falling so low they cannot be pumped.

“The states collectively have not identified and adopted specific actions of sufficient magnitude that would stabilize the system,” Bureau of Reclamation Commissioner Camille Touton said. Together, the missed deadline and the latest cuts put officials responsible for providing water to cities and farms under renewed pressure to plan for a hotter, drier future and a growing population. Touton has said a 15% to 30% reduction is necessary to ensure that water deliveries and hydroelectric power production are not disrupted.

Seven states and Mexico rely on water from the Colorado River for both consumption and recreational needs. And the water needs in those Western states are increasing. The populations in Arizona, Colorado, Idaho, Nevada, and Utah all grew by more than 10% over the past decade, according to Census Burea data.

Back in 2016, the Bureau of Reclamation (BOR) forewarned: “Growing demands in the Colorado River system, coupled with the potential for reduced supplies due to climate change, may put water users and resources relying on the Colorado River at risk of prolonged water shortages in the future.”

While both this and next year’s announced cuts by the BOR will not affect residential use, the current cuts have already forced Arizona farmers to cut back around 65% of their Colorado River allotment. The drier Colorado River is not all due to a drying climate, either—agricultural interests draw heavily from groundwater supplies that also source about half of the Colorado River’s water. Continued dry conditions and groundwater extraction could lead to a 30% decline in the river’s flows over the next 30 years, which would necessarily include even more drastic water allotment cuts.

While many conversations and assessments will need to be made before Arizona’s water projects come to fruition, the recently-passed legislation and its dedicated funding show there are possibilities to start solving Arizona’s water use demands.

The state may end up conveying water from the Mississippi River or transferring desalinated water from offshore Mexico, both ideas that Arizona is examining, or it may discover those ideas are not financially viable. For now, the fact that those ideas and others are even being considered demonstrates state lawmakers recognize the need to find creative ways to overcome water problems that will likely only intensify as populations in many parts of the West continue to grow.

In an era where bipartisan agreement is increasingly rare, Arizona lawmakers from both major political parties wisely agreed that securing water for the coming decades required swift action that was bold enough to embrace an “all of the above” type approach, which means local governments and potential public and private partners will not be limited in looking for ways of potentially delivering innovative solutions to secure and save water.

Modern technology has provided the means to make sure there can be enough water to sustain populations all over the world, including in dry, fast-growing environments like the Western United States. While some methods are still quite expensive and not always practical at scale, potable water can now be generated from almost any potential source, including seawater and even raw sewage.

For Western states to meet their growing populations’ water needs, they will need funding, the flexibility to seek a wide variety of projects, and a determination by lawmakers and local leaders to pursue the right arrangements to structure those critical projects and operate and maintain them for decades.

Managing and operating water projects comes with inherent risks. For example, cities in the Eastern United States have dealt with deferred maintenance issues with their aging municipal water systems. Needed repairs and upgrades that have been put off for years become increasingly expensive and difficult for governments and taxpayers to fund.

Long-term leases and public-private partnerships with clear contracts and accountability can be effective in shielding taxpayers from the financial risks of building and maintaining many expensive water infrastructure projects. Governments can transfer the risks to private companies better capable of managing those risks.

While Western states and the federal government have made efforts to plan for higher water demand and reduced supplies from traditional sources, much work remains to be done. Arizona made a critical step in passing legislation earlier this year that gives the state’s local water systems varied and valuable tools to help manage water acquisition, conservation, and conveyance. Arizona’s legislation saw nearly unanimous support in both legislative chambers and other states might find it useful to adopt a similar approach as they seek to secure water for the future.

The post Western states facing water cuts should look at Arizona’s recent water legislation appeared first on Reason Foundation.

With the state’s elected leaders prudently setting aside more than $500 million for water augmentation and conservation projects and overhauling the state agency responsible for financing water infrastructure in the closing days of the legislative session, Arizona’s robust tradition of using public-private partnerships (P3s) to deliver critical water investments appears set to enter a transformative new phase. 

The state’s economy today would not exist without the legacy of major waterworks like the Central Arizona Project or Salt River Project’s network of dams, reservoirs, and canals—projects built with extensive collaboration between federal, state, and private entities. Cities like Phoenix have also used public-private partnerships to deliver major new water and wastewater infrastructure.  

Financing water infrastructure is complex, but the fundamental issue for Arizona is simple: There aren’t enough traditional tax or ratepayer dollars today to deliver the future water infrastructure Arizona needs.

Offshore desalination plants, new reservoirs, and multistate pipeline agreements are among the types of promising—but costly—new-build water supply projects that have captured the minds of policymakers.

These projects could easily cost billions of dollars on their own and, back in 2013, the U.S. Environmental Protection Agency estimated the state would need $7.4 billion by the mid-2030s just to improve, repair, and upgrade existing water infrastructure, a figure that excludes costly expansions needed to accommodate population growth.  

Public-private partnerships provide opportunities to overcome many of the water infrastructure challenges that Arizona faces, including sourcing, conveyance, and treatment. They have been used extensively around the world to ensure water systems and treatment facilities are financed, built, operated, and upgraded in ways that minimize taxpayer exposure. 

When government water agencies enter partnerships designed to manage major financial and operational risks, they shield taxpayers and users from unexpected repairs and other costly problems.  

While water P3s typically involve large projects with high upfront costs, they also include decades-long commitments to operations and maintenance that government agencies typically lack the resources to do alone, resulting in lower operating costs over the long term. 

Private partners are on the hook for decades for managing the systems under performance-based contracts, as well as handing managed assets back to government owners in good shape. Contracts designed to protect the public interest while outlining clear terms for project delivery give partner firms the incentive to find value through the right capital investments that balance cost and quality.  

Some major P3 investments are being used to secure and deliver water from new sources to accommodate population growth. In 2016, fast-growing San Antonio, Texas, entered a 30-year, $923 million P3 to deliver up to 50,000 acre-feet of water per year via a new 140-mile pipeline to provide about half of the water needed to meet future population demand.

The partnership puts the risks of securing the water on the private partner responsible for negotiating with local landowners to secure drinking water supplies, as well as the risk of building and operating a 140-mile pipeline to deliver the water to the city from its watershed source. The project was financed with loans taken out by the private partner, which will be repaid by the city over several decades from collected user fees.

Santa Clara, California, after an unsuccessful attempt a few years back, is close to finalizing a similar 30-year, $600 million public-private partnership that would secure water from multiple sources. 

Just as Arizona’s water challenges aren’t confined to sourcing clean water, P3s can be and have been used to overcome numerous ecological and environmental challenges. Chicago, Atlanta, Baltimore, and many large cities have partnered with private firms to deliver and operate wastewater treatment and processing facilities to help prevent massive pollution problems, often to comply with EPA and state consent decrees.  

Opportunities also exist to encourage land ownership practices through P3s that reduce the strain put on water and sewer infrastructure: Prince George’s County in Maryland has worked with landowners and developers to integrate more porous ground surfaces capable of diverting stormwater from the area’s overburdened sewer systems. And San Mateo, California, is in the process of exploring an advanced water treatment P3 that can keep clean water in reserve for droughts and other hazardous conditions. 

Innovations in leak detection, a problem that results in 1.7 trillion gallons worth of lost revenue for water systems each year, are also becoming a source of water agency contracting, as technology allows detection using acoustics without digging.  

With the Arizona state legislature setting aside a major down payment for critical water projects and simultaneously expanding the state finance agency’s toolkit to deliver them the key to success will be giving governments the greatest flexibility to enter long-term public-private partnerships designed to increase water supplies through acquisition, treatment, conservation and more. 

Arizona’s continued economic success will require effective partnerships between public, private, and stakeholder interests to secure the state’s clean water future in a fiscally responsible way going forward.  

A version of this commentary first appeared in The Arizona Republic.

The post How to maximize Arizona’s water investment appeared first on Reason Foundation.

Among other provisions, Senate Bill 2508 would have created new requirements for the South Florida Water Management District (SFWMD) to certify “that its recommendations to the United States Army Corps of Engineers are consistent with all district programs and plans” before the release of state funds. A previous version of the bill required SFWMD to ensure that its plans did not “diminish the quantity of water available to existing legal users.”

This language was interpreted by environmental groups to favor the interests of agricultural producers in the region to the detriment of environmental restoration efforts. Flexibility regarding the management of water within Lake Okeechobee is key to several restoration goals in the region. While DeSantis noted that the final version passed by the legislature was “an improvement over what was originally filed,” he maintained that it would create “unnecessary and redundant regulatory hurdles that may compromise the timely execution and implementation of Everglades restoration projects, water control plans, and regulation schedules.”

As the Tampa Bay Times reported:

After opponents swarmed legislators with nearly 40,000 petitions and more than 1,200 phone calls, senators reversed course, removing provisions in the bill that advocates said would have led to toxic discharges, more Red Tide blooms and dead fish on beaches.

Still, advocates said the final version of the bill would have knelt to agriculture interests and been detrimental for Florida’s conservation and environment.

DeSantis on Wednesday announced the veto to loud applause during a news conference in Fort Myers Beach. “I’ve heard you; we’ve vetoed that today,” he said.

Gov. DeSantis has made the restoration of the Florida Everglades one of his policy priorities. The Florida Legislature has largely acted in lockstep with the governor’s agenda, passing substantial reforms in recent years. State lawmakers have allocated additional money to fund ongoing infrastructure projects, imposed harsher penalties on water polluters, and provided state and federal agencies greater flexibility in the management of water flows through the series of canals, storage reservoirs, and treatment areas.

Decades of water mismanagement have resulted in the deterioration of the Everglades ecosystem and a series of toxic blue-green algae blooms in waterbodies throughout central and south Florida. In July of 2020, Reason Foundation released a comprehensive report providing the historical context of Florida’s water management issues, an overview of current challenges and ongoing projects in the state, and several recommendations for future restoration efforts. The state’s actions have largely been in line with the 2020 report’s recommendations.

A significant problem restoration efforts seek to solve is that of algal blooms, which occur when large amounts of nutrients enter a body of water. The algae feed on the nutrients and grow until a slimy, green layer is formed on the water’s surface. The recent blooms in Florida originated predominately in Lake Okeechobee before spreading to St. Lucie and Caloosahatchee estuaries.

The spread of blooms to the coasts is the result of state and federal infrastructure projects which block the natural flow of water south to the Everglades and Florida Bay. Beginning in the 1850s, wetlands in the historic Everglades region were drained and cleared for human settlement. A series of devastating hurricanes and floods in the early 1900s prompted the construction of the Herbert Hoover Dike surrounding Lake Okeechobee and a series of canals to the east and west to divert water through the St. Lucie and Caloosahatchee rivers when water levels in the lake climb too high.

Severe algal blooms have become more frequent over recent years, prompting state of emergency declarations in 2016 and 2018. These episodes were largely triggered by major storm events and higher-than-average rainfall in those years.

Mitigating toxic algal blooms will require a reduction in discharges to the coast and, to some extent, allowing additional water to flow south. Such changes to the current management and flow of water will require flexibility on the part of the SFWMD and the Army Corps of Engineers. As Gov. DeSantis recognized, the requirements included in SB 2508 may have imposed unnecessary obstacles to that flexibility. 

Florida lawmakers have taken significant steps to advance restoration goals and speed up various projects that have been in progress for nearly two decades. Gov. DeSantis’ veto of Senate Bill 2508 will help ensure that progress continues.

The post Florida Gov. DeSantis continues to pursue Everglades restoration appeared first on Reason Foundation.

California Gov. Gavin Newsom, noting years of drought in the state, harshly criticized the rejection, saying, “We need more tools in the damn tool kit.”

The commission claimed it was worried about higher water bills for the area’s lower-income residents, impact on marine life near the facility, and reduced public access to the shoreline, especially during the construction period. It remains to be seen whether those objections will also defeat the proposed Doheny Beach desalination facility in southern Orange County despite its seemingly initially favorable reception from regulators. But even if the Doheny plant is approved, it would provide only 10% of the water that the Huntington Beach facility would’ve provided.

The Coastal Commission’s objections to larger facilities are out of touch with numerous other countries pursuing desalination at scale. Australia has five major desalination plants with more under development. Spain has hundreds of smaller desalination plants providing water for industry, agriculture, and drinking. On El Hierro, in the Canary Islands, desalination plants are powered by wind energy and hydroelectric power, demonstrating how Spain is addressing climate change and water security.

Last year, Singapore opened its fifth desalination facility and now meets about 30% of its water requirements from purified seawater. Its government is also experimenting with new technologies that reduce desalination’s energy consumption sharply.

Israel’s success with desalination is well known. It has five operating plants and two more under construction. Once all seven plants are online, they will collectively provide enough fresh water to meet 85%-to-90% of Israel’s municipal and industrial water requirements.

The world’s largest desalination plants are in Saudi Arabia and the United Arab Emirates. The Ras Al Khair plant in Saudi Arabia can produce 228 million gallons of water daily—more than four times the volume processed by the facility in Carlsbad, which remains California’s only major desalination plant.

These numerous examples suggest an overall pattern: countries with high per capita income, insufficient rainfall, and a seacoast are increasingly investing in desalination. But California, despite years of drought and its long-term water needs, is not following this global trend. And even within the United States, California is becoming an outlier.

This year, Arizona Gov. Doug Ducey proposed an ambitious plan to increase his state’s water supply. Under Gov. Ducey’s plan, Arizona would fund two desalination plants on the Sea of Cortez in northern Mexico. The desalinated water would be used in Mexico in exchange for Arizona being allowed to increase its use of Colorado River water, which is now limited by a binational agreement that reserves a portion of the water for Mexico.

If California officials cannot get comfortable with building more desalination plants in the state, they might consider participating in the Arizona project. Or, perhaps they could work on a similar deal with the Mexican state of Baja California, which had to cancel its own desalination project in 2020 due to the declining value of the Mexican peso. If California agreed to buy a portion of the water purified by the proposed facility in Rosarito, about 15 miles south of the border, perhaps the economics would work for everyone.

While it is true that desalinated water is much more expensive than groundwater or snowmelt piped in from the Sierra, this cost needs to be put in perspective. The estimated cost of water from the Huntington Beach desalination plant would have been $2,900 per acre-foot, which works out to just under one cent per gallon. This is a tiny fraction of the cost of bottled water, recently estimated to average $9.60 per gallon.

With many of the state’s politicians warning of worsening climate change and severe droughts, California shouldn’t be rejecting a sustainable opportunity to buy water for a penny per gallon.

A version of this commentary originally appeared in The Orange County Register.

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EPA assigns water providers violation points based on a complex formula outlined in a 2009 memo on enforcement targeting to ensure water “systems comply with the requirements of the Safe Drinking Water Act.” It describes its violation point system as follows: 

The enforcement targeting formula is the basis for the enforcement targeting tool that identifies public water systems having the highest total non-compliance across all rules, within a designated period of time. A higher weight is placed on health-based violations (including treatment technique and maximum contaminant level violations). The formula calculates a score for each water system based on open-ended violations and violations that have occurred over the past five years but does not include violations that have returned to compliance or are on the ” path to compliance” through a specified enforceable action. 

The accompanying map shows data for over 900 city- and county-owned water providers across the United States. Dedicated water districts are not included in this analysis. Dot colors on the map reflect the net income or loss per resident and the number of water quality violation points the water providers have accumulated. The red dots on the map reflect providers with some combination of substantial financial losses or many violation points while green reflects positive net income and/or relatively few violations. 

Three municipal water providers serve as good case studies for relatively poor performance across these two metrics.  

Lindsay, CA 

Lindsay is a small city located in California’s Central Valley. About a third of its residents live in poverty and per capita income is less than half of the state’s average.  Lindsay has suffered long-term fiscal distress as documented in a 2021 report by the State Auditor’s Office and this fiscal distress has impacted the city’s ability to provide safe drinking water to residents. 

As the California State Auditor Elaine Howle observed in her summary: 

Lindsay has improved the condition of its general fund over the past several fiscal years…because the city forgave more than $6 million in loans from restricted funds to its general fund, a violation of Proposition 218, which restricts the use of certain local government funds. This unlawful action has exposed the city to possible litigation from taxpayers and utility ratepayers, and it obscures what we estimate to be a general fund deficit of more than $3 million as of June 30, 2020, instead of its apparent surplus. 

Because of both Lindsay’s loan forgiveness and the fact that it has not regularly updated the fees and rates it charges for city services and utilities, it lacks resources in some of its utility funds. The city’s water fund recently incurred a nearly $1 million deficit and is unable to pay for necessary infrastructure projects… 

In fiscal year 2020, Lindsay's municipal water fund reported a loss of $195,000, or $14 per user, and had no cash reserves. Without available financial resources or positive cash flow, the city’s water system does not have the resources to tackle water contamination issues. The city’s water system has been repeatedly cited for providing water with excessive levels of two categories of disinfection byproducts: Total Trihalomethanes (TTHM) and Haloacetic Acids (HAA5).  According to the city’s 2020 Annual Drinking Water Quality Report: 

The TTHMs and HAA5s were found to be out of compliance during 2020 and studies have been completed and identified the options available to correct the violations.    The City is pursuing funding to construct improvements. Quarterly sampling and public notification are in place until the violation is corrected. 

The report goes on to note that some people who drink water with high TTHM levels over many years “may experience liver, kidney or central nervous system problems, and may have an increased risk of getting cancer,” while excess HAA5 intake over many years may also be a cancer risk. 

Lindsay has not imposed a water rate increase since 2015 and does not expect to do so until it completes multiple studies. Meanwhile, residents are obliged to choose between bottled water or taking the risk of bladder cancer due to long-term consumption of disinfection byproducts. 

Lemoore, CA 

Fifty miles west of Lindsay, the city of Lemoore is also struggling with disinfection byproducts in its municipal water supply even though it is in a stronger financial position to address the problem. The city is fully reliant on groundwater, which has naturally-occurring compounds that react with chlorine to produce TTHMs. Lemoore's city water exceeded TTHM health guidelines in 87 of the 88 samples analyzed between 2014 and 2019. 

In fiscal year 2020, Lemoore’s water fund reported a net income of $3.75 million, or $114 per resident. The city also reported substantial general fund reserves and a positive unrestricted net position—two indications of strong overall fiscal health. 

In March 2019, the city issued $27.8 million in water revenue bonds to finance the construction of new water treatment plants, an additional well, and a storage tank. It then approved a design-build contract with J.R. Filanc Construction to create the new facilities while also contracting with AdEdge Water Technologies to remove TTHM’s from its chlorinated groundwater using a combination of ozone, activated carbon, and ion exchange. 

Unfortunately, the city’s initiative suffered a severe setback in June 2021 when a gas explosion destroyed the city’s new water tank, killing a J.R. Filanc employee and injuring a city worker. 

Aiken, SC 

Unlike Lindsay and Lemoore, the municipal water in Aiken, SC, did not contain contaminants above legal limits, although its TTHM levels usually exceed 0.15 parts per billion, which is the health guideline published by the Environmental Working Group. Aiken has instead been cited for various procedural violations including failure to maintain a sanitary control area of at least 100 feet around one of the city’s wellheads, employing a system operator lacking the required license grade, and not conducting tests to ensure that fire hydrants have adequate water pressure. 

Aiken has a combined water and sewer fund that reported a net loss of $2 million in fiscal year 2020, amounting to about $48 per resident. But the fund had over $10.5 million of cash on hand, suggesting that resources are available to address the procedural issues found by state inspectors. 

Conclusion 

Every town, city, or county that operates water, sewer, or stormwater systems will continue to face challenges in the coming decades. Larger, older cities with declining populations will be especially challenged, as their infrastructure will require significant investments while their ratepayer bases and (likely) bond ratings fall. But even fast-growing cities will face sourcing and compliance challenges as treatment facilities must be expanded or created to maintain compliance standards with larger demands of water and sewer infrastructure for ratepayers. Finding the right people to operate those systems and facilities is becoming a greater challenge, too. 

While hardly a definitive means to identify all potential problems, our modest effort to cross-tabulate financial and compliance data to yield a combined analysis presents a fuller picture of municipal water system challenges and potentially helps identify problems mentioned earlier. While those challenges will affect municipalities differently and unevenly, more forward-thinking and openness to contracting and public-private partnerships in municipal water systems will be required by agencies to ensure systems operate safely and effectively. 

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The advent of automated, laser-guided methods of weed control for agriculture could mean that farmers will no longer have to use potentially dangerous herbicides or less effective natural weed control options. In light of public concern with the use of herbicides, some regions of the U.S. have banned certain chemicals used to prevent weed growth. While some farmers gladly accept mandates on herbicides and pesticides because they believe traditional chemicals to be harmful to people and/or the environment, most natural weed control methods come at a high price. Natural herbicides cannot kill the roots of weeds as effectively as more chemically-modified compounds, thus many natural pesticides require farmers to spray their crops multiple times a season—raising the costs to farmers, whereas traditional chemical methods only need one application.  

Given decreased efficiency of natural herbicides, it is unsurprising that many farmers are hesitant to embrace the shift away from the traditional chemicals used to protect their crops. Many farmers are looking for cost-effective alternatives that offer environmental protection alongside cost-reduction benefits and some entrepreneurs are stepping up to fill this market need. 

Carbon Robotics is one of several players in the automated driving farm technology industry and focuses on building purpose-driven products to automate a specific part of the farming process. The company’s new product, the Autonomous LaserWeeder, utilizes automated driving technology alongside laser beams to zap a field’s weeds—no chemicals required. 

Requiring no physical human oversight, the device can fully weed anywhere from 15-to-20 acres a day. Today’s average farm team, on the other hand, would need at least a week to treat the same acreage. The Automated Laserweeder can also work at any time of day, in any weather, and ultimately decreases the cost of running a farm.

Beyond efficiency, the Autonomous LaserWeeder is much friendlier to the overall health of a farm’s soil and plants. Some of the longest-used chemical herbicides are those which selectively kill weeds, allowing farmers to save time and labor by indiscriminately spraying all crops. Unfortunately, these herbicides that selectively kill weeds harm the farm’s soil over time, with some even sterilizing the soil. 

Although some farmers continue to use chemical-based methods and support the soil through other means, many farmers choose more natural herbicides for the sake of their soil. Since these methods are not selective towards agricultural plants and cannot kill all weeds, farms that use natural herbicides often face lower crop yields and higher labor costs overall as they willingly sacrifice some of their profits for the sake of the soil’s health.

Laserweeding technology would allow farmers to benefit from the time-saving advantages of selective herbicides by using high-resolution cameras to differentiate weeds from crops. This technology could also help farmers maintain profits while avoiding harm to the health of the soil.

Heavily reducing chemical herbicide use would likely directly translate into reduced operating costs for most farmers since these types of chemical herbicides account for nearly 30% of total farming expenses on average according to surveys.

Laserweeding may also have direct benefits for human health. Current estimates suggest that the use of pesticides in the last half-century has caused major soil depletion, leading researchers to estimate that some vegetables have lost up to 40% of their nutritional value compared to older versions of those crops. Since laserweeding would allow farmers to avoid any chemicals, over the long-term, it is likely more beneficial for the soil than even the safest herbicides. Further, by leaving the soil untouched and unmodified, laserweeding negates the need for herbicidal additives that compromise the land’s chemical integrity, benefiting both the farmer and the environment.

As more farmers learn of and gain access to this technology, it is likely many will opt to take advantage of its many benefits, and herbicides will become less and less popular on a commercial level. However, as with any new technology comes an adoption curve since many smaller farmers will likely be unable to embrace this new technology immediately or until prices decline and the products become more widely available.

In the interim, for many farmers, traditional pesticides are going to continue to be the most cost-effective way to keep their farms running. For this reason, regulators should not force farmers to immediately cease utilizing traditional chemicals. Rather than ban herbicides with harmful chemicals, policymakers should ensure that regulations don’t block or slow the development of farming technology like laserweeding.

As the American agricultural industry embraces laserweeding and other technological advancements are developed and hit the market, it could largely negate the future need for chemical herbicides. 

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Although the term telecommuting was coined all the way back in 1973, the practice required technological progress, and, sadly, a global pandemic to come into its own. Businesses, non-profits, and government agencies in the early 1970s lacked personal computers, had rudimentary telecommunications capabilities, and relied heavily on physical files for information storage. Workers needed to be physically present just to obtain and share information.

The rise of personal computers (PCs), the internet, digital video cameras, smartphones, and cloud technologies have enabled most knowledge workers to exchange information and complete tasks from almost anywhere. Meanwhile, categories of work not traditionally thought of as knowledge or office work have come online.

Over the last two decades, online collaboration software has proliferated and improved. But online meeting tools don’t fully capture the interpersonal dynamics of physical meetings. And for many users, they can be tiring. Stanford Communications Professor Jeremy N. Bailenson has researched the phenomenon of “Zoom fatigue.” He considered four possible aspects of online meetings that could cause participants to become fatigued:

• Excessive amounts of close-up eye gaze, 
• Cognitive load arising from difficulty in sending non-verbal signals, 
• Increased self-evaluation from staring at video of oneself, and 
• Constraints on physical mobility.

New technology promises to reduce some of these drawbacks by making online meetings less stressful and tiring. Meta (formerly known as Facebook) is beta testing Horizon Workrooms, which leverages the company’s Oculus Quest 2 VR headsets to create a virtual workspace. Currently, Meta’s workroom service is free, but to get the full benefit, participants need to have the headsets which cost $299 each.

Instead of staring at colleagues’ video headshots on Zoom, participants in a Horizon Workrooms meeting view their coworkers’ avatars around a virtual conference table, a configuration that demands less one-on-one eye contact. Avatars can move around and share virtual whiteboards, mimicking a common tool used for planning, ideation, and product design in physical meetings.

Reviews suggest that Meta’s VR workroom will face barriers to adoption. The headsets are heavy and extended use can cause discomfort. But these issues should be ameliorated through technological innovation. For example, the Quest 2 headsets weigh 12% less than their predecessor, following the trajectory of laptops and other electronic devices that have become lighter over time.

In the wake of Facebook’s name change to Meta, the company’s emphasis on virtual reality and the metaverse has been subject to derision not unlike that directed to older platforms such as Minecraft and Second Life. But those who dismiss VR may not have a full historical appreciation of the process from obscure technology to household name. Technologies that seemed solely fit for recreation have become mainstream.  Consider, for example, how Robinhood attracts younger investors by “gamifying” the task of portfolio management.  iPads and other tablets originally targeted at home users are now commonly used for point of sale applications. With heavy investment from Meta, Microsoft, and others, there is reason to think that VR will enter the mainstream later in the 2020s.

Policy Implications

The idea that telecommuting has environmental benefits goes back to at least 1979 when economist Frank Schiff wrote in The Washington Post about the possibility of remote work reducing gasoline consumption, congestion, and air pollution.

Now, with VR joining a stable of older enabling technologies, remote work appears to be on its way to becoming commonplace with or without policy change.

The San Francisco Bay Area’s Metropolitan Transportation Commission (MTC) considered mandating large employers keep at least 60% of their employees at home by 2035. The mandate would have applied to all businesses with 25 or more employees in jobs eligible for remote work. But the idea was criticized by transit advocates concerned about ridership impacts. Ultimately, MTC watered down the mandate, instead recommending that employers implement trip reduction programs “to shift auto commuters to any combination of telecommuting, transit, walking, and/or bicycling.”

But, from a climate perspective, mass transit travel is not a full substitute for telecommuting. Even trips completed on fully electrified transit modes are not fully green. The Bay Area’s utility, Pacific Gas and Electric, generates one-third of its electricity from renewable sources and hopes to reach 60% from renewables by 2030. But this means a sizable proportion of electricity is, and will continue to be, derived from burning fossil fuels.

In any event, the Bay Area could reach the now discarded remote work target without a mandate. In July, the Bay Area Council found that 68% of the employers it surveyed expected a typical employee to go into the office three days or less post-pandemic. A Bay Area News Group poll found “that 70% of those able to work from home now want to stay out of the office most, if not all, of the time once the pandemic is over.”

So, at least in one large metropolitan area, a transition to remote work appears to be inevitable without government funding or encouragement. That said, government policies that could potentially slow this climate-friendly development deserve more careful scrutiny. These government policies include explicit and implicit subsidies for physical travel. For example, fares covered less than 10% of the cost of operating public transit in Santa Clara County before the pandemic. If this 90% travel subsidy was reduced or focused just on students and low-income passengers, more white-collar employees and their employers might opt for remote work. 

On the other hand, policies that reduce the cost of accessing broadband networks can make it less expensive to work from home while taking advantage of advanced technology like VR. That said, direct broadband subsidies in recent federal legislation could result in waste. Encouraging greater competition among private providers is a more fiscally sustainable approach.

But, as long as governments do not get in the way, we can expect the megatrend of remote work to continue—yielding unexpected climate change-related dividends with minimal costs to taxpayers. The further development of VR and other advanced technologies promise to accelerate this welcome trend.

The post Can virtual reality technology encourage remote work and slow climate change? appeared first on Reason Foundation.

While ESG encompasses a wide range of factors, it is the “E” that gets the most attention in the municipal bond market, with climate change being a major concern. When thinking about the role of climate change in municipal finance, we can imagine two issues: (1) Does climate change increase the risk of a municipal-bond default for specific issuers?; and (2) can investors choose bonds that finance projects that provide the largest reductions in greenhouse-gas emissions? Let’s consider these two questions in turn.

Climate Change and Default Risk

Unlike corporate equities, municipal bonds offer little financial upside related to global warming. While an equity investor may achieve enormous returns by purchasing shares in a company that invents new green technologies, the best-case scenario for a municipal-bond buyer is the return of principal at par along with interest payments that rarely exceed 5 percent annually.

But investors may be able to avoid the loss of interest and principal if they can predict whether a given municipal issuer is going to be affected by a climate-related disaster such as flooding, fires, or drought. Unfortunately, this isn’t so easy.

Many municipal-bond issuers have authority over large geographic areas only portions of which are subject to climate impacts. Consider, for example, the State of California. Its forests are burning, and may well continue to do so, but most of the vulnerable areas are far away from the coastal cities that generate most of the state’s tax revenue. So a large increase in California forest fires is unlikely to be a significant credit event for the state’s municipal bondholders.

Scientists expect coastal areas to be affected by sea-level rise, but the initial effects in California will likely be confined to areas very close to the Pacific Ocean. Property one mile or more away from the coastline should suffer limited impacts, at least during the life of any given municipal bond, which is generally 30 years or less.

Smaller jurisdictions could be at greater risk from climate change, but even in these cases, the default-risk implications may not be intuitive. In November 2018, a wildfire wiped out the small California city of Paradise, which had issued pension-obligation bonds in conjunction with two other California cities back in 2007. Two months later, Moody’s downgraded the bonds by three notches to Caa3, noting that “the heavy physical, social, and economic damage to the town, will inexorably devastate its financial position, realistically eliminating any short term ability to pay debt service on its share of the bonds, thus rendering a near-term default almost certain.”

But that default did not occur thanks to proceeds from an insurance settlement and the state legislature’s decision to backfill Paradise’s lost property tax receipts, prompting Moody’s to upgrade the bonds by one notch in August 2019. Earlier this year, Moody’s further upgraded the bonds to Ba2 after the town received $270 million from Pacific Gas & Electric, whose power lines were blamed for the conflagration.

The bonds now carry a higher rating than they did prior to the fire, reflecting an informed view that Paradise is now better positioned to perform on its pension obligation bonds than before it burned down.

Of course, these circumstances may not occur after all adverse climate events, but the federal government has shown an increasing propensity to provide aid in the aftermath of major disasters. The takeaway for analysts trying to assess the default-risk implications of environmental factors is that they may have to also perform analysis of intergovernmental aid offsets as well as insurance and litigation payouts to get the full story.

Finally, there is a question of how climate-model results can translate into better-informed opinions about the prospects for asset destruction. For example, the latest report from the Intergovernmental Panel on Climate Change states:

Increasing evaporative demand will expand agricultural and ecological drought and fire weather (particularly in summertime) in Central North America, Western North America and North Central America (from medium to high confidence). Severe wind storms, tropical cyclones, and dust storms in North America are shifting toward more extreme characteristics (medium confidence), and both observations and projections point to strong changes in the seasonal and geographic range of snow and ice conditions in the coming decades (very high confidence).

Converting these generalized predictions into risk assessments for specific geographic areas requires a lot of assumptions, especially for those predictions made with less-than-very-high confidence.

Given uncertainties around the specific impacts of climate change on individual municipal-bond issuers, as well the availability of third-party assistance, it is hard to see how climate-risk analysis can benefit bondholders. Over the past 80 years, general-obligation municipal-bond defaults have been quite rare. Further, the most recent major defaults — notably, those in Detroit and Puerto Rico — have coincided with high levels of debt (including pension debt) and population loss. So, for now, it appears that traditional economic and fiscal analysis is sufficient to protect municipal-bond investors from most defaults.

Encouraging Municipal Climate Investments

Some municipal-bond investors would like to use their assets to fund a robust state and local government response to climate change, while many municipal issuers would like to demonstrate their leadership on climate issues. But with so much demand for municipal securities and near record-low bond yields, it is hard for issuers to reduce interest costs by issuing green bonds.

Whether or not green bonds provide measurable financial benefits, interest in green bond certification is high. Since 2014, local governments in North America have issued over $50 billion in bonds carrying green certifications from the Climate Bonds Initiative, an NGO that publishes sector-specific standards for providing such certifications. CBI does not certify the bonds itself but authorizes third-party verifiers to apply its criteria and provide certifications.

But if an institutional investor buys a portfolio of certified climate bonds, would that institution make a meaningful contribution to combatting climate change? The answer depends on how well the standards are crafted and implemented.

One city with an especially aggressive green-bond program is San Francisco. The controller touts a report from C40 Cities noting that San Francisco has already reduced its greenhouse gas emissions by 36 percent since 1990 (although most of that reduction cannot be attributed to green bonds, which the city only began issuing in 2015).

Certifications notwithstanding, it is far from clear that investing in San Francisco bonds is a great way to combat climate change. One San Francisco certified green bond helped finance the Salesforce Transit Center, a new transportation terminal that recently opened in the city’s downtown. The Series 2019 green bonds helped fund a rooftop park for the center as well as its “train box.”

Although the rooftop park’s trees provide some climate benefits, this is not the case with the train box, which was built to accommodate commuter-rail service from San Jose, as well as California High-Speed Rail. But trains cannot reach the station until a subway tunnel is constructed between the Salesforce Transit Center and the current terminus at the Caltrain station.

Only 1.4 miles separate the two locations, but the subway project has yet to be funded. Transit officials will have to pull together $6 billion to build the line and make associated improvements. Even if the bipartisan infrastructure bill is signed into law, San Francisco will have to compete with other communities for the federal share of this funding package. And, even once funding is identified, it could take a decade or more to start service. Even the transit advocates at Streetsblog project a start date of “sometime after 2032.”

So bond funding of the train box will not result in any transit service for at least thirteen years from the date of issuance, if it ever does. Even then, it is not clear that many train passengers will use the new station, given the transition to work-from-home now occurring in the Bay Area and nationally. Further, train ridership overstates the climate benefit to the extent that riders switch to the train from walking or other transit alternatives. Right now, passengers alighting at the Caltrain terminus often board a light rail train that connects to downtown.

Building a train station in San Francisco without connecting track in hopes that it will attract a subway line and passengers ditching their cars to use it does not seem like the most efficient way of using bond proceeds to reduce greenhouse gas emissions. But investors relying on climate bond certifications would not know that.

In addition to the certifications, several rating agencies and analytics firms are assigning ESG ratings and scores to municipal-bond issuers and their debt securities. Much of this analysis is proprietary and thus not readily available for analysis. But a recent Standard and Poor’s analysis of a San Francisco green-bond offering for additional transit upgrades does not address ridership impacts, let alone estimate the number of car trips displaced or carbon emission reductions.

At this stage, municipal ESG analysis is relatively new. But it looks like it will have to go a long evolution before it can provide meaningful guidance to investors hoping to fight climate change in the most cost-effective manner.

For now, municipal investors seem best served by pursuing strategies that maximize their risk-adjusted returns, employing traditional credit analysis. While it is theoretically possible to achieve better financial and environmental results by incorporating ESG factors, real-world benefits are likely to be elusive given the incomplete amount of available information.

A version of this column previously appeared in National Review Capital Matters.

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Carbon taxes are again being discussed in the United States as a means of reducing emissions of carbon dioxide and other greenhouse gases (GHGs). Three main arguments are proffered in support of carbon taxes, either alone or in combination:

1. That by setting a price on greenhouse emissions equal to the “social cost of carbon,” a carbon tax would optimally reduce GHG emissions.
2. That replacing existing regulations, subsidies, and tax expenditures with a carbon tax would more cost-effectively achieve emissions-reductions goals.
3. That a revenue-neutral carbon tax would be economically beneficial.

These arguments are found to be wanting.

First, in theory, a carbon tax set at the “social cost of carbon” would lead to an optimal rate of greenhouse emissions. However, the “social cost of carbon” is highly uncertain. The current U.S. administration has chosen to use estimates of the “social cost of carbon” developed during the Obama administration, which would be in the region of $53 per metric ton of “carbon dioxide equivalent” emissions. This is likely significantly higher than the optimal rate.

A carbon tax applied with no offsetting reductions in other taxes or changes in regulations would increase the cost of goods and services. Energy and energy-related goods would be especially hard hit. A tax of around $50 per ton would raise natural gas prices by about 40% and gasoline prices by about 15% above recent levels. This would reduce economic growth by as much as 0.2% and also reduce employment. Even taking into account reductions in damage associated with GHG emissions, applying a carbon tax at a rate of $53 per ton would most likely cause net economic harm.

Second, numerous existing regulations, subsidies, and tax expenditures currently aim to reduce greenhouse gas emissions, including: the Renewable Fuel Standard, vehicle fuel economy and GHG emission standards, renewable portfolio standards, and tax credits for renewable energy and low-emission vehicles.

These regulations, subsidies, and tax expenditures cost hundreds of billions of dollars but do relatively little to reduce emissions. Replacing them all with a carbon tax applied at a uniform rate would in principle be both much less costly and more effective as a means of incentivizing reductions in emissions.

In practice, the likelihood of such a “grand bargain” being successfully implemented is extremely low because powerful, concentrated special interests who currently benefit from the regulations, subsidies, and tax expenditures would lobby heavily to maintain them.

Third, a revenue-neutral carbon tax, achieved by reducing either corporate income tax or the payroll tax or both, could have net benefits even if existing policies aimed at reducing carbon emissions were not repealed. However, it is unlikely that a carbon tax would be implemented in a truly revenue-neutral manner.

Many proposals from Congress and the Biden administration propose paying for new programs with carbon tax revenues, suggesting that there would be pressure to increase such revenue. This is precisely what happened in British Columbia, where an initially revenue-neutral carbon tax has gradually been increased. Elsewhere in the world, carbon taxes have almost ubiquitously been used for revenue-raising purposes.

Introduction

Governments across the world, including the U.S. federal government and many state governments, have sought to regulate emissions of greenhouse gases (GHGs) through a vast array of regulations and subsidies. Several of these have been controversial. For example, federal mandates and subsidies to promote the production and use of ethanol as a fuel have been criticized by both economists and environmentalists.

Meanwhile, vehicle and appliance energy efficiency standards became a cause célèbre in the recent U.S. presidential election.

Governments across the world, including the U.S. federal government and many state governments, have sought to regulate emissions of greenhouse gases (GHGs) through a vast array of regulations and subsidies.

In the face of such controversies, many economists and policy advocates (on both the political left and right) have argued that a carbon tax would be a more efficient policy to reduce GHGs emissions than these regulations and subsidies. There are broadly three arguments made in favor of introducing a carbon tax.

First, from an economic perspective, it is viewed as an efficient way to reduce GHG emissions, thereby internalizing the “social cost” of those emissions.

Second, regardless of whether a carbon tax is desirable per se, it is widely viewed as being superior to existing regulations and subsidies.

Third, even if a carbon tax were introduced on top of existing regulations and subsidies, some argue that it would have net economic benefits if it were implemented revenue-neutrally.

This brief considers the arguments for and against such a tax. It is organized as follows:

• Part 2 describes and evaluates the merits and drawbacks of the social cost argument.

• Part 3 discusses the economic effects of introducing a carbon tax without any other changes in tax, subsidy, or regulatory policy. The aim is to describe the effects of introducing a carbon tax on top of existing policies.

• Part 4 describes and critically evaluates the “grand bargain” argument, whereby a carbon tax is introduced as a replacement for existing regulations, subsidies, and tax expenditures that are aimed at reducing GHG emissions.

• Part 5 assesses the possibility and consequences of introducing a revenue-neutral carbon tax, that is to say combining the introduction of a carbon tax with offsetting reductions in other taxes so that net revenue remains constant.

• Part 6 offers some concluding remarks.

Excerpt of the Policy Brief’s Conclusions

This brief has explored the main arguments put forward in support of introducing a carbon tax.

Part 2 considered the argument that a carbon tax is justified on the grounds that carbon emissions impose a net external cost on society. While that may be true, the scale of those external costs remains uncertain. In determining an appropriate price for carbon emissions, the current U.S. administration uses “social cost of carbon” estimates developed during the Obama administration of approximately $53 per metric ton of CO2-e.

Part 3 explored the economic implications of applying a carbon tax at about that rate. Such a tax would significantly increase the cost of energy and energy-related goods. Studies show that, in the absence of any other changes to taxes, subsidies, or regulations, a carbon tax of around $50 per metric ton would cause U.S. GDP to fall by about 0.4%, lead to hundreds of thousands of lost jobs, and cause incomes to fall across the board, perhaps especially among those already on lower incomes.

While a carbon tax on its own would undoubtedly cause economic harm (notwithstanding any environmental benefits that might arise), it would likely be far less harmful than the many regulations and subsidies currently implemented to reduce carbon emissions. It would also likely be more effective than those policies in reducing emissions. So, in principle, a “grand bargain” in which a carbon tax was introduced in return for eliminating all those more harmful policies would have merit.

Unfortunately, as discussed in Part 4, the existing regulations and subsidies have created sets of concentrated beneficiaries, while the harms they cause are dispersed among the wider population. As such, any attempt to reform these policies is likely to be met with fierce and well-funded opposition.

Part 5 noted that a revenue-neutral carbon tax, achieved either by reducing (possibly even eliminating) corporate income tax or by reducing the payroll tax, could have net benefits even if existing policies aimed at reducing carbon emissions were not repealed. However, it seems unlikely that a carbon tax would be implemented in a truly revenue-neutral manner. Even if such a tax were initially close to revenue-neutral, numerous pressures would almost inevitably lead to it being increased at a rate such that it would generate additional net tax revenues.

Given the economic harm that would be caused by a carbon tax, and since most if not all the benefits from either a grand bargain or a revenue-neutral carbon tax would be generated by the reduction in other taxes, regulations, and subsidies, it would seem preferable for governments to reduce those taxes (or, at least not increase them), and remove those regulations and subsidies without imposing a carbon tax.

Full Policy Brief: A Primer on Carbon Taxes

Full Study: Evidence-Based Policies to Slow Climate Change

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