Tag Archives: economics

Make “Sustainable Food” the Economic Engine of Downtown Davis

 

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Many communities around the region, such as Sacramento and Woodland, have jumped on the “farm to fork” bandwagon to promote their relationships with agriculture. Davis can distinguish itself from the crowd by taking this a step further to promote itself as the center of “sustainable food.” In doing this, Davis can develop placemaking that is the key to economic development and vitality.

Davis is home to one of the top-rated food production research universities in the world in UC Davis. The City of Davis should leverage this position and strengthen its relationship to reinvigorate the downtown. The City has an opportunity as part of its Downtown Davis or Core Area Specific Plan to define a vision to achieve that goal.

Sustainable food minimizes damages to the planet in its cultivation, production, preparation, consumption and disposal. It is largely plant-based because this is the most direct way to deliver calories and protein to our diets. Animal production has much higher waste products, resource consumption, greenhouse gas emissions, and tainted food per calorie or gram of protein. For example, based on U.S. Department of Agriculture statistics, beef production emits four times as much greenhouse gases (GHGs) per calorie than soybeans or wheat and twice as much GHGs per gram of protein. Given California’s goal to be a “net carbon zero” emitter by 2045, the state will need to take a wide range of steps to cut emissions across the board, including in food production and consumption. Sustainable food is also more ethically consistent and healthful than our current food production and consumption patterns.

Sustainable food has been in the press frequently of late, with numerous stories in the Bay Area media. San Francisco has become the venture capital center of the world—especially for sustainable food–but real estate is becoming too expensive there to allow an industry that focuses on physical products sufficient space. Davis is close enough to that center for easy communication, but still has comparatively inexpensive land.

Creating a sustainable food ecology in Davis would have five aspects:

  1. Supporting innovation in sustainable food production and distribution
  2. Providing sustainable infrastructure to support companies that are innovating
  3. Serving and delivering sustainable food locally
  4. Preparing food that is consumed locally in a sustainable manner
  5. Attracting sustainable food-oriented tourism

The City can focus development of a sustainable food industry hub in the “Flex District” proposed for the G Street Corridor in the Downtown Plan. This area could house a wider range of facilities, such as test labs, within easy access distance of the UCD campus and the Capitol Corridor train to the Bay Area. Larger research facilities can be housed in other parts of the City where larger, industrial facilities are more appropriate.

Part of the attraction to companies locating here could be a sustainable infrastructure configuration starting in this district, with a district energy network and electric microgrid supporting fully electrified space conditioning and water heating systems. The other sustainability attributes identified in the Downtown Davis Plan should be incorporated and highlighted.

We can also encourage existing restaurants to serve more sustainable food on their menus, and attract new restaurants to cater to the new sustainable food businesses and their employees. The investors and workers at these companies are much more likely to follow their ethical beliefs in their consumption choices. The City could provide incentives through reduced fees to existing businesses, and evaluate how to speed the start up of new businesses.

As part of establishing a sustainable environment, the City should facilitate switching restaurants to more sustainable preparation practices. This includes switching from natural gas to induction cooktops and convection ovens, district water heating and space conditioning, and better management of waste. (Yes, we may need to recruit chefs for this new challenge.)

Finally, Davis can become a sustainable food destination. Less than 20% of our downtown visitors are from out of town according to analysis by consultants to City working on the Downtown Davis Plan. Given our location on the Capitol Corridor train route and Interstate 80, the community has much room for growth in tourism to boost our economy beyond UCD students’ parents visiting in September and June.

Davis already has a core attraction in its world-famous Farmers’ Market. With the addition of plant-based oriented restaurants and closer integration with the Mondavi Center entertainment area, a visitor could easily spend a whole day in Davis with a quick trip on the train from the Bay Area. Implementing this vision just needs closer coordination with UCD to bring events to Mondavi and the new Shrem Art Museum on Saturdays and setting up an electric bus shuttle between there and downtown.

UCD’s Robert Mondavi Institute for Wine and Food Sciences provides an example of how local development can be both sustainable and invigorating. That locale now has a microgrid that relies on renewable power. Both UCD and the City could benefit from a closer relationship centered around sustainable food in several dimensions.

Implementing all of this vision requires going beyond the form-based zoning codes that will come out of the Core Area Specific Plan. The City needs a comprehensive economic development plan, direction and resources for its economic development staff, and a willingness to focus on removing the barriers to bringing and supporting these businesses in Davis.

(with Anya McCann, COOL Cuisine)

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Another finding of the obvious from academics…

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This study published in the American Journal of Agricultural Economics seems to have a surprising finding, at least to academic economists, that farmers with riskier water supplies rely less on irrigation! What? If you’re uncertain about whether you will get water every year, you are less likely to count on that water to irrigate your crops? Who possibly would think that way?

Not so bad in our estimate…

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The University of California ARE Update published a short study that found that the drought emergency regulations adopted by the State Water Resources Control Board were only 18% more costly than the most “efficient” standards. In May 2015, the State Water Resources Control Board adopted Resolution No. 2015-0032 which imposed restrictions to reduce water use by local agencies by 4 to 36 percent depending on their circumstances. Northern California agencies were to reduce usage by 16.2 percent on average, while Southern California utilities were to reduce by 22.5 percent. In the end, Northern California utilities far exceeded their target with a 23.3 percent reduction, and Southern California’s just missed theirs with an average of 21.4 percent. M.Cubed conducted the economic study of the regulations, and found that the insurance benefits were likely substantial enough to justify the costs.

The real headline of the study should be “Drought regulations remarkably efficient!” Given that the regulations were developed in just a few months and that they were done on a prospective basis with uncertainties and unknowns (e.g., the price elasticities referenced in the study), missing the mark by only 18% is truly remarkable. In comparison, the California Air Resources Board may have missed the mark by more than 100% in setting out its AB 32 Greenhouse Gas Reduction Scoping Plan in 2008 by relying too heavily on mandated measures such as renewables generation and certain types of energy efficiencies instead of more effective market based measures.

Nevertheless, the study appears to the make mistake of making the classic economist’s joke “sure it works in practice, but does it work in theory?” Consumers are chastised for behavior that doesn’t fit the fitted values for price elasticities. The study compares the mandated and achieved reductions and notes that achieved reductions were more even across agencies than the mandates. Agencies with lower mandates achieved higher reductions, and those with higher mandates fell short on achievements. Instead of questioning the original price elasticity estimates–and such estimates commonly have a wide range and are often situation specific–the report just plows ahead as though these theoretical results should have driven human behavior.

The more interesting question the researchers should have asked given the consistent patterns in achieved versus mandated reductions is what factors caused these agencies to diverge from the mandates. Geography is clearly only part of the reason. It also appears that there is not as much “demand hardening” at the low end of use, and a higher premium put on water uses at the upper end. These factors have implications for how we should modify our price elasticity estimates.

Views on a sustainable Davis

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Two board member of the Valley Climate Action Center, Gerry Braun and Richard Bourne wrote two articles on making building energy use in Davis sustainable and resilient. VCAC board members, including myself, had input into these articles. They reflect a vision of getting to a zero-net carbon (ZNC) footprint while being economically viable. Both were published in the Davis Enterprise.

Vogtle nuke cost could top $25 billion| From Utility Dive

The Vogtle nuclear power plant cost is projected to balloon to more than $12,000 per megawatt. In a study we did for the California Energy Commission in 2009, even at $4,000 per megawatt, nuclear power was uneconomic. This explains why nuclear power is not taken seriously as a solution to reducing greenhouse gas emissions.

Source: Vogtle nuke cost could top $25B as decision time looms | Utility Dive

A response to Environmental and Urban Economics on impact of climate change on counties

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I follow Matthew Kahn, now at USC, post on June 30 about the how the “Lucas Critique” undermines a recent study forecasting how counties across the U.S. might be affected differentially by climate change. Quoting the New Palgrave Economic Dictionary, “The ‘Lucas critique’ is a criticism of econometric policy evaluation procedures that fail to recognize that optimal decision rules of economic agents vary systematically with changes in policy.” In other words, individuals within the economy are able to anticipate changing events, including government decisions, and can mitigate the impacts of those events when compared to continuing with the status quo. Kahn puts great faith in the Chicago School premise that individuals can readily adapt to all conditions without government or collective decisions.

However, Kahn ignores two important points. First, he misses the distributional focus of the study, and instead focuses on the overall efficiency gains from the net changes. That’s not the point of the study. We can see on example that land can’t be moved from one county to another, so landowners can’t adapt in anticipation of climate change without significant investment to protect their land. Homeowners will lose value in their homes, and others will find their asset value stranded. Sure, the overall economy will adapt and certain counties may gain enough to offset those losses, but residents within the net loss counties will be worse off. Economics for too long has focused solely on net gains without parsing the impacts and considering how to manage better outcomes for the losers. (I see this failure as one aspect of dissatisfaction driving Trump voters–which brings me to my second point.)

And second, if the Lucas Critique was truly valid, coal miners in Appalachia would have long abandoned their towns as they saw the decline of coal, and the need to satisfy West Virginia coal miners would not be driving national policy today. Instead, we see that people are myopic and these changes are likely to have significant consequences.

 

 

Creative Pie Slicing To Address Climate Policy Opposition | Energy Institute at Haas

Severin Borenstein’s post raises an important issue that economists have ignore for too long. I posted the following comment there:

We gave politicians the tool of benefit-cost analysis which they have used to justify their policy objectives, but we completely failed to drive home the requirement that those parties who are on the losing end need to be compensated as well. I looked in my edition of Ned Gramlich’s book on Benefit-Cost Analysis (who taught my course), and the word “compensation” is not even in the index! Working on environmental regulations, I regularly see agency staff derive large positive ratios for the “general public” and then completely dismiss the concerns of particular groups that will be carrying all the burdens of delivering those benefits. If we’re going to teach benefit-cost analysis, we need to emphasize the “cost” side as much as the “benefit” that politicians love to extol.

Source: Creative Pie Slicing To Address Climate Policy Opposition |