Seismic externalities

Injection-Induced Earthquakes
William L. Ellsworth

Abstract: Earthquakes in unusual locations have become an important topic of discussion in both North America and Europe, owing to the concern that industrial activity could cause damaging earthquakes. It has long been understood that earthquakes can be induced by impoundment of reservoirs, surface and underground mining, withdrawal of fluids and gas from the subsurface, and injection of fluids into underground formations. Injection-induced earthquakes have, in particular, become a focus of discussion as the application of hydraulic fracturing to tight shale formations is enabling the production of oil and gas from previously unproductive formations. Earthquakes can be induced as part of the process to stimulate the production from tight shale formations, or by disposal of wastewater associated with stimulation and production. Here, I review recent seismic activity that may be associated with industrial activity, with a focus on the disposal of wastewater by injection in deep wells; assess the scientific understanding of induced earthquakes; and discuss the key scientific challenges to be met for assessing this hazard.

Perhaps an enterprising graduate student can figure out an optimal management strategy for this risk.

Should people living in high-risk locations get relief when they are hit by natural disasters?

National survey evidence on disasters and relief: Risk beliefs, self-interest, and compassion
W. Kip Viscusi, Richard J. Zeckhauser

Abstract: A nationally representative sample of respondents estimated their fatality risks from four types of natural disasters, and indicated whether they favored governmental disaster relief. For all hazards, including auto accident risks, most respondents assessed their risks as being below average, with one-third assessing them as average. Individuals from high- risk states, or with experience with disasters, estimate risks higher, though by less than reasonable calculations require. Four-fifths of our respondents favor government relief for disaster victims, but only one-third do for victims in high-risk areas. Individuals who perceive themselves at higher risk are more supportive of government assistance.

Un-gated version here. The conclusion is succinct:

This paper explored two broad questions: 1. What factors drive individuals’ beliefs about their risks from various disasters, and how accurate are those beliefs? 2. What policies do individuals favor for disaster relief, and how do those policies relate to their assessed risks?
The answer to the first question is that risk beliefs have many rational components, but fall short of what one would expect with fully rational Bayesian assessments of risk. Personal experience and location-related risk influence risk assessments in the right direction, but insufficiently. These factors should have a very powerful influence, as our Lorenz Curve for fatality risks by state shows that natural disaster risks are highly concentrated, unlike auto fatality risks. 

For each of our four natural disasters, more than half of our respondents thought that their fatality risk from natural disasters was below average, and another roughly thirty-five percent thought their risk was average. Even people who had experienced disasters did not differ markedly from those who had not. 

A common explanation for apparent underestimation of risks, such as those from auto accidents, is that individuals suffer from an illusion of control. That explanation does not apply to natural disasters. A plausible hypothesis, worthy of further study, is that individuals actually understand the skewness in the distribution of risk. Though only half of the population can be below median risk, the vast majority are below average in risk. That is surely true for auto accidents as well, the favorite domain for “control” hypotheses. 

More than four-fifths of our respondents favored government assistance for victims of natural disasters, but this fraction fell to only one-third when the natural disasters happened to people living in high-risk areas. This decline suggests that respondents intuitively un- derstand the concept of moral hazard. We label this phenomenon “efficient compassion.” That is, there is a strong element of compassion in their responses, but it is tempered when disaster victims have knowingly exposed themselves to high risk. Individuals who perceive themselves to be at greater personal risk are more supportive of government assistance, as are groups that tend to be liberal politically. Black respondents, who may have been particu- larly struck by the governmental failure to rescue the black population of New Orleans from Hurricane Katrina, are much more supportive of continued aid to that city. In short, policy preferences for disaster relief reflect both compassion for the unfortunate, and a dollop of self-interest.

More interesting excerpts:

Political orientation is a main driver of the support for relief, not just for the efficient compassion questions, but for all the relief options. In every instance, Republicans have a consistently lower probability of supporting the relief policies than do Democrats and independents. After controlling for political affiliation, blacks have higher probabilities for support; females also have higher probabilities, though not where moral hazard is a prime factor. Presumably, these groups are more liberal than their mere political affiliation indicates... 

The equations also included a measure of individual risk-taking behavior—the general health risk exposure of the respondent as reflected in whether they currently smoke cigarettes. Smokers face a considerable smoking-related mortality risk; their probability of premature death due to smoking is 1/6 to 1/3. The smoker variable consequently captures willingness to expose oneself to extremely large health risks. Beyond this, the smoker variable may also reflect a tolerance for others who take risks and are guilty of moral hazard, since smokers are frequent targets of criticism for their own risk-taking behavior. For the two relief questions involving individual choices to engage in risky behavior, smokers are more forgiving of decisions involving moral hazard and are more willing to support relief. Both effects are significant at the 10 percent level. 

Weekend links @ the Adventure Journal

Some links from the adventure journal that I found and liked during my continuing ascent (descent?) into the blogosphere:

- The climate on other planets can put ours in perspective.

- Optimal policies for adaptation to environmental risk does not involve reducing our risks to zero. Instead, we should aim to accept calculated risks when the [marginal] cost of mitigating them becomes high.

- In rural Rwanda, bikes are low-tech but high-value, endearing them to their owners and D. Turrene, who put together this 1 minute tribute:


Une Minute de Vélos - Rwanda from Darcy Turenne on Vimeo.

Arctic sea ice on track for a new record minimum

One of the research areas in which I work is how humans deal with new information about risk, especially climate risk. Thus I was very interested (and, of course, dismayed) to hear that we're currently on track for a record low in Arctic sea ice coverage.

The red line is us right now (2011) and note that it's currently tracking or exceeding the record minimum set in 2007. The decline in Arctic sea ice cover is widely considered to be one of the strongest pieces of evidence we have that we're dangerously altering the climate, though it also has its own more immediately concerning problems.

There's a discussion thread hosted by our friends at uber-climate blog Real Climate if you're so inclined, and a general-interest article about the decline and its relevance to non-climatologists on Andrew Freedman's Washington Post blog here.

Trends in weather deaths

Jesse pointed me to this opinion piece in the WSJ about weather related deaths in the US, thinking I should comment on it.  I have lots of comments on it, but I'm saving several of them for a paper I'm working on with Daiju Narita (stay tuned...).  But in the meantime, interested folks can see this recent article (by Betsy Wiesendanger at Columbia B-School's magazine Chazen Global Insights) about my related work with Daiju.

Weather-driven pirate risk maps

A variety of sources point out that Naval Research Labs' James Hansen* has come up with a piracy-risk model that takes as its two major sources of input current and forecasted weather and in-field reports on pirate activity:

"Usually, I'm doing theoretical stuff down in the weeds," said Hansen, a Seattle-area native and applied mathematician at the Naval Research Laboratory in Monterey, Calif. "This is the only project where I can actually show pictures of the impact," he said, projecting images of Somali boatmen armed with missile-launchers and automatic weapons.

The quote is from an article in the Seattle Times about a presentation that Hansen gave at the American Meteorological Society meeting. The model is driven by the fact that most if not all modern piracy depends on small, fast boats that can evade long-distance detection and can outpace larger slower cargo ships. In heavy weather the boats can't operate. Combine weather forecasts with observed pirate activity and voilà.

I can't locate any sort of working paper at present, so if any of y'all locate it please do send it to me. And as I wrote to the sdev-internal email list: someone please please please write a paper using this ASAP. Just be careful of your exclusion restrictions.

* As Sol points out: "How many climate scientists are named James Hansen? I now know of 3."

Risk Denialism and the Costs of Prevention

Sol's posts about the BP oil spill (here and here) got me thinking a little bit about the interplay between denialism and risk and how deeply related that is to the sprawling mess of concepts we put under the umbrella of "sustainable development."

One of the major themes in the coverage of the spill has been how poorly equipped BP was to deal with a spill of this magnitude. Now, regardless of your opinion of BP as a company, ex-post this is a bad thing. BP would much rather, right now, be known for its quick, competent and effective response to a major catastrophe than be roundly (and for that matter, rightly) villainized. They've lost about half their market cap since the spill happened, and now they have to set up a $20 billion clean up escrow account. Why weren't they better prepared?

There are a few potential answers to that. The spill's magnitude may simply have been completely unforeseeable, a "Black Swan" -style event that BP can be forgiven for not anticipating the same way New Yorkers can be forgiven for not buying tornado insurance. Or perhaps, net of prior cost-benefit analysis, the probability of a spill this big was so low compared to the cost of maintaining intervention equipment that BP decided to skimp on it, akin to how most New Yorkers spurn flood or wind insurance despite the fact that hurricanes intermittently hammer the city. But the answer that now seems most likely is that that there was a fundamental disconnect between what the rig workers told upper management (internal BP documents refer to it pre-spill as a "nightmare") and what upper management told them to do. This is akin to New Yorkers not buying renter's insurance after they've been told the burglary rate in their neighborhood is quite high.

What I find interesting about this is how closely the framework of this story jibes with so many of the other narratives in environment and development. A group of technically trained experts warns of a potentially catastrophic risk (climate change, overfishing, pandemic flu) only to have their warnings discarded by cost-bearing decision makers (politicians, corporate executives, voters) who deny that the risk is as great or even extant. In these scenarios, it's not that the decision makers wouldn't face massive costs should they turn out to be wrong, it's that there's a big difference between what their behavior indicates they think the probability of facing those costs is and what they're being told by technical advisors.

Why? Well, it seems that cost-bearing seems to have a very strong influence on how someone interprets difficult-to-verify information about risks, especially social / shared risks. In psychology this is known as the defensive denial hypothesis and there's a fair bit of empirical evidence to support it. The BP managers tasked with running the platform knew the immediate costs of reducing flow, or stopping drilling, or increasing safeguards, and it seems highly likely that this influenced how they interpreted warnings from the rig workers. The same sort of phenomenon seems to occur in a lot of other areas: fishermen are more sanguine about the risks of overfishing, oil executives downplay the risk of climate change, and derivatives traders claim that their activities are nowhere near dangerous enough to warrant regulation. Now, many other factors are clearly at stake in all of these, from discounting to strategic maneuvering to cheap talk, but given the genuineness with which deniers of, say, climate change argue their case, it seems difficult to say that they are not at least somewhat personally convinced that their interpretation of the evidence is correct.

Now that on its own isn't terribly revelatory, but when you combine it with the notion that perceptions of costs can be subject to manipulation as well, you get an interesting result. The more (or less) salient a risk's mitigation cost is made, the lower (or higher) people come to view the probability of that risk. Witness, for example, the repeated attempts to link efforts to combat climate change to personal tax burden by those who think (or claim to think) that it's a bogus risk. This may not even necessarily be an actual cost: the Jennifer McCarthy- led trend in parents refusing to vaccinate their children (leading to the actual risk of polio, measles, etc.) seems to be almost entirely a function of parents being led to believe that there is a potential cost to vaccination (possible autism) that is not supported by scientific evidence. BP's managers faced the immediate and salient costs of risk mitigation steps that they'd need to justify to highers-up and behaved in a way that seems to indicate that they didn't think the risk of a major industrial accident was worth fretting over.

So what? I think the lesson here is that while risk denial is often depicted as stemming from short-sightedness, or ignorance, or political zealotry, it's actually pretty common human behavior. People have preferences and like to align their behavior appropriately, and if that means that they have to subconsciously alter their assessments of how dangerous some far off activity may be, they'll do so. If we are concerned about arresting climate change, or preserving biodiversity, or managing natural resources, then it's important to keep in mind that the way people perceive the incidence of the cost of mitigation will not only affect their preferences in terms of raw cost-benefit analysis, but also legitimately move their perception of the riskiness of their behavior. If we want political support for efforts to deal with these sort of risks, it thus seems similarly important to find and then emphasize ways in which the costs can be made low and painless as it is to stress the potential for future damages.

1980

This is surreal to me. This is an excerpt from an article in the New York Times on April 12, 1980.

I repeat. 1980. Thirty years ago. The internet was still science fiction then.

It is about the oil spill caused by the Ixtoc I oil well in the Gulf of Mexico, which spewed 140 million gallons over several months in 1980:

History's largest oil spill has been a fiasco form the beginning to end. Human errors and ineffctive safety equipment caused the blowout, and none of the "advanced" techniques for plugging the well or recapturing the oil worked satisfactorily thereafter. The gusher ran wild for nearly ten months....

The enduring question is whether a devastating blowout could occur in our own offshore waters....

A second question: Could a blowout in American waters be quickly capped and cleaned up? Ixtoc I shows that control technology is still quite primitive.  Attempts were made to jam the pipe back into the hole; a large cone was lowered over the well to capture oil and gas, and steel and lead ball were dropped down the well to plug it. Nothing worked. Relief wells to pump in mud failed for months to reach their target... The mop-up techniques did not function effectively either....

Most Americans would accept risking such blowouts to find oilfields as rich as Mexico's.  But the lessons of Ixtoc I can help reduce the risks.

If you don't know why this is darkly funny, look over the list of strategies BP has employed to stop the current spill.  There is obviously something wrong with the incentives to innovate emergency/cleanup technology.  In 1980, the techniques we are still using today were being joked about as "advanced."

The sheer volume of innovation that has occurred in the last 30 years across an uncountable number of research fields is astonishing and a tremendous feat of human ingenuity.  The fact that effectively zero innovation has occurred in oil-drilling-catastrophe-management suggests that nobody believed there was a sufficient payout to warrant such investments.  Since these catastrophes are massive public-bads, and the cost of the externality is almost certainly not internalized by the oil-companies, then standard economic theory would suggest the government needs to create incentives to invest in these technologies.  The problem is doubly difficult because we often think that research in profitable industries is under-supplied, since researchers cannot capture the full value of their work.  So policies to reduce our risk must counteract both a public-bad problem and an innovation problem.

The obvious tendency is to heap blame on BP.  But the current situation is a result of 30 years (at least) of improper policy.  Whether the US government had sufficient information in 1980 to realize its policies motivating innovation [in these technologies] was too weak, I cannot say.  But this article seems to suggest that perhaps they did.

(Oil spill & windmill) x (technology & management)

The BP spill is tragic, but it's gotten me learning about oil drilling technology and history. Some nice sites by the NYTimes, which I think are generally much more interesting then their coverage of the political drama:

A graphical explanation of how the well was supposed to be plugged.

A reference describing the different attempts at stopping the leak.

A timeline of historical oil spills, with actual newspaper clippings from the events and descriptions of the legislation that followed each.

Also, quite depressing, is this innovative way of communicating to people exactly how large of an area is affected by the slick.

After all of this, I think (or at least hope) that we're all more educated about the technology underlying our massive energy infrastructure.

Trying to be a pragmatist, I keep looking at these diagrams (especially the ones that show how far underwater, and underground, the leaking well is) and thinking to myself, "is this really easier than windmills, seriously?" It's understandable (at least from a micro-economists perspective) that power companies with massive amounts of sunk capital would misrepresent the costs of a transition to cleaner technology, even if it would have large positive externalities. Interestingly, on this point, a recent NREL study suggests that the costs of stabilizing energy supply using wind and solar power have been exaggerated.

A major argument against more rapid investment in renewables provided by many energy experts has been that it is difficult to ensure a steady supply of energy when weather and daylight fluctuate. To me, this always seemed dubious, since the US is enormous and there are large anti-correlations in wind and cloud-cover across the country. It seemed that if panels and farms were distributed intelligently across space, we could take advantage of these known structures to provide a smoother power-supply to the country. All it would take is some planning, knowledge of meteorology and some cooperation among utilities. This is exactly the finding of the NREL study. They say that 35% of energy could be supplied by renewables without installing substantial backup capacity. All it would take is a little coordination.