By Amy Tourgee, guest blogger, Kent Place School alumna and Environmental Studies undergraduate at Princeton University
Every December, the holiday season is sure to bring us a lot of things: traveling to see family and friends, fighting the traffic and crowds at the mall, mailboxes stuffed with holiday cards and, of course, a deluge of movie releases. This year was no exception cinema-wise, and the end of the 2012 year was certainly filled with star-studded movies, but one movie in particular, Promised Land, caught my eye. You may not have been able to tell by the commercial – or you may have been distracted by the stars John Krasinski and Matt Damon – but the movie centers around the debate of hydraulic fracturing, not exactly a typical holiday topic.
Nonetheless, the topic of fracturing (or “fracking”) is a huge issue, one of much importance and controversy. The rise of hydraulic fracturing in recent years promises enormous economic benefits as well as equally enormous environmental drawbacks.
Here’s a short review of the cost benefit analysis of hydraulic fracturing:
Benefits: source of energy, energy independence for the U.S., low natural gas prices, job creation
Costs: air and water pollution, human health hazards, huge water consumption, earthquakes
Even to me, an environmental scientist, the benefits are very appealing despite the environmental issues. It seems to me that the costs and benefits are equally matched – and I just wonder, how you can truly evaluate them?
The Economic Lesson
To some degree, you can reconcile them! The risks of hydraulic fracturing are externalities – while they do not affect the producer of the good monetarily, they do influence the standard of living in society. If externalities were taken into consideration, they would shift the curves on the supply-and-demand graph, setting a new equilibrium. For example, the inclusion of fracturing’s negative externalities would show us that natural gas is being overproduced for the price being paid for it.
There are many obstacles that economists and scientists face in order to accomplish an economic analysis like this, such as putting a monetary value on environmental and health conditions. Hopefully, however, economists and scientists can work together to truly maximize the benefits and minimize the costs of hydraulic fracturing.