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Natural resource management following institutional shifts: case studies from agriculture and bitcoin
Gebben, Alexander C.
Gebben, Alexander C.
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2024
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Abstract
Economics helps to disentangle the complex interactions of markets, institutions, and natural resource management. In this dissertation, three examples of unanticipated changes to natural resource management strategies are evaluated using econometric methods.
In Chapter I, Southern Colorado farmers faced a threat of state-imposed well curtailment in 2006. A 43% decline of property values is estimated using hedonic methods. This facilitated collective action to manage water within the local community. The farmers implemented a self-imposed pumping fee that efficiently conserved water. Over time, this collective management restored long-term expectations for farm profit and led to a recovery in property values, although conservation efforts continue.
In Chapter II, the pumping fee is found to non-intuitively dampen the conservation efforts of the Conservation Reserve Enhancement Program. This program pays farmers to fallow land in environmentally sensitive regions. Land that would have been fallowed under the new pumping fee was disproportionately enrolled in the program. This resulted in 32% less water being conserved compared to a counterfactual, as found through difference-in-differences methods. The analysis also considers second-order conservation effects, including potential spillover effects on adjacent wells.
In Chapter III, the private adoption of bitcoin is found to influence the seemingly unrelated oil industry. Bitcoin mining creates a market for flared natural gas, which alters the regional distribution of returns to drilling. A model of bitcoin miners is developed, which is supported by empirical structural vector autoregression and nonlinear autoregressive distributed lag models. These identify an asymmetrical response to positive and negative bitcoin price shocks by miners. The model predicts a shift in drilling towards gas-rich basins without access to pipelines. United States oil producers are expected to see a net increase in revenue of 1.36% resulting from an increase in production of 0.55%. This demonstrates how the establishment of an innovative market can create ripple effects throughout the national energy economy.
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