Posts in Q&A

^{USGS image by David Pratt.}

As California’s drought enters its fourth year, more than 70 percent of the state is under extreme drought conditions. Just this week, the California Water Commission announced new lawn restrictions for development projects, limiting grass to 25 percent of the landscape. But such efforts amount to merely a drop in what is already a very dry bucket.

Like California, Australia recently experienced a prolonged period of drought. In response, Australia implemented several reforms to promote water markets that allowed water trading to occur across competing uses. But did it work? And if so, could California and other western states do something similar?

Jeff Bennett is an economist at Australian National University and a 2015 PERC Lone Mountain Fellow. He is also the author of the recent report from the Reason Foundation, How to Solve California’s Water Crisis: Lessons from Australia’s Water Reforms, examining Australia’s experience with water markets.

To learn more, we asked Jeff about water market reforms in the “Land Down Under” and what lessons we can learn to address California’s drought.

Q: With California and much of the western United States reeling from drought, some have pointed to Australia as a model for how to deal with water scarcity. What exactly has Australia done?

A: Australia’s water reforms have centered on the Murray Darling Basin, an area of more than 400,000 square miles in the southeast of the continent. Water in the Basin is used for irrigation and domestic use, but it also supports a wide range of wetland, river, and floodplain ecosystems.

Prior to the 1990s, water uses were heavily regulated by government agencies. The result was an over allocation of water for irrigation as politicians sought political favor from the farm sector and an inflexibility in the ways that water was used. Now, property rights to water have been clearly defined and an active market has emerged in which irrigators trade water rights.

The price of water is determined by the interaction of supply and demand. During a drought, as water becomes increasingly scarce, the price of water increases. In response, irrigators ration their use and invest more in water saving technologies. As the price rises to reflect increasing scarcity, less valuable uses of water are given up. For example, irrigated annual crops are not planted, and only the most valuable uses of water are continued. The process ensures that water is used as efficiently as possible.

At the same time, the over-allocation issue was addressed by establishing and funding an agency to buy back water rights from irrigators. That water is now used to provide “environmental flows” that sustain river ecosystems.

Q: Why did Australia move toward this market allocation of water?

A: The over allocation of the waters of the Murray Darling Basin to irrigation became apparent in the 1980s and 1990s. The lack of water began to cause the loss of wetland areas and forests of River Red Gums along the rivers. Increasing levels of soil salinity caused by excessive irrigation were also of concern. Hence, both farming and environmental groups began voicing their concerns about the management of the water resource.

However, it was the “Millennium Drought” of the 1990s and 2000s that brought the situation to a head. The unprecedented conditions brought about by the drought, on top of the stress already caused by over allocation, triggered widespread recognition that urgent action was required to ensure the survival of both the environment of the Basin and its farming communities.

Q: What have been the results of Australia’s reforms? Has it worked?

A: The market for water rights provides remarkable flexibility in the management of water for irrigated agriculture. It allows farmers to cope more effectively with both seasonal and annual variability in water availability.

The structure of irrigated agriculture is evolving in response to the reforms. Lower-valued uses of water such as irrigated pastures and grains have given way to higher-valued crops such as wine grapes and almonds.

So while the overall amount of water used in irrigated agriculture has declined as a result of the reforms, the value of production has remained relatively stable. In this regard, the reforms worked. The environment of the Basin has begun a ”repair” phase, and the early evidence suggests that wetlands and floodplain ecosystems have recovered—although this is harder to judge given that the reforms have so far been implemented across a sequence of relatively wet years.

Q: What were the responses to Australia’s reforms?

A: The crisis situation brought about by the Millennium Drought created a political context in which change was feasible. However, there were winners and losers from the reform process. Farmers who were freed to either buy or sell water did so because they were made better off by their actions. Buyers have built their enterprises to become more flexible and more profitable despite the higher prices of water. Sellers have either left the agricultural sector, downsized their irrigation operations, become more efficient in their use of water, or converted to dryland farming.

Many Australian farmers required that the reform package be “sweetened” by subsidizing some water conservation investments to ensure that production levels could be maintained. However, these sweeteners were not enough to placate some interest groups in the Basin. Protests against reform were mounted in towns across the Basin, citing concerns that some communities would be threatened by reduced irrigation activity on the surrounding farmlands.

It is true that population has declined in some towns. But these losses have not deviated from long-term trends of depopulation in small communities. Some regions have actually grown with the relocation of water rights and the consolidation of rural populations into larger towns.

Those concerned with the condition of the Basin’s environment have been overwhelmingly supportive of the reforms but continue to advocate for more government spending on the purchase of water rights from irrigators for environmental flows.

Q: What about Australia’s cities? How have they dealt with drought?

A: The water reforms implemented in the Murray Darling Basin have not been mirrored in the allocation of water in Australia’s major urban centers. Faced with supply shortages during the Millennium Drought, water supply authorities in cities such as Sydney and Melbourne resorted to use restrictions and supply supplementation investments.

Restrictions included time-of-day as well as use-type rationing. For example, watering of gardens using fixed hoses was initially restricted to night-time hours and then banned altogether. Major investments were made in desalination plants, and households were subsidized to install rainwater tanks and water-saving plumbing.

With the Millennium Drought now over and water supplies up again, these desalination plants are now unproductive, yet they still place tremendous financial burdens on their cities’ residents because of the need to run them in maintenance mode to preserve their reverse osmosis filters.

The costs of these investments have now been shown to far exceed the benefits they produced. Their impacts could have been achieved at far lower cost through the effective use of price as a means of rationing available supplies among competing uses.

Q: In terms of urban water use, what could be done to promote exchange between higher-value users and lower-value users?

A: The advantages of water trading in the Murray Darling Basin were not experienced by the people of Sydney, Melbourne, and other major urban centers.

People with high values from water use such as gardeners with prize-winning roses were treated just the same as those whose water use was inconsequential. Price was not allowed to act as a signal of water scarcity, and people were not able to react to that signal as they saw fit. Instead, bureaucratic processes dictated what could and couldn’t be done. Rose gardeners, therefore, had to carry buckets of water to their beloved plants, contributing to the emergence of a condition that became known amongst chiropractors as “bucket back.”

This situation could be addressed by allowing urban residents to react to changes in water prices. If the price of water was determined by the level of water in storage, those with high-valued uses of water could simply decide to pay the price while water savings would come from those with low values for water.

Reform would free up trade in water between urban and agricultural users. Given that the value for potable water in urban areas is generally higher than that generated by irrigated cropping, there are potential gains from trade between urban and rural users.

Q: Is Australia’s experience a model for California and other western states dealing with drought?

A: In Australia’s experience, water trading has proven to be a highly effective mechanism for dealing with drought. California and other western states would do well by taking on board the experience “Down Under” as a guide to what could be achieved and how.

The removal of bureaucratic allocation processes and the establishment of water markets in both irrigation and urban contexts would ensure the flexibility needed in drought conditions. Safeguarding the environment through the purchase of water rights from irrigators is also key strategy. It also ensures that irrigators are compensated for the loss of their rights to water.

However, even these environmental allocations should not be removed from the water market. Ongoing trades between consumptive water users and those responsible for environmental flows can be advantageous for all parties.

To read more, see Jeff Bennett’s report “How to Solve California’s Water Crisis: Lessons from Australia’s Water Reforms” at the Reason Foundation.

Meet Marti Hoffer, an enviropreneur whose passion for harnessing natural light to improve lives shines through in everything she does.

The founder of lumenomics, Inc., Marti is an alum of the 2014 Enviropreneur Institute, and the winner of this year’s Shark Tank competition. Our panel of judges – a venture capitalist, an enviropreneur, a conservation economist, and an environmental philanthropist – decided Marti’s project and pitch were the best to represent PERC’s Enviropreneur Institute at SXSW Eco in October. As a Springboard finalist for SWSW Eco 2014, we’re confident Marti and lumenomics will help people understand how enviropreneurs harness markets to enhance environmental quality.
        

Q. What was your very first job?

A: Pinning draperies. Working at Inside Outfitters, the company my dad started, I would use a small hand held tool to place pins in drapery. Envision using a stapler all day. You load staples and place the staple on the mark.    

Q: What did you gain growing up working in the family business?

A: Looking back I have gained HUGE respect for entrepreneurs who create jobs – whether it’s three jobs or three thousand. Somebody has to want to get up EVERY day and create opportunity. I happened to grow up with both parents who worked for themselves their entire lives. Imagine generating your own pay check with benefits EVERY day.

Q: When you walk into a new room or town, what's the first thing you notice?

A: The architecture and use of natural light.

Editor’s Note: This is true. It’s why we asked the question. It’s also why we loved having Marti at the Enviropreneur Institute. Her passion for what she does was evident from the very start when she introduced herself by saying “My name is Marti Hoffer and lumenomics could reduce PERC’s electricity consumption for this room by 31,468 watts a year.”

Q: What is your vision for lumenomics?

A: lumenomics will employ the best people in communities internationally and work with owners to design, install, and maintain spaces that squeeze every drop of natural light into their built environment.

Q. You’re using new technology to satisfy increasing demand with a virtually limitless resource. The growth potential must be huge. How big is this sector of the economy?  

A: Lighting is a $50 billion industry. At lumenonics, we focus on natural lighting design, a $200 million niche market. Some of my sector’s growth in recent years has been driven by energy regulations, but even setting regulatory compliance aside, daylight solutions have huge returns -- economic, aesthetic, and environmental. More and more people are simply choosing environmentally friendly construction, including natural light. I believe the future of daylight design is bright.

Q: What are some of your biggest challenges as a growing business?

A: Access to working capital and complying with regulation while competing with the leading brands.

Q. What -- in addition to your commitment to sunlight's energy efficiency and aesthetic value -- informs your business philosophy?

A: I like to keep the perspective that people want to work some place that’s about more than just earning a fair wage. People want a story that they can share in their community about who they are, what their company does, and what they do for the company. They want work that is meaningful and most people like to be challenged. To do meaningful work you need to have products – such as energy-saving window coverings or hybrid light technologies – that are serving real purpose in our every day lives.

Q. Why Seattle?

A: Why not Seattle?! Seattle has ocean, mountains, trees, mild temperatures, lots of opportunity... Actually, I moved here because Seatlle is on the cutting edge with lighting experts – like the researchers at University of Washington’s Daylighting Lab – who design with natural light and educate people about it. This is a technology town filled with early adopters who choose do the right thing with or without regulation, and independent of bottom-line ROI’s. If it serves the greater good and the environment, they do it.

Q: What was your biggest takeaway from the Enviropreneur Institute?

A: To be a steward of our environment and have longstanding impact, an entrepreneur must be able to translate a vision into a plan including the what, why, when, who, and how. To sustain the vision, an entrepreneur must find a way to generate a profit and create contracts that clarify ownership and responsibility – establishing clear incentives and transferable property rights.

Q: What surprised you most about your time in Montana?

A: I was overwhelmed by the earthly beauty of Montana in July. I decided right away to visit every year and found myself asking what is November through April like in Montana?   

Editor’s Note: Montana can be cold and dark from November through April (much like Seattle), but it is often snowy and beautiful, offering winter wildlife, snowshoeing, cross-country skiing, and downhill sports.

Q: What are you most looking forward to at SXSW Eco?

A: I look forward to understanding what business models are successful and why. I’m interested in learning what the competitive landscape for lenders and investors looks like.

Q: What advice would you give to other enviropreneurs?

A: Keep getting vertical. Establish a board of advisors/directors and have regular meetings. Start with a financial forecast that is vetted by an experienced CFO, and make sure you include a reasonable salary to pay yourself and other key roles to ensure your ability to execute on the forecast. Write a business plan that properly capitalizes the company and stick to it unless your advisory board/BOD agrees to change the plan. Identify priority #1 and stay focused on priority #1 until it is achieved.                                    
    

If you are an enviropreneur, consider joining Marti and PERC at SWSW Eco 2014, “one of the more eclectic mixes of start-ups, investors, tree huggers and policy wonks the world has yet dreamed up.” We look forward to connecting with other innovators and creators October 6-8 in Austin, Texas.

What's ahead for global energy markets? How will the U.S. shale revolution affect our energy future? To find out, we asked Stephen Arbogast, an expert with more than thirty years of experience in finance working with the energy sector. As Prof. Arbogast explains, when it comes to global energy markets, the next decade will look very different from the last four decades. 

Stephen Arbogast is an Executive Professor of Finance at the C.T. Bauer College of Business, University of Houston. In that capacity, he has authored more than 70 case studies on technical and economic aspects of the energy business. He is also the author of the book Resisting Corporate Corruption, now in its second edition. Prof. Arbogast has taught in graduate MBA programs since 1987 and was awarded the Bauer College Payne Teaching Excellence Award in 2008.

We thank Prof. Arbogast for taking the time to answer our questions. For more PERC Q&As, visit the series archive.

Q: You’ve said that when it comes to the geopolitics of energy, the next decade could look quite different than the last four decades. What do you mean by that?

A: The last four decades have been dominated by the operations of the OPEC cartel. With only occasional exceptions, this cartel has determined the general price level for crude oil. This price represents roughly two-thirds of the price of final products to consumers, so it is most consequential for the cost of energy in developed economies. The next decade could be different for two reasons. The first is the shale revolution. Right now, that revolution—unlocking oil and gas from tight rock formations—is catapulting the U.S. back to a position of world’s leading oil producer. What is not known is the extent to which this will spread to other lands. Many non-OPEC countries, including China, have vast shale resources. To the extent production surges outside of OPEC, the cartel’s dominance will certainly decline.

The second issue is more ominous and concerns a key OPEC member, Saudi Arabia. For decades the Saudis have operated as OPEC’s flywheel, absorbing production cuts in times of glut and expanding production to combat scarcity. Will Saudi Arabia remain much as it has been in the years ahead? Will it still be ruled by the extensive Royal House of Saud? One looks at Syria, Egypt, Iraq, Libya, and Iran and wonders.

Q: How has OPEC shaped oil politics in the past, and where are we headed?

A: In 1973, OPEC discovered it could dictate the short-term price of crude oil. The cartel saw that developed nation oil demand is quite inelastic over the near term. This means the cartel could and did dictate price to its customers. The result then was a 400% price increase that brought to the OECD nations. Over time, the cartel also learned that abrupt price hikes sow seeds of reversion. Price hikes to $40/b in 1980 led to a demand bust and price collapse below $10/b in 1986.

These experiences led OPEC, under Saudi leadership, to a price targeting strategy. The cartel seeks prices which balance several objectives. First, they must be high enough to generate current revenue to fund the political models in these states. These political models concentrate wealth in the state and purchase political support with generous handouts and subsidies. Second, the prices should not be so high that they trigger demand destruction undermining the price level’s foundation. Finally, they also should not encourage sustained efforts to replace petroleum with alternative fuels.

Surveying the history of price levels since 1973, it must be conceded that OPEC largely achieved these objectives. No alternative fuels “silver bullet” has emerged. Demand for petroleum has grown and most forecasts show it growing for decades to come. Only the shale revolution and regional political stability raise the possibility of shaking the cartel’s grip on the energy price.

Q: What role does Saudi Arabia play?

A: Saudi Arabia plays the role of “swing producer” within the cartel. This means the Saudi’s reduce production in times of glut and increase it during moments of peak demand. Cartels generally require some member willing to play this role—otherwise supply and demand excesses will drive prices to cyclical peaks and troughs.

The Saudis have unique characteristics that, alone among OPEC members, allow them to play this role. First, they possess huge oil reserves, estimated to exceed 200 billion barrels. This allows the Saudis to add production capability and maintain the spare capacity needed to cushion demand peaks. Second, the Saudi have a small population. Until recently that population did not exceed 20 million. This meant that the Kingdom could amass large financial reserves during periods of peak demand and prices. These reserves could then be drawn upon to fund domestic spending when slack demand required the Kingdom to cut production.

It is not as clear going forward that the Saudis will be able to play this same role. Despite their ample reserves, the Saudis seem to be having difficulty increasing production capacity beyond 12 million barrels per day. Much of their “spare” is less desirable medium and heavy crude that encounters refining bottlenecks during demand peaks. Meanwhile, a larger, more subsidized population has raised the cost of preserving social peace. Indeed, one can detect elements of domestic concern in the current Saudi hard line towards Syria and Iran.

All this said, the graveyards are full of people who prematurely forecast the demise of the House of Saud. The shale revolution, ironically, could pose more of a threat than disturbances among their neighbors if it undermines the crude price and pinches the Saudi paternalistic ruling model. 

Q: We’ve seen a number of sharp peaks and troughs in oil prices over the last few decades. How much of a role does OPEC play in driving or moderating these changes?

A: The answer here is a bit unconventional. OPEC has usually been divided into price hawks and a more moderate, long-term optimizing group. Before 1980, Iran and Libya led the hawkish group. During this period, they repeatedly succeeded in driving prices to peaks well beyond those envisioned by the more moderate, Saudi-led group. Between 1980 and 1985, a major showdown took place between the two factions. This climaxed with the Saudis flooding the market with production, leading to the price bust of 1986. Since then, Saudi price policy has largely reined. The cartel has effectively managed prices when its spare capacity lies within 3-6 mb/d. Since 1986, price booms and busts have largely resulted from demand “surprises” that moved cartel spare outside of this range. The Asian crisis of 1997 produced a demand bust that toppled crude prices in 1998-99. China’s stupendous demand growth then fueled a demand peak that led to record prices in 2008. The Saudis have tried to reinforce their capacity to manage demand by adding new production capacity. There are, however, widespread doubts as to whether the Saudis can expand beyond the present 12 mb/d level.

Q: What influence does OPEC’s price umbrella have on oil development throughout the world? What are its implications for North American energy development?

A: Somewhat perversely, it means that higher cost oil gets developed first. Much OPEC oil is very low cost. In particular, the reserves in Saudi Arabia, Iran, Iraq and Libya are easy to develop – largely onshore drilling of already discovered fields. Political constraints of various sorts, including war and civil unrest, combine with OPEC policy to prevent their development. Meanwhile, the international oil industry busies itself developing much higher cost oil in politically safer locations – tar sands in Canada and “pre-Salt” finds in deep water Gulf of Mexico. A single well in this later location can cost well over $100 million to drill. The average cost of production for tar sands, including a return on capital, is probably in the $65/b range

The implications for North America are interesting. The OPEC price umbrella has ultimately paved the way for North America to become self-sufficient. Both the Canadian tar sands and the shale oil production are economic at $80/b and higher. Assuming current price levels remain in place, North America’s economies should need no crude oil imports by 2020.

Q: What about unconventional energy sources? How do global markets affect these energy sources?

A: Global prices determine whether these resources can be economically developed.  The answer today for tar sands and shale oil is yes.

Logistics enter the picture at this point. One fascinating, recurring story in the energy business is that new oil and gas keeps showing up in unexpected places. Then it becomes imperative to put logistics in place to get the new production to market. Nobody expected new oil and gas production in places like Pennsylvania and Ohio. Similarly, little infrastructure existed in the Bakken and Eagle Ford basins; much of that in the Permian basin of West Texas was old or ran in the wrong direction. Pipelines adequate for new Canadian tar sands production don’t exist. These logistical bottlenecks suppress production for a time and depress current prices. This is the reason why West Texas Intermediate, the main U.S. benchmark crude, has carried a $5-15/b discount versus international prices for the past several years. Over time these logistical bottlenecks will be removed and the price discrepancies will disappear.

However, these kinds of infrastructure constraints will be big issues for other countries with shale oil and gas reserves. Here we are talking about countries as diverse as China and the Ukraine. There is vast potential elsewhere in terms of what’s geologically under the earth. In terms of infrastructure, however, these lands are way behind where the U.S. was as the shale revolution began. Together with other limitations, their inadequate infrastructures will delay the shale revolution from spreading globally.

Last we must say a word about shale gas. It is different from oil in that it is much harder to transport internationally. Liquefying the gas into LNG is the principal means, but this requires huge capital, massive facilities, and special ships. Those only get built when there are firm buyers and long-term contracts. Without these, new gas can be “stranded”—discovered but left in the ground. That is the story today with much U.S. shale gas. It needs export permits to find overseas LNG markets, but the Obama administration has been “slow walking” these approvals for various reasons. 

Shale gas developed overseas, say in China and the Ukraine, should find immediate uses in power, heating, and manufacturing. These countries are energy importers and use copious quantities of coal that can be replaced.

Q: What are the environmental implications of foreign vs. domestic energy production?

A: This is a tricky business. Domestic U.S. energy production increases the environmental impacts within the physical U.S. However, these efforts are intensively regulated. Even allowing for a major failure like the Deepwater Horizon, from a global perspective, energy operations in the U.S. will be safer and more environmentally sound than in many other energy producing locations. Globally, it’s better to have more production in the U.S. and less in China, Nigeria, or Angola. But, that will not satisfy the NIMBY crowds within our ranks.

Q: What impact will the U.S. shale revolution have on global energy markets and on the U.S. economy?

A: The shale revolution is an enormous breakthrough, but it needs to be carefully understood.  Let me outline three key points.

First, we are at the beginning of understanding this revolution. There is much we do not know. We don’t know how much “source rock” can be exploited worldwide in this way. In other words, we can’t yet estimate the total amount of additional oil and gas reserves now available through fracking and horizontal drilling. In addition, we don’t yet have a finished exploitation technology. Service companies and producers continue improving their methods. For example, some companies are fracking in the Eagle Ford without using water. All of these improvements mean that we don’t yet know the lowest production costs feasible for shale production. Obviously, the lower these costs and more flexible the methods, the more reserves can be exploited worldwide.

The second point is that the shale revolution poses major policy challenges for many countries.  The U.S. is in many ways “lucky” in that it has unique conditions conducive to shale development. In the U.S., private landowners own the mineral rights on their land. They can lease these to developers without having to get an approval from Washington. Also, regulatory activity is largely at the state level. The U.S. is fortunate to have a collection of states friendly to oil and gas production. Texas, Oklahoma, Louisiana, and Arkansas all gave immediate blessings to shale development. One only needs to look at Pennsylvania and New York to seek how different attitudes on this can be. The former is merrily supporting development and harvesting huge economic and fiscal benefits. The latter is happily preserving the quiet economic destitution of the western part of the state. It’s about these kinds of choices, but in the U.S. with its federal system, we are blessed with the opportunity to have different choices made in different places. Other countries are not so fortunate. Whether you are talking about China or the U.K., the central government controls the mineral rights. Local communities see no benefit from the inconveniences of development, and so are largely united in opposition. How these governments will change their current arrangements to share benefits with the local communities is a policy issue. Most of these policy choices have yet to be made.

Collectively these points mean that the U.S. is soaring ahead of everywhere else in shale development. This is bringing fantastic benefits to the U.S. economy, in no small part because the slowness of response elsewhere means the U.S. can go full-bore ahead without collapsing the price structure. If everybody was climbing aboard the shale revolution, prices would probably crater – dropping below that needed to support new drilling. If everyone started drilling for shale oil right away, we’d probably see $60/b oil that would stay there for some time. 

Because this is not happening, U.S. shale development can proceed to deliver both good returns to developers and stable prices to consumers – indeed some of the recent price moderation drivers are seeing at the pump is due to the bounty of light crude coming out of U.S. shale production. The benefits hardly stop there. State treasuries are being replenished. The federal government is drawing increasing revenue and royalties from production on federal lands. Cheap gas has reinvigorated energy-intensive manufacturing in the U.S. The number of new chemical plants announced and under construction is staggering. Our balance of payments benefits greatly. Oil imports are down sharply while exports of refined products, chemicals, and natural gas grow rapidly. Abundant natural gas is displacing environmentally dirty coal in power generation. Lastly, we have gained more protection and freedom of action in the national security arena. Physically our economy will not be touched by embargoes or outages in the Middle East, though prices will still be impacted. Plentiful gas gives us diversification options to cut exposure to global oil events further.

This brings us to the last point. We need to think of this revolution as a reprieve, not a permanent reversal. However abundant the shale reserves, they are still finite and subject to depletion. This means the search for other, renewable sources of energy must continue. When oil prices busted in the 1980s, much research into alternative fuels was abandoned. When efforts resumed around 2006, the research experts were long gone. This boom and bust cycle in energy research should not be repeated. Building subsidized industries that cannot compete under current prices is not desirable, but continuing to prepare for tighter supplies and higher prices down the road should be a good national investment.

This summer PERC welcomed 14 entrepreneurs from all over the world for its 13th annual Enviropreneur Institute. One of our enviropreneurs, David Hoffman, is an avid outdoorsman with a particular interest in air quality. He is developing a company devoted to measuring air quality based on a network of optical sensors. He holds a doctorate from Montana State University, where he focused on the design, construction, and deployment of a high spectral resolution LIDAR for atmospheric aerosol observation.

DAVID HOFFMAN

Q: Could you describe the technology you are developing?

A: I am currently developing technology to measure air quality based on the intensity of sunlight observed by a network of LED-based sensors on the ground.  This network will provide a map of air quality.  Such a map could be used by people to make decisions based on the health impact of the air they will be breathing at different locations on any given day.

Q: How do these sensors measure air quality?

A: The sensors measure air quality by recording the intensity of sunlight and comparing the observed intensity to the intensity that should be observed if the air is clean.  The incident solar radiation is observed at multiple wavelengths, which allows for the determination of the size distribution of particulate matter in the air, as well as the detection of certain trace gasses.  The particulate matter and trace gas information can be used to make inferences about the quality of the air.

Q: What’s the status of the project?

A: At the moment, I am refining and testing the technology, developing a business plan, and seeking potential investors.

Q: What challenges lie ahead in creating market incentives for measuring air quality?

A: People are interested in the quality of the air they breathe because it has a significant impact on their health and quality of life.  Many large industrial and mining facilities are under pressure (from the EPA, concerned citizens, and other groups) to curb their emissions of harmful chemicals and particulate matter.  I am tailoring my product (spatial mapping of air quality) to these two markets. I believe that a significant incentive already exists to better understand and monitor air quality.

Q: How do you see this new technology changing the way people respond to air quality?

A: I see individuals making daily decisions based on their new-found knowledge of air quality.  For example, they may choose to recreate in a location where the air is better, rather than risking their health by recreating in a location with dangerously bad air.  People may choose to keep their kids indoors if the air at their location becomes dangerously polluted. Additionally, large industrial sites will be able to better keep tabs on their emissions, which will help them to comply with existing clean-air standards.

Q: What did you take away from PERC’s Enviropreneur Institute that will help you develop your project?

A: The Enviropreneur Institute provided me with the tools I need to get an environmentally friendly business off the ground.  I learned how to use market forces to solve environmental problems such as a lack of adequate air quality information.  The mentoring provided by the Institute faculty and the other enviropreneurs has proven invaluable in all aspects of my project.

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