Saturday, November 17, 2012

Property Rights to the Rescue

Why did fracking arise in the US instead of somewhere else? Property rights, federalism and open access.

In the US mineral rights belong to the surface landowner. In other countries they belong to the government. This made possible experimentation that has not happened in other countries where all decisions about how to exploit under ground resources are made by the government.

The federal structure of regulation also made possible experimentation that was later adopted by other states.

Finally, the open access structure of our pipeline system also facilitated the use of the same network for different fuels.

Merrill also notes that fracking has been good for the environment and is one of the main reasons that the US, without the help of the Kyoto treaty, has actually reduced its carbon emissions while Europe's have remained flat and Asia's have increased. Gas is a threat to renewables but it is a great threat to Coal, which is the main source of greenhouse gasses.

More speculatively, the drop in prices from fracking may make the economically correct thing to do--the imposition of a carbon tax--politically feasible as well.

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