Tuesday, February 27, 2007

Save lives - sack the economists

An amusing piece from Gristmill's Gar Liplow who has a good rant against economists with Lomborgian tendencies (or maybe just all economists).


Ranking suffering
One of the subtlest and most dangerous flaws haunting environmental analysis is the tendency to view the world as some sort of moral health club. The world is not a series of tests; it is an imperfect place we do our imperfect best to make better.

Bjørn Lomborg, for example, loves to point out you can save more lives per dollar by funding clean water or mosquito netting than by fighting global warming. Economists and statisticians deal with the hard choices -- for other people anyway. I notice Lomborg never suggests that people would be better off donating money to UNICEF than buying copies of his books, or paying his speaking fees. I've never heard of a study comparing the benefits of funding economics departments at universities to mosquito nets; maybe we could get by with one-third of the economists, and use 66 percent of the money we currently spend on various types of economics to help save the lives of poor people.

I expect economists would answer back indignantly that you could find money for mosquito netting lots of other places before you cut back on their departments. Economic studies provide valuable benefits, information we need. And they would be right. (If I was in a mood to provoke I would ask to see analysis showing they provide net benefit, given all the harm incompetent and dishonest economists do.) Fundamentally it is an unfair question.


Now that is what I call a good old fashioned blog post. The article continues in a similar style.

Which third of economists should get the boot first? That is the question.

International Trade, Georgraphy and Specialisation: Empirical readings

The following link to a webpage maintained by Professor Marius Brulhart (Lausanne) provides an excellent link for those interested in the broader "international trade" and "spatial economics" literature. I begin teaching a related course tomorrow.

Whilst we have worked on the boundary between trade and the environment there are issues covered in this excellent list of papers (with download links for some papers) that provide food for thought. I believe a couple of my own papers sneak in here as well.

The link has also been placed in the "education" sidebar. Papers are listed under the following topics: Where is the trade and environment policy category we ask?

International Trade, Geography and Specialisation: Empirical Evidence

1. INTRODUCTION
1.1 Theory: From Ricardo to Krugman
1.2 Empirics: Overview

2. DESCRIPTIVES: SPECIALISATION AND TRADE VOLUMES
2.1 Trade Structures
2.2 Sectoral Specialisation / Geographic Concentration
2.3 Geographical Clustering of Firms

2.4 The Gravity Model and Border Effects

3. ANALYTICAL EMPIRICS: TESTING THEORIES
3.1 Regressing Specialisation on its Determinants
3.2 Testing Neoclassical Trade Theory: Leontief, Etc.
3.3 Testing the "New" Trade Theory: The Home-Market Effect, Etc.

4. POLICY-RELATED ISSUES

4.1 Trade and Wages
4.2 Geography, Agglomeration and Regional Inequality
4.3 Trade and Factor-Market Adjustment

Quick Facts: "Renewable Resources"

Over at PlanetArk they post the occasional "FACTS" article. These are useful educations pieces for those that want quick and dirty information on a topic.

I post it here in full for the record (and file it under the Education and Energy labels).

The "Facts" include:

What are renewable energies?
How long have renewable energies been around?
What are the advantages of renewable energies?
What the the disadvantages with renewable energies (economics related)?
What are the disadvantages with renewable energies (other)?
What does the future for renewable energies look like?

Conclusion: all comes down to economics. At the moment the cost is too high - how long will be this situation last? Probably a lot longer than most people believe.

What Are Renewable Energies?

* WHAT ARE THEY?

-- Renewable energies occur naturally and can be tapped again and again, unlike fossil fuels such as coal or oil, which take millions of years to form and can only be used once. Renewables include firewood, hydro, wind, solar, geothermal and tidal power.

-- The main renewable energy used worldwide is "biomass", mainly firewood or organic waste which is a main source of energy for more than two billion people in developing nations.

-- Biomass, which includes biofuels as a tiny fraction, accounted for about 10 percent of world primary energy use in 2004. Second was hydropower with a 2 percent share. Other major types of renewables -- wind, solar, geothermal and tidal power -- made up just one percent. By contrast, fossil fuels supply about 80 percent of world energy.


* HOW LONG HAVE THEY BEEN AROUND?

-- "Biomass is the oldest form of renewable energy exploited by mankind, mainly in the form of wood burnt to provide heat and light," the International Energy Agency (IEA) said in a review.

-- The Ancient Egyptians harnessed the wind for sailing perhaps 5,500 years ago. Windmills have operated for centuries -- from the Netherlands to Spain, where Cervantes' fictional hero Don Quixote attacked some after mistaking them for giants.

-- Hydropower turbines were first used to generate electricity in the 1880s. Hydropower has been used for hundreds of years in watermills.

-- The sun is the basis for life on earth. Bell Laboratories in the United States patented the first solar cell based on silicon in 1955 -- exploiting photovoltaics to change sunlight into electricity. Another form of solar power -- concentrating the sun's rays to provide heat -- led to solar-powered steam engines in France in the 1860s.

-- Countries such as Iceland have long exploited hot water from geothermal sources. Italian engineers were first to tap geothermal power to generate electricity in Larderello in 1904.

-- France opened what is still the world's biggest tidal power plant in 1967 at La Rance, Normandy. Water is held back by a dam at high tide and drives turbines as the tide falls.


* WHAT ARE THE ADVANTAGES?

-- Clean energies don't run out and can be tapped in many parts of the world, meaning they can help governments break dependence on imported energy.

-- Some renewable energies -- wind, solar and waves -- don't produce the greenhouse gas carbon dioxide (CO2). Others -- plant-derived fuels which are burnt such as biomass and biofuels -- only produce the same amount of CO2 that those plants originally absorbed. This is a critical advantage over fossil fuels like oil and coal for combatting climate change.

-- The U.N.'s climate panel said in a Feb. 2 report that carbon emissions from burning fossil fuels were "very likely" to be the main cause of global warming in the past 50 years.

-- Clean energies do not release other toxic pollutants associated with burning fossil fuels, and they do not have the risks or waste storage problems involved with nuclear power.


* WHAT ARE THE DISADVANTAGES?

-- Cost. Many renewable energies cannot compete without subsidies against fossil fuels, even with oil at US$60 a barrel.

-- The renewable energy lobby points out that the fossil fuel industry itself gets big subisidies and does not include the social cost of its greenhouse gas emissions.

-- Big improvements in competitiveness in recent years mean renewables are catching up with fossil fuels, with on-shore wind for example now broadly competitive.


* OTHER DISADVANTAGES:

-- The wind does not blow all the time, meaning windmills have to be backed up by other forms of electricity generation. Some people object to windmills, for instance, as eyesores.

-- Hydro power dams can cause huge disruptions -- more than one million people were forced to leave their homes by China's Three Gorges Dam, the biggest hydro project in the world.

-- The sun does not shine all day and solar power is best tapped in a "sunbelt" near the equator.

-- Geothermal power is often expensive to tap because of drilling costs.

-- Tidal power projects disrupt marine life in estuaries, only operate at falling tides and have to operate with only a few metres (yards) drop.


* WHAT IS THE OUTLOOK?

-- The IEA projects that renewables will gain overall to supply 13.7 percent of world primary energy by 2030 from 13.2 percent in 2004, in a scenario based on current trends. If governments do more to promote them, the share could rise to 16 percent.

-- The IEA reckons many renewable energies will have strong growth -- from a tiny base. But A decline in poverty would curb use of biomass as more people in developing nations get connected to electricity grids, often run on fossil fuels.

-- The European Renewable Energy Council and Greenpeace issued a 2007 report projecting half of all energy could come from renewables by 2050, with the biggest shares by then for wind and solar power followed by hydro, biomass, geothermal and ocean energy.

Monday, February 26, 2007

Oil Drum on Discounting

A long essay on the evolution of the discount rate. There are some interesting points raised in this rather left-field analysis.

The interview to start the article off is highly amusing but I suspect depressingly representative. Neoclassical economics also gets a kicking.

The whole Peak-Oil brigade post a lot of "interesting" stuff for those that like conspiracy stories - this is one of the better, but still amusing, posts.

There is also a great "evolutionary" cartoon in there as well.

Climate Change, Sabre Tooth Tigers and Devaluing the Future
The debate on the realities of both climate change and Peak Oil has moved from 'are they real?' to questions concerning timing, magnitude and impact. At the same time, expanding research in 'temporal discounting' in economics (called 'impulsivity' in psychology), is shedding light on how steeply we value the present over the future, a trait that has ancient origins. Knowing this tendency, how can we expect factual updates on peak oil and climate change to behaviorally compete with Starbucks, sex, slot machines, and ski trips?

Science is rapidly increasing our knowledge about the planet. To affect change however, we must become equally knowledgeable about ourselves. The time has come to integrate ecological science with insight about human behavior derived from new findings in anthropology, hunter gatherer studies, evolutionary psychology and the neurosciences. Below the fold is an overview on human discount rates, their evolutionary origins, and their relevance to the mitigation and adaptation to climate change and peak oil.

Here is a nice little definition and take on discount rates for all those Stern Report readers out there who want to know what all the fuss is about:
Everyone is familiar with the 'discount rate' in the financial markets. It's the rate that the Federal Reserve charges its member banks. Its also the rate that a stock analyst might use to discount a companies future earnings stream back to the present. Imagine a company whose entire business plan is to sell a product in 10 years – say at the Olympics – they make no money until then but a lot of money in that one year, say $100 million. How much would investors pay for this company? Certainly something less than $100 mil, as that money wont come for 10 years. They would determine what the risk was of actually getting that $100 mil 10 years hence, then determine what an appropriate rate of return would be, say 15% per year. Discounted at 15% per year, $100 mil is $24.75 mil- that is what they should be willing to pay. So in this example, the discount RATE is 15% and the discount FACTOR is 24.75%, or how much something in the future is worth today. The higher a discount rate the lower the discount factor will be. A discount rate approaching 1, means things in the future have no value at all in the present moment. A discount rate of zero means that $1 dollar in 2050 is worth $1 today.

The original neoclassical assumption was that the discount rate curve was exponential, meaning that we discounted the same from period to period. Actual economic experiments however show that the shape of the discount curve is hyperbolic, or as Harvard economist David Laibson prefers quasi-hyperbolic. This means that the early periods have much steeper discount rates than later periods. Laibsons research indicates that peoples discount rates are 12% during days 0-5 but drop to 4% in days 20-25. We REALLY prefer the present.


Hat-tip: Gristmill.

Friday, February 23, 2007

Cross-boundary pollution: China's sand (and toxic dust) on the move

Hot on the heels of a post on the impact that Chinese rubbish is having on neighbouring countries comes news that Chinese sand is causing even greater cross-boundary pollution problems. Whilst sand causes problems enough, when it is mixed with toxic dust it makes for a damaging cocktail.

Such sandstorms are blamed for "scores of deaths and billions of dollars worth of damage". There is no doubting the economic impact of the problem.

Choking Sand Storms Head for South Korea
SEOUL - South Korea said a pall of sand mixed with toxic dust from China could make its way to the Korean peninsula late on Thursday, starting a seasonal event blamed for scores of deaths and billions of dollars in damages.

The sand storms have been growing in frequency and toxicity over the years because of China's rapid economic growth and have led to increased tension with neighbours South Korea and Japan.
../
The dust, which originates in the Gobi Desert in China, picks up heavy metals and carcinogens such as dioxin as it passes over Chinese industrial regions, before hitting North and South Korea and Japan, meteorologists say.

Dry weather and seasonal winds in China hurl millions of tonnes of sand at the Korean peninsula and Japan each spring.

South Korea used to have yellow dust storms about four days a year in the 1980s, nearly eight days a year in the 1990s and over 12 days a year since 2000, the Environment Ministry said.

The state-sponsored Korea Environment Institute said the dust kills up to 165 South Koreans a year, mostly the elderly or those with respiratory ailments, and make as many as 1.8 million ill.

Annual economic damage to South Korea from the storms is estimated at between 4.2 trillion won to 5.5 trillion won ($4.47 billion to $5.86 billion), according to the institute.

When a storm hits, skies turn a jaundiced hue. Schools shut down and warnings are issued for the young, elderly and those with respiratory ailments to stay inside. Commercial aviation can grind to a halt.

Hynix Semiconductor Inc., the world's second-biggest maker of computer memory chips, said it has to step up its filtration systems to keep the air clean at its sensitive production lines in South Korea.

China is likely to suffer more severe sandstorms than normal this spring because of an unusually dry winter, the country's media reported in January.

Beijing, which had 17 sandstorms in the spring of 2006, has pledged to hold a sandstorm-free Olympics in 2008 and has begun campaigns to repair denuded land and rein in over-grazing and over-logging.

Interesting to see that China only addresses these issues when they are in the spotlight. Such moves also go to prove the man-made nature of the problem. Over-grazing is all linked to tragedy of the commons related issues.
South Korea said in December it has reached a deal with Mongolia and China to set up more monitoring stations for dust storms. Environmentalists said it will take a huge amount of money to contain desertification in China's arid regions.

Here in lies the problem - there are many theoretical economics papers that look at this sort of issue. It is good to see a good real life example trans-boundary pollution and how hard the solution will be to find.

Thursday, February 22, 2007

Europe fights back: No more free IKEA plastic bags for Americans

Swedish furniture store IKEA, that is gradually taking over the living rooms of the lower middle classes across the globe, has decided to strike at the heart of America by charging 5 cents for a plastic bag.

As the first US retailer to take such a step it is to be applauded. Environmental education takes time. However, (1) 5 cents is a rather small percentage of the cost of a wardrobe or fancy shelving unit and (2) plastic bags are rather practical for carrying all those nik-naks that one sees piled into those large yellow bags.

It will interesting to see if the figures change from the 70 million bags that are currently given away once the 5 cents charge comes in. IKEA's aim is to half that number and then to eliminate disposable plastic bags altogether. Although an economist might argue that 5 cents is not going to tip many consumers over the "marginal" edge, IKEA claim that bag charging has reduced UK consumption by 95%. Impressive. I suspect the charge in for UK citizens is greater than 3p (roughly equivalent to 5 cents at current exchange rates).

It is interesting, but perhaps not surprising, to hear that the US is behind most of the rest of the world including Rwanda and Bangladesh on plastic bag legislation.

Ikea to Charge US Customers for Plastic Bags (PlantetArk).

PHILADELPHIA - Sweden's IKEA will charge US customers five cents for disposable plastic shopping bags in what the international furniture giant said on Wednesday was a first step to ending their use altogether.

IKEA said the decision to stop giving away free bags to customers aimed to reduce the estimated 100 billion bags thrown away by all US consumers each year.

IKEA is believed to be first retailer in the United States to undertake such a program, according to National Retail Federation spokesman Scott Krugman.

Concern about widespread pollution caused by the bags has led cities and countries from Ireland to Australia and Rwanda to ban their use. Bangladesh outlawed plastic bags after they blocked drains and contributed to flooding. Taiwan uses 80 percent fewer bags after stores began charging for them.

Environmentalists say the bags add unnecessarily to landfills, clog drains and endanger wildlife.

IKEA currently provides some 70 million free bags to its US customers; it expects to cut that by half in the first year and to eventually eliminate the use of the bags.

The company said it will also cut the price of reusable bags to 59 cents from 99 cents to encourage their use. The program will begin on March 15 at the company's 29 US stores and the money from bag sales will go to American Forests, a conservation group.

Last June, IKEA began charging its U.K. customers for plastic bags, and has reduced its bag consumption by 95 percent, said spokeswoman Mona Astra Liss.

The average American family of four throws away about 1,500 single-use polyethylene bags, which do not degrade for around 1,000 years, IKEA said. Less than 1 percent are recycled.

"We believe Americans are starting to be more conscious of the environment," Liss said. "Our objective is to get people to really think about the impact of the bags which are strangling the planet."

Wednesday, February 21, 2007

Carbon Offsetting: absolving our climate sins

A good post from Ecological Economics (thanks for the pointer):

I to remain sceptical of the whole carbon offsetting business - there is something vaguely unsavourary about the whole set up.

Carbon Offsets: Modern Day 'Indulgences'?
Carbon offsets are the modern day indulgences, sold to an increasingly carbon conscious public to absolve their climate sins. Scratch the surface, however, and a disturbing picture emerges, where creative accountancy and elaborate shell games cover up the impossibility of verifying genuine climate change benefits, and where communities in the South often have little choice as offset projects are inflicted on them.

This report argues that offsets place disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. Promoting more effective and empowering approaches involves moving away from the marketing gimmicks, celebrity endorsements, technological quick fixes, and the North/South exploitation that the carbon offsets industry embodies.

PDF of the full report HERE.

Along similar lines is this excellent spoof from Celsias about a new site called "cheatneutral".

Carbon offsetting: is it cheating?
At cheatneutral.com, you’re encouraged to reduce incidences of cheating on your partner, but if you cannot (for reasons beyond your control), you can offset your cheating by investing in a single celibate person, or a monogamous couple.

What is Cheat Offsetting?

When you cheat on your partner you add to the heartbreak, pain and jealousy in the atmosphere.

Cheatneutral offsets your cheating by funding someone else to be faithful and NOT cheat. This neutralises the pain and unhappy emotion and leaves you with a clear conscience.

Can I offset all my cheating?

First you should look at ways of reducing your cheating. Once you’ve done this you can use Cheatneutral to offset the remaining, unavoidable cheating.


An excellent idea - I think I know plenty of economists that could be funded to remain faithful (the majority not through choice).

Cross-boundary pollution: China's rubbish hits the beaches

There is a large literature in environmental economics that looks at the economics of cross-boundary pollution although it is usually theoretrical and concerns air pollution and the location of factories etc.

This story from China is a good example of a new type of cross-boundary pollution.

Taiwan Rankled By China Litter Washing Up On Beaches
KINMEN - It's been decades since artillery shells landed on this strategic frontline island at the height of the China-Taiwan civil war, but now a new battle rages as garbage from the Chinese mainland washes up on Kinmen's shore.

Bottles, plastic bags, rags and effluent from China is washing up on the otherwise pristine beaches of the Taiwan-controlled, sub-tropical island of Kinmen, better known in the West as Quemoy.
../
Wind-driven ocean currents from China's booming coastal city of Xiamen, only about 2 km (1.25 miles) away, bring garbage across a sea channel that decades ago was the scene of fierce fighting between China and Taiwan during a protracted civil war.

The problem gets worse when it rains, as storms bring extra-large onslaughts from the mouth of the nearby Jiulong River in China.

../
Kinmen residents aren't the only ones complaining about trash from their bigger neighbour. China's refuse also contaminates seawater and fouls the air in Japan, South Korea and Hong Kong.

South Korean fishermen have complained about polluted waters, and their government is investigating pollution from China in the Yellow and East China seas, said Park Sun-yong, an official with the fisheries ministry.

"There is no border in the sea, so we cannot say how much water pollution is coming from China," said Park.

"However, we're investigating with China on the Yellow Sea's environmental condition."

Seoul and Tokyo have also complained about dust storms that blow in from northern China in March and April almost every year. Eroded soil from China's over-grazed and deforested north-central plains adds dust to storms that originate in Mongolia.

In Hong Kong, many suspect the city's near-constant haze originates in the heavily industrialised Pearl River Delta region of southern China. Recent reports also say pollution is threatening Hong Kong's mangrove trees.

Any clean-up will take an international effort, a Beijing-based environmental expert said, since the pollution comes in part from at least 60 foreign firms and an unknown number of Taiwan and Hong Kong firms with factories in China.

"Things are complex, because China is manufacturing to the rest of the world," said Ma Jun of the non-governmental Institute of Public and Environmental Affairs in Beijing. "I myself believe that pointing fingers is not the way to deal with this."

../
Back on Kinmen, local officials say they mention the trash to China whenever they meet counterparts in Fujian province, across the straits from the Taiwan province.

But the Chinese say it's not their problem, said Lee Shang-ren, a tour guide and environmental volunteer.

This final quote shows the extent of the problem - will China say the same thing when pressed on global warming?

Tuesday, February 20, 2007

Making Globalisation Work: Stiglitz podcast

The Timesonline have today released a podcast of Joeseph Stiglitz's speech on the "Making Globalisation Work".

Today's article in the Times disucsses the podcast.

Globalisation must make fewer malcontents

From the orginal piece:

Globalisation has been a double-edged sword. To those able and willing to seize the opportunities and manage globalisation on their own terms, it has provided the basis of unprecedented growth. China and India, two countries with, together, 2.4 billion people, have for more than a quarter century been growing at historically unprecedented rates with hundreds of millions of people moving out of poverty. They have taken advantage of globalisation of knowledge and globalisation of markets.

Included in the transcript is some excellent "globalisation" material on how globlisation can be made to work.

For this blog however, I just draw out his comments on "Global Warming":
I spend some time in the book talking about global warming. Global warming is, of course, our most important global environmental challenge. The reason I do is because it illustrates the problems of global governance, the difficulties of the international community getting together to solve the collective problems that face us. I argue in the book that one of the essential problems is that economic globalisation has out-paced political globalisation. Economic globalisation means that the countries of the world have become more integrated. As they become more integrated, they become more inter-dependent. As they become more inter-dependent, there is greater need for acting together, for collective action. But we have not developed either the institutions or the mindsets that enable us to act together collectively, effectively, democratically.

This is becoming of critical importance as we face the problem of global warming. Even if we solve the world’s economic problems; if our environment continues to deteriorate, if the dangers that the scientific community has pointed out are realised, it may be for little or naught. In the book, I outline what can be done. The United States claims that it cannot afford to do anything about global warming, to cut the emissions of greenhouse gasses that have contributed so much to global warming. But that is not the case. There are countries – in Europe, Japan, all around the world - with emission levels that are but a fraction of those of the United States per dollar of GDP and they live just as well.

The issue is not whether the United States can afford it. The issue is that not paying attention to this important, what economists call, externality imposes costs on others which the United States doesn’t pay. And that gives American producers a competitive advantage over other producers. That is an unfair advantage.

The WTO was created to ensure that there was a level playing field, and being able to produce with high levels of greenhouse gas emissions is effectively a hidden subsidy. What I try to argue is that this kind of subsidy should no longer be allowed and explain how, within the WTO framework, there are actually provisions suggesting that this is not allowed. The United States imposed tariffs against shrimp that were caught in nets that resulted in the killing of turtles that were an endangered species. When Thailand objected, it eventually went to the appellate body of the WTO and they sustained the United States’ position. The United States’ position was that environmental issues trump these other trade issues and that it was unfair to allow Thailand to continue to catch shrimp with these turtle-unfriendly nets.

But, if it is permissible to impose a trade restriction – trade sanctions in effect – to protect an endangered species of turtle, surely it is permissible to use trade sanctions to save our planet. In the book I lay out a variety of other reforms that would go a long way to addressing the problems of global warming.


The book Stiglitz refers to is:

Friday, February 16, 2007

Wolf's Climate Change Forum: Economics of Stern

In light of the previous posts on this blog related to the economics of climate change and specifically the economics of the Stern Review Martin Wolf and his panel of invited guests make some interesting comments.

In spite of economic sceptics, it is worth reducing climate risk

In the public at large, including sizeable sections of the business community, a new consensus on climate change has emerged: it is happening; it is important; and something needs to be done. The publication last week of the latest assessment from the intergovernmental panel on climate change and discussions at this year’s annual meeting of the World Economic Forum in Davos made the growing agreement on all these points plain. Yet there is one group among whom dissent reigns: economists.

It was to them, above all, that Sir Nicholas Stern’s review on the Economics of Climate Change was addressed. It has failed to persuade. So much the worse for economists, the environmentally minded will declare. I disagree. Economists are trained to address the costs and benefits of alternative policies rigorously. Scientists are not.

What then do economists object to in the arguments for early and forcible action to halt the increase in the stock of greenhouse gases? In essence, they make three arguments: first, the Stern review has exaggerated the economic costs of climate change; second, it has underestimated the costs of mitigating emissions; and, third, it has employed the wrong discount rate for relating near-term costs of mitigation to the costs of continuing on our present course.

Other participants include Jeffrey Frankel, Lawrence Summers, Paul Seabright, John Williamson, Andrew Oswald, Stephen Cecchetti and Claude Henry.

The are some excellent points raised in particular by Claude Henry and Paul Seabright. Essential reading and I am sure many of these points will be raised at the up coming Workshop here at Birmimgham.

Mankiw on Prescott on Globalization

This little post by Greg Mankiw on this blog struck a cord. As well as teaching environmental economics I keep my hand in with some postgraduate international trade.

The Martin Wolf book (see book of the week) does an excellent job in explaining why, although seemingly a thankless task, it is something economists must do. Bhagwati has also been ploughing this furrow for many years (see bookshop).

Here is Greg's post:

Greg Mankiw's Blog: Prescott on Globalization

Nobelist Ed Prescott writes in today's Wall Street Journal (subscription required):

Of all the thankless jobs that economists set for themselves when it comes to educating people about economics, the notion that society is better off if some industries are allowed to wither, their workers lose their jobs, and investors lose their capital -- all in the name of the greater glory of globalization -- surely ranks near the top.

Yes, tell me about it.


The link above is to Greg's paper in the Journal of Monetary Economics titled "The politics and economics of offshore outsourcing" with Phillip Swagel.

I seem to recall reading this when it came out as a working paper which should be freely available through the usual channels. The Economists at Nottingham University have also written widely on this topic. See a previous post on this blog HERE.

Thursday, February 15, 2007

Weitzman Review of the Stern Review Book

Of the recent posts on Stern (see below) the Weitzman book review is academically excellent (as you would expect).

The Stern Review of the Economics of Climate Change [PDF]

Weighing in at 22 pages it provides a comprehensive analysis of the Stern Review book (see below).



Ecological economics blog provide a good summary of the Weitzman review.

Workshop Warm-up: Climate Change Commentary

On the 12th Feb Greg Mankiw posted a quick summary of some of the more recent views on Stern and climate change.

All three articles are interesting and should contribute to the discussion at the workshop next month here at the University of Birmingham on the Economics of the Stern Review.

Climate Change Commentary
Economists Joe Stiglitz, Nicholas Stern, and Martin Weitzman have new pieces on global warming. The most interesting (as well as the most technically demanding) is the one by Weitzman. His conclusion: "The Stern Review may well be right for the wrong reasons."

Workshop on the Economics of the Stern Review

A lot has been written on the Stern review on this blog and many others. The Department of Economics and the Institute for Energy Research and Policy both at the University of Birmingham have now put together a Workshop on the Economics of the Stern Review on the 9th March 2007.

The Workshop includes some of the most influential economists working in this area (see below). The panel and floor discussion promises to be a lively affair. See the post below for registration details etc. Places may be limited.

Contact David Maddison if you have any questions.

Invitation to attend a workshop on climate change

Birmingham University’s Department of Economics and the Institute for Energy Research and Policy are holding a one day workshop entitled “The Economics of the Stern Review”.

The workshop will be held in the European Research Institute of the University of Birmingham and is billed as an academic debate between the proponents and opponents of the Stern Review of the Economics of Climate Change.

The workshop takes place on Friday 9th March at 0930–1745. More details including information about the speakers can be found by visiting the workshop website: www.economics.bham.ac.uk/seminars/stern/index.htm

The speakers of the workshop and a summary are included below:


The Economics of the Stern Review

There have been numerous economic analyses of climate change of which the Government commissioned Stern review is merely the most recent. But whereas earlier reports recommended what some environmentalists would regard as surprisingly modest reductions in GHG emissions, the Stern review advocated far more ambitious cutbacks. The findings of the report were quickly embraced by political leaders of all the main parties in the United Kingdom. But in the months following its release a number of economists in Europe and the US have expressed their doubts regarding the Stern Review.

The purpose of this workshop is to understand why Stern emerges with policy prescriptions which appear to differ from those supplied by previous economic analyses of the climate change problem. Did earlier analyses neglect important aspects of the climate change problem which Stern has managed to address or has the economic and scientific literature upon which they relied moved on? Or is the case that the Stern Review itself is in some respects deficient? The workshop brings together leading members of the Stern Review, contributors to the Review process and economists who have been openly critical of the Stern Review.

Date and time

Friday 9th March 2007 at 0930-1745.

Venue

The European Research Institute, Pritchatts Road, University of Birmingham, Birmingham B15 2TT

Workshop fees

Staff and students of the University of Birmingham FREE

Staff and students of other universities £50

All others £200

You can pay the workshop fee at the University of Birmingham online shop by clicking here and scrolling down to “Department of Economics”. You will need a credit card. Note that places are strictly limited and that we cannot unfortunately accept payment on the day.

Schedule of events

09.30 Welcome

09.35 Dimitri Zenghelis (HM Treasury)

10.30 David Maddison (University of Birmingham)

11.15 Coffee and Biscuits

11.45 Dennis Anderson (Imperial College London)

12.30 Lunch

13.30 Richard Tol (Economic and Social Research Institute Dublin)

14.45 Cameron Hepburn (University of Oxford)

15.30 Coffee and Biscuits

16.00 Panel Discussion

17.00 Open Floor Discussion

17.45 End of the Workshop

Organisers

The workshop is being organised by the Department of Economics and the Institute for Energy Research and Policy, University of Birmingham.

For more information please contact David Maddison on +44 (0)121 414 6653 or d.j.maddison@bham.ac.uk

Wednesday, February 14, 2007

Valentines day special: On the carbon footprint of red roses

This post is for economists on this Valentines day.

Whilst the headlines are about the huge carbon footprint of red roses imported from Kenya when economists examined the costs more closely it was clear that once heating costs etc. were taken into account it was better for the environment to buy them from Africa than next door in the Netherlands.

Lovers left to count the cost of Valentine's Day bouquet

UNDER the bright African sun, the cut comes before the rose blooms. On the banks of Lake Naivasha, Craig Oulton, manager of the Flamingo Homegrown farm is preparing to light up a Scottish lover's heart.

The stems cut today by Craig and his staff, across the Kenyan farm's vast acreage, are whisked to the pack house, graded for size and quality, packed in a cold store then rolled out on to lorries for the one-hour drive to Nairobi airport. They are then flown 4,333 miles to Heathrow, where they are collected by companies such as Flower Plus or Zwetsloots for delivery to a supermarket or florist near you.

According to Michael Buick of Climate Concern on the difference between flowers from Holland and flowers from Africa:

"You have to keep in mind that these figures do not represent life cycles of the flowers, so you cannot make assumptions about their comparative carbon footprints. Studies have compared producers from Holland and Africa. One of the points that came out was that while the flowers may travel further, those produced in Holland were grown in greenhouses that had to be heated using gas burners, so in reality they had a far larger footprint."

Mr Buick added that the carbon footprint of a bunch of flowers would be so small as to represent just a few pennies. Yet the pennies mount up. The British flower market is worth £2.2 billion each year, the equivalent of £36 per person, of which £28 is spent on flowers and £8 on plants. This is a rise of £28 per person since 1984, however we still lag behind Europe whose average spend is between £60 and £100 per person. Scots, however, are particularly passionate about their blooms, while only 8.7 per cent of the population, we account for 12 per cent of flower sales.

Each year Britain imports £315 million worth of flowers, while exporting just £16 million. The government's latest Official Trade Statistics show that in the past three years the quantity of flowers from the Netherlands has fallen 47 per cent from 177,000 to 94,000 tonnes a year. Imports from Africa have risen 39 per cent to 17,600 tonnes. They have gone up 200 per cent since 1998. Kenya's flower exports to Britain are followed by those of Colombia and Spain.

Yet consumers are on the horns, or should that be thorns, of a dilemma. The air may be polluted with more plane fumes, but African nations are benefiting from each bouquet. In Kenya, the nation's profits from flowers are the fourth-largest generator of foreign exchange after tea, coffee and tourism. Ethiopia has seen its business begin to blossom with exports to the UK rising from just one ton in 2003 to 130 tonnes last year.

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"Research proves that growing flowers overseas, where the light is brighter and the air is warmer, uses less fuel - including the air freight - than growing them in Europe," said Andrea Caldecourt of the Flowers and Plants Association. "It gives employment, plus education and medical services, to often impoverished rural regions which would otherwise rely on charity handouts to survive."

Yet the environmental lobby is concerned about the cost of "flower miles". Friends of the Earth points out the rise in greenhouse gases produced by air freighting bouquets of flowers thousands of miles, as well as the use of chemicals and water in cultivation. A spokesman for the FoE said that the flowers were dead and suggested instead that the public grow their own gift.

Yesterday, as Valentine's Day approached, an orange glow shone through the mass of white plastic greenhouses which stretch for miles along the shores of Lake Naivasha - the lights shining as the farm workers pick the roses 24 hours a day to feed the European market.

"Light Pollution Conference": Do we want to reclaim the night?

A little off beat for this blog but with urban sprawl the problem of light pollution is growing. Is it a problem? I suspect more research needs to be done looking at the psychological effects of the 24 hour lit society.

One phrase I heard this morning was a complaint about the "Rottweiler security lights" that are increasing being stuck onto the sides of houses to blind would be burglars (or simply to show them the way in).

Conference on light pollution
An NSCA conference, entitled 'Tackling light - can we reclaim night?' and all about light pollution and managing its impacts, will be held this week on 14th February at the Institute of Physics, London W1:

Our increasingly 24 hour economy calls for more lighting for longer - for amenity, safety, decoration and entertainment. However, excessive or misdirected light impacts on the local and wider environment.

Since the inclusion of light in nuisance legislation1, NSCA is experiencing increasing enquiries from local authorities and the public concerned about lighting - however most transport facilities - often a source of intrusive lighting - remain outside the law. This topical conference brings together professionals with the expertise to address these concerns.

At Light Pollution, Managing the Impacts, delegates will learn more about impacts of inappropriate or excessive light and current and future legislative and technical options for managing that impact. It provides an opportunity to support work towards the integration of lighting into policy making at local and national level.

China's Environment: Problems and Policies

New paper just published by Alistair McBean in "The World Economy". All interesting background material although I have not read the full paper yet.

China's Environment: Problems and Policies

Abstract

Historically, rapid growth has produced environmental destruction. China is no exception. Because of its huge and growing population, 20 years of over nine per cent per annum growth, a history of neglect and adverse geography, China faces crises. Floods devastate in the south while droughts afflict the north. One in three of China's rural people lacks safe drinking water. China suffers air pollution, deforestation, loss of grasslands, and species, erosion, encroaching desert, acid rain, dust storms that engulf cities such as Beijing and can carry far abroad. It has 16 of the 20 most polluted cities in the world. Environmental degradation grows and China's development is threatened by it. Water shortages have hit industries and factories have been shut by energy crises. The costs of cleaning up the environment will grow still greater if prompt and effective action is not taken. China's government recognises these problems and developed laws and institutions to protect the environment, but at grassroots level they fail to be implemented because local governments value short-term gains in growth and jobs over a better environment. The international community can help, but only China can deal with the problems.

Monday, February 12, 2007

"Trash Exports": Comparative Advantage or Exploitation

For every "globalisation is good for the environment" story there appear to be another 10 that don't shed such an attractive light on this topic - such is the role of the media. However, one needs to carefully study the economics of trash a little more closely.

The news that the West exports high quantities of trash and has done so since the 1960's and 1970's kind of passed me by even though I have been working with detailed trade statistics for years.

I suppose this is because I find it hard to percieve that it can be cost effective to transport rubbish half way around the world. In the international trade and economic geography literature transport costs (iceberg costs) are an important element in modelling international trade patterns. The gravity model result that distance matters is a cornerstone of the emprical trade literature.

So how does the trade in trash fit with the theory. The answer is that this is no ordinary trash. This is a good article and is thus posted in full.

This article is from ChinaDialogue.

Waste exports: the underside of globalisation

Sky TV recently reported that the world's largest container ship, the Emma Maersk, had arrived in south China’s Lianjiao, laden with 170,000 tonnes of rubbish. The local economy has relied on waste recycling for years. As a result, fumes can be seen pouring out of Lianjiao’s chimneys, its rivers are blackened, its soil is contaminated, its water is polluted and trash can be seen piled up like mountains. The story has ignited controversy in both the UK and China.

But this is not a new phenomenon. Western nations started exporting waste to developing countries as early as the 1960s and ‘70s, with disastrous consequences. In August 2006, a boat chartered by a Netherlands-based firm dumped hundreds of tonnes of toxic waste in the Ivory Coast, killing seven and hospitalising 24, with almost 40,000 people suffering to some degree.

The overwhelming opinion of online commentators is that this demonstrated how western countries adhere to double standards with regard to the environment. But waste dumping is not carried out by nations: it is carried out by corporations.

But how can it be economic or profitable? Ah, the avoidance of environmental regulations. The Pollution Haven Hypothesis is alive and well. But, China also gains a raw material - but at what costs?
Exporting trash has allowed firms to earn money from governments in the developed world, cutting government costs and avoiding local regulations, while the exporters earn an additional income from selling the rubbish. At the same time, developing countries get a source of raw materials. China is the world's second largest consumer of plastic; one tonne of synthetic resin costs 11,000 yuan (around US$1,420), but a tonne of imported plastic, discarded in the west, can be bought for as little as 4,000 yuan (around US$515). The work of sorting the waste is hard and dirty, but for many it is more lucrative than the alternative. “We’re poor, so we still have to,” explained one interviewee. “If we plant crops, we can only earn around 2,000 yuan (around US$260) every year. But this work pays much more quickly: as much as 800 yuan (around US$100) every month.”

When there is this kind of profit to be made, there will always be someone willing to risk others’ health by importing trash, and many more who will endanger their own to sort it: it is simple economics.

A nice quote - we now have some "value of statistical life" stuff thrown in there.
Or is it? If the UK had weaker environmental laws, money could be made processing waste there, and nobody would export rubbish to China. Trash ends up in China because developed countries have more robust green laws, greater social supervision and more effective governments; high fees associated with waste processing and pollution emissions have made it uneconomical to process the trash locally.

But the low cost of waste processing and the large profits to be made in China make it a lucrative industry. Meanwhile, government oversight is weak and punishment is mainly in the form of fines that go directly to government rather than compensating the victims of pollution. As a result, companies and individuals involved can keep on polluting.

Globalisation benefits both developed and developing nations, but environmental laws and their enforcement are weaker in poorer countries. This gives richer nations a chance to export their waste and pollution. The economic and environmental differences are, in essence, the result of underdeveloped systems.

Globalisation increases the interaction between different systems, and exposes the gaps between them. In the same way that less-developed systems attract unregulated and risky investments, they also attract waste.

Governments, businesses and the international community should make a sustained effort to prevent the continuation and expansion of this serious problem.

International agreements that invoke the authority of a third party should be implemented. Sponsored by the United Nations or global environmental groups, such agreements would reduce the potential for harm to developing countries. The third party should also be able to help with the costs of environmental protection.

It is also important to control those factors that allow this unregulated trade. In this particular case, the UK government should bear responsibility for not implementing international agreements, take its rubbish back and discuss more effective systems for managing the international flow of solid waste with the Chinese government. Similarly, China should increase the cost of waste production and waste imports to reduce the price differentials: only this can get to the root of the problem. Otherwise, this issue will become intractable, and more problems will arise.

The Chinese government recognises the harm caused, and a law on solid waste is being rushed through the legislative process. Laws and regulations should be enough to improve the management of imported waste and reduce its environmental harm. But many have concerns about their effectiveness; waste processing and plastics are still highly lucrative industries, and the companies at the heart of the industry may just relocate.

The most basic and important measure is to build the public into the new systems. In the west, it is social pressure that blocks interest groups, keeps the government in line and pushes for strict environmental policies. Public movements inspired by environmental disasters in the 1960s and ‘70s led to a solid environmental protection system and a tradition of public oversight of the environment.

NGOs such as Greenpeace, the media, strict laws and responsible local governments must all play a part in helping China's environment to ensure that situations like this do not continue to arise.


Some good economic analysis in this piece that provides food for thought.

Research on Globalisation and Economic Policy at the University of Nottingham

Today I presented our most recent paper at the The Leverhulme Centre for Research on Globalisation and Economic Policy at the University of Nottingham (hence the lack of posts).

The Economics department at Nottingham has a large number of academics and researchers (and external fellows including yours truely) working in the broad area of "Economics of Globalisation" and an excellent working paper series the GEP research paper series.

They also hold a number of workshops and seminars as well as hosting visitors from around the world.

A full list of this year's seminars can be found here "GEP seminars".

Our paper was: "Multinationals, Foreign Ownership and the Environment: Firm Level Evidence for Argentina". This will hopefully appear on our research webpages soon "Globalisation and the Environment" and is part of a series of papers looking at the issue of whether multinationals are good or bad for the enviroment of developing countries.

The next event of note at the GEP centre is next week when Jim Markusen gives the Nottingham Lectures in International Economics.

The Nottingham Lectures in International Economics
Three Lectures To Be Given By
Professor Jim Markusen, University of Colorado at Boulder
On

‘Multinational Firms’

“Interacting Factor Endowments and Trade Costs”
20th February at 4pm in Room A39 Sir Clive Granger Building

“Teaching the Locals New Tricks: The Effects of Foreign Firms and Foreign Experts on Domestic Wages and Productivity”
21st February at 4pm in Room A40 Sir Clive Granger Building

“Offshoring and Outsourcing of Business Services: Lessons From the Modern Theory of the Multinational Enterprise”
22nd February at 5pm in Room A40 Sir Clive Granger Building

All interesting topics.

Polluters vrs Olympics: This town ain't big enough for the both of us

News that Beijing's largest polluter has packed its bags and is moving on out leaving an inevitable trail of job losses, broken dreams and cleaner air for the world athletes to breath in 2008.

Whilst positive for many you cannot help but marvel at events that would be most unlikely to happen in a functioning democracy. Imagine how this would be fought tooth and nail by different lobby groups of different kinds in the West.

This is almost an economics free story except for the high costs paid by the previous employees of the steel mill. They must rue the day that China won the rights to hold to Olympic games. The good public relations price is often a high one.

End of Era as Beijing Polluter Leaves Town

BEIJING - Beijing's worst polluter, the Shougang Iron and Steel Group, is packing up and leaving Beijing to help clear the air for the Olympic Games in 2008.

The city has pledged to clean up its polluted air and restore its once-legendary blue skies in time for the games, China's coming-out party to the world. It is spending billions to clear plants like Shougang's from the capital. But the departure of Beijing's greatest industrial icon is also the end of an era, and the human toll may rival the financial cost.

Only about 10,000 of Shougang's 82,500 workers will be employed at new plants. Many of the others face early retirement, and most haven't been told where they will be placed.

China's state-owned heavy industries provided housing and clinics for workers, schools for their children, and pensions for retirees. Most even had a company newspaper.

Now, the cradle-to-grave system known as the iron rice bowl is being dismantled.

"At first it was hard to accept, but now people have gotten used to the idea," said Yue Wenhui, plant manager at a furnace that will shut later this year. He does not yet know if he will have work at one the new facilities.

"It's up to the leaders to decide how we are arranged. Of course, I am pretty eager to be sent to Caofeidian because it will give me a chance to work with the newest stuff."

Shougang is building a new, state of the art plant at Caofeidian on the nearby coast, and has already begun operations at another campus in neighbouring Hebei Province.

White collar workers will mostly stay in Beijing, while blue collar workers will shuttle out to work for several days at a time at the new plants.

Their families will stay in Beijing, where schools and jobs are better and where retirees can chat in the sun with coworkers they've known for a lifetime.


CLEANING UP

Shougang is China's sixth-largest steelmaker, and its vast campus to the west of China's capital belch thick smoke and a evil smell.

China's cities are cloaked in pollution so heavy it whites out the sky and dims the sun. Its rivers have long stretches of dead water, and millions of Chinese suffer from lung diseases, birth defects and other effects of a poisonous environment.
Planners are toying with the idea of shutting all factories near Beijing for two months before and during the Olympics, to ensure the city shines. Shougang will have shuttered most, but not all, of its Beijing facilities by 2008.

Shougang has already closed some of its worst-polluting plants -- including the hulking blast furnace No. 5, which was built in 1959 at the height of China's Great Leap Forward, when Chairman Mao mobilized his country to industrialize as fast as possible. It roared continuously until mid 2005.


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In moving to new locations, Shougang will also upgrade its plants to be more energy efficient, use less water and emit less pollution. At the same time, it will produce more higher grade steel and less of the cheap construction steel that has glutted China's market.

Shougang will spend 60 billion yuan on the Caofeidian portion of its move alone. It will get a tax holiday during the transfer.

Friday, February 09, 2007

Regulations and Deforestation: 1000 words

From the Greenpeace website.

The photo below won 2nd prize in the 'Contemporary Issues' section of the world's permier photo competition.

The photo shows an area of the Amazon that has been cleared to make way for Soya plantations. The lone tree in the photo is a Brazil Nut tree, protected under Brazilian law.





This picture tells so many stories. First, it enables the viewer to get a handle on the scale of the land clearance in Brazil - the straight lines giving a feel for the efficiency with which it is done. Second, the lone Brail Nut tree saved from the chainsaws. Did they really leave all Brazil Nut trees? What about when nobody was looking? There is also something faintly absurd about cutting down vast swathes of the Amazon with the knock on effects for global warming and yet going to all that effort to save a single Brazil Nut tree.

Somehow this picture summerises the environmental mess we are in/ getting into.

Paul Volcker: curbing global warming need not "devastate economy"

After many years of Macroeconomic/ Time series econometric seminars changes in the chairman of the Fed always get a mention and none more so that the Volcker regime.

It is good therefore to see "financial legend" discussing the US attitude to global warming. Nothing like a bit of rational economics to bring some much needed light to the darker reaches of the global economy. From the International Herald Tribune.

This is one of the best articles I have read for a while for its sheer simplicity and ability to get to the heart of the matter. Whilst Volcker's comments are hopefully common sense to readers of this blog it should be noted that Volcker is a respected and once powerful "financial legend".

Will his speech make any difference? Almost certainly not.

Economist Paul Volcker says steps to curb global warming would not devastate an economy
CAIRO, Egypt: Measures to reduce global warming would not be devastating economically and the United States has been "particularly delinquent" on the issue, Paul Volcker, the former chairman of the U.S. Federal Reserve, said Tuesday.,

Speaking to the American Chamber of Commerce in Egypt, Volcker said the argument that taxes on oil or carbon emissions, for example, would ruin an economy was "fundamentally false."

"First of all, I don't think (such a step) is going to have that much of an impact on the economy overall. Second of all, if you don't do it, you can be sure that the economy will go down the drain in the next 30 years," Volcker said, referring to the impact forecast by a U.N. report last week.

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Volcker told some 200 Egyptian and foreign business executives that he had been surprised by the warm winter in New York and the cold weather in Cairo, where temperatures dropped to 48 F (9 Celsius) on Tuesday. "Global warming seems to be catching up with us pretty quickly," he commented.

What may happen to the dollar, and what may happen to growth in China or whatever," he said, raising his voice, "pale into insignificance compared with the question of what happens to this planet over the next 30 or 40 years if no action is taken."

"The scientists seem pretty well agreed that (global warming) is still potentially manageable if we act decisively, beginning now into the next decade or so, by taking measures that are technically and economically feasible."

Leadership had to come from the United States, "and I don't see much evidence of that happening at the moment," said Volcker, who as Federal Reserve chairman in 1979-87 applied politically unpopular measures that brought U.S. inflation under control.

The United States, which produces about one-quarter of the world's greenhouse gases, is widely criticized for refusing to ratify the Kyoto Protocol, a 1997 pact that requires industrial nations to cut global-warming gases by an average 5 percent below 1990 levels by 2012.

Volcker said taxes either on emissions or on petroleum could be effective in reducing global warming, although it would be difficult to reach an international consensus on the desired levels.

"It's an area where in my view the United States has been particularly delinquent," he said, adding it would be wiser to impose a tax on oil, for example, than wait for the market to drive up oil prices. A tax would give the government "some leverage that you can use for other things."

Asked why Americans were so reluctant to act on global warming, Volcker said in an interview afterward that he puzzled over the same question.

"I think any democracy has difficulty focusing on a problem which is not a crisis today but, with a high degree or probability, is going to be a major problem 10, 15, 20 or 30 years from now." This was particularly the case when people feared, exaggeratedly in his opinion, that the immediate effects of tackling the problem would be adverse.

"A lot of people in the United States haven't been convinced that it's a problem. Now I think that is changing. The evidence is becoming so strong that may be we are building a base for a political understanding that hasn't been there before," he said.

It is worth repeating one line from this article:
Asked why Americans were so reluctant to act on global warming, Volcker said in an interview afterward that he puzzled over the same question.

Aren't we all.

Thursday, February 08, 2007

Environmental Regulations: Is the gap between developed and less developed countries growing or shrinking?

A stylised fact that underlies a large swathe of the "globalisation and the environment" literature is the premise that environmental regulations differ across countries (or indeed regions within a country). An often used assumption in empirical papers is that there is a strong correlation between income and regulatory stringency (including some element of regulation enforcement).

This assumption then allows researchers to see whether firms are relocating from high to low regulation countries - a fairly intuitive hypothesis even if evidence is somewhat harder to come by.

This recent FT article talks about the regulatory regime is Europe. If regulations in the West increase but remain the same (or are at least still as poorly enforced) in LDCs then one might expect to see more pollution haven consistent behaviour of firms.

What is interesting is just how poorly enforced regulations have been in the West. No wonder governments in LDCs find it tough especially given the relatively high levels of corruption.

Goal is a level and clean playing field
Environmental regulation has been tightening in many regions of Europe as concerns grow over pollution and climate change.

Tighter UK regulations mean companies face much heavier fines than in the past. Company directors can be held personally liable for pollution and face jail terms or anti-social behaviour orders if they breach environmental regulations. Individuals can be fined up to £5,000 for failing to dispose of waste correctly.

Changes were brought in partly because companies were ignoring the previous system of fines. There were cases of companies taking payment for disposing of waste, then dumping it in fields because the fines were so small they could pay them and still make profits.

Now, the UK has a "pretty tough regime", said Brian Hall, head of the environmental group at Clifford Chance, the law firm..

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As some environmental crimes can cross borders, the European Union has been trying since 1999 to find ways of plugging loopholes between the national legal systems. But, national sovereignty in this area is a sensitive topic. While the European Commission tabled a proposal in 2001, it was ignored when justice ministers adopted their own plan in 2003. The Commission went to court to prove it should have been involved and won at the European Court of Justice last year.

Whether governments agree, by majority voting, to accept its new directive depends on how close it is to their original proposal. It prescribes minimum penalties for the most serious crimes, those in which those liable were negligent and caused death or acted as part of a gang. They extend up to 10 years in prison.

Fines for companies or other institutions should be between €750,000 ($971,000, £493,000) and €1.5m. Only those governments that wish to recognise the criminal liability of people acting for a company need do so, however. Other penalties include winding companies up, excluding them from aid and forcing them to clean up.

"Criminal sanctions are not in force in all member states for all serious environmental offences even though only criminal penalties will have a sufficiently dissuasive effect," the directive says. Spain and Greece apply civil law only to the illegal shipping of waste.

Elsewhere in the world, there is a mixed picture on enforcement. The dumping of waste, ranging from toxic to radioactive material, in developing nations is an increasing problem. China has been cracking down on some polluters - for in-stance, PetroChina was handed its biggest fine last month, according to the Xinhua news agency - but critics complain that the law is too weak.

India claims to have good environmental laws but campaigners raised an international controversy over conditions in shipbreaking yards there, when France tried to send the Clemenceau to India for disposal

Getting a world wide agreement on regulations is next to impossible. Europe would be a start.

Wednesday, February 07, 2007

China to be a Net Importer of Coal

The fact that coal contributes to air pollution and global warming is undisputed. What is worrying is the sheer amount of coal currently being used and how much will be needed in the future. China remains a serious challenge to the West's desire to see global emissions reduced.

ANALYSIS - China May Swing to Net Coal Imports by Year End

HONG KONG - China, the world's top coal producer and consumer, may swing sooner than expected into a net importer of the fuel by the end of 2007, a move that will boost prices and step up competition among Asian energy importers.

Chinese coal output is not growing fast enough to power an economy expanding at an annual rate of more than 10 percent, especially as oil prices are high and Beijing is closing small mines for safety and environmental reasons, analysts say.

"China will be a net importer of coal this year," said Paul Markowski at Global Research Partners.

That view was echoed by international coal traders and producers although some in China were more cautious.

"In the long run, we do believe China will be a net importer, but not this year," said an official at one of the country's top coal producers. "The economy is still very strong. We need enough coal to fuel the economy."

China is also rushing ahead with an ambitious programme of port expansions, to be able to take in larger vessels from overseas coal producers.

This suggests China will be able to absorb some of the huge growth in low quality Indonesian coal output projected for 2007, bullish news for the global coal market and for rival producers in countries such as Australia and South Africa.

South African producers have already benefitted from the drying-up of Chinese exports over the past few months. Indian buyers who rely on Chinese or South African coal told Reuters recently there is no Chinese coal available this year.

Chinese demand is growing as its power capacity expands and generators burn more coal. The trend is likely to continue despite growing domestic worries over the environment as coal remains readily available with a third of world reserves in the Asia-Pacific region.

"Coal is cheaper than oil on a btu (British thermal units) basis...Many companies have dual power generation equipment. With oil prices above US$40 per barrel, they are switching from diesel to coal," Markowski said.

Official data showed Chinese raw coal output climbed 11.9 percent to 2.07 billion tonnes last year -- but Chinese total coal-fired power generating capacity jumped 23.7 percent to 484.05 gigawatts.

Markowski told Reuters Chinese monthly net coal imports might reach as much as 2 million tonnes by the end of this year, partly due to the deficiences of the railway systems in moving coal from the producing north to the consuming south.

Indonesia should be able to supply more coal to China in the near future, partly offsetting smaller anthracite exports from Vietnam following the introduction of export taxes there.

Indonesia plans to boost thermal coal production by about 10 percent in 2007 to 196 million tonnes.

Asia's demand for coal is rising as high oil and gas prices spur more coal-fired plants.

"China will have to buy from everywhere else, competing with India or Japan. I think it is going to be a big problem," a further analyst said.

"Now they will not just stop exporting to Japan and Korea, but they will be competing with Japan and Korea," he said.

Now stop and imagine the environmental implications.

London Calling: Uk to host climate change meeting for Economists

Again, Gordon Brown is showing his green credentials by getting Stern to gather parliamentarians and economists from around the globe to discuss the economics of climate change.

On a somewhat smaller scale we are also holding a workshop here at the University of Birmingham on March 9th on the Economics of the Stern Report. More details to follow soon.

Britain to Host Climate Change Economics Meeting

LONDON - Britain will later this year host a meeting of politicians and economists from around the world to discuss the costs of climate change, chief government economist Nicholas Stern said on Tuesday.

Stern is the author of a report that last October warned that the costs of delaying action on global warming could be 20 times higher than acting now on areas such as curbing the burning of fossil fuels.

"It's a gathering of parliamentarians and economists from different countries to talk through the issues," he said of the planned conference which is likely to take place towards the end of the year.

Finance minister Gordon Brown has asked Stern and Colin Challen, chair of the UK All Party Parliamentary Climate Change Group, to organise the event.

Tuesday, February 06, 2007

Global Warming to Hit the Poorest Hardest: News?

It what can hardly be considered a shock new item the UN Secretary-General Ban Ki-moon told environment ministers from around the world on Monday that it will be the world's poor, who are the least responsible for global warming, will suffer the most from climate change.

I suspect the worlds ministers are only to aware of this fact, especially those from the richer nations that are doing a lot of the polluting.

However, it can only be good news that the WTO is putting sustainable development to the top of the agenda.

Global Warming to Hit Poor Worst, Says UN's Ban
Experts say Africa is the lowest emitter of the greenhouse gases blamed for rising temperatures, but due to its poverty, under-development and geography, has the most to lose under dire predictions of wrenching change in weather patterns.

Desertification round the Sahara and the shrinking of Mount Kilimanjaro's snow-cap have become potent symbols in Africa of the global environment crisis.

Trade Agreements and the Environment: Will the Revived Doha Round help?

The WTO obviously believe that gloablisation is good for the environment.

INTERVIEW - Free Trade can Help Guard the Environment - WTO
Proposals in the revived Doha Round of free trade talks could help protect the environment if governments agree to a deal at forthcoming negotiations, the head of the World Trade Organisation (WTO) said on Monday.

Can it be that simple? The primary solution seems to be to cut subsidies and tariffs on environmental goods.
Measures to cut farming and fisheries subsidies will stop overproduction while others will lower tariffs on environmentally sound goods and services, Pascal Lamy said on the fringes of a major UN environment meeting in Kenya.

So with the environment so high on the agenda does this mean that Doha Round will succeed this time? The solution, as ever, lies with the US along with the EU and Japan this time.
Experts say the key to a deal lies in getting deeper US cuts in farm subsidies, which poor nations say give farmers there an unfair advantage, and in securing similar reforms from the EU, Japan and other big importers on farm tariffs.

I for one will not be holding my breath.

Monday, February 05, 2007

China's national plan for climate change

From Reuters via Development Crossing.

China preparing national plan for climate change
BEIJING (Reuters) - China is preparing its first plan to battle climate change, a senior policy adviser said, stressing rising alarm about global warming in a nation where economic growth has gone untethered.

Zou Ji, a climate policy expert at the People's University of China in Beijing, told Reuters the national program will probably set broad goals for emissions and coping with changing weather patterns.

It is likely to be released this year after at least two years of preparation and bureaucratic bargaining, he said.

In reaction to the recent IPPC report:
"As a responsible great power, China won't evade its duty," Pan told the paper. "There's tremendous pressure to reduce emissions, but this won't be solved overnight."

Zou said the program was awaiting approval from China's cabinet, or State Council, after being vetted by over a dozen ministries and agencies, but preparations for a major Communist Party congress later this year may slow its release.

The dilemma facing President Hu Jintao is how to translate concern into policies that deliver growth and jobs while cutting fossil fuel use and greenhouse gases, said Alan Dupont, an expert on climate change and security at the University of Sydney.

"The whole stability of the regime and, as Hu would see it, the future of his country, depends on the continuation of economic growth of 8 and 9 percent," Dupont said.

"But the realization is dawning on them that China will not get to where it wants to go unless it deals with climate change."

In China's secretive, top-down government, few major policy shifts are advertised beforehand. But there have been growing signs that Beijing is worried about how global warming could frustrate ambitions for prosperity, stability and influence.

Climate experts have been preparing a presentation on global warming for China's top leaders, the first time one of their regular study sessions will be devoted to climate change and a sure sign the issue is climbing the political ladder, said Zou.

It is good to see some positive progress although this article makes it clear that the over riding factor as always is "economics" with jobs and growth remaining the priority. At least other considerations are being thrown into the policy making pot.

Interdependence and Pollution Havens

This research paper extends traditional pollution haven analysis to consider quite rightly spatial effects. Anecdotally spatial spillovers are intuitive and it is good to see empricial reseach emerging.


Assessing the Pollution Haven Hypothesis in an Interdependent World
Date: 2007-01
By: David Drukker (StataCorp)
Daniel Millimet (SMU)

URL: http://d.repec.org/n?u=RePEc:smu:ecowpa:703&r=env

After proposing a simple theoretical framework to illustrate the importance of third-country effects in empirical studies of the Pollution Haven Hypothesis, we test the model using state-level panel data on inbound US FDI and relative abatement costs. Our analysis reveals that while own state attributes rarely have statistically significant effects on own inbound FDI when aggregated over all manufacturing sectors, many neighboring state attributes do matter. Moreover, the theoretical model does well in explaining FDI in the chemical sector; we tend to find significant effects in the correct direction of variables designed to reflect market demand and production costs. Finally, we consistently find a negative impact of own environmental stringency on inbound FDI in the chemical sector; the impact of neighboring environmental stringency is also statistically significant, but the impact is negative on average, contrary to our initial expectations. Nonetheless, the fact that the impact of more stringent environmental regulations spillover across states indicates that future research into the validity of the PHH must account for spatial spillovers.
Keywords: Foreign Direct Investment, Environmental Regulation, Spillovers, Spatial Econometrics
JEL: C31 F21 Q52

Sunday, February 04, 2007

"IPCC draft report in FULL": Embargo Broken

With the release on Friday of the IPCC Policymakers summary comes news that Junkscience.com have released their 2006 copy of the second draft of the full IPCC report that the recent summary is based upon. There are some serious megabytes of report available to download.

Officially we still have to wait another few months for the full and final edited report. It is a surprise therefore to see an embargo on earlier drafts broken by Junkscience.

Below is their argument for this release.

As everyone is probably by now aware, Friday, February 2, 2007 marks the release of the IPCC's political document: Assessment Report 4, Summary for Policymakers. The media seem to be operating under the misapprehension this is equivalent to the release of IPCC Working Group I Contribution to the Intergovernmental Panel on Climate Change Fourth Assessment Report: Climate Change 2007: The Physical Science Basis -- this is regrettably neither true nor even close to the truth.

Bizarrely, the actual report will be retained for another three months to facilitate editing -- to suit the summary! IPCC procedures state that: Changes (other than grammatical or minor editorial changes) made after acceptance by the Working Group or the Panel shall be those necessary to ensure consistency with the Summary for Policymakers or the Overview Chapter (Appendix A to the Principles Governing IPCC Work, p4/15) -- this is surely unacceptable and would not be tolerated in virtually any other field (witness the media frenzy because language was allegedly altered in some US climate reports).

Under the circumstances we feel we have no choice but to publicly release the second-order draft report documents so that everyone has at least the chance to compare the summary statements with the underlying documentation. It should not be necessary for us to break embargo and post raw drafts for you to verify a summary of publicly funded documentation (tax payers around the world have paid billions of dollars for this effort -- you own it and you should be able to access it).

Reluctantly then, here is the link to our archive copy of the second-order draft of IPCC Working Group I Contribution to the Intergovernmental Panel on Climate Change Fourth Assessment Report: Climate Change 2007: The Physical Science Basis. The second-order draft was distributed in 2006, 5 years into what has so far been a 6 year process and these copies were archived last May.


We would be interested to know what other bloggers think of this break of the embargo if that is what it actually is. One could argue that this post only fuels the flames with what little puff this blog has but surely that is what blogs are for. I hope no messengers are injured.

Thanks to Kate Sheppard (see previous post) for the hat-tip.

IPCC report: Overview of the Overviews

In addition to the hundreds of blog reviews and comments on the IPCC report the newspapers have been full of doomsday scenarios and impending catastrophic events that will inevitably kill us all.

This post is to provide a series of links for those wanting further reading:

Reactions to UN Climate Panel Report


Reactions to the report from various luminaries (Planetark summary).

The IPCC Fourth Assessment SPM

Provides a "first cut" at a summary of the Policy makers summary.

IPCC: Now that we've all agreed, let's disagree

A good series of links from Kate Sheppard at Gristmill.

Who and what are the IPCC - FAQ

Linking from Grist this is a good post by Sarah Burch on Terry. Anything you want to know about the IPCC answered. Good resource.

Global warming: the final warning [Independent Front Page]

In this article the Indy describes the effects of different rises in temperature. I quote just the last two as they provide a particularly bleak picture.

Two lines that stand out are: "World food supplies run out" and "Most of life on Earth has been snuffed out". Cheery stuff.

+5.4°: Sea levels rise by five metres

The West Antarctic ice sheet breaks up, eventually adding another five metres to global sea levels. If these temperatures are sustained, the entire planet will become ice-free, and sea levels will be 70 metres higher than today. South Asian society collapses due to the disappearance of glaciers in the Himalayas, drying up the Indus river, while in east India and Bangladesh, monsoon floods threaten millions. Super-El Niños spark global weather chaos. Most of humanity begins to seek refuge away from higher temperatures closer to the poles. Tens of millions of refugees force their way into Scandanavia and the British Isles. World food supplies run out.

+6.4°: Most of life is exterminated

Warming seas lead to the possible release of methane hydrates trapped in sub-oceanic sediments: methane fireballs tear across the sky, causing further warming. The oceans lose their oxygen and turn stagnant, releasing poisonous hydrogen sulphide gas and destroying the ozone layer. Deserts extend almost to the Arctic. "Hypercanes" (hurricanes of unimaginable ferocity) circumnavigate the globe, causing flash floods which strip the land of soil. Humanity reduced to a few survivors eking out a living in polar refuges. Most of life on Earth has been snuffed out, as temperatures rise higher than for hundreds of millions of years.

Friday, February 02, 2007

Economists offered CASH to dispute IPCC report

If we thought Exxon and the oil companies had changed their ways we had better think again.

In a disappointing story from today's Guardian come news that:

Scientists offered cash to dispute climate study
Scientists and economists have been offered $10,000 each by a lobby group funded by one of the world's largest oil companies to undermine a major climate change report due to be published today.

Letters sent by the American Enterprise Institute (AEI), an ExxonMobil-funded thinktank with close links to the Bush administration, offered the payments for articles that emphasise the shortcomings of a report from the UN's Intergovernmental Panel on Climate Change (IPCC).

I have checked my post twice today but still nothing. How does one qualify?
Travel expenses and additional payments were also offered.

Intriguing - additional payments for what?
The AEI has received more than $1.6m from ExxonMobil and more than 20 of its staff have worked as consultants to the Bush administration. Lee Raymond, a former head of ExxonMobil, is the vice-chairman of AEI's board of trustees.

The letters, sent to scientists in Britain, the US and elsewhere, attack the UN's panel as "resistant to reasonable criticism and dissent and prone to summary conclusions that are poorly supported by the analytical work" and ask for essays that "thoughtfully explore the limitations of climate model outputs".

Climate scientists described the move yesterday as an attempt to cast doubt over the "overwhelming scientific evidence" on global warming. "It's a desperate attempt by an organisation who wants to distort science for their own political aims," said David Viner of the Climatic Research Unit at the University of East Anglia.

This is a great quote though:
Ben Stewart of Greenpeace said: "The AEI is more than just a thinktank, it functions as the Bush administration's intellectual Cosa Nostra. They are White House surrogates in the last throes of their campaign of climate change denial. They lost on the science; they lost on the moral case for action. All they've got left is a suitcase full of cash."

What is depressing is just how much it is possible to buy for a suitcase full of cash.
It appears that other oil sponsored think-tanks will be hard on their heels:
On Monday, another Exxon-funded organisation based in Canada will launch a review in London which casts doubt on the IPCC report. Among its authors are Tad Murty, a former scientist who believes human activity makes no contribution to global warming. Confirmed VIPs attending include Nigel Lawson and David Bellamy, who believes there is no link between burning fossil fuels and global warming.

Released: "IPCC Report"

Although every vaguely related green blog will be posting this link here it is for the record.

IPCC REPORT (PDF)

China and the Tibet Plateau: droughts, sandstorms and desertification ahead?

As China continues to grow at speed we have posted numerous times on how the environmental degradation in China may put a break on growth.

Water shortages and the pollution of existing water resources are giving grave cause for concern.

On the eve of the IPCC report the effects of global warming on future water supplies is highlighted by the Chinese state media regarding the effect of increased temperatures on the Tibet plateau.

China Warns of Disasters from the Melting of the Tibet Plateau.

BEIJING - Chinese scientists have warned that rising temperatures on the Qinghai-Tibet plateau will melt glaciers, dry up major Chinese rivers and trigger more droughts, sandstorms and desertification, state media reported on Thursday.


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Temperatures on the plateau had risen 0.42 degrees Celsius (about 1 degree Fahrenheit) each decade since the 1980s, the China Daily said, citing the Chinese Academy of Meteorological Sciences, a government think-tank.

"One of the worst results of the rising temperature on the plateau could be an ultimate change in the volume of water flowing into the Yangtze, the Yellow and other rivers that originate in the mountainous region," the paper quoted Xu Xiangde, an academy researcher, as saying.

There could be trouble ahead...
Typhoons, floods and droughts killed 2,704 people and inflicted economic losses of 212 billion yuan (US$27.32 billion) in 2006, the warmest year since 1951, state media reported.

Temperatures on the plateau have also nudged record highs this winter and brought sandstorms two months early, Xinhua news agency said last week.

The report followed a forecast from Beijing's environmental bureau that more severe sandstorms than normal would hit the capital in the spring because of the mild and dry winter.

The warm January could make it easier for worm eggs and bugs to survive the winter, raising the possibility of plant diseases and insect pests in the spring, said Song Lianchun, head of the disaster reduction forecast department at the meteorological administration.

"Global Warming Facts": Impact of Temperature Rises

This post brings together a series of facts about global warming from PlanetArk ahead of today's IPCC report.

1. The Impacts of Temperature Rises
2. Future Projections
3. UN Climate Panel and Past Reports

Global Warming: Impacts of Temperature Rises

The Intergovernmental Panel on Climate Change (IPCC) will publish a report, the most complete overview of climate change science, in Paris on Feb. 2. It will guide policy makers combating global warming.


A draft of the report projects temperatures rising by 2 to 4.5 Celsius (3.6 to 8.1 Fahrenheit) above pre-industrial levels by 2100, with a "best estimate" of a 3C (5.4 F) rise.

Below are some estimates of the global implications of different temperature rises in degrees Celsius relative to pre-industrial levels, as detailed in a report on climate change by Nicholas Stern, chief British government economist, published in October.


Temp. rise/ Impacts 1 DEGREE

* Shrinking glaciers threaten water for 50 million people

* Modest increases in cereal yields in temperate regions

* At least 300,000 people each year die from malaria, malnutrition and other climate-related diseases

* Reduction in winter mortality in higher latitudes

* 80 percent bleaching of coral reefs, e.g. Great Barrier Reef


2 DEGREES

* 5 - 10 percent decline in crop yield in tropical Africa

* 40 - 60 million more people exposed to malaria in Africa

* Up to 10 million more people affected by coastal flooding

* 15 - 40 percent of species face extinction (one estimate)

* High risk of extinction of Arctic species, e.g. polar bear

* Potential for Greenland ice sheet to start to melt irreversibly, committing world to 7 metre sea level rise


3 DEGREES

* In Southern Europe, serious droughts once every 10 years

* 1 - 4 billion more people suffer water shortages

* Some 150 - 550 additional millions at risk of hunger

* 1 - 3 million more people die from malnutrition

* Onset of Amazon forest collapse (some models only)

* Rising risk of collapse of West Antarctic Ice Sheet

* Rising risk of collapse of Atlantic Conveyor of warm water

* Rising risk of abrupt changes to the monsoon


4 DEGREES

* Agricultural yields decline by 15 - 35 percent in Africa

* Up to 80 million more people exposed to malaria in Africa

* Loss of around half Arctic tundra


5 DEGREES

* Possible disappearance of large glaciers in Himalayas, affecting one-quarter of China's population, many in India

* Continued increase in ocean acidity seriously disrupting marine ecosystems and possibly fish stocks

* Sea level rise threatens small islands, coastal areas such as Florida and major cities such as New York, London, and Tokyo


Future Projections:

Temperatures are likely to rise by 2-4.5 Celsius (3.6-8.1 Fahrenheit) above pre-industrial levels if carbon dioxide concentrations are kept at 550 parts per million in the atmosphere, against about 380 now. The "best estimate" for the rise is about 3C (5.4F).

- The warming is very unlikely to be less than 1.5C (2.7F). Rises much above 4.5C cannot be ruled out but those computer projections do not fit well with observations. Main uncertainties are whether more clouds will form in a warmer world -- and bounce heat back into space.

- The report cites six models with core projections of sea level rises ranging from 28 to 43 cms (11.0-16.9 inches) by 2100. That is a narrower and lower band than the 9 to 88 cms gain (3.5-34.6 inches) forecast in 2001.

- It is "very likely" that extremes such as heatwaves and heavy rains will become more frequent. Arctic sea ice could disappear in summer by the latter part of the 21st century in some projection. Warming is expected to be greatest over land and at high northern latitudes, and least over the Southern Ocean and North Atlantic.

- Antarctica is likely to stay too cold for wide surface melting and is expected to gain in mass due to more snow.

- A system of Atlantic currents including the Gulf Stream, bringing warm waters northwards, are very likely to slow by 2100 but an overall warming will more than offset any cooling effect. The draft says that an abrupt shift is "very unlikely".


UN Climate Panel and Past Reports

Following are some facts about the Intergovernmental Panel on Climate Change (IPCC):

- The IPCC was set up in 1988 by the United Nations to help policy makers address climate change. It draws on work by about 2,500 specialists in more than 130 countries.

- A draft of the new report, the IPCC's fourth assessment, says that it is "very likely" that human activities, led by burning fossil fuels, are the main cause of warming in the past 50 years. "Very likely" means more than 90 percent probability.

- The 2001 study said there was "new and stronger evidence" linking human activities to rising temperatures. It also said it was "likely" that human activities caused most of the warming in the last half century -- "likely" means at least a 66 percent chance.

- In 1995, the IPCC report concluded that "the balance of evidence suggests a discernible human influence on global climate". That report paved the way to the U.N.'s Kyoto Protocol in 1997, which obliges 35 industrial nations to cut greenhouse gases to 5 percent below 1990 levels by 2008-12.

- The first report in 1990 outlined risks of rising temperatures and played a role in prompting governments to agree a 1992 U.N. climate convention that set a non-binding goal of stabilising greenhouse gases at 1990 levels by 2000. That target was not met overall.

- Concentrations of heat-trapping greenhouse gases in the atmosphere, largely from burning fossil fuels in power plants, factories and vehicles, have risen by more a third since before the Industrial Revolution.

- Temperatures rose by about 0.6 Celsius (1.1 Fahrenheit) during the 20th century. The 10 warmest years since records began in the 1850s have been since 1994.

- Rising temperatures are likely to cause more floods, erosion, desertification, heatwaves, drive many species to extinction and raise global sea levels. Benefits in some regions may include longer growing seasons.