Friday, November 30, 2007

China spends 1.35% of GDP on the environment

In an ambitious statement, China has pledged to spend 1.35% of GDP on environmental protection. Significantly higher than the 1% of GDP the Stern review requests all countries spend.

There is still a data problem here. Some academic research based on Chinese data appears to show SO2 levels falling. Yet this article claims that SO2 has rose 27% between 2000 and 2005. I tend to believe that figure. I suppose the good news is that energyu consumption increased 55% so at least energy production is becoming "relatively" cleaner through the introuduction of clean(er) technologies and more stringent regulations.

China promises 1.35% of GDP as annual environmental protection investment [People Daily online]

The Chinese government will invest 1.35 percent of its gross domestic product (GDP) each year for the next three years in environmental protection.

The State Council, China's cabinet, publicized a belated five-year environmental protection plan for 2006 to 2010 on Monday.

"Most of the investment will go to treating water pollution," said Zou Shoumin, director of the Chinese Academy for Environmental Planning, who took part in drafting the plan.

He estimated the government would spend 640 billion yuan (85.33billion U.S. dollars) on treating water pollution, 600 billion yuan (80 billion dollars) on air pollution and 210 billion yuan (28 billion dollars) on solid waste.

In 2005, China spent 238.8 billion yuan (31.8 billion dollars) on environmental protection, accounting for 1.31 percent of that year's GDP, according to a government white paper.

The plan, only adopted by the State Council in September, sets out guidelines, major tasks and measures for the government to tackle pollution.

As part of the plan, China aims to cut its chemical oxygen demand (COD), a major index of water pollution, in 2010 by 10 percent from 2005 and sulfur dioxide emissions also by 10 percent.

By 2010, the plan says, 75 percent of China's large cities will enjoy more than 292 days of good air quality (air quality level IIor better) every year. In 2005, the percentage was 69.4.

China's air quality level II is equal to a pollution reading of between 51 and 100.

The country issued a five-year environment plan for 2001 to 2005 but the targets set were not met.

According to the State Environmental Protection Administration (SEPA), sulfur dioxide emissions in 2005 increased by 27.8 percent over that in 2000 instead of dropping while the COD fell 2.1 percent from 2000 rather than 10 percent.

Water pollution has been worsening. Twenty-six percent of surface water can not be used for any purpose, 62 percent is not suitable for fish and 90 percent of the rivers running through cities are polluted.

"The country failed to meet the target of reducing sulfur dioxide emissions, mainly because of the unexpected increase in energy demand between 2000 and 2005," Zou said.

The energy consumption in 2005 increased by 55.2 percent from 2000 but the newly-built thermal plants did not adopt facilities to reduce the sulfur dioxide emissions while the projects to update the old ones with eco-friendly technologies did not go well, he said, adding the papermaking industry had also caused serious pollution.

"Some local governments have favored economic growth much more than environmental protection and the environment watchdog also lacks strong power to supervise them," he said.

The State Council said in its statement on the new plan that it will set up an assessment mechanism to monitor the local governments.

Every half year, the State Council will publicize a report of major pollutant discharges in all provinces and regions and launch national checkups on how local governments implement the plan in 2008 and 2010, the statement said.

"The results will be key to assessing the performance of local governments," it said.

Treehugger also cover this announcement in the "treehugger" style.

Is 27 Billion Dollars Enough to Clean Up China?


Wednesday, November 28, 2007

On the existence of a climate change "tipping point"

Interesting interview with Dr. James Hansen, who heads the NASA Goddard Institute for Space Studies from Scitizen.

It is useful for environmental economists to keep up to date with the latest scientific research in the area.

Of particular interest is the existence of a so-called "tipping point".
A tipping point occurs when climate change reaches a point such that, because of warming already 'in the pipeline' and positive climate feedbacks, very little if any additional climate forcing is needed to cause rather rapid, large climate impacts.

Are we there yet?

It is interesting that the two suggestions from preventing a climate induced catastrophe are to stop the implementation of any more coal fired power stations and to gradually increase the price of carbon emissions.

I assume he is aware of the Chinese and American plans to build a shed load of coal fired power stations. Looks like we are doomed after all.

Climate: "Positive Feedbacks Are Already Operating" [Scitizen]

Scitizen interviews Dr. James Hansen, who heads the NASA Goddard Institute for Space Studies, for a look back at the events of 2007.

Scitizen: 2007 was a year full of events for climate experts, science journalists, and policymakers. Do you think that the public is now well-informed?
Dr Jim Hansen: No. They have only learned that there is an important issue, and that
humans are responsible for the situation, but the cacophony has not informed them well about what needs to be done.

S: What is your opinion with the conclusions and forecast of the IPCC group I report released earlier this year?
JH: The IPCC report is very useful, because it shows that even with the constraints that it operates under, the evidence that humans are responsible for global warming is so strong that it cannot be denied. That report requires sign-off by all countries including, for example, Saudi Arabia, so it is very cautious and conservative. This helps, in a way, because it creates an aura of being 'authoritative'.

S: The speed of the Arctic ice retreat shown by satellites has astonished scientists; as well, the year 2007 saw the melting record in Greenland for areas above 2000 meters. What should we learn from these situations?
JH: These are illustrations of physical mechanisms that contribute to climate tipping points, A tipping point occurs when climate change reaches a point such that, because of warming already 'in the pipeline' and positive climate feedbacks, very little if any additional climate forcing is needed to cause rather rapid, large climate impacts. One reason that these changes in the Arctic are beginning to accelerate is that the melting of sea ice exposes dark ocean water, and meltwater on the surface of Greenland makes the snow surface darker. These changes cause the ocean and ice sheet to absorb more sunlight and accelerate melting.

S: Do you agree with the concept of "tipping point", the point at which a positive feedback loop beings? Are we about to reach such a point?
JH: We have already reached a point at which these positive feedbacks are operating. They are not run-away feedbacks, however, i.e., feedbacks that can by themselves now proceed to cause very large planetary changes. They still require human-made forcings. If we reduce these forcings we can still stop the climate change. The forcings include, in addition to carbon dioxide, methane, low-level ozone, and black soot. A program focused on all of these could stop the climate change, even though some further increase of carbon dioxide is inevitable given the infrastructure that is in place.

S: A recent study published in the PNAS suggests that Earth's atmosphere is accumulating carbon dioxide faster than current predictions. What is your opion on current public policiees, such as the Kyoto Protocol, which proposes to set a limit on CO2 emissions?
JH: That study was misleading. The usual definition of the 'airborne fraction' of carbon dioxide is the ratio of the observed increase in atmospheric CO2 divided by the emissions of CO2 into the air from fossil fuel burning. That is the best definition, because those are the two numbers that we know accurately. With that definition we see that the airborne fraction of CO2 is about 57% of the emissions. That percentage fluctuates from year to year, but it has not been increasing. The atmosphere has not been accumulating CO2 faster than expected, rather it is just as fast as expected, but the world is still (foolishly) increasing the rate of CO2 emissions. The PNAS story confused the public by using a definition of airborne fraction that included such terms as CO2 released from cutting down trees, growing trees, bad soil practices, good soil practices, etc., but we just do not know those terms accurately, so they can report any answer-- it is useful research to try to estimate those terms, but they manage to confuse the public.

S: Also, the "after-Kyoto" is now being discussed. What measures do you think should be taken?
JH: The climate problem is solvable via actions that make sense for other reasons and which will have many ancillary benefits, including cleaner air and water, improved public health, increased agricultural productivty, and preservation of the environment and species.

The two primary actions required are a moratorium on new coal-fired power plants (until technology for carbon capture is ready) and a gradually increasing price on carbon emissions. The latter can be done in a way such that the small user, by making choices to save more emissions than the average, can actually gain financially. Government leadership is needed to make these two actions work, e.g., rules for utilities must be changed such that they make more profit when they help improve energy efficiency -- now they make more money if they sell us more energy.

In addition to these two primary actions, we need some focused programs to reduce the non-CO2 climate forcings, especially methane emissions and black soot.


Research Paper: "SO2 and Trade, Technique and Composition Effects"

A new research paper looking at the role of trade, technique and composition effects on the fall in world-wide SO2 emissions between 1990 and 2000.

The key is the role of technological advances being sufficient to offset the scale effect from China and other rapidly growing countries.


"Trade, Technique and Composition Effects: What is Behind the Fall in World-Wide SO2 Emissions 1990-2000?"
FEEM Working Paper No. 93.2007

University of Neuchatel - Institute for Economic
and Regional Research (IRER)

University of Lausanne

University of Geneva - Department of Political
Economics, Centre for Economic Policy Research
(CEPR), World Bank

Full Text:

ABSTRACT: Combining unique data bases on emissions with sectoral output and employment data, we study the sources of the fall in world-wide SO2 emissions and estimate the impact of trade on emissions. Contrarily to concerns raised by environmentalists, an emission-decomposition exercise shows that scale effects are dominated by technique effects working towards a reduction in emissions. A second exercise comparing the actual trade situation with an autarky benchmark estimates that trade, by allowing clean countries to become net importers of emissions, leads to a 10% increase in world emissions with respect to autarky in 1990, a figure that shrinks to 3.5% in 2000. Additionally, back-of-the-envelope calculations suggest that emissions related to transport are of smaller magnitude, roughly 3% in both periods. In a third exercise, we use linear programming to simulate extreme situations where world emissions are either maximal or minimal. It turns out that effective emissions correspond to a 90% reduction with respect to the worst case, but that another 80% reduction could be reached if emissions were minimal.


A Coasian Conundrum

Matthew Kahn over at Environmental and Urban Economics posts on a Coasian conundrum over in Santa Moncia.

Santa Monica Airport Should Vanish! Noise and Air Pollution in Residential Communities --- A Coasian Conundrum

The Coase Theorem will not go away. Today's New York Times has a nice case study of the rising costs of air and noise pollution generated by a local airport in West Los Angeles. For those of you who only think about Kobe Bryant and Paris Hilton when you do think about LA, permit me to provide some details.


CBI backs Green Taxes

The extent to which business is facing up to its environmental responsibilities is shown clearly by the news that the CBI (confederation of British Industry) is in favour of new green taxes and increases in the price of carbon.

CBI backs new UK green taxes [FT]

The newspapers editorial also comments and seems to have it worked out.

In the hothouse [FT]

Two messages leap from the pages of a report on climate change by the CBI, the British employers' group. The first is that business gets it: global warming poses risks to -society and the economy. The second is that action is needed now.

These conclusions are self-evident. To most people, they are accepted current thinking. The real problem lies in what to do about climate change. Some critics may be tempted to dismiss the report as the glossy progeny of consultants. Indeed, McKinsey, as the appendix makes clear, was heavily involved.

But to see the findings in that light would be unfair. The consultants have earned their fees, producing original analysis on government measures, the development of new low-carbon technology and steps to boost energy efficiency. A key conclusion, surprising given the CBI's role as business lobbyist, is the high price the report puts on emitting greenhouse gases. By 2030 a price of €40 ($59) a tonne for carbon dioxide will be needed, it says, double the present phase-two price in Europe's emissions trading scheme.

This, more than anything else, shows how far business has moved. A report of this kind five years ago would have been unthinkable. Then the sole worry of UK industry would have been its competitive vulnerability vis a vis overseas rivals. Those concerns remain but the emphasis has moved to resisting increases in so-called "green" taxes.

For now, carbon taxes are not on the agenda. Momentum is building behind cap-and-trade schemes. A high projected price for carbon, and the tight limits on emissions that implies, will add to manufacturers' costs. But they are essential for such schemes to be credible. Clear business support should be a spur to world leaders about to discuss a possible successor to the Kyoto -climate change protocol.

The report is optimistic, too, that ambitious targets to cut carbon emissions can be achieved. It argues much can be done in the short term at relatively low cost to meet those goals. More insulation, condensing boilers and low-energy lighting are among steps that could contribute 30 per cent of the necessary savings. Industry, transport and power generation would provide the rest.

Without incentives, this is unrealistic. Despite pledges by big companies, there is little evidence that they have become more energy -efficient. Any well-run business will take basic energy saving measures, but the paybacks from more ambitious schemes take longer than most companies' planning horizons. To vanquish the climate change demon and slash emissions, corporate goodwill is not enough.


Economics of Extinction, Chinese medicine and Tibetan caterpillars

The FT weekend magazine has an excellent article about a Caterpillar that turns into a fungus and is worth £19,000 a kilo. Why? Because it is highly valued in the booming Chinese medicine market.

Result - our old friend "tragedy of the commons" rears its ugly head and is driving the caterpillar to extinction taking with it the livelihoods of many locals from the Tibetan plateau.

Any article that has the term "sprouting through its forehead" in the first few paragraphs has to be worth reading. As this fungus cures all ills, including erectile dysfunction, there is likely to be a growing market with demand rising considerably.

The revelation that this fungus is also used to bribe officials may say something about the health of the said officials.

An interesting read. Some quotes are provided below:

Rich pickings [FT]

The fungus "Yartsa gunbu," or "Cordyceps" is a medicinal mushroom that grows parasitically on a moth caterpillar native to the Himalayas and Tibetan plateau, Cordyceps sinensis is a rare and expensive Chinese medicine.

Last winter, fungus spores landed on a caterpillar and began to consume its body, slowly killing it. As it died, the caterpillar burrowed underground. Eventually the fungus overtook the body, sprouting through its forehead and out of the ground – producing the growth Wang-yag spotted. The lifecycle is contained in the Tibetan name: yartsa gunbu means “summer grass winter worm”.

In Chinese medicine, caterpillar fungus is known as something of a wonder-drug. Boiled in soup or eaten whole, it is said to aid every ailment from immune deficiencies to erectile dysfunction.

Cordyceps is incorporated into several western products, such as Origins’ Mega-Mushroom skin creams and Steven Seagal’s Lightning Bolt energy drink. Demand is also rising in China, where chongcao, or “worm-grass”, is rolled into cigarettes, turned into elaborate dishes at special caterpillar fungus restaurants, and used to bribe officials. Prices, in turn, are skyrocketing. One kilo of prime Cordyceps now draws Rmb300,000 – more than £19,000.

It is clear that harvesting is a slow process. This may not give a good impression of the household work allocation in Tibet.
When Wang-yag returns to her tent after a day of picking, her husband, Sonam Rrichen, is there waiting. A loud man with darting eyes, he spends most of his free time polishing his motorcycle, which he bought this spring with Cordyceps money. Wang-yag hands him her bu, and he combines it with his own, collected in the hills surrounding a relative’s tent. He counts: 20 caterpillars in two days.

The collection of this fungus is also somewhat frowned upon:
Although Cordyceps was harvested in past centuries, Buddhism held that it disturbed earth spirits and its collection was taboo. Sonam Rrichen recalls an old saying: “Picking one bu is like killing 18 men.” Today, only monks and nuns abstain. In parts of the plateau where the harvest is less regulated, some people begin picking in early May, before the fungus is mature. Others don’t replace the soil they dislodge, exacerbating erosion, already a serious problem.

As with any valuable resource regulation and conflict go hand in hand. As the fungus becomes rarer the protection of "property rights" gets more intense.
Increasingly, the harvest also leads to conflict. In Sichuan, Tibetans clashed over picking rights in July, brandishing semi-automatic rifles and grenades in a conflict that killed six and left 100 wounded. Earlier in the season, in Nepal, 16 people died while trying to pick during a blizzard. And in 2005, when nomads from neighbouring Nangchen ventured on to Dzato land to search for the fungus, the government reacted by taxing the outsiders while the locals blockaded the county’s main road. Nangchen pickers broke through the barriers, prompting a two-week clash in which houses were razed, stores looted and at least one man died.

Whenever there are weak property rights there will be problems. The caterpillar it seems is disappering fast.
Caterpillar fungus, it seems, is disappearing. When Wang-yag started picking 24 years ago, she found 200 to 300 fungi a day (older relatives remember picking 1,000). Now she finds 10 on a good day. Last year, Indian zoologists documented a 30-50 per cent decline of the fungus over a two-year period in villages in the Indian Himalayas. This year, Chinese ecologist Yang Darong found that Cordyceps numbers in western China have fallen to between 3.5 and 10 per cent of their totals from 25 years ago.

Ah, the beauty of economics:
Tibetan pickers, meanwhile, are caught in a vicious cycle: as prices increase, collection becomes all the more irresistible.

Until they are all gone of course - boom and bust.

As with non-renewable resources, perhaps technology can save the day:
As worries about the sustainability of Cordyceps increase, finding a substitute has become a priority in China and abroad. Researchers have isolated polysaccharides that they believe are the active ingredients. Several companies have reproduced these by culturing the fungus in liquid or on grains of rice, wheat or barely, creating a caterpillar-free “cultivated” Cordyceps.

"Kyoto Protocol" facts

Whilst I am sure I have posted on the basically underpinning the Kyoto Protocol before it doesn't do any harm to highlight some of the key issues again given the Bali conference will soon be taking place (December 3-14) to discuss what it to succeed Kyoto.

The elephant in the room is the US non-compliance that effectively undermines the whole process. Why should other rich countries such as Japan (see previous post) spend millions of dollars on carbon credits when the US simply sits back and carries on as usual leaving other developed countries fighting over political and economics scraps.

What is the Kyoto Protocol? [PlanetArk]


-- It is a pact agreed by governments at a 1997 UN conference in Kyoto, Japan, to reduce greenhouse gases emitted by developed countries to at least 5 percent below 1990 levels by 2008-12. A total of 174 nations have ratified the pact.


-- Governments agreed to tackle climate change at an "Earth Summit" in Rio de Janeiro in 1992 with non-binding targets. Kyoto is the follow-up.


-- Kyoto has legal force from Feb. 16, 2005. It represents 61.6 percent of developed nations' total emissions. The United States, the world's biggest source of emissions, came out against the pact in 2001, reckoning it would be too expensive and wrongly omits developing nations from a first round of targets to 2012.


-- Countries overshooting their targets in 2012 will have to make both the promised cuts and 30 percent more in a second period from 2013.


-- No, only 36 relatively developed countries have agreed to targets for 2008-12 under a principle that richer countries are most to blame. They range from an 8 percent cut for the European Union from 1990 levels to a 10 percent rise for Iceland.


-- Greenhouse gases trap heat in the earth's atmosphere. The main culprit from human activities is carbon dioxide, produced largely from burning fossil fuel. The protocol also covers methane, much of which comes from agriculture, and nitrous oxide, mostly from fertiliser use. Three industrial gases are also included.


-- The European Union set up a market in January 2005 under which about 12,000 factories and power stations are given carbon dioxide quotas. If they overshoot they can buy extra allowances in the market or pay a financial penalty; if they undershoot they can sell them.


-- Developed countries can earn credits to offset against their targets by funding clean technologies, such as solar power, in poorer countries. They can also have joint investments in former Soviet bloc nations.


Friday, November 23, 2007

"Carbon Credits": Japan to buy from just about anybody

Today's FT reports that Japan is looking to hoover up shed loads of carbon credits on the cheap to meet its Kyoto agreements.

Such a move, whilst entirely legal is not entirely politically desirable. This article explains why.

This issue of course is that Japan promised to reduce its emissions 6% below its 1990 figure and it is now 8% above. The problem with buying carbon credits is that it does not necessarily reduce emissions by a single tonne of CO2. What then is the point exactly?

The collapse in eastern European heavy industry means they have an excess of credits to sell (and is one reason why Russia signed up in the first place despite dragging its heals for many years).

Japan to start buying cheap carbon credits[FT]
Japan will announce as early as next week that it intends to buy carbon credits from Hungary, a move that could foreshadow a much larger purchase from Russia - and one that would provoke criticism as a means of meeting its obligations under the Kyoto protocol.

Japan could become the world's biggest buyer of -carbon credits because, under Kyoto, it has pledged to cut emissions to 6 per cent below 1990 levels but is currently 8 per cent above.

The memorandum of understanding with Hungary could lead to similar deals with Poland and the Czech Republic, officials from Japan's trade ministry said, and would test the waters for a contract with Russia.

Buying carbon credits from Russia and Hungary would provoke criticism because the credits do not result in cuts in emissions. Under the Kyoto protocol, negotiated in 1997, targets to cut emissions were set relative to 1990 levels but eastern European countries, including Russia, lost much of their industry following the collapse of the Soviet Union, so their emissions today are much lower than in 1990. This means they have large numbers of -carbon credits, known as "assigned amount units" or AAUs, for sale.

Japan is interested in Hungarian and Russian credits because they are much cheaper than the alternative, which do result in emissions cuts. These "certified emissions reductions" are awarded by the United Nations to emissions-cutting projects in developing countries, such as wind farms or methane capture.

Japan has so far contracted to buy an estimated 350m tonnes of certified emission reductions (CERs). If Tokyo decides to buy from Hungary and Russia, that could hurt the market for CERs as the country is likely to be such a big buyer of credits.

Toshihiro Mitsuhashi, director of the trade ministry's office for the promotion of the Kyoto mechanism, said Japan was reluctant to pay what he said were the "crazy prices" being fetched by CERs. These had recently climbed to about €17 a tonne, he said.

"There's some criticism that buying AAUs somehow doesn't help the earth," said Mr Mitsuhashi. "We have promised to meet our Kyoto obligation but we will use any means necessary. These AAUs exist. There's no reason we can't use them."

Mr Mitsuhashi said that, to forestall criticism, Japan would insist that countries selling carbon credits set aside the proceeds for green projects. But he acknowledged that any deal with Russia would invite suspicion that the money would not be spent on the environment, but instead "go into the pocket of [Russian] bureaucrats".

Gavin Raftery, senior associate at law firm Baker & McKenzie's Tokyo office, said Japan was struggling to balance the cost of buying credits with its wish to be an environmental leader.

"I find it hard to believe that Japan would just cash out by only buying from Russia's big balloon of hot air despite inevitable environmental criticism," he said.

Mark Partington, a consultant to EEA Fund Management, a carbon asset manager, said threatening to buy from Hungary and Russia was Japan's way of signalling it was not prepared to "comply at any price".

Japan is reluctant to spend vast amounts to comply with Kyoto as the US has never ratified the treaty and India and China have no obligation to cut emissions. Mr Mitsuhashi said Japan had to think about its own taxpayers as well as the environment.

The issue is becoming increasingly sensitive in Japan because Tokyo is hosting the G8 meeting of advanced economies next year at which climate change is expected to be a key issue.


Fight climate change? Or stay competitive? (or both)

The usually environmentally friendly Independent has a habit of throwing in "controversial" columnists into the mix to rile the Greenpeace brigade.

It is fine for Lawson to attack the hypocrisy of the politics behind this issue (and there is no shortage of material) but less impressive to ride rough shod over the economic arguments.

You can guess what lines are trotted out. Of course, the "China builds 2 power stations a week" makes it in there. Plastic bags as a by-product of oil also gets an airing.

All in all, this is an interesting article that does raise some important points. What it misses is the fact that tougher regulations need not necessarily lead to a loss of competitiveness. Whilst this may be the case in the short run, in the long run "regulation induced technological advances" may mean the UK leads the world in green technologies thus creating large export and employment opportunities.

Dominic Lawson: Fight climate change? Or stay competitive? I'm afraid these two aims are incompatible [Independent]

Isn't politics wonderful? Within days of Gordon Brown's address to the conservation group WWF, in which he pledged eye-wateringly tough reductions in British emissions of Co2, the Government has announced its support for the construction of a third runway at Heathrow Airport. "This time he really gets it," Greenpeace's executive director had enthused after the Prime Minister's "Let's save the polar bear" speech. Yesterday, following the Transport Secretary's endorsement of BAA's expansion plans, Greenpeace was back to its default position, spitting ecological tacks.

You might think this is a case of the left hand not knowing what the right hand is doing (or possibly the left hand not knowing what the left hand is doing) especially given the Government's growing reputation for administrative chaos. In fact it is entirely deliberate. The Government both wants to claim "leadership in the fight against climate change" while at the same time it – quite understandably– does not want to do anything which might reduce this country's international competitiveness. It knows that these two objectives are incompatible – very well, then: it will contradict itself.

Gordon Brown's commitment to the most stringent reductions in C02 emissions yet announced by a British Prime Minister follows exactly the path set by his predecessor. Mr Blair would, with a great moral fanfare, pledge this nation to achieve some carbon emission target. Then, when it became completely clear that we were not on track to meet it, he would announce – with equal confidence and certainty – not an easier target but an even tougher one than that which we were failing to achieve.

The civil servants who live in the real world of facts and actually have to devise the practical policies to meet these political flourishes have become increasingly panicky. A month ago there was a leak of an especially desperate memo in which officials warned that the previous Prime Minister's commitment to produce 20 per cent of our energy from renewable sources by 2020 was facing "severe practical difficulties".

As we know, that is senior civil servant speak for "this will be absolutely impossible." One of the memos rather plaintively pointed out that if we admitted this publicly and tried to advocate a general lowering of such targets internationally, there would be "a potentially significant cost in terms of reduced climate change leadership".

Here we see the absurd grandiosity of our global ambitions, partly a legacy of Tony Blair's messianic approach, but which is to some extent a characteristic of the British political class as a whole. More than half a century since the collapse of the British Empire, our leaders still seem to think that what we do or say is as important in the eyes of the rest of the world as it was when we really did rule the waves. It is a grotesque vanity, economically as well as politically.

It has been written often enough that any likely reduction in Co2 emissions from our own generation of electricity is not just sub-microscopic in terms of any measurable effect on the climate: the People's Republic of China is now opening two new coal-fired power stations every week. Real "climate change leadership" would be developing "clean coal" technology and selling it to the Chinese – but for some reason that does not fascinate politicians in the way that targets do. It is insufficiently heroic.

We can see the same national self-obsession in the debate over the environmental consequences of opening a third runway at Heathrow: last year China announced plans to expand 73 of its airports and build 42 new ones. Yes, the British government could demonstrate "increased climate change leadership" by blocking BAA's plans to build another runway at Heathrow. Does anyone seriously imagine that the consequence of further congestion and delays will be something other than a transfer of traffic from that airport to others in the immediate vicinity, such as Charles de Gaulle, which already has much more capacity?

For those on the provisional wing of the British environmental movement, arguments about a loss of business to other countries are irrelevant. They would insist that this complaint makes no more sense than saying that it's necessary to sell arms to unpleasant dictatorships because if we don't, other countries will, to the benefit of their own economies.

If, like George Monbiot, you regard flying as morally equivalent to "child abuse", then, yes, the executives of BAA should be thrown in jail ( after a fair show trial, of course) and never be let out. As for any recession deriving from a closing down of Heathrow – pah! A recession would be a good thing, since it would lead to further reductions in Co2 emissions.

I accept that there will be many sensible people living in the area around the Heathrow Terminals who will not welcome the increase in planes taking off and landing. On the other hand, there has been an aerodrome at Heathrow since the 1930s and the first Terminal was opened by the Queen in 1955: that is to say, there are unlikely to be many home-owners living in the Heathrow area who bought under the impression that he or she would enjoy peace and quiet. Doubtless the property prices there reflect that fact.

Anyway, why worry about airports when we are going to ban the plastic bag? That, you will recall, was the "eye-catching initiative" within Mr Brown's WWF speech. It was artfully designed to capture the headlines in the popular press, and duly did so. The Prime Minister declared that we should "eliminate single-use plastic bags altogether in favour of more sustainable alternatives." Perhaps, since Mr Brown argued that fighting climate change was the political challenge for the younger generation, students should already have been marching on Whitehall with placards declaring "Ban the Bag."

The only problem with that is that plastic bags, though undeniably irritating when left lying around, are essentially the by-product, rather than the cause, of fossil fuel generation. Approximately 98 per cent of every barrel of oil, once refined, is consumed as petrol or diesel. If the remaining two per cent of naphtha was not used for packaging, it would almost certainly be flared off – which is pure waste.

Paper bags have the reputation of being environmentally sounder, but I don't see how this can be justified. They require significantly more space in landfill, being much less compressible – and don't they come from trees, which we are meant to be preserving as capturers of Co2? Besides, if the plastic bag is to be banned, what are we going to use to line our rubbish bins? We need to know the answer to such important questions, Prime Minister, before we allow you to put us forward as the saviours of the planet.


Thursday, November 22, 2007

C02 market gets complicated

The success of the carbon trading market means the array of products derived from the simple premise of buying and selling permits has exploded.

As with any financial instrument there is money to be made from making the system as complicated as possible. The less people understand the easier it is for the top companies, who employ rows and rows of mathematicians, to make money.

However, it is good to see "finance and the environment" being so closely linked and suggests that environmental economics has a rosy future (while the world speeds to its impending doom).

Hot, Volatile CO2 Market Spawns Derivatives Trade [PlanetArk]
LONDON - The booming carbon market, heading for a US$70 billion value, is spinning off a flourishing network of new derivative instruments, from options and swaps to bond-style repos.

The multi-million dollar derivatives are thriving under the European Union's emissions trading scheme (EU ETS), Europe's flagship programme to tackle greenhouse gases blamed for global warming, allowing companies to hedge positions, aggregate risk exposure, or speculate on underlying price movements.

"With a stable regulatory regime and a liquid physical market comes the ability to have derivatives," said Greg Dunne, a director at carbon project developer ICECAP.

IntercontinentalExchange's European Climate Exchange (ECX), Europe's largest carbon exchange, reported option volumes for European Union Allowances (EUAs) at 26.4 million tonnes of CO2 in the third quarter of 2007, more than twice the total traded in the six months before. The exchange's third quarter options transactions accounts for eight percent of the ECX's total volume of almost 330 million EUAs traded during that period.

Underlying price volatility, an important prerequisite for derivatives trading, is not new to the expanding carbon market, which the International Emissions Trading Association said this week would more than double in value this year.

EUA futures for Phase I (2005-07) of the EU ETS hit 32 euros a tonne before crashing in April 2006 on news of an over-allocation of credits by the European Commission.

Phase II EUAs, looking comparatively stable due to stricter emissions quotas set for member states in 2008-12, still hit a 5-month high of 24.20 euros early Wednesday.

The benchmark Dec-08 contracts have fluctuated between 12 and 26 euros this year, with Swiss bank UBS last week forecasting EUA prices as high as 40 euros by 2013.

Certified emissions reductions (CERs), the US$5 billion carbon offsets market under the UN's Kyoto Protocol, are also seeing a derivatives market develop around them.

The first exchange-traded CER options contracts were launched Friday on the Chicago Climate Exchange, though only a single contract has traded.


This summer, Norway's Nord Pool started settling CER-EUA swap trades, another derivative instrument which allow counterparties to exchange, or swap, credits before an agreed future date.

Since September, the Nordic energy exchange said it has settled almost 5.5 million CER-EUA swaps, or 75 percent of its CER trading activity, at a total value of almost 30 million euros (US$44 million).

Repurchase agreements, or repos, are another trading instrument companies are considering.

"Companies buy EUAs, which then just sit there not yielding anything, so a repo market is a natural development," Dunne said.

A repo, normally associated with the bond market, is an agreement between two counterparties whereby one sells the other a security at a specified price with a commitment to buy it back at a later date for another specified price.

"The carbon market is starting to look like a government bond market," Richard Wilson, head of emissions at brokers Tullett Prebon, told Reuters.

"Carbon offsets are similar in that there are both high quality credits and junk credits, and you'll be able track them all once the International Transaction Log is running," Wilson added, referring to the UN's new carbon-trading link slated to be fully operational in 2008. Even the unregulated voluntary offset market has the potential to breed a healthy derivatives market, Dunne added.

"There's an unlimited amount of things that can be done with derivatives. We're only at the beginning, we've barely even started."

*For additional analysis on the carbon markets, visit (US$1=0.6821 Euro) (Reporting by Michael Szabo; Editing by Will Hardy)


Wednesday, November 21, 2007

Overdramatic climate change picture of the day

The old polar bear on the last bit of ice picture is always a good one to pull at the heart and purse strings. This photo is out of the top draw.


Tuesday, November 20, 2007

Fisheries: Fish Dumping "immoral" and FISH FACTS

As my Econ211 students "should" be in the middle of writing about fisheries as there term essay this news item is well timed.

The BBC have done a good job of covering the main issues. What is required is careful thought about the "economics" of the current quota system and how it has failed in light of the incentives of the average fisherman.

Is the solution to collapsing cod stocks really to ask for an increase in the quote size when stocks have only "marginally increased"?

For those writing an essay check the "options" tab on this article. FISH FACTS will also give you plenty of background material.

Dumping North Sea fish 'immoral'[BBC]

Fisheries Minister Jonathan Shaw has agreed that dumping thousands of tonnes of dead fish back into the sea because of EU fishing quotas is "immoral".

He said he supported the view of EU Fisheries Commissioner Joe Borg and would be pushing for quota increases.

The fishing industry has warned it faces ruin because fish caught after quotas are exceeded have to be dumped.

But environmentalists say quotas are necessary to protect stocks, and want to see a change in fishing practices.

40%-60% dumped

European Union quotas strictly limit the amount of fish that vessels can bring back to port, but there is no restriction on the amount of fish they actually catch.

BBC rural affairs correspondent Jeremy Cooke found that boats fishing in the "mixed fishery" of the North Sea often accidentally catch a species or size of fish which is above their quota and have to throw the "discard" back.

The EU estimates that between 40% and 60% of fish caught by trawlers in this area is dumped back into the sea.

Mr Borg - who is instrumental in setting the laws and limits - described such discarding of fish as "immoral" but said there was no clear solution.

"The problem is when we come to work out the details of how to eliminate discarding but at the same time have sustainable fisheries - that is the big problem."

Mr Shaw said it was an "absolute waste" to throw good quality fish back into the sea.

He told BBC Radio 4's Today programme he would be pushing for an EU cod quota increase as well as looking at technological solutions, such as nets that would catch only certain kinds of fish.

"We have seen a recovery in cod in the North Sea in particular - now that is good news," he said.

"So that is why we will be pressing the commission at the annual round in December for an increase in cod and hopefully that will help the fishermen."

Trawler skipper Phil Walsh told BBC News he had landed all of the cod he was allowed by June this year.

Since then, he has been fishing for prawns and dumping prime whiting, haddock and cod, which would fetch as much as £13.50/kg on a supermarket shelf.

"I can't describe the feeling really," he said.

"It's your livelihood and you spend your life trying to catch it and then you have to throw it back over the side.

"It's an impossible situation and, unless it is sorted out soon, we will all be finished."

Marine protection

Many Scottish and English fishermen say they have seen a huge increase in the number of cod in the North Sea this year and now want an increase in the quota level for cod and other white fish they catch.

"I feel very bitter because we've been so long trying to protect the cod," said trawler skipper David Mell.

"[We've had] decommissioning, increased our mesh size, we've been through a lot of pain really.... [But] I thought I would never see the day that I had to throw adult cod overboard."

But environmentalists, who have for years been sounding the alarm bell over the decline of North Sea fish stocks, say now is not the time to increase the amount being caught.

They say quotas are essential to ensure spawning stocks are allowed to mature and to breed.

But, like the fishermen, activists such as the World Wildlife Fund's Helen McLachlan agree that throwing dead cod back into the water is not the answer.

Instead, she said, there must be a change in fishing practices.

"Nobody wants discards," she said.

"So let's not catch the fish in the first place.

"Let's avoid areas where there are going to be large spawning stocks of fish, let's avoid juveniles... let's use selective gear so [a fisherman can say], 'I will only catch prawns, I will not catch white fish'."

Oliver Knowles, a campaigner for Greenpeace, also believes quotas are not working for the UK's mixed fisheries.

He says the only answer is to stop fishing altogether in 40% of the world's oceans.

"Most importantly, I think you have got to create marine reserves. We don't have any proper protection for the marine environment.

"We are talking about a very large scale - about 40% - and Greenpeace isn't alone in calling for protected areas at around that size."

Monday, November 19, 2007

Japan and the Humpback whale round-up

In this blog we have tracked the behaviour of whaling activities and the political maneuverings of the pro-whaling countries (primarily Norway Iceland and Japan) and the huge amount of money spent on lobbying landlocked countries for support (see sidebar).

In every case the economic argument for the resumption of whaling is incredibly weak. The damage that adverse publicity has on the country in question, this time Japan, tends to far outweigh any cultural or economic benefits. It would be far cheaper for the Japanese government to pay the whalers vast amounts NOT to catch whales than to allow it to go ahead. The loss in profits by any public boycott of Japanese cars for example (which will surely happen) will more than outweigh any benefits.

Japan fleet sets off to hunt humpbacks [Yahoo news]

Save the whale. Again [Independent]

Japanese whalers hunt humpbacks [BBC]


Saturday, November 17, 2007

IPCC Draft Report 16/11/2007: "climate change is unequivocal"

The IPCC released its summary for Policymakers of the Synthesis Report of the IPCC Fourth Assessment Report on the 16th November 2007.

The report can be downloaded below:

Summary for Policymakers of the Synthesis Report of the IPCC Fourth Assessment Report [Large PDF]

The summary has all the facts and figures.

The BBC do a good job of summarising the key points although those who have been following the climate change debate will find nothing new or surprising.

UN calls for joint climate effort [BBC]
United Nations Secretary General Ban Ki-moon says a new report on climate change has set the stage for a real breakthrough in tackling the issue.

Launching the Intergovernmental Panel on Climate Change report, he said it made clear that real and affordable ways to deal with the problem exist.

He called for action at next month's climate change conference in Bali.

The IPCC report states that climate change is "unequivocal" and may bring "abrupt and irreversible" impacts.

After a week of arduous talks in Valencia, Spain, the UN panel of scientists agreed the document which says the planet is being driven toward a warmer age at a quickening pace by human activity.

The scientists concluded that carbon dioxide emissions are rising faster than they were a decade ago, prompting the panel's chairman, Rajendra Pachauri, to highlight the need to deal with impacts which are coming whether or not global emissions are curbed.

Even if levels of CO2 in the atmosphere stayed where they are now, he said, research showed sea levels would rise by between 0.4 and 1.4 metres simply because water expands as it warms.

Unavoidable effects

"This is a very important finding, likely to bring major changes to coastlines and inundating low-lying areas, with a great effect in river deltas and low-lying islands.

"If you add to this the melting of some of the ice bodies on Earth, this gives a picture of the kinds of issue we are likely to face," he said after the landmark report was published.

The report was officially unveiled by UN chief Ban Ki-moon in Valencia.

As he began Mr Ban congratulated the IPCC and the thousands of scientists involved in its work on their recent award of the Nobel Peace Prize.

"I come to you humbled after seeing some of the most precious treasures of our planet threatened by humanity's own hand," said the UN chief, who has just been on a fact-finding trip to Antarctica and South America.

"All humanity must assume responsibility for these treasures."

"Let us recognise that the effects of climate change affect us all, and that they have become so severe and so sweeping that only urgent global action will do. We are all in this together - we must work together," Mr Ban added.

Focus on Bali

Among the report's top-line conclusions are that climate change is "unequivocal", that humankind's emissions of greenhouse gases are more than 90% likely to be the main cause, and that impacts can be reduced at reasonable cost.

The synthesis summary finalised late on Friday warned that climate change may bring "abrupt and irreversible" impacts.

Such impacts could include the fast melting of glaciers and species extinctions.

"Approximately 20-30% of species assessed so far are likely to be at increased risk of extinction if increases in global average temperature exceed 1.5-2.5C (relative to the 1980-1999 average)," the summary concludes.

Other potential impacts highlighted in the text include:

* between 75m and 250m people projected to have scarcer fresh water supplies than at present
* yields from rain-fed agriculture could be halved
* food security likely to be further compromised in Africa
* widespread impacts on coral reefs

The IPCC findings will feed into the next round of negotiations on the UN climate convention and Kyoto Protocol, which open in Bali on 3 December.

"Today the world's scientists have spoken clearly and with one voice," Mr Ban said in Valencia. "In Bali I expect the world's policymakers to do the same."


Thursday, November 15, 2007

Recycling gone too far? Used condoms

In a follow up to our detailed study of the economics of recycling yesterday comes news that China is taking recycling to new heights (or is it depths).

The concept of recycling used condoms to wear as hair bands may not appeal but remember that someone has the job of collecting and processing the said used condom. Whilst we are on the subject, where would a budding used condom entrepreneur source his or her stock? Sounds like a spoof story to me.

China recycling used condoms as cheap hair bands [Yahoo news]

BEIJING (AFP) - Used condoms are being recycled into hair bands in southern China, threatening to spread sexually-transmittable diseases they were originally meant to prevent, state media reported Tuesday.

In the latest example of potentially harmful Chinese-made products, rubber hair bands have been found in local markets and beauty salons in Dongguan and Guangzhou cities in southern Guangdong province, China Daily newspaper said.

"These cheap and colourful rubber bands and hair ties sell well ... threatening the health of local people," it said.

Despite being recycled, the hair bands could still contain bacteria and viruses, it said.

"People could be infected with AIDS, (genital) warts or other diseases if they hold the rubber bands or strings in their mouths while waving their hair into plaits or buns," the paper quoted a local dermatologist who gave only his surname, Dong, as saying.

A bag of ten of the recycled bands sells for just 25 fen (three cents), much cheaper than others on the market, accounting for their popularity, the paper said.

A government official was quoted as saying recycling condoms was illegal.

China's manufacturing industry has been repeatedly tarnished this year by a string of scandals involving shoddy or dangerous goods made for both domestic and foreign markets.

In response, it launched a public relations blitz this summer aimed at playing up efforts to strengthen monitoring systems.


Wednesday, November 14, 2007

Reseach Paper: "Review of Environmental, Economic and Policy Aspects of Biofuels"

By reading this article, in theory, you can cut your desire to read 101 newspaper articles or blog posts on this issue, the majority of which will fall down on the economics.

I am sceptical about the whole biofuel business - this article discusses a wide range of issues and arrives at the standard economist conclusion: Biofuels could be good, they could be bad - it depends on a combination of 101 different factors. There is no right answer as all students should know.

The conclusions of the article are:

1. The current generation of biofuels, which is derived from food crops, is intensive in land, water, energy, and chemical inputs.

Not surprising.

2. The environmental literature is dominated by a discussion of net carbon offset and net energy gain, while indicators relating to impact on human health, soil quality, biodiversity, water depletion, etc., have received much less attention.

In this direction, an interesting research agenda lies.

3. Third, there is a fast expanding economic and policy literature that analyzes the various effects of biofuels from both micro and macro perspectives, but there are several gaps.

Find those gaps and start writing.


"Review of Environmental, Economic and Policy Aspects of
World Bank Policy Research Working Paper No. 4341

University of California, Berkeley - Energy and
Resources Group

University of California, Berkeley - The Richard &
Rhoda Goldman School of Public Policy

Full Text:

ABSTRACT: The world is witnessing a sudden growth in production of biofuels, especially those suited for replacing oil like ethanol and biodiesel. This paper synthesizes what the environmental, economic, and policy literature predicts about the possible effects of these types of biofuels. Another motivation is to identify gaps in understanding and recommend areas for future work. The analysis finds three key conclusions. First, the current generation of biofuels, which is derived from food crops, is intensive in land, water, energy, and chemical inputs. Second, the environmental literature is dominated by a discussion of net carbon offset and net energy gain, while indicators relating to
impact on human health, soil quality, biodiversity, water depletion, etc., have received much less attention. Third, there is a fast expanding economic and policy literature that analyzes the various effects of biofuels from both micro and macro
perspectives, but there are several gaps. A bewildering array of policies - including energy, transportation, agricultural, trade, and environmental policies - is influencing the evolution of biofuels. But the policies and the level of subsidies do not reflect the marginal impact on welfare or the environment. In summary, all biofuels are not created equal. They exhibit considerable spatial and temporal heterogeneity in production. The impact of biofuels will also be heterogeneous, creating winners and losers. The findings of the paper suggest the importance of the role biomass plays in rural areas of developing countries. Furthermore, the use of biomass for producing fuel for cars can affect access to energy and fodder and not just access to food.

All you want to know about "Recycling"

The Economist does recycling.

The truth about recycling [Economist]
As the importance of recycling becomes more apparent, questions about it linger. Is it worth the effort? How does it work? Is recycling waste just going into a landfill in China? Here are some answers

The conclusion:
If done right, there is no doubt that recycling saves energy and raw materials, and reduces pollution. But as well as trying to recycle more, it is also important to try to recycle better. As technologies and materials evolve, there is room for improvement and cause for optimism. In the end, says Ms Krebs, “waste is really a design flaw.”

"Coase Theorem" without the environment

Joshua Gans at CoreEcon comments on a post by Levitt over at Freakonomics.

Both blog posts are worth reading. Undergraduates taking environmental economics courses (especially mine) should think carefully about these posts as they provide a interesting perspective of Coase at work (or not at work).

...and there is no mention of the environment (unless you count the crop fire example Levitt uses).

A Freakonomics Contest: The Coase Theorem Online [Freakonomics]
The Coase Theorem is a somewhat rare species of beast: an economic theory that is both completely counterintuitive and yet often right in practice. The idea is named after Ronald Coase, one of the University of Chicago’s many Nobel Laureate economists. Nearing the age of 100, he may not hear quite as well as he used to, but otherwise he is still going strong, sitting on the Board of Directors of the Becker Center, giving lectures, writing academic articles, and attending the occasional seminar.

The basic idea of the Coase Theorem is that no matter who is assigned property rights, as long as transaction costs are not too high, the efficient outcome will be achieved. In his original article nearly fifty years ago, Coase motivated this idea by writing about the problem of sparks from railroad trains setting wheat fields on fire. We will assume that these fires are very costly, and as such it is best to take action to prevent them from occurring.

My students should know very well the theory and why Coase does not often work in practice.

Levitt then links Coase to online URL ownership assuming that the the URL will eventually end up in the hands of those that value it the most highly (resulting in an efficient allocation of URL names). He then asks for counter examples which Freakonomics readers provide in the comments section.

Gans provides a counter-argument and a link to one of his academic papers.

Domain Ownership Tracking[CoreEcon]

While the Coase theorem says that ownership should track efficiency, market transactions for assets (given that they usually link an asset owner with a single potential buyer) will not necessarily lead to ownership tracking efficiency. Indeed, I demonstrated just that in my 2005 RJE paper on the subject.

Try to follow the arguments in this post carefully.


Tuesday, November 13, 2007

Econ101 in 1 minute

In case anyone missed it.

First year economics in 1 minute. Excellent.


Rhinos, antelopes and externalities

A good example of unintended consequences hinged with some tragedy of the commons. Given we covered the economics of extinction in today's "Environmental economics" lecture the timing of this news article is propitious.

There is something depressingly inevitable about the Rhino protection plan from the very start. Where were the economists?
A decade ago, the saiga antelope seemed so secure that conservationists fighting to save the rhino from poaching suggested using saiga horn in traditional Chinese medicines as a substitute for rhino horn.

Maybe I will take down the WWF advert in the sidebar in protest - "Adopt an animal as a wonderful christmas present for someone that will make a difference" :-)

Rhino rescue plan decimates Asian antelopes [New Scientist]

An antelope that just a decade ago crammed the steppes of central Asia is this spring on the verge of extinction, victim of an epidemic of poaching. Biologists say it is the most sudden and dramatic population crash of a large mammal ever seen.

In 1993, over a million saiga antelopes roamed the steppes of Russia and Kazakhstan. Today, fewer than 30,000 remain, most of them females. So many males have been shot for their horns, which are exported to China to be used in traditional fever cures, that the antelope may not be able to recover unaided.

The slaughter is embarrassing for conservationists. In the early 1990s, groups such as WWF actively encouraged the saiga hunt, promoting its horn as an alternative to the horn of the endangered rhino.

Saiga (Saiga tatarica) once dominated the open steppes from Ukraine to Mongolia. They have always been hunted for meat, horns and skins. However, even in Soviet times, hunters killed tens of thousands each year, without dramatically lowering the population.

But since the collapse of the Soviet Union, a lucrative market in the horns has opened up, with hunters using motorcycles and high-powered weapons to chase and kill their quarry. In China, saiga horns fetch around $100 a kilogram. Organised gangs illegally export the horn by train from Moscow to Beijing, or across the border from Kazakhstan.

Black with antelopes

"The plains used to be black with these antelopes, but now you can go out there and not see any at all," says Abigail Entwistle, a zoologist from Fauna and Flora International, a British-based charity. "This is the most sudden change in fortune for a large mammal species recorded in recent times."

The closest comparison may be with the African elephant, which faced a similar poaching frenzy in the 1980s, causing its numbers to fall from a million to half a million in a decade. But the saiga's numbers, which started at a similar level, have fallen by 97 per cent.

The scale of the slaughter, and its almost total destruction of the male saiga, has overwhelmed the animals' famed fecundity. "We don't know of any case in biology where the sex ratio has gone so wrong that fecundity has crashed in this way," says Eleanor Milner-Gulland of Imperial College, London, the leading expert in the West on the species.

Between 1993 and 1998, saiga numbers across central Asia almost halved, to around 600,000. Then, with most of the males gone, the population crash began in earnest, says Milner-Gulland. Numbers have halved each year since, until 2001's census recorded just 30,000 individuals. There is, she says, no sign that the crash is due to disease or unusual weather.

No return

One of the most critically endangered herds is in the huge Betpak-Dala region in central Kazakhstan, where in 1993 more than half a million saiga lived. By 2001 their numbers had crashed to just 4000 - a 99 per cent drop from which there may be no return.

Aerial surveys in 2001 by the Institute of Zoology in Kazakhstan revealed no adult or juvenile males, only females, says Milner-Gulland. And time is running out to bring extra males in, as saiga antelopes normally only live for three to four years.

Conservationists have struggled to keep up with the scale of the disaster, and did not put the saiga on the Red List of critically endangered species until October 2002. In the coming months they will launch an emergency appeal to rescue wild herds.

"We think we have probably got just two years to save the species," says Entwistle. "The trouble is, most people have never heard of the animal, so it is hard to raise funds."

Confined to zoos

It is unlikely that hunters will drive the saiga to total extinction, as they did the dodo, quagga and passenger pigeon. But without a dramatic reversal of its fortunes, it will soon be confined to zoos and a few small reserves.

A decade ago, the saiga antelope seemed so secure that conservationists fighting to save the rhino from poaching suggested using saiga horn in traditional Chinese medicines as a substitute for rhino horn.

Research commissioned by WWF at the Chinese University of Hong Kong in the late 1980s found it to be as effective as rhino horn in fighting fevers, and in 1991 WWF began a campaign in Hong Kong to publicise it as an alternative. The following year, the UN Environment Programme appointed WWF ecologist Esmond Bradley Martin as its "special envoy" to persuade pharmacists across Asia to adopt saiga horn (New Scientist print edition, 9 March 1991 and 3 October 1992).

But the saiga had died out in China in the 1960s, and the resulting upsurge in demand opened the floodgates to unregulated imports. By 1993, says Milner-Gulland, "Hong Kong markets were piled high with saiga horn" from Kazakhstan and Russia. The slaughter had begun.

Bradley Martin is unapologetic. He told New Scientist: "I supported the use of saiga antelope horn as a substitute for rhino horn from the early 1980s. In my opinion it was the correct policy at the time. But I stopped around 1995, when I read about the start of the sharp decline in saiga populations."

H/T: marginal revolution

Monday, November 12, 2007

Another Chinese environmental horror story

Hardly a day goes by without one of the British broadsheets doing the old "in depth" article on the state of tne environment in China. They are worse than second rate bloggers (like this one) for recycling stories.

In fact this is just a rehash of the Elizabeth Economy article that we posted many weeks ago.

Economics of the Environment in China update

However, these articles always make good reading for any dismal scientist as they show nicely how economics may destroy the planet eventually and how economics may be the only thing that can save it.

Toxic cost of China’s success [Times]

China’s environmental problems are mounting. Water pollution and water scarcity are burdening the economy, rising levels of air pollution are endangering the health of millions of Chinese, and much of the country’s land is rapidly turning into desert.

How many times have we read, or have I written, a variation on that paragraph? There is nothing new in this article but some interesting statistics are worth pulling out.

China’s ministry of public health is sounding the alarm. In a survey of 30 cities and 78 counties released in the spring, the ministry blamed worsening air and water pollution for dramatic increases in the incidence of cancer throughout the country: a 19% rise in urban areas and a 23% rise in rural areas since 2005. All along China’s major rivers, villages report skyrocketing rates of diarrhoeal diseases, cancer, tumours, leukaemia and stunted growth.

As economists we would like to control for other things - has China just become better at diagnosing these illnesses? Are more people going to the doctors that previously because (1) there is better education, (2), people can now afford to go to the doctors.

The unsustainability of the current situation is summed up as:

Clearly, something has got to give. The costs of inaction to China’s economy, public health and international reputation are growing. And the government is well aware of the increasing potential for environmental protest to ignite broader social unrest.


Friday, November 09, 2007

"Encroaching Desert, Hidden Water"

Headline of the week award goes to the Independent for this desertification article (even if I changed "missing" to "hidden" in my title).

This is a good article and is littered with examples of X watched as his farm disappeared and Y looked on as the lake dried up. All well and good and makes for a compelling read but there is a lack of substance.

For example,
"The water is less and less every year, and without water we can't grow the crops," said Jiang, who wears a baseball cap at a jaunty angle and smokes copious cigarettes as he sits on a stool surrounded by drying cotton.

What is the jaunty angled baseball cap telling us exactly?

The gathering sandstorm: Encroaching desert, missing water [Independent]
China is losing a million acres a year to desertification. In Dunhuang, a former Silk Road oasis in the Gobi, the resulting water shortage has become critical.

This statistic is more worrying. We all know that China is large and that it has a huge population but did we know that 1/5th of China is desert?
The government in Beijing acknowledges desertification as the biggest environmental challenge holding back sustainable development, and has pledged to control the country's spreading deserts, which already cover a fifth of its land.

So what can be done? The following quote does suggest that all will not continue to be rosy in China and a whiff of social unrest is in the air. If we thought a 1/5th was a lot SPEA are suggesting 40% "soon" although no indication is given to "how soon is now?"
China's environmental watchdog, Sepa, says the desert's march is claiming a million acres of land every year, and soon 40 per cent of China could be lost to the creeping sands brought in by worsening sandstorms. Millions of tons of sand from the Gobi desert are dumped on Beijing by sandstorms every spring, and Chinese dust makes its way into the skies above cities as far away as Los Angeles. China suffers from a shortage of 30 billion cubic metres of water for irrigation every year. And while China has more than 20 per cent of the world's population, it has only 7 per cent of its arable land, precious farmland that the desert is slowly but surely eating its way into. This could result in higher food prices throughout China, a potential disaster given 750 million people live on less than £1 a day and can ill afford more expensive rice and other staples.

Finally, to emphasise the economics lurking behind this story one only needs to look for the "tragedy of the commons" quotes that the locals inadvertently speak of:
In a neighbouring field, He Zicheng, 50, is clearing a field with his son Wei, loading the brush from the cotton fields on to a cart. His nine sheep nose around, seeking mouthfuls to nibble on. Slim pickings. "Without water the cotton doesn't grow well. Ten years ago we had more water, but there were too many wells and now we have this," he said.

Or what about this one:
Song points to a mark where the water level used to reach. "The biggest shortage we have at Dunhuang is water. It's disappearing because the water table is falling and the spring is not producing as much as before. The trees won't grow, because there is not enough water. It was used up by farmers when irrigation started in the 1970s and the underground water started to diminish," said Song.

Unless government policy includes issues related to "property rights" things are unlikely to improve.


Top 200 Universities: Birmingham 65

The THES this week released a ranking of the top 200 Universities.

The UK has 20 in the top 100 with the University of Birmingham moving up from 90 to a creditable 65. At the top are Cambridge (2) and Oxford (3). The rankings are dominated by US and UK Universities with Canada and Australia doing well.


Here is the ranking in PDF form.

World Rankings [PDF]

Also, in a recent Guardian ranking of UK Universities the University of Birmingham was ranked 7th.

Guardian UK ranking [Guardian]


Thursday, November 08, 2007

Brookings: "Economic Approaches to Reforming Energy and Protecting the Environment"

An excellent event and it is good to see Brookings getting involved in climate change via the Hamilton Project.

The event was to discuss how best to promote market mechanisms to reduce greenhouse gases. An excellent agenda and bringing into focus the different approaches between government regulation and private sector incentives.

A Climate of Change: Economic Approaches to Reforming Energy and Protecting the Environment
On October 30, The Hamilton Project at Brookings hosted a two-part forum on mitigating climate change through market mechanisms and new technologies. In addition to the release of a new Hamilton Project strategy paper, the forum highlighted two new discussion papers on how to best design market mechanisms to reduce greenhouse gas emissions and will include proposals to expand —and possibly restructure—the federal research and development program to better promote the development of new greenhouse gas reducing technologies.

Former U.S. Treasury Secretary Robert E. Rubin and Hamilton Project Director Jason Furman, also a Brookings senior fellow, opened the event with a special award presentation, followed with opening remarks by former U.S. Treasury Secretary Lawrence H. Summers on economic approaches to energy security and climate change—the subject of the new strategy paper.

The new Hamilton Project strategy paper argues that the best way to address climate change is to give the private sector the right incentives to undertake emissions reductions. At the same time, the strategy calls for policies to protect low- and middle-income families from the consequences of higher energy prices.

The two new discussion papers feature alternate views on how to best harness market forces to protect the environment. Gilbert E. Metcalf of Tufts University discussed his proposal for a carbon tax and Robert N. Stavins of Harvard University presented his proposal for a cap-and-trade system. John Deutch of the Massachusetts Institute of Technology and John Podesta of the Center for American Progress discussed their recent proposal for a new federal research and development strategy, and Richard Newell of Duke University and Resources for the Future shared his ideas for creating science and technology policies that would enable new technologies to work effectively.

Additional resources:

Policy papers:

* An Economic Strategy to Address Climate Change and Promote Energy Security
by Jason Furman, Jason E. Bordoff, Manasi Deshpande, and Pascal J. Noel
* An Equitable Tax Reform to Address Global Climate Change
by Gilbert E. Metcalf
* A U.S. Cap-and-Trade System to Address Global Climate Change
by Robert N. Stavins
* View presentation by Richard Newell [PDF]

VIDEO of the event HERE.


China and India to suffer water shortages due to biofuel production

Hear an interview with Charlotte de Fraiture who discusses the water shortage situations in China and India, the effects of biofuel production, and the implication for environmental and agricultural policies in these two countries.

Biofuel Production Threatens Water Supplies in China and India[]


Vanishing Fish in South-East Asia

Having just given a lecture on over fishing and the possible government policies (quotas, taxes, aquaculture) to address the problem it is timely that a new report has been released talking about the vanishing fish of south-east Asia.

This story reinforces the "open access" problem related to the "tragedy of the commons" argument.

In the lecture we even examined how fishing in the Philippines had followed the traditional growth curve - the data finished in the mid 1980s. What this article reveals is just how bad the problem has not got.

In the Gulf of Thailand, the density of fish had declined by 86 percent from 1961 to 1991, while between 1966 and 1994 the catch per hour in the Gulf by trawlers fell more than sevenfold.

In Vietnam, a new fishing power and a rising source of imports by Australia, the total catch between 1981 and 1999 only doubled despite a tripling of capacity of the fishing fleet -- a sure sign that fishing was reaching capacity, she said.

In the Gulf of Tonkin, where Vietnam shares resources with China, the record was even worse with fish catch per hour in 1997 only a quarter of that in 1985.

"In the Philippines, most marine fisheries were overexploited by the 1980s, with catch rates as low as 10 percent of rates when these areas were lightly fished," she said.

That is now a lot of effort to catch a much small number of fish. This means we are clearly past any profit maximising or maximum sustainable yield position and are clearly at the open access equilibrium where, if costs were to fall, could push the stocks of many fish to dangerously low levels. Finally, the article ends with a comment on just how difficult policy enforcement is.

Article below:

The report is from the Lowy Institute and the report can be downloaded from HERE.[1.3MB]
Southeast Asia's oceans are fast running out of fish, putting the livelihoods of up to 100 million people at risk, leading to more illegal incursions into Australia's northern fisheries and putting the future of shared stocks between Australia and Southeast Asia at grave risk. A new Lowy Institute Paper entitled 'Enmeshed: Australia and Southeast Asia's Fisheries' by Dr Meryl J. Williams looks at the sources of this depletion and what can be done regionally to address it before it becomes too late.

Media in Australia and Southeast Asia have responded to Meryl's paper with the original Reuters story being picked up in the Philippines and Thailand (and Pakistan) while Singapore's Straits Times also ran a story on the paper.

Fish Vanishing from Southeast Asian Oceans - Report [Planet Ark]
SYDNEY - Southeast Asia's oceans are fast running out of fish, putting the livelihoods of up to 100 million people at risk and increasing the need for governments to support the maintenance of fish stocks, an Australian expert said.

Fisheries in the region had expanded dramatically in recent decades and Indonesia, Thailand, Vietnam and the Philippines were now in the top 12 fish producing countries in the world, Meryl Williams said in a paper for Australia's Lowy Institute.

"As the fourth largest country in world fish production, Indonesia is a fisheries giant. Yet ... Indonesian marine fisheries resources are close to fully exploited and a significant number in all areas are over-exploited," she said.

Williams, a former director general of the international WorldFish Center, said the number of fishers was still increasing in most Southeast Asian countries despite a trend since the 1980s to close frontiers due to territorial claims and overfishing.

In the Gulf of Thailand, the density of fish had declined by 86 percent from 1961 to 1991, while between 1966 and 1994 the catch per hour in the Gulf by trawlers fell more than sevenfold.

In Vietnam, a new fishing power and a rising source of imports by Australia, the total catch between 1981 and 1999 only doubled despite a tripling of capacity of the fishing fleet -- a sure sign that fishing was reaching capacity, she said.

In the Gulf of Tonkin, where Vietnam shares resources with China, the record was even worse with fish catch per hour in 1997 only a quarter of that in 1985.

"In the Philippines, most marine fisheries were overexploited by the 1980s, with catch rates as low as 10 percent of rates when these areas were lightly fished," she said.

Williams said Southeast Asian fisheries were serviced by a plethora of regional bodies and agreements, but few acted effectively on illegal fishing and shared stock management.

At the same time, illegal fishing was "dynamic, creative, clever and usually one step ahead of authorities".

A Southeast Asian government may issue a single fishing licence only to find it being used by four different boats, she said. In Indonesia, foreign fishing vessels, often Chinese in joint-ventures, operated on the "margins of legality" in a geographically vast archipelago.

Williams said Australia should step up collaboration with Southeast Asian countries to help manage fish stocks.


Carbon Trading Markets: US to enter?

It is interesting how US big business maintains an eye on a profit despite the behaviour of the current government. This story has "Porter-hypothesis" overtones and suggests that higher EU regulations have lead other countries to steal a march on the US by being ahead in the Carbon Trading game. But for how long?

The final line is important:

"The carbon emission market is benefiting from the emergence of exchanges ... (but) the question is more about the economic viability of these xchanges,"

Full article:

US Exchanges Explore Carbon Trading Market[Planet Ark]

NEW YORK - Some of the biggest US exchanges are eyeing a piece of the global carbon trading market, which is expected to double in size by 2012 from current levels as governments and industry step up efforts to reduce pollution.

The market for trading carbon emissions reached 22 billion euros (US$32 billion) in 2006 and will cross 40 billion euros (US$58 billion) by 2012, according to a report by Boston-based research firm Celent.

"The opportunity is that it's a new product area that's not traded very heavily on exchanges right now," said Niamh Alexander, an analyst at Keefe, Bruyette & Woods.

"Lots of exchanges are likely to come up with different structured products to participate in that market," she said.

Analysts said carbon trading is likely to be among the slew of lucrative new products that exchanges are racing to offer customers. Exchanges the world over are buying stakes in each other to take advantage of new technologies that allow customers to swiftly trade a variety of products, from currency options to weather futures, across national boundaries.

New York Stock Exchange operator NYSE Euronext recently said it has partnered with French bank Caisse des Depots (CDC) to launch a carbon trading market in early 2008.

The market will allow trading and settlement of carbon dioxide allowances and credits, which can be bought and sold like any commodity.

NYSE Euronext spokesman Stefane Flex said further details will be presented at the United Nations' panel on climate change next month.

Craig Donohue, chief executive of CME Group Inc, the world's largest derivatives market, also said on a third-quarter earnings call his exchange was interested in developing carbon trading products.

CME recently acquired a 10 percent stake in Brazilian derivatives exchange BM&F, and Donohue said carbon trading may be a joint area of focus.

"Our agreement with BM&F does call for joint product development... but very much in particular, we are going to be focused on the agricultural and commodity markets, as well as the carbon market," Donohue said.

Exchanges can help create transparent and rules-based markets for trading carbon and other greenhouse gas emissions, analysts said.

Currently, about two-thirds of carbon trading happens in over-the-counter markets, said Veronique Bugnion, managing director of Point Carbon, which provides research on global energy and carbon markets.

Four exchanges -- Nord Pool, Powernext, the European Carbon Exchange and Chicago Climate Exchange -- conduct the remainder, Bugnion said.

The Chicago Climate Exchange is the first US exchange to create a market for carbon credit trading.

Nymex Holdings Inc, owner of the New York Mercantile Exchange, has also said it will begin offering contracts for carbon trading in the first quarter of 2008.

The United States, -- unlike the European Union -- is yet to establish a mandatory nationwide cap on greenhouse gas emissions. But many US companies, including giants like Ford Motor Company and Intel Corp, are participating in voluntary trading of carbon allowances.

"Exchanges are gradually nibbling away at the over-the-counter market," Bugnion said.

But Celent analyst Axel Pierron, who authored the report, said lack of liquidity and uncertainty around regulation has prevented exchanges from jumping in to offer carbon trading.

"The carbon emission market is benefiting from the emergence of exchanges ... (but) the question is more about the economic viability of these exchanges," Pierron said.

Other Carbon Trading Stories from today:

Carbon Traders Demand More UN Market Experts[Planet Ark]
SINGAPORE - The United Nations should replace policy officials with market experts to run a US$5 billion carbon trading scheme administered under the Kyoto Protocol, project developer EcoSecurities said.

Voluntary Carbon Market to Boom in Asia, US [Planet Ark]
SINGAPORE - Trading in voluntary carbon markets is booming as companies, in top customer the United States but also in Asia, rush to offset their impact on global warming outside a regulated Kyoto protocol scheme.


Regulating Global Trade and the Environment

New book of interest:

Regulating Global Trade and the Environment

Author(s) - Paul Street

Series: Routledge Studies in International Business and the World Econom


Examining the roles of international institutions, multinational corporations and other transnational players in framing the trade and environment debate, this book takes a multi-disciplinary approach that draws upon the experiences of developing countries, and assesses the limitations and possibilities for achieving substantive human freedoms and sustainable environmental futures.


1. Globalization and Risk 2. Law, Development and Sustainability 3. Regulating Transnational Trade 4. Trade and Biodiversity 5. Food Security and Globalization 6. TNCs, FDI 7. Conclusions: Transnational Law and Strategies of Change

List Price: £60.00
ISBN: 9780415277891
ISBN-10: 0415277892
Publisher: Routledge
Publication Date: 15/04/2008
Pages: 240
Trim Size: 234X156


Tuesday, November 06, 2007

Are geoengineers taking the p*** in the Pacific?

Although typically an end of the week type post this article serves to show how regulatory loopholes can be exploited.

Is this a good or a bad idea?

You do have to wonder how sites get selected for such geoengineering experiments.

Absorbing CO2 by Dumping Urea Into Ocean Pisses Off Activists[Weird Science]

The Philippines government has approved an Australian company's plan to absorb excess CO2 by dumping massive amounts of urea in the Sulu Sea. Environmental activists say the dumping is a potentially risky, scientifically unsound gamble that underscores the dangerous absence of international geoengineering regulations.


The groups called for regulators currently meeting to discuss the London Convention to evaluate urea dumping as well as iron seeding. The Convention, enacted by the International Maritime Organization in 1972, prohibits oceanic waste dumping -- but while simply pouring urea into the sea would be illegal, doing so to absorb carbon dioxide is permitted, or at least not forbidden.

That regulatory loophole is symbolic of the general absence of international guidelines for large-scale climate modification projects, both at sea and on land; and Sulu Sea urea dumping, proposed by the Ocean Nourishment Corporation and planned in the future for Malaysia, Chile and the United Arab Emirates, is symbolic of projects that are only going to become more common as climate change and entrepreneurship collide.

Pissing for Profit in the Pacific[ETE Group]
As governments meet in London today to discuss whether the high seas should be used for large-scale iron dumping by companies promising a quick-fix for climate change, one private company is rushing ahead with a new ocean dumping scheme in Southeast Asia – this time with urea. Civil society groups have learned that Ocean Nourishment Corporation (ONC) of Sydney, Australia has been given a “go signal” by the Philippines government to experimentally dump hundreds of tonnes of industrially-produced urea, most likely into the Sulu Sea between Philippines and Borneo.


“The global South is once again a dumping ground for risky technologies – this time our oceans are being threatened by high-risk geoengineering schemes that are rushing forward without public consultation or intergovernmental oversight,” said Neth Dano of Malaysia-based Third World Network.


“This technology is dangerous and unacceptable because it could imperil our marine environment – the main source of survival and livelihood for poor fisherfolk in the Philippines,” said Ruperto Aleroza, chair of Kilusang Mangingisda – a fisherfolk movement in the Philippines. “Under Philippine law, experiments like this must undergo environmental impact assessment and the communities that would be affected must give informed consent. Proponents of this technology must comply with these laws and the Philippine government must enforce them,” said Aleroza.


They argue that urea dumping could tackle climate change and push up fish stocks. However, international scientific bodies, including the International Panel on Climate Change (IPCC) have warned that toxic tides and lifeless oceans might instead result from such geo-engineering activities.