Thursday, December 27, 2007

The "400": Economists for the climate high jump

What better way to end 2007 that a good old fashioned rant against "Economists" by "real" scientists.

This relates to a previous post on this blog:

Inhofe fights back: Sceptics Christmas message

In this article I suggested that what needed to be done was to have a good look at exactly who these 400 scientists were and attempt to debunk them. This has been done but the results were somewhat surprising.

It is "ironic" and more than a little amusing to find that the biggest criticism that the debunkers can come with is that there are too many "economists" on the list and given that economists are rank somewhere around the primeval swamp level this means Infofe's famous 400 can be instantly dismissed.

We are now in the strange position of having to debunk the debunkers. As far as I can see at a quick glance there are 8 economists (out of 400). Consider this when reading the following post:

This article is from the gloriously named "Crooks and Liars".

Don’t believe Inhofe’s hype [Crooks and Liars]

Late last week, Sen. James Inhofe (R-Okla.) released a so-called “report,” pointing to hundreds of alleged independent scientists who agree with him about climate change — which is to say, they deny the reality of global warming.

More than 400 scientists challenge claims by former Vice President Al Gore and the United Nations about the threat of man-made global warming, a new Senate minority report says.

Far-right blogs pounced, heralding Inhofe’s “expose.”

There is, however, one small problem: Inhofe’s report plays fast and loose with the facts.

“Padded” would be an extremely generous description of this list of “prominent scientists.” Some would use the word “laughable” (though not the N.Y. Times‘ Andy Revkin, see below). For instance, since when have economists, who are pervasive on this list, become scientists, and why should we care what they think about climate science?

There’s been a lot of great coverage of this, highlighting Inhofe’s many errors of fact and judgment, including items here, here, and here.

It is the Climate Progress article that the economists get singled out for attention.

Inhofe recycles unscientific attacks on global warming, NYT’s Revkin gives him a pass


Who are these mythical economists?

Here are the economists that signed up (I may have missed some). Can 8 be considered pervasive?

Hans H.J. Labohm, PhD, economist, former advisor to the executive board, Clingendael Institute (The Netherlands Institute of International Relations), The Netherlands

An economic historian. NO peer reviewed papers according to desmogblog (link above).

The Rt. Hon. Lord Lawson of Blaby, economist; Chairman of the Central Europe Trust; former Chancellor of the Exchequer, U.K.

Right-winger who writes populist articles in the press. Peer reviewed papers limited (or none).

Alister McFarquhar, PhD, international economist, Downing College, Cambridge, U.K.

PhD 1962. Not prolific. Peer reviews articles limited.

Ross McKitrick, PhD, Associate Professor, Dept. of Economics, University of Guelph, Canada

Some decent papers in some good journals.

1. McKitrick, Ross R. (2006) Why Did US Air Pollution Decline After 1970? Empirical Economics , DOI:10.1007/s00181-006-0111-4.
2. McKitrick, Ross (2006). The Politics of Pollution: Party Regimes and Air Quality in Canada Canadian Journal of Economics 39(2), May 2006, 604-620.
3. McKitrick, Ross (2005). "Decentralizing a Regulatory Standard Expressed in Ratio or Intensity Form." Energy Journal 26(4) 1-9.
4. McKitrick, Ross and Timothy Shufelt (2002). "Environmental Impacts of Enhanced Property Rights." Environment and Energy 13(3) pp. 367-382.
5. McKitrick, Ross R. and Robert C. Collinge. (2002) "The Existence and Uniqueness of Optimal Pollution Policy in the Presence of Victim Defense Measures." Journal of Environmental Economics and Management 44, pp 106-122.
6. McKitrick, Ross R. (2001) "The Design of Regulations Expressed as Ratios or Percentage Quotas." Journal of Regulatory Economics 19(3), pp. 295-305.
7. Weersink, Alfons, Ross McKitrick and Michael Nailor (2001). "The Economics of Voluntary Shared Cost Programs" Current Agriculture, Food and Resource Issues 2/2001:23-36. (CAFRI)
8. McKitrick, Ross R. (2001). "Mitigation versus Compensation in Global Warming Policy" Economics Bulletin, Vol 17 no. 2 pp. 1-6.
9. McKitrick, Ross R. and Robert C. Collinge, (2000) "Linear Pigovian Taxes and the Optimal Size of a Polluting Industry" Canadian Journal of Economics 33(4) pp. 1106-1119.
10. McKitrick, Ross R. (1999) "A Derivation of the Marginal Abatement Cost Function." Journal of Environmental Economics and Management May 1999, pp. 306-314.
11. Helliwell, John F. and Ross R. McKitrick, (1999) "Comparing Capital Mobility across National and Provincial Borders," Canadian Journal of Economics 32(5) pp. 1164-1173. additional results
12. McKitrick, Ross R. (1999) "A Cournot Mechanism for Pollution Control under Asymmetric Information." Environmental and Resource Economics October 1999, pp. 353-363.
13. McKitrick, Ross R. (1998) "The Econometric Critique of Applied General Equilibrium Modelling: The Role of Functional Forms." Economic Modelling 15 pp. 543-573.
14. McKitrick, Ross (1997). "Double-Dividend Environmental Taxation and Canadian Carbon Emissions Control" Canadian Public Policy December 1997, pp. 417-434.

Frank Milne, PhD, Professor, Dept. of Economics, Queen's University, Canada

An excellent economist with a string of top papers although nothing in environmental economics journals unfortunately. Not sure where his skepticism comes from.

# Frank Milne and Klaus Ritzberger, "Strategic Pricing of Equity Issues", Economic Theory, 20, 2002, pp. 271-294.

# Dilip Madan, Frank Milne and Robert Elliott, Incomplete Diversification and Asset Pricing in K. Sandmann and Plilipp Schonbucher (eds.) Advances in Finance and Statistics, Springer, Berlin, 2002.

# Frank Milne and Xing Jin "The Existence of Equilibrium in a Financial Market with Transaction Costs," in Quantitative Analysis in Financial Markets: Collected Papers of the New York University Mathematical Finance Seminar ed. Marco Avellaneda, Jeffrey D. Phillips, World Scientific Pub Co., 1999.

# Frank Milne and David Kelsey, "Induced Preferences, Non-Additive Probabilities and Multiple Priors," International Economic Review, 40(2), May 1999, pages 455-478.

# Frank Milne, "Liquidity and Control: A Dynamic Theory of Corporate Ownership Structure: Comment," Journal of Institutional and Theoretical Economics, 154(1), March 1998, pages 212-15.

# Frank Milne and David Kelsey, "Induced Preferences, Dynamic Consistency and Dutch Books," Economica, 64(255), August 1997, pages 471-81.

# Frank Milne and David Kelsey, "The Existence of Equilibrium in Incomplete Markets and the Objective Function of the Firm," Journal of Mathematical Economics, 25(2), 1996, pages 229-45.

Alan Moran, PhD, Energy Economist, Director of the IPA's Deregulation Unit, Australia

An interesting article can be read here:

How on earth did Alan Moran get a PhD in “public transport economics”?

Academic papers limited.

Andrei Illarionov, PhD, Senior Fellow, Center for Global Liberty and Prosperity, U.S.; founder and director of the Institute of Economic Analysis, Russia

Andrei Illarionov, former chief economic adviser to Russian president Vladimir Putin, is a Senior Fellow of the Cato Institute's Center for Global Liberty and Prosperity. Illarionov has been an assistant professor of international economics at St. Petersburg University, where he received a Ph.D. in 1987. In 1992 he became deputy director of the Center for Economic Reform, the Russian government’s think tank. In April 1993 he became chief economic adviser to Prime Minister Viktor Chernomyrdin, a position he resigned in February 1994. Illarionov has written three books and more than 300 articles on Russian economic and social policies.

Alex Robson, PhD, Economics, Australian National University

Three published papers and lots of policy type papers. ET is a good journal.

* "Costly Enforcement of Property Rights and the Coase Theorem," (with Stergios Skaperdas), forthcoming, Economic Theory.
* "The Welfare Cost of Capital Immobility and Capital Controls" (with A.J. Makin), Economic Analysis and Policy, 36 (1/2), March/September 2006, pp 13-24.
* "Comparing Trade and Capital Weighted Measures of Australia's Effective Exchange Rate" (joint with A.J. Makin), Pacific Economic Review, June, 1999.

Now, here are the problems.

First, eight out of a total of 400 is by reckoning a very small percentage and hardly worth a headline.

Second, which ever way you cut this cake it is hard to come to the conclusion that you have got any of the worlds leading economists or environmental economists.

I leave it to the reader to dig deeper.

Saturday, December 22, 2007

Kenneth Arrow on "Climate Change" and "the Stern review"

To get back to the real world, one of the worlds top bona fide economists talks about climate change. It is good to get back to real economics after the previous post.

The Case for Mitigating Greenhouse Gas Emissions [Project syndicate]

Last fall, the United Kingdom issued a major government report on global climate change directed by Sir Nicholas Stern, a top-flight economist. The Stern Review Report on the Economics of Climate Change amounts to a call to action: it argues that huge future costs of global warming can be avoided by incurring relatively modest cost today.

Critics of the Stern Review don’t think serious action to limit CO2 emissions is justified, because there remains substantial uncertainty about the extent of the costs of global climate change, and because these costs will be incurred far in the future. However, I believe that Stern’s fundamental conclusion is justified: we are much better off reducing CO2 emissions substantially than risking the consequences of failing to act, even if, unlike Stern, one heavily discounts uncertainty and the future.

Two factors differentiate global climate change from other environmental problems. First, whereas most environmental insults – for example, water pollution, acid rain, or sulfur dioxide emissions – are mitigated promptly or in fairly short order when the source is cleaned up, emissions of CO2 and other trace gases remain in the atmosphere for centuries. So reducing emissions today is very valuable to humanity in the distant future.

Second, the externality is truly global in scale, because greenhouse gases travel around the world in a few days. As a result, the nation-state and its subsidiaries, the typical loci for internalizing externalities, are limited in their remedial capacity. (However, since the United States contributes about 25% of the world’s CO2 emissions, its own policy could make a large difference.)

Thus, global climate change is a public good (bad) par excellence . Cost-benefit analysis is a principal tool for deciding whether altering it through mitigation policy is warranted. Two aspects of that calculation are critical. First, it has to be assumed that individuals prefer to avoid risk. That is, an uncertain outcome is worth less than the average of the outcomes. Because the possible outcomes of global warming in the absence of mitigation are very uncertain, though surely bad, the uncertain losses should be evaluated as being equivalent to a single loss greater than the expected loss.

The second critical aspect is how one treats future outcomes relative to current ones – an issue that has aroused much attention among philosophers as well as economists. At what rate should future impacts – particularly losses of future consumption – be discounted to the present?

The consumption discount rate should account for the possibility that, as consumption grows, the marginal unit of consumption may be considered to have less social value. This is analogous to the idea of diminishing marginal private utility of private consumption, and is relatively uncontroversial, although researchers disagree on its magnitude.

There is greater disagreement about how much to discount the future simply because it is the future, even if future generations are no better off than us. Whereas the Stern Review follows a tradition among British economists and many philosophers against discounting for pure futurity, most economists take pure time preference as obvious.

However, the case for intervention to keep CO2 levels within bounds (say, aiming to stabilize them at about 550 ppm) is sufficiently strong to be insensitive to this dispute. Consider some numbers from the Stern Review concerning the future benefits of preventing greenhouse gas concentrations from exceeding 550 ppm, as well as the costs of accomplishing this.

The benefits are the avoided damages, including both market damages and non-market damages that account for health and ecological impacts. Following a “business as usual” policy, by 2200, the losses in GNP have an expected value of 13.8%, but with a degree of uncertainty that makes the expected loss equivalent to a certain loss of about 20%. Since the base rate of economic growth (before calculating the climate change effect) was taken to be 1.3% per year, a loss of 20% in the year 2200 amounts to reducing the annual growth rate to 1.2%. In other words, the benefit of mitigating greenhouse gas emissions can be represented as the increase in the annual growth rate from today to 2200 from 1.2% to 1.3%.

As for the cost of stabilization, estimates in the Stern Review range from 3.4% of GNP to -3.9% (since saving energy reduces energy costs, the latter estimate is not as startling as it appears). Let’s assume that costs to prevent additional accumulation of CO2 (and equivalents) come to 1% of GNP every year forever, and, in accordance with a fair amount of empirical evidence, that the component of the discount rate attributable to the declining marginal utility of consumption is equal to twice the rate of growth of consumption.

A straightforward calculation shows that mitigation is better than business as usual – that is, the present value of the benefits exceeds the present value of the costs – for any social rate of time preference less than 8.5%. No estimate of the pure rate of time preference, even by those who believe in relatively strong discounting of the future, has ever approached 8.5%.

These calculations indicate that, even with higher discounting, the Stern Review’s estimates of future benefits and costs imply that mitigation makes economic sense. These calculations rely on the report’s projected time profiles for benefits and its estimate of annual costs, about which there is much disagreement. Still, I believe there can be little serious argument about the importance of a policy aimed at avoiding major further increases in CO2 emissions.


Inhofe fights back: Sceptics Christmas message

Why I am posting this I do not know. Flames of publicity and all that.

Amazing what a little spin can do.

It is worth reading for a laugh if it were not so disturbing (and a possible hoax).

A little more research is needed on the merits of the scientists listed and to see whether these quotes can be accurately be linked to these scientists.

There is sure to be many blogging inches given over to this story in the next few days.

U.S. Senate Report: Over 400 Prominent Scientists Disputed Man-Made Global Warming Claims in 2007 [The official sounding "US Senate Committee on Environment and Planning"]

Over 400 prominent scientists from more than two dozen countries recently voiced significant objections to major aspects of the so-called "consensus" on man-made global warming. These scientists, many of whom are current and former participants in the UN IPCC (Intergovernmental Panel on Climate Change), criticized the climate claims made by the UN IPCC and former Vice President Al Gore.

The new report issued by the Senate Environment and Public Works Committee’s office of the GOP Ranking Member details the views of the scientists, the overwhelming majority of whom spoke out in 2007.

Even some in the establishment media now appear to be taking notice of the growing number of skeptical scientists.


Out comes Dr Tim Patterson with this quote:

Paleoclimatologist Dr. Tim Patterson, professor in the department of Earth Sciences at Carleton University in Ottawa, recently converted from a believer in man-made climate change to a skeptic. Patterson noted that the notion of a “consensus” of scientists aligned with the UN IPCC or former Vice President Al Gore is false. “I was at the Geological Society of America meeting in Philadelphia in the fall and I would say that people with my opinion were probably in the majority.”


There is then a list of quotes from many scientists each one more implausible than the last.

Fish Quotas for 2008

With topical timing, the announcement of the new fisheries quotas comes at 2 weeks before the Econ211 essay on "The Economics of Fisheries" is due to be handed in.

'Fair' deal at fisheries summit [BBC]

Cuts in fishing days of 18% and 10% were agreed for Scotland's west coast and the North Sea respectively, with an 11% rise in the North Sea cod catch.

Crews will also be "given back" days at sea for helping conservation measures.

Representatives of the Scottish fishing industry were "cautiously optimistic" about the deal.

But Greenpeace said the EU was continuing policies that are dragging the seas "to a point of no return," while the WWF accused European ministers of having "gambled on the future" of cod stocks with the strategy.

There is economics and political economy all over this deal. Does it not appear a little short sighted to say that some countries "resisted" tighter controls because fish prices were going up. What do they expect if demand stays the same and supply falls due to over fishing. Just what do they expect to happen to the price of cod if it is overfished past the point of no return (Newfoundland know all about this)?

Then there is the incentives and motivation of your average fisheries minister. Are they looking out for the fish or the voters? Unemployed fisherman are able to lobby and protest far more effectively than your average haddock and certainly get more local and national press.

Some countries resisted moves towards tighter controls, citing the soaring price of fish.

Saskia Richartz, marine policy expert for Greenpeace, was furious with the new deal.

She said it "continues a three-decade long trend of ministerial incompetence that is dragging Europe's seas towards a point of no return.

"The fisheries ministers simply cannot be trusted and more than ever Europe's environment ministers need to be included in future negotiations," she added.

Other links:

I like this question:

Q&A: The 2008 EU fishing quotas [BBC]

If cod is so scarce, why is there no shortage of it in the shops?

Some 90% of the fish consumed in the UK comes from outside the EU, from Iceland, Greenland and the Faroe Islands. The fish stocks in these fisheries are healthier.

Mixed reaction to fisheries deal [BBC]

Fisheries: Fish Dumping "immoral" and FISH FACTS [Globalisation and the Environment]

and finally an interesting website (from a comment on the above story) with some interesting news items and intelligent and detailed analysis of the Scottish fisheries situation.

China Chokes - pollution haven or comparative advantage

The New York Times recently published a lengthy article on China and its environmental problems.

The gist of the story is that a lot of dirty industries from the West have been relocating to China. This has the effect of (1) making China dirtier, (2) making the West cleaner (in terms of local pollutants), (3) increasing global emissions (or no change at best).

The pollution haven hypothesis as used by economists infers that polluters deliberately relocate their production to those countries with less stringent environmental regulations or domestic firms displace Western firms (who close) because they cannot compete on price as a direct result of regulation differentials.

Despite anecdotal evidence such as this article, the evidence is mixed. One reason is that industry relocates for many reasons and regulations are only a small percentage of total costs. Wages and other factors are more likely to be the cause of any shift. This is clear from this article.

China Grabs West’s Smoke-Spewing Factories [NY Times]

Talking about two towns, one in Germany and one in China.

These two steel towns have an unusual kinship, spanning 5,000 miles and a decade of economic upheaval. They have shared the same hulking blast furnace, dismantled and shipped piece by piece from Germany’s old industrial heartland to Hebei Province, China’s new Ruhr Valley.

The transfer, one of dozens since the late 1990s, contributed to a burst in China’s steel production, which now exceeds that of Germany, Japan and the United States combined. It left Germany with lost jobs and a bad case of postindustrial angst.

What we want to know as economists is WHY did this furnace move?
In its rush to re-create the industrial revolution that made the West rich, China has absorbed most of the major industries that once made the West dirty. Spurred by strong state support, Chinese companies have become the dominant makers of steel, coke, aluminum, cement, chemicals, leather, paper and other goods that faced high costs, including tougher environmental rules, in other parts of the world. China has become the world’s factory, but also its smokestack.

Clearly, this is NOT a problem of Germany PUSHING dirty production to China but the Chinese PULLING dirty production into China.
This issue quickly gets to the heart of the climate change debate:
China’s worsening environment has also upended the geopolitics of global warming. It produces and exports so many goods once made in the West that many wealthy countries can boast of declining carbon emissions, even while the world’s overall emissions are rising quickly.

In the following quote we are looking at the environmental cost of production - the issue here is not that Chinese regulations are not strict but that they are not enforced and that corruption is rife.
The Ruhr Valley city of Dortmund, where ThyssenKrupp once made steel, still suffers from high unemployment because of the loss of jobs to lower-cost countries like China. But Germans can buy Chinese-made iPods, washing machines and cargo ships at prices that, because of lax pollution controls, do not reflect the toll on the environment. And the outsourcing of polluting industries has given them cleaner air and water.

The Chinese government is finally seeing the folly of their ways. This has been clear for years and yet only now are they beginning to see that things will need to change.
“Some enterprises are abusing the environment to lower export prices,” Chen Guanglong, a Ministry of Commerce official, said in announcing a crackdown on polluters this fall. “They sell their products abroad, but the pollution is left at home.”

Another important issue is that it is NOT environmental economics that is the problem but the sheer lack of basic economic understanding in China. Steel is not the only sector to have massive over capacity and firms that are kept open by loss making local banks. The bad debt provisions of Chinese banks should NOT be underestimated. The issue is that it is jobs that matter but not profits. Such a situation is unsustainable.
But steel has also proved a curse. China has 77 large steel mills like Hangang, and hundreds of smaller rivals. They have so much excess capacity that production of some basic steel products has become unprofitable at home and abroad. Worse, steel pollutes more than any other industry in China, perhaps in the world.

Clearly there are different ways of looking at this problem and this is what economists need to do:
A study by researchers at Carnegie Mellon University found that if all the goods that the United States imported between 1997 and 2004 had been produced domestically, America’s carbon emissions would have been 30 percent higher.

Good news for the US perhaps and US citizens being able to breath cleaner air. But:
A separate study for the European Parliament examined the transfer of steel production to China from Germany. It found that China’s less efficient steel mills, and its greater reliance on coal, meant that it emitted three times as much carbon dioxide per ton of steel as German steel producers.

Not so good for global emissions.

There is plenty of scope for more research in this area.


Friday, December 21, 2007

Climate Change and Financial Markets Workshop

It is interesting to see that the "city" and the financial markets are beginning to take climate change seriously.

This workshop on the 11th January at Warwick Business School covers a range of finance related topics that I am sure will be of interest to many although it is not for the mathematically or academically faint hearted.

ESRC, MMF and WFRI Finance Workshop Series One Day Workshop

Friday 11th January 2008

Climate Change and Financial Markets:
catastrophe instruments, reinsurance, securitisation and risk transfer

9.30 Registration and Coffee

10.00 Climate change and monetary policy Andrew Sentance (Warwick University and Member of the Monetary Policy Committee, Bank of England)

10.45 Why have exchange traded catastrophe instruments failed to displace reinsurance?
Michel Habib (University of Zurich, Swiss Banking Institute)

11.45 Pricing of catastrophe reinsurance and derivatives with a Cox process with shot noise intensity Angelos Dassios (London School of Economics)

12.45 LUNCH

1.30 Climate Change and the Insurance Industry Trevor Maynard (Manager Emerging Risks, Lloyds Insurance)

2.15 The Robustness of Arbitrage-Free and Actuarial Models in the Pricing and Hedging Catastrophe Derivatives Stephen Weston (Global Credit Trading, Risk Management, Deutsche Bank ,

3.15 Self-Protection and Insurance with Interdependencies Alexander Mürmann (Institute of Risk Management and Insurance, Vienna

4.15 TEA

4.45 Optimal design of risk sharing between insurer, reinsurer and capital markets Pierre Devolder (Institut des Sciences Actuarielles, UCL)

5.45 END

The workshop will take place in lecture theatre B0.01 in Warwick Business School. In order to ensure a place you must contact Rhona Macdonald on


Environmental PODCASTS: Economy on China and Llewellyn on Climate Change

A post for the technologically advanced generation of readers.

We have posted many times on China's environmental problems and Elizabeth Economy's view on this (click the China label in the sidebar). She is certainly getting a lot of mileage out of her analysis. She now talks to Bloomberg for those that prefer to listen instead of reading.

Elizabeth Economy Says China Too Soft on Curbing Pollution
Dec. 18 (Bloomberg) -- Elizabeth Economy, director of Asia studies at the Council on Foreign Relations, spoke yesterday with Bloomberg's Tom Keene from New York about the environmental challenges facing China. (Source: Bloomberg)

The other is from Dr. Llewellyn, senior economic policy adviser for Europe at Lehman Brothers Holdings who "spoke about the search for global warming solutions that don't dampen worldwide economic growth and elaborated on his own climate strategy involving a combination of greenhouse-gas emissions regulations and expansion of carbon-trading markets." (Bloomberg press release).

Llewellyn Says Global Warming Interest Is `Accelerating'
Dec. 18 (Bloomberg) -- John Llewellyn, senior economic policy advisor for Europe at Lehman Brothers Holdings Inc., spoke on Dec. 13 with Bloomberg's Tom Keene from London about the search for solutions to global warming without dampening worldwide economic growth and Llewellyn's strategy involving a combination of greenhouse-gas emissions regulations and expansion of carbon-trading markets. (Source: Bloomberg)

Tuesday, December 18, 2007

Climate Change Performance Index 2008

Never one to miss a chance to post some numbers here is a link to the latest "Climate Chnage Performance Index 2008" that has just been released.

The performance index is calculated by "GermanWatch".

Climate Change Performance Index 2008

This link gives access to tables, videos and previous years data.

Green Daily provide some commentary and a summary table (to save me doing it).

Climate Change Performance Index 2008 released [Green Daily]

The index compares the relative performance of 56 countries in combating climate change, taking into account not only current emissions, but emissions trends and governmental policy. Not surprisingly, the US did poorly, ranking 55th, ahead of only Saudi Arabia and 15 spots below fellow greenhouse gas giant China. However, Americans aren't alone down there - particularly alarming is that of the top 10 gassers, 7 of them are below 40th place in the list, meaning in general that they have no practical strategy for, or intention of, reducing emissions anytime soon.


Monday, December 17, 2007

Carbon Caps, Competitiveness and the "leakage problem"

The post-Bali fall out continues. I have resisted posting endless commentary on what it all means but this New York Times piece by Judith Chevalier has some economic analysis that illustrates some of the difficulties ahead.

The key objection trotted out endlessly in the US is:

Critics also object that it would damage American competitiveness to commit to domestic reductions without parallel commitments from developing-country trade partners like China.

One way of thinking about this is to think of Bali as 180 countries all sitting in the audience waiting for a play to start on the Titanic (a tragedy of course). The US will not let the play start until they have been given the best seats in the house. However, China and India also want a good seat and don't see why they should give up their seats to the big bully US. The result - the titanic sinks killing all the delegates before the play even got started.

That make sense? ;-)

The actual idea outlined below would appear to have some merits. The problems are of course "enforcement", the inevitable increase in prices for consumers and producers - never politically popular and finally the possibility of this approach being used as a protectionist measure to "protect US jobs".


“The best policy — both in terms of the environment and in terms of economic theory — would be to have all countries take on binding emissions caps under an international agreement,”

I think we can all agree on that.

A Carbon Cap That Starts in Washington [NYT]

THE United Nations conference on climate change wrapped up in Bali, Indonesia, last week without a firm commitment from the United States or China to reduce emissions of carbon dioxide and other greenhouse gases. While a binding global agreement would be the best way to cut back on those emissions, a more limited but still useful approach is available, and it is wending its way through Congress.

In its current version, the Lieberman-Warner Climate Security Act, as the bill is known, would cap American carbon consumption through a tradeable permit plan. Even among those who support tradeable permits, there is considerable debate about what level of emissions reductions is realistic. Critics also object that it would damage American competitiveness to commit to domestic reductions without parallel commitments from developing-country trade partners like China.

But instead of using Chinese inaction as an excuse to avoid dealing with the problem, we should consider why emissions from China are soaring. There are numerous factors, all stemming from China’s rapid economic development. Yet one of the biggest is the enormous increase in China’s production of manufactured goods for export. Indeed, a study by the Tyndall Center for Climate Change Research in Britain estimated that in 2004, net exports accounted for 23 percent of Chinese greenhouse gas emissions.

We know where most of those Chinese exports are headed — to developed countries, like the United States, which accounts for about a quarter of them. A rough calculation suggests that almost 6 percent of Chinese carbon emissions are generated in the production of goods consumed here. That is the rough equivalent of the total emissions produced by Australia or France.

The Tyndall Center argues that carbon reduction policies should focus on carbon consumption, not emissions. That makes sense, especially in the absence of a binding global agreement.

One goal of a tradeable permit system is to force consumer prices for goods to reflect the harm that the production of those goods causes the planet. For example, if a television were made using a high-emission process, the factory would have to buy many carbon permits, driving up the TV’s price. A television made in a low-emission factory would require fewer permits, lowering its relative price. Consumers, of course, would have an incentive to choose the TV from the low-emission factory, and all factories would have an incentive to lower emissions.

A problem would arise, however, if a producer needed to buy permits to make televisions in a country with a carbon cap, while no permits were required in a country without a cap. The television from the country without the cap would be cheaper, consumers would prefer it, and there would be no economic incentive to cut emissions. Environmentalists call this the “leakage problem”: just as a balloon squeezed at one end will bulge at the other, emissions caps applied in only some economies will lead to emissions surges in others.

A provision in the current version of the Climate Security Act links responsibility to carbon consumption, not production. This idea derives from a joint proposal by the American Electric Power Company and the International Brotherhood of Electrical Workers. The provision requires that importers of goods from countries without carbon caps obtain permits for the emissions resulting from the goods’ production. While this requirement could be used to protect American jobs from foreign competition, if handled equitably, it could provide an elegant solution to the leakage problem.

If the United States adopted a tradable permit system that treated emissions from domestic producers identically to emissions associated with imported goods, then products that are more emissions-intensive, whether domestic or imported, would require more permits and thus be more expensive. Producers in the United States and abroad would have an incentive to reduce greenhouse gases to make their goods more competitive.

Of course, such a plan would have an immediate cost for Chinese producers and American consumers. Chinese production methods are now much more carbon-emission-intensive than American methods, so the plan would probably raise the average price of Chinese imports. The alternative, however, is to try to force the Chinese to adopt binding carbon caps similar to those considered in the United States. But that would also raise the Chinese imports’ price. Moreover, Chinese adoption of carbon caps would apply to the whole economy and would be much more costly for China; an American carbon consumption permit system would shield the Chinese domestic sector.

“The best policy — both in terms of the environment and in terms of economic theory — would be to have all countries take on binding emissions caps under an international agreement,” said Nathaniel Keohane, director of economic policy and analysis at Environmental Defense, a nonprofit advocacy group. “But we have to recognize that’s not going to happen overnight.” In the meantime, he said, the United States and other developed countries “need to take the lead.” He called carbon consumption caps “a good first step.”

“FROM an environmental point of view,” Mr. Keohane said, “it would ensure that the pollution we cut here at home doesn’t simply end up coming out of a smokestack somewhere else. It levels the playing field for American companies in the global economy. And it also helps us move toward a truly international system, by providing an incentive for developing countries to take on binding caps of their own.”

The carbon consumption provision will face scrutiny under current trade agreements, but there is sound logic for including it in any emissions legislation. Most important, it would eliminate an excuse for doing nothing.

Judith Chevalier is a professor of economics and finance at the Yale School of Management.


Saturday, December 15, 2007

Bali Boo Hoo Boys Win the Day - but what have they really won?

The delegates at Bali have eventually come up with a road map for progress on climate change. Whilst this is undoubtedly better than no deal at all, as economists we like to see numbers. It is the numbers that are conspicuous by their absence.

We will not comment at length in this blog as this is headline news and more to do with politics than economics.

However, the political wrangling was impressive and the pincer movement by India and the EU that isolated the US was an excellent example of orchestrated political maneuvering. I expect the US and George Bush are secretly or not so secretly livid.

The booing of the US delegate will be remembered for many years to come as a pivotal moment in the history of climate change action. Political drama at its best.

So where are we now:
The "Bali roadmap" initiates a two-year process of negotiations designed to agree a new set of emissions targets to replace those in the Kyoto Protocol.

So now we have 2 years of negotiations ahead on how to cut emissions. It all comes back to the stand-off between developing countries who have growth as a priority and the developed nations who want all countries to cut emissions proportionately even though the current climate change crisis was due primarily to Western and not LDC pollution.

There is no simple solution but one that involves a transfer of green and clean technologies (as requested by India) seems a logical way forward.

Climate deal sealed by US U-turn [BBC]

The final paragraph of the BBC report simply states:
"We need to find a new mechanism that values standing forests," said Andrew Mitchell, executive director of the Global Canopy Programme, an alliance of research institutions.

"Ultimately, if this does its job, [deforestation] goes down to nothing."

Mr Mitchell said the only feasible source of sufficient funds was a global carbon market.

But many economists believe mandatory emissions targets are needed to create a meaningful global market.

Thursday, December 13, 2007

"Environmental Economics"

There is nothing like writing a paper with a broad title.

You would have thought that there would have already been a paper called "Environmental Economics" before.

If not then this paper represents impressive marketing. If there is, does it matter? Is there any law against identical paper titles? The title kind of suggests that the paper might be rather long. Entire text books are written with this title.

The "environmental economics" blog likewise did well in their snaffling of that term for their blog by being first movers (thus ensuring plenty of google traffic heads their way).

With a title like "Environmental Economics" this paper had better be good. The NBER branding is one signal of quality and Stavins is considered to be a major player in this subject area. See for yourselves below.

Students on my "Environmental Economics" course should read this paper as it should pretty much cover everything we study regarding alternative environmental policies.


Environmental Economics

Date: 2007-11

By: Robert N. Stavins


This article provides an overview of the economics of environmental policy, including the setting of goals and targets, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. Also reviewed are the means of environmental policy, that is, the choice of specific policy instruments, featuring an examination of potential criteria for assessing alternative instruments, with focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional command-and-control mechanisms and market-based instruments.

JEL: K32 Q28 Q38 Q48


How to be an Ecological Economist

It is not entirely clear to me why someone would want to be an ecological economist but if there are some would be ecological economists out there this article is for you.

The question should be "why become an ecological economist and not an environmental economist and what the heck is the difference anyway?".

I believe the boundaries are becoming increasingly blurred but there is still a discernible difference as I am this this paper by Malte Faber points out.

I suppose it comes down to whether one believes this statement or not:

"Mainstream Economics altogether lacks the concepts required to deal adequately with nature, justice and time."


How to be an Ecological Economist
Date: 2007-10
By: Malte Faber (University of Heidelberg, Department of Economics)


To answer the question "How to be an Ecological Economist", we must start by defining the field of Ecological Economics. Mainstream Economics altogether lacks the concepts required to deal adequately with nature, justice and time. It was the absence of these three concepts in this otherwise great social science that led to the establishment of Ecological Economics. The interest in nature, justice and time is its defining characteristic. The main thesis of this paper is that our field is a fragile institution and that the professional existence of an ecological economist is no less fragile. However, this very fragility also represents freedom, scope for free thinking, conceptualising and research. Nevertheless, to be able to really use and in turn enjoy the full scope of this freedom, an ecological economist needs certain specific characteristics, in particular what is termed in the German philosophical tradition "Urteilskraft" and in English "power of judgement". A description of these characteristics is developed in this paper, providing an answer to the question "How to be an ecological economist?"

Keywords: ecological economics; mainstream economics; political economy; nature; justice; time; growth; power of judgement

JEL: A10 A12 A13 B10 Q00 Q57 O40


Wednesday, December 12, 2007

Does online Bingo hold the key to economic life?

A very good question.

With all the world's environmental eyes on Bali and not on this blog I have the chance to post on what really matters.

Sometimes, links to the economics arise in the strangest places. Online Bingo Blog win today's award for most obscure link to economics.

As this post represents one of the best ever blog posts I have read I repost it here in full.

These quotes should be enough to whet your appetite. Genius.

"With world stock markets behaving like they are on crack cocaine"

"currency exchanges like they need prozac"

"However, I have an advantage over these suckers that gives me a whole different perspective on how to deal with these things – it’s called online bingo."

Rad on.

Is online bingo a microcosm of economic life? [Online Bingo Blog]

With world stock markets behaving like they are on crack cocaine and currency exchanges like they need prozac, trying to understand what is happening in the economy is becoming more and more of a crap shoot as this year draws to a close.
Every day we hear more and more frightening stories about housing crashes, another Northern rock bank failure and the possibilities we are heading into a recession. So what gives?

The answer to that is I don’t have a clue, which puts me in the same company as such economic titans as Chancellor Darling, the PM, Mr Bernanke over in the US and various other captains of finance. However, I have an advantage over these suckers that gives me a whole different perspective on how to deal with these things – it’s called online bingo.

Stay with me on this…

The key here is mental toughness. People who play online bingo regularly face the nail-biting anxiety of wondering what life will throw up next. With every number a random event, we have trained ourselves to respond quickly and efficiently once the number is known. We are not fazed when the number is not the one we are waiting for. How many people working the markets can say the same thing as they await whatever interest rate cut the Bank of England decides to throw out?

Don’t get me wrong. I’m not saying bingo online is substitute for understanding the complexities of modern economics, but I do believe online bingo games provide more of a chance at having fun than what we see passing for economic news today. And the rewards are often better than mere .25% cut in interest rates.

If things do start to get worse in the so-called real world, be assured Bingo Street is still going to be here to provide online bingo players with an escape from the doom and gloom and a chance that you may walk away a whole lot richer.


Chinese to takeway kebabs in fight against pollution

Fast food wars hit China. This blog never shys away from confronting the big issues in environmental economics which is why we are pleased to report on China's latest attempt to cut pollution in the run up to the Olympic games.

The humble Kebab has been well and truely skewered.

Beijing Cracks Down on Kebabs to Reduce Pollution [Environmental graffiti]


The city won’t just be aiming to reduce car driving or factory emissions. They’ve already implemented strategies to reduce those No, Beijing is now cracking down on the offenders you rarely hear about: kebab vendors.

After spending $16 billion to reduce the pollution from cars, taxis, buses, and factories, the city is still in danger of missing its environmental targets. Beijing hopes to meet a “blue sky day” quota, meaning the number of days with a relatively safe level of pollution. To help ensure they actually meet this quota, they’ve begun to crack down on the smaller polluters as well as the larger.

One of the cities main targets in this effort is the army of grilled food vendors in the streets. The outdoor kebab sellers generally burn wood or coal to grill their wares. While this may make their food quite tasty, the smoke created by grilling meat and vegetables adds to the already heavy pollution in the city. Beijing is also cracking down on other polluters at lower levels. Other targets include uncovered trucks and construction sites, which can cause more air pollution when they kick up dust and debris in the construction process.


Monday, December 10, 2007

Becker and Posner on "Carbon Offsetting"

Carbon Offsetting is all the rage among the environmentally conscious middle class travellers.

What then are the economics mechanisms lurking behind the headlines and hundreds of companies offering us a way out of carbon footprint induced guilt?

The Posner blog post gives a good insight into some of the key global warming issues and is written to be accessible to all using simple language and simple examples.

The blog comments section is also worth ploughing through.

The Becker post concentrates on the "crowding out" argument that projects paid for by carbon offsetting would have occurred anyway. A fair point.

Carbon Offsets--Posner
The most serious drawback of the carbon-offsets movement is that it is likely to make the problem of excessive carbon emissions more rather than less serious, and this for three reasons. The first is that it creates the impression that modest reductions in the rate of annual increases in carbon emissions make a meaningful contribution to the fight against global warming. They do not.


Second, the movement encourages the belief that anyone who reduces his carbon "footprint" (that is, the emissions of carbon dioxide that he causes) to zero has done his bit to combat global warming.


Third, and most serious, the carbon-offset movement, combined with well-publicized projects by Google and other companies to reduce carbon emissions, creates the false impression that global warming can be tamed by voluntary efforts, just as cleaning up after dogs has been achieved by voluntary efforts, without need for legal compulsion.

On Carbon Offsets-Becker

In our complicated and interdependent global economic system, opportunities to create carbon offsets can be readily produced by both companies and governments without any significant affect on the scale of emissions. Mainly for this reason, but also because of the reluctance of most individuals to voluntarily pay significant costs for acting "green", a cap and trade system, despite its many flaws, is a far preferable direction to develop in order to cut down on carbon emissions.


Wind Farms to supply 50% of UK power

The UK is taking its "green leadership" position very seriously. I believe this is an excellent strategy both economically and politically. For labour it should help shore up the green vote, it takes the green card away from the liberals and the conservatives and it helps the UK's reputation abroad.

Economically, it will put UK firms and UK technology at the forefront of what can only be a booming economic sector. By taking a first mover advantage UK plc will be well positioned.

Whether this particular scheme makes economic sense is another question entirely. Could the investment be better made elsewhere? How to the costs compare to the alternatives (nuclear)? Id the technology up to it? Have the negative "eye sore" effects been correctly costed by environmental economists? Will the "NIMBY" protests be too great and create too much bad publicity for the government?

Giant offshore wind farms to supply half of UK power [Times Online]

Britain is to launch a huge expansion of offshore wind-power with plans for thousands of turbines in the North Sea, Irish Sea and around the coast of Scotland.

John Hutton, the energy secretary, will this week announce plans to build enough turbines to generate nearly half Britain’s current electricity consumption. He will open the whole of Britain’s continental shelf to development, apart from areas vital for shipping and fishing.

The scheme could see turbines so large that they would reach 850ft into the sky, nearly 100ft taller than Canary Wharf. Each would be capable of powering up to 8,000 homes.

Britain’s current range of coal, gas, nuclear and other power stations are capable of generating 75 gigawatts (GW) of electricity, but less than 0.5GW comes from wind. Planning consents have been granted for a further 3GW and the government had already made clear it wanted this raised to 8GW.


Environmental Economics: Critical Concepts in the Environment

News of a new book from Routledge called:

"Environmental Economics: Critical Concepts in the Environment" by Chuck Mason and Erwin Bulte.


About the Book

Environmental economics is dedicated to the analysis of externalities (i.e. the side-effects or consequences of industrial or commercial activities that are not reflected in market prices), including the characterization of possible manifestations, appropriate policy remedies, measurement of the benefits and costs of treating externalities, and the implications for both short- and long-term societal well-being. Such analyses embrace a large number of increasingly urgent issues, including efficiency (are decisions made in such a way as to minimize costs to society?), scarcity (are we running out of key resources, including environmental attributes such as clean drinking water and clean air?), and sustainability (will future generations be able to enjoy a similar standard of living as do current generations?).

In four volumes, this new Routledge Major Work brings together the best foundational and cutting-edge research on these and other vital topics to provide a conspectus of a vibrant and internationally important field. It is an essential work of reference and is destined to be valued by all scholars and students of environmental economics as a vital one-stop research and pedagogic resource.

So far so good. What then is the price of this 4 volume set? The answer is a whopping £595. That is pounds and not dollars.

The publishers are strongly encouraged to send a copy to this blog for review. I am sure it will be a great reference tool although I suspect it is aimed at libraries and just the occasional rich environmental economist.


Sustainability Report: Cold Hard Facts

Today's FT has a report on "Sustainability" in companies.

The increasing awareness of companies to all things green has been impressive inspired by the Stern review and Al Gore's doom laden film.

The mix of the academic and populist approaches appears to have struck and cord and this blog (which in theory is a similar mix of academic and trivial items) hopes to contribute to this debate.

Our current academic research is also looking more closely at the environmental behaviour of firms to see exactly what drives firms adoption of environmental management systems - in a good journal near you soon. Note: this last sentence also covers average journals and given the time papers take to get published soon could also mean years.

We are particularly interested in the role played by "fuzzy public relations" as the FT calls them. We tend to find that they this remains a primary motivation for "some" firms.

The question is whether this report is in itself not really just another talking shop that is merely "fuzzy public relations" at the government level.

As academic economists this following statement sums of our frustration:

But even if companies are getting better at explaining their impact on the environment, they still struggle to come up with numerical targets they can be tested against. Carbon emissions can be measured in different ways, as can energy usage. Moreover, there is no single agreement on what should be included in these measurements.

Without hard numbers it is hard to do hard science.

Sustainability report seeks the cold, hard facts [FT]

Not so long ago "green" issues were commonly associated with fuzzy public relations gestures rather than cold, hard numbers. But as companies increasingly accept the need to tackle climate change, the focus has shifted to technical measurements.

Enter the accountants, and what observers say is nothing less than a sea change in thinking in the past year. A host of initiatives have examined what to report and, more importantly, how to measure it.

"No longer is this an issue you can delegate to a function that works offline. It is mainstream and the responsibility of the CFO and CEO," says David Phillips, senior corporate reporting leader at PwC.

Roger Adams, head of technical services at the Association of Chartered Certified Accountants, adds: "The Stern report lit the fuse and Al Gore was the rocket once that fuse was lit."

This week, that view will be further reinforced with the publication of a report by the Prince of Wales' Accounting for Sustainability project, which will focus on how to "embed" sustainability considerations into general corporate thinking, but also on how to report these efforts.

"This is a report that says: 'Here is where we are, these are the issues and this is what we suggest you begin looking at,' " says Richard Reid, UK vice-chairman of KPMG and a member of the AfS project board.

"What has been really interesting is the amount that is happening in business and government and trying to pull all that together - there had been a concern that sustainability was being talked about a lot, but that it might just be lip service."

According to research by Deloitte, the number of FTSE 100 companies producing a standalone corporate responsibility report - as opposed to separate reports on issues such as "community" and "environment" - is at a new peak, more than tripling since 2002 to 69 last year.

But even if companies are getting better at explaining their impact on the environment, they still struggle to come up with numerical targets they can be tested against. Carbon emissions can be measured in different ways, as can energy usage. Moreover, there is no single agreement on what should be included in these measurements.

"We need a common language of valuation so the financial implications come through clearly to the global markets," says Mr Adams. "We need to do more to engage the financial community - it's a bastion of short-termism still to be conquered and we need to be talking their language."

But there is a sense of caution in how to proceed. Mr Phillips warns: "Rush too quickly into how to measure and how to audit this, and if we get the metrics wrong, we'll get the wrong behaviours as a result."

Whatever systems are agreed, the work looks like an extra burden on companies. But advocates say there is little choice, given growing public pressure, and they point to the commercial benefits.

"It isn't just a 'nice to have'. It is about turning sustainability into a commercial issue and linking it into business strategy. Cutting emissions is a sustainability problem, but it is also an economics issue," says Mr Reid.

Some sectors are further ahead than others. The most advanced tend to be extractive industries such as oil producers and miners, who have long faced public pressure as a result of their clear impact on the environment.

Nearly all the energy, mining and utility groups in the FTSE 100 produce standalone reports. However, almost as many financial and property groups now do likewise - a sharp jump from five years ago, when less than a third did.

Even when companies are reporting, there is a further problem in getting them to report in a comparable way. If each uses different measurements, the results are impossible to compare, leaving investors and other stakeholders no better off. This is only multiplied when accountants and businesses are working on a global system.

"It's important we get everyone to talk before we end up with so many standards of reporting that we have the tremendous cost of converging them," says Jan Babiak, head of regulatory and public policy at Ernst & Young.

The Amsterdam Global Reporting Initiative is one such group, drawing up guidelines to encourage common reporting standards.

Yet most of the practical efforts are still being done at a national level, hence the Prince of Wales report this week.

"It is not as if companies aren't already working on this and we're not saying this is the Holy Grail of sustainable reporting," said one project worker on the report.

"I wish we were there, but this is still just the start."


Saturday, December 08, 2007

Greenpeace Bali blog

From the inbox:

For those interested in keeping abreast of events in Bali the Greenpeace blog will provide the NGO perspective.

Latest documents and reports from Greenpeace HERE.

PDFs are available for the following reports:

Tropical Deforestation Emission Reduction Mechanism - A Discussion Paper

Tropical deforestation and the Kyoto Protocol

Greenpeace briefing: Kyoto and the Bali Mandate: what the world needs to do to combat climate change

How the palm oil industry is Cooking the Climate

What is the IPCC

Greenpeace Briefing: China - taking action on climate change

ChinaDialogue also have an interesting piece called "Why does Bali matter?" by Tan Copsey for anyone still needing a little revision on this topic.

Why does Bali matter?

Bewildered by Bali? Tan Copsey provides a short background to the politics of global warming, Kyoto and why the world is watching the climate talks now taking place in Indonesia.


OK, but what’s Bali all about?

Bali hosts to the thirteenth UN Climate Change Conference. Yvo de Boer, the UNFCCC executive secretary, has said there are reasons to be optimistic about a more far-reaching agreement being reached at the meeting, stressing that the conference would be a “culmination of a momentous 12 months in the climate debate” . A large increase in public awareness of climate change has upped the political pressure for a more extensive accord, and many nations – including prominent EU countries – will be pushing for increased reduction targets.

However, the negotiations are likely to hinge on the positions taken by the US and China, the world’s two largest emitters, whose positions have been highly interdependent historically. Neither nation has agreed yet to binding targets. China needs the US to take the lead in reducing emissions, but the Bush administration has refused to sign up to targets without the participation of developing countries. The likelihood of this impasse being overcome at Bali remains slim.

Negotiations at Bali are expected to focus on extending Kyoto’s central approach, which is characterised by “liberal environmental” economic mechanisms such as emissions trading and technology transfer.

However, issues such as mitigation, deforestation, development and resource mobilisation also will be addressed, and increasingly urgent discussions of climate-change adaptation will take place – reflecting the increased acceptance that climate change is not entirely preventable.


Friday, December 07, 2007

Methane Free Kangaroo flatulence to save the planet?

Another quality Friday post that could, as a by-product, save the planet from imminent disaster.

The ability of Kangaroos to break "methane free" wind could revolutionise the animal flatulence induced climate change problem. I expect a little genetic engineering might be required however (boo).

Don't just take my word for it. Yahoo had to lower the tone with their title though for which I can only apologise.

Eco-friendly kangaroo farts could help global warming: scientists[Yahoo News]
SYDNEY (AFP) - Australian scientists are trying to give kangaroo-style stomachs to cattle and sheep in a bid to cut the emission of greenhouse gases blamed for global warming, researchers say.

Thanks to special bacteria in their stomachs, kangaroo flatulence contains no methane and scientists want to transfer that bacteria to cattle and sheep who emit large quantities of the harmful gas.

While the usual image of greenhouse gas pollution is a billowing smokestack pushing out carbon dioxide, livestock passing wind contribute a surprisingly high percentage of total emissions in some countries.

"Fourteen percent of emissions from all sources in Australia is from enteric methane from cattle and sheep," said Athol Klieve, a senior research scientist with the Queensland state government.

"And if you look at another country such as New Zealand, which has got a much higher agricultural base, they're actually up around 50 percent," he told AFP.

Researchers say the bacteria also makes the digestive process much more efficient and could potentially save millions of dollars in feed costs for farmers.

"Not only would they not produce the methane, they would actually get something like 10 to 15 percent more energy out of the feed they are eating," said Klieve.

Even farmers who laugh at the idea of environmentally friendly kangaroo farts say that's nothing to joke about, particularly given the devastating drought Australia is suffering.

"In a tight year like a drought situation, 15 percent would be a considerable sum," said farmer Michael Mitton.

But it will take researchers at least three years to isolate the bacteria, before they can even start to develop a way of transferring it to cattle and sheep.

Another group of scientists, meanwhile, has suggested Australians should farm fewer cattle and sheep and just eat more kangaroos.

The idea is controversial, but about 20 percent of health conscious Australians are believed to eat the national symbol already.

"It's low in fat, it's got high protein levels it's very clean in the sense that basically it's the ultimate free range animal," said Peter Ampt of the University of New South Wales's institute of environmental studies.

"It doesn't get drenched, it doesn't get vaccinated, it utilizes food right across the landscape, it moves around to where the food is good, so yes, it's a good food."

It might take a while for kangaroos to become popular barbecue fare, but with concern over global warming growing in the world's driest inhabited continent, Australians could soon be ready to try almost anything to cut emissions.

H/T. Dilbert Blog who has a vaguely (very vaguely) amusing take on this story.


Divorce is bad for the Environment

Obvious research result award goes to Jianguo Liu, an ecologist at Michigan State University for his paper that shows that divorce leads to the use of more resources. Anyone surprised? I hope these esteemed institutions and foundations got their money's worth.

I find this statement odd to say the least:

Liu, who researches the relationship of ecology with social sciences, said people seem surprised by his findings at first, and then consider it simple. "A lot of things become simple after the research is done," he said.

Who would find this a surprise? What I am missing?

Mother Nature feels the pains of divorce [Yahoo news]

WASHINGTON - Divorce can be bad for the environment. In countries around the world divorce rates have been rising, and each time a family dissolves the result is two new households.

"A married household actually uses resources more efficiently than a divorced household," said Jianguo Liu, an ecologist at Michigan State University whose analysis of the environmental impact of divorce appears in this week's online edition of Proceedings of the National Academy of Sciences.

More households means more use of land, water and energy, three critical resources, Liu explained in a telephone interview.

The research was funded by the National Science Foundation, the National Institutes of Health and the Michigan Agricultural Experiment Station.

H/T: Freakonomics (who make no comment).

World Bank admits "Congo errors"

The FT today reports on news that the World Bank has accepted that it made mistakes over its "sustainable logging" plan for the Congo (the 2nd biggest rainforest after the Amazon).

You learn something new everyday and the fact from this story that I shall mentally file away is that there are between 300,000 and 500,000 pygmies living in the Congo rainforest. I am not sure if I expected there to be less or more than that.

World Bank admits Congo errors [FT]

The World Bank has acknowledged a series of "omissions" in reforms it supported to promote the sustainable exploitation of the Congo rainforest, the world's second largest after the Amazon.

In a document obtained by the FT, the bank defends an overall policy against the claim of environmental activists that it is encouraging uncontrolled logging which could damage irreversibly the world's second lung.

The document was produced in response to an independent inquiry triggered by indigenous Pygmy communities in the forest who complained they were not consulted and that their livelihoods were threatened. The findings are due to be discussed at a World Bank board meeting on December 20.

In the document the bank recognises that an environmental impact assessment "should have been prepared", and that the programme did not sufficiently take into account the estimated 300,000-500,000 Pygmies who live in the rainforest. It also admits that plans to earmark parts of the forest for alternative uses were "dropped before it started". This was explained by tense relations with Congo's then environment minister, according to one bank official.


The intention was to reorganise forestry concessions, many of them illegally allocated during the war, and to "protect forests from appropriation from powerful interests for private gain".


An area almost twice the size of the UK had been hived off as forestry concessions, a figure the bank says was reduced to 21m hectares when a moratorium on new concessions came into effect in 2002.


"We have found there is complete anarchy in the provinces we visited. Everything comes back to the lack of controls. There is no reporting on forest production and often felling doesn't have appropriate authorisation," he added.


Responding to questions from the FT, the World Bank admitted that "the situation on the ground is far from satisfactory and that the reform agenda has been unevenly implemented".

The official added that the overall situation would be far worse if the bank had not engaged.


Thursday, December 06, 2007

Martin Wolf on Climate Change

Martin Wolf writes about climate change. Nothing really new but a nice link to Malthusian thinking.

He basically summarises a recent Human Development Report from the UN. Newspaper column writers can be thought of as well paid bloggers. They get sent press releases or reports and then simply summarise them adding extra comment and some basic analysis. If only academics didn't have so much real work to do.

Martin Wolf as usual makes a series of excellent points.

Why the climate change wolf is so hard to kill off [FT]

The point of the story of the boy who cried wolf is that, finally, a wolf did appear. I feel the same way about the intellectual heirs of Thomas Malthus. Malthusians have finally found a wolf called climate change. Many now agree. But it is far away and coming slowly. “If the worst comes to the worst,” mutter the rich to themselves, “we can always let our children cope.”

This is the complacency that the latest Human Development Report from the United Nations Development Programme attacks. It does a good job, too. But does it do a good enough job to turn the Bali climate change conference into a call for effective action? I fear not. This is not because it fails to make a morally sound case. It is rather because humanity will change its behaviour only when convinced that the lifestyle the better off enjoy now – and the rest of the world aspires to – remains in reach.

A reader replies in today's FT.

Climate change – not just looming but here now [FT]

We urgently need to devote more of our political energies towards helping our populations adapt, from flood defences through to education campaigns about heat waves to protection against insects and so on. We need to involve civil society better in these adaptations.

I would agree with Mr Wolf that we don’t need to be Malthusian about this: our civilisations are resilient; mankind is ingenious; European leaders and the European Union have already shown their resolve.

But we can only seriously address these issues if collectively we shift the debate beyond simplistic notions about an impending process which, in reality, is already with us.

Wednesday, December 05, 2007

Are we too hard on China?

There is an interesting ongoing debate in the blogosphere concerning Western attitudes to China's environmental problems, specifically the state of air quality ahead of the Olympic games.

We have done out fair share of "China environment" posts - see the "China" label for dozens of stories. Why? Because one could argue that China's environmental problems are a by-product of globalisation. A percentage of all Chinese industrial pollution is, after all, caused by companies producing goods to sell to developed countries.

The link below gives an interesting perspective on how the Chinese perceive the Western media's apparent obsession with air pollution in Beijing. It is also interesting to note that the Chinese government is using the Chinese media to justify "pollution as usual" in China by blaming the US and the West for causing "past pollution".

Are Pollution Stories Anti-Chinese? Sometimes, yes. [Transpacifica]

When Chinese state media stories argue that developed countries who have already gotten rich at a cost to the environment should be responsible for tightening their belts more than those still developing, it’s hard to argue. But just try to get that sort of thinking through the U.S. Congress, and notice how far the Kyoto Protocol got with that ethic partially enshrined.

A sense of responsibility for past emissions needs to accompany pressures on emerging emitters. Richer countries with cleaner environments should work with poorer countries in the process of development to slow environmental degradation. The air in Beijing is indeed quite striking when you come from the United States—especially for me, from a background in the Colorado Rocky Mountains. But as the same Rhodes Scholar told me when I mentioned that I balked at jogging in Beijing air, “get over it.” Whether or not it’s the only focus of the “Western” press, and even though I don’t believe Fallows intends to be demeaning or contribute to a paternalistic narrative, putting across the message that “holy moly these people have dirty cities” does not create the understanding we’ll need to put together real solutions in the future. And dirty or not, we all keep going through life here.

H/T: Responsible China


Greenpeace protestors shot at in Indonesia

When Greenpeace decide on their next location for a protest - the standard thing - climb something big and unfurl a large banner whilst videoing the whole affair for websites and blogs - they might want to avoid Indonesia.

The video is good publicity and the gun firing incident looks good on film.

Greenpeace activists shot at as climate conference opens [Greenpeace website]

All activists were arrested.


Will sun spots save us after all?

The Independent today report that the decline in sun spot activity observed in recent years may lead to a FALL in global temperatures of 1.5C by 2020.

This would nicely offset the predicted increases from man made global warming. Sorted. In fact it may more than offset any predicted increases.

Is it really that simple? It is never wise to give too much publicity to half baked scientific theories in case climate change skeptics use them as an excuse for "business as usual." These theories do have a certain level of scientific credibility however.

Ray of hope: Can the sun save us from global warming? [Independent]

Something is happening to our Sun. It has to do with sunspots, or rather the activity cycle their coming and going signifies. After a period of exceptionally high activity in the 20th century, our Sun has suddenly gone exceptionally quiet. Months have passed with no spots visible on its disc. We are at the end of one cycle of activity and astronomers are waiting for the sunspots to return and mark the start of the next, the so-called cycle 24. They have been waiting for a while now with no sign it's on its way any time soon.


The past decade has been warmer than previous ones. It is the result of a rapid increase in global temperature between 1978 and 1998. Since then average temperatures have held at a high, though steady, level. Many computer climate projections suggest that the global temperatures will start to rise again in a few years. But those projections do not take into account the change in the Sun's behaviour. The tardiness of cycle 24 indicates that we might be entering a period of low solar activity that may counteract man-made greenhouse temperature increases. Some members of the Russian Academy of Sciences say we may be at the start of a period like that seen between 1790 and 1820, a minor decline in solar activity called the Dalton Minimum. They estimate that the Sun's reduced activity may cause a global temperature drop of 1.5C by 2020. This is larger than most sensible predictions of man-made global warming over this period.


Tuesday, December 04, 2007

Stern on Bali: Effectiveness, Efficiency and Equity

Nicholas Stern (of Stern review fame) writes in the Guardian about Bali. It is good to see that he is still very much a "true believer".

Whilst there is nothing really new here he has usefully put the need for action under three headings that will appeal to economists: (1) effectiveness, (2) efficiency and (3) equity.

Until this year my students would be asked to write an essay comparing the efficiency and equity behind possible policy prescriptions to tackle pollution.

The key to the whole problem is "equity". Different countries have different perceptions of what is or is not equitable. The US do not seem to have grasped this concept yet or appear to be working from a different definition to Stern.

A good article.

Bali: now the rich must pay [Guardian]
The Bali summit on climate change, which starts next week, will seek to lay the foundations for a new global agreement on reducing the greenhouse gas emissions that cause rising temperatures and climate change. Ambitious targets for emission reduction must be at the heart of that agreement, together with effective market mechanisms that encourage emission trading between countries, rich and poor. The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay. Climate change is a result of the greatest market failure the world has seen.

The evidence on the seriousness of the risks from inaction is now overwhelming. We risk damage on a scale larger than the two world wars of the past century. The problem is global and the response must be collaboration on a global scale. The rich countries must lead the way in taking action. And in thinking about global action to reduce greenhouse gas emissions, we must invoke three basic criteria.

The first is effectiveness: the scale of the response must be commensurate with the challenge. This means setting a target for emission reduction that can keep the risks at acceptable levels.

The overall targets of 50% reductions in emissions by 2050 (relative to 1990) agreed at the G8 summit in Heiligendamm last June are essential if we are to have a reasonable chance of keeping temperature increases below 2C or 3C. While these targets involve strong action, they are not overambitious relative to the risk of failing to achieve them.

The second criterion is efficiency: we must keep down the costs of emission reduction, using prices or taxes wherever possible. Emission trading between countries must be a central part of the story. And helping poor countries cover their costs of emission reduction gives them an incentive to join a global deal.

Third, we should be concerned about equity. Our starting point is deeply inequitable with poor countries certain to be hit earliest and hardest by climate change. But rich countries are responsible for the bulk of past emissions: US emissions are currently more than 20 tonnes of CO2 equivalent per annum, Europe's are 10-15 tonnes, China's five or more tonnes, India's around one tonne, and most of Africa much less than one.

For a 50% reduction in global emissions by 2050, the world average per capita must drop from seven tonnes to two or three. Within these global targets, even a minimal view of equity demands that the rich countries' reductions should be at least 80% - either made directly or purchased. An 80% target for rich countries would bring equality of only the flow of current emissions - around the two to three tonnes per capita level. In fact, they will have consumed the big majority of the available space in the atmosphere.

Rich countries also need to provide funding for three more key elements of a global deal. First, there should be an international programme to combat deforestation, which contributes 15-20% of emissions. For $10bn-$15bn per year, half the deforestation could be stopped.

Second, there needs to be promotion of rapid technological advance to mitigate the effects of climate change. The development of technologies must be accelerated and methods found to promote their sharing. Carbon capture and storage for coal (CCS) is particularly urgent since coal-fired electric power is currently the dominant technology around the world, and emerging nations will be investing heavily in these technologies. For $5bn a year, it should be possible to create 30 commercial-scale coal-fired CCS stations within seven or eight years.

Finally, rich countries should honour their commitment to 0.7% of GDP in aid by 2015. This would yield increases in flows of $150bn-$200bn per year. The extra costs that developing countries face as a result of climate change are likely to be upwards of $80bn a year, and it is vital that extra resources are available. This proposed programme of action can be built if rich countries take a lead in Bali on their targets, the promotion of trading mechanisms and funding for deforestation and technology. With leadership and the right incentives, developing countries will join.

The building of the deal, and its enforcement, will come from the willing participation of countries driven by the understanding that action is vital. It will not be a wait-and-see game as in World Trade Organisation talks, where nothing is done until everything is settled.

The necessary commitments are increasingly being demonstrated by political action and elections around the world. A clear idea of where we are going as a world will make action at the individual, community and country level much easier and more coherent.

These commitments must, of course, be translated into action. There is a solution in our hands. It will not be easy to build. But the alternative is too destructive to accept. Bali is an opportunity to draw the outline of a common understanding, which will both guide action now and build towards the deal.

· Sir Nicholas Stern led the Stern review on climate change; today in London he is giving the Royal Economic Society public lecture on Climate Change, Ethics and the Economics of the Global Deal


Monday, December 03, 2007

Chronology of Global Climate Gatherings

If there was ever any doubt that climate change had gone "mainstream" we present a timeline of this years "climate change" gatherings leading up to the Bali submit in December.

CHRONOLOGY - From LiveEarth To Bali: A Year Of Climate Gatherings [PlanetArk]

Feb 2, PARIS: First of four reports this year by the UN climate panel concludes that mankind is very likely to be to blame for global warming. Subsequent panel reports highlight the risks of extreme weather events, such as floods, droughts and heatwaves and that poor nations would bear the brunt of a warmer world. The cost of even the most stringent scenarios to dramatically curb emissions meant a loss of global GDP by 2030 of less than 3 percent.

* July 7, NEW YORK, LONDON, SYDNEY, TOKYO, SHANGHAI, RIO DE JANEIRO, JOHANNESBURG, HAMBURG: former US Vice President Al Gore organises the "Live Earth" global climate change benefit involving 24 hours of music across seven continents beamed to an estimated two billion people.

* Sept 17-21, MONTREAL: Canada hosts week of talks on how to quickly eliminate hydrochlorofluorocarbons (HCFCs) at the 19th meeting of signatories to the Montreal Protocol. The chemicals, which are powerful greenhouse gases, harm the ozone layer that protects the Earth from ultraviolet radiation. The United States says faster phase-out of HCFCs would be twice as effective as the Kyoto Protocol in fighting climate change.

* Sept 24, NEW YORK: UN Secretary-General Ban Ki-Moon convenes one-day conference with top officials from more than 150 countries to build momentum before Bali. Ban says world leaders showed a "major political commitment" to forge a pact on climate change once the Kyoto Protocol runs out.

* Sept 28, WASHINGTON: US President George W. Bush holds his first major climate change meeting, inviting the 17 biggest greenhouse gas emitters to a two-day conference. Bush, who has refused to ratify Kyoto, stresses new environmental technology and voluntary measures to tackle the issue.

* Oct 12, OSLO: The UN Intergovernmental Panel on Climate Change (IPCC) and Al Gore, star of the Oscar-winning climate film "An Inconvenient Truth," are joint-winners of the Nobel Peace Prize for 2007 "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change".

* Nov 20, BONN: The 41 industrialized nations that have signed up to the United Nations Framework Convention on Climate Change submit detailed emissions data for climate experts to assess. The data shows their total greenhouse gas emissions rose to a near all-time high.

* Nov 21, SINGAPORE: The 10 members of the Association of South East Asian Nations (ASEAN) and six other attendees Australia, China, India, Japan, South Korea and New Zealand, pledge collective action to combat climate change in the "Singapore Declaration" but set no targets to curb emissions.

Trade barriers on climate-friendly prodcuts to be removed?

The premise for this blog is to relate the forces of globalisation to changes in the environment. The following is therefore a classic "globalisation and the environment" story.

Of course, the removal of "trade barriers" relating to "climate-friendly technologies" will account for only a tiny fraction of trade and the removal, whilst undoubtedly a positive move, will not make any drastic difference to the diffusion of clean technologies most of which are intra-firm.

This is not to say that this is not a welcome development. In recent work (to be posted on soon) we find that the two main obstacles to a firm implementing environmental management practices were (1) Cost and (2) information. This may help on both counts.

US, EU Propose Trade Plan to Counter Climate Change [PlanetArk]

WASHINGTON - The United States and European Union launched a proposal in world trade talks on Friday aimed at countering global climate change by removing barriers to trade to climate-friendly technologies.

"WTO (World Trade Organization) members have an unprecedented opportunity to address in a concrete and meaningful way the global environmental challenge of climate change," US Trade Representative Susan Schwab said in a statement.

"By eliminating tariff and nontariff barriers to environmental goods and services, particularly clean energy technologies, we can lower their costs and increase global access to and use of these important products," Schwab said.

The push in the long-running Doha round of world trade talks came as delegates from about 190 nations were preparing to meet in Bali, Indonesia, from Dec. 3 to 14 to try to launch separate negotiations on a new pact to deal with climate change.

The goal is craft a successor to the United Nations' Kyoto Protocol, which binds 36 industrial nations to cut greenhouse gas emissions by 5 percent below 1990 levels by 2008-12.

EU officials called the joint proposal "an important part of the EU and the US' contribution" to a Dec. 8-9 trade ministers meeting also being held in Bali in conjunction with the broader climate change talks.

President George W. Bush announced shortly after taking office in 2001 that the United States would not join the Kyoto pact because it excluded major developing countries like India and China that are a growing source of greenhouse gas emissions.

Bush said on Wednesday the United States' guiding principle in the Bali talks would be to find a way to reduce greenhouse gases "that does not undermine economic growth or prevent nations from delivering greater prosperity for their people."

Global trade in the environmental goods covered by the US-EU proposal totalled about US$613 billion in 2006, with exports increasing about 15 percent annually, US trade officials said.

The World Bank has estimated removing tariffs and nontariff barriers on key climate and clean energy technologies could increase trade in those goods by 7-14 percent a year and help to cut greenhouse gas emissions, US trade officials said.

The US-EU proposal calls for all WTO members to eliminate tariffs on 43 climate friendly technologies identified by the World Bank, such as solar panels and wind turbines.

A smaller group of developed and advanced developing countries would negotiate a broader "environmental goods and services agreement," that would include goods related to air pollution control, hazardous waste management, clean water and other environment goals, a US trade official said.

The plan would liberalize trade in environmental services like pollution monitoring, cleaning up hazardous waste sites and production of renewable energy, the official said.

The United States and the European Union are leading exporters of environmental goods and services, but India and China are also developing strong capacity, US and EU officials said.

The six-year-old Doha round of world trade negotiations has showed some signs of progress in recent months, but many experts remain sceptical a deal will reached.

However, it is possible that countries could still reach an agreement to liberalize trade in environmental goods and services even if the overall Doha talks flounder, the US trade official said.