Wednesday, October 29, 2008

The environment vrs economy trade off

Bringing you news as it hits the streets here is one small anecdote from the stock market that reveals the effect that a global slowdown has on the environment.

Tinci Holdings is a small AIM listed stock that fits filters to power stations in China. Here is a copy of their trading update released today. The share price is down a whopping 79% this morning. Pity the poor shareholders of this stock.

The assumption has to be that this process is going on across the world. The result is that emissions will not be reduced as quickly as they should be due to economic conditions. Whilst, a global fall in demand is good for the environment (less goods produced and thus less pollution) stories such as these show the real trade off between the environment and the economy.


The Directors of Tinci Holdings Ltd. ("the Company" or "Tinci") (TNCI), the AIM quoted environmental engineering company, provide an update to shareholders on the Company's current trading.

Following the Company's return to profitability in the first six months to 30 June 2008, trading conditions have deteriorated considerably. Despite the general recognition that China needs to reduce the pollution produced by its power stations, a number of desulphurisation projects have been postponed or withdrawn due to power stations deferring capital expenditure. As a result, the number of projects available for Tinci to bid has reduced considerably.

Tinci is taking appropriate steps to reduce its costs and is in the process of reviewing its management structure. However, the decline in sales will lead to a significantly reduced profit in the second half of 2008. The Directors expect Tinci's profit for the year ending 31 December 2008 to be similar to the profit for the six months to 30 June 2008.

Mr Xu Jinfu, Chief Executive Officer of Tinci Holdings Ltd., commented:

"Although 2008 began well, the power station market has become much more difficult as the year has gone on. There is no doubt that China needs to improve its record on protecting the environment and Tinci's work is central to reducing pollution from the country's power stations. We are disappointed that the profit for 2008 will be below expectations."

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Tinci Holdings Ltd. is the parent company of Tinci Sanhe Environmental Engineering Co. Ltd., an environmental engineering company founded in October 2001, which is primarily involved in developing, manufacturing and installing flue gas desulphurisation (FGD) systems for reducing sulphur dioxide (SO2) emissions from coal-fired power stations and large industrial boilers in China.


China dictates "climate change price"

In a positive development China appear to have embraced the difficulties between rich and poor countries when deciding who is to blame and who has to pay to tackle climate change into the future.

The problem is such that no multilateral agreement is ever likely and the son of Kyoto is doomed to fail unless one side changes their current stance.

At least China is now putting a price on their cooperation. The plan to "spread green technologies" is also an excellent one and links back to my recent work on environmental spillovers where we argue that MNCs have an incentive to spread good environmental practices. The issue is whether more encouragement is required to speed up this process.

Obviously the idea of rich countries giving 1% of GDP to poor countries is a none starter I am sure but there is no doubt that it would work (certainly help). This is at least somewhere to start from. It is these sorts of amounts that are required to really make a difference.

China Sets Price For Cooperation On Climate Change[PlanetArk]

BEIJING - China wants rich countries to commit 1 percent of their economic worth to help poor nations fight global warming, and will press for a new international mechanism to spread "green" technology worldwide.

Unveiling the demands on Tuesday, a senior Chinese official for climate change policy, Gao Guangsheng, said the financial turmoil rattling the global economy should not deter a big increase in funds and technology to poor nations.

"Developing countries should take action, but a prerequisite for this action is that developed countries provide funds and transfer technology," Gao told a news conference.

"Developed countries' funding to support developing countries response to climate change should reach 1 percent of the developed countries' GDP."

Gao said current funds to help fight climate change were "virtually nothing". China will detail its proposal at a conference next week that will assemble representatives from the United States, Europe and many rich and poor countries, he said.


Nike does the "green shoe" shuffle

In another example of how large multinational are embracing the cachet of "green products" Nike today announced an increase in their "green shoe" range.

Clearly this is part of a profit maximising strategy but equally it shows how individuals and green pressure groups and encourage producers to change.

One fear is that the global recession will make consumers a lot more cost conscious.

The rather depressing aspect of this press release is that it is really just spin. Nike acknowledge that "Going Green" will INCREASE costs and that any increase in margins is just a result of cutting costs elsewhere. Sigh.

Nike Unveils New Products In Environmental Push [PlanetArk]

NEW YORK - Nike Inc unveiled a line of more eco-friendly products on Tuesday which aim to use more sustainable, recyclable materials that should also translate into better profit margins for the future.

That strategy will help the world's largest maker of athletic shoes and apparel keep its stride as consumers worldwide cut back on spending on worries about a deepening financial crisis, its top executive told Reuters.

The new "Nike Considered" products are made with more efficient design patterns that use less material and are easier to recycle, adhesives made from water instead of toxic chemicals, and sustainable items like cork and organic cotton.

There is still a problem here - surely environmentally friendly inputs mean expenses and costs will go up? Now we learn that this entire press release is just spin and that the real cost cutting comes from supply chain changes.

We're trying to reduce costs and improve margins," said Chief Executive Mark Parker in an interview. "To make the company more profitable while reducing the footprint we have on the planet."

Parker said streamlining the supply chain will offset increased costs from the environmentally-preferred materials, which tend to be more expensive.

As a result, sustainably-designed shoes and clothes will carry the same price tags and profit margins as others, he said, noting that over time, margins will improve.

This is just bad economics. Why will margins improve over time? What if supply costs cannot be stripped out? Then green shoes are more expensive. Green shoes are only 15% of Nike's range. Does this mean the supply costs will translate into CHEAPER mainstream shoes? This means that the green shoes will be RELATIVELY more expensive.


Monday, October 27, 2008

New NBER Environmental Economics Papers

The latest batch of NBER research papers contains a remarkably high proportion of environmental economics related papers. A mere coincidence, deliberate paper bunching or a result of having more environmental economists as NBER members?

It is interesting to see top economist, Torsten Persson working in this area.


"Uncertainty, Climate Change and the Global Economy"

NBER Working Paper No. W14426

DAVID VON BELOW, Stockholm University - Institute for International Economic Studies (IIES)
TORSTEN PERSSON, Stockholm University - Institute for International Economic Studies (IIES), London School of Economics & Political Science (LSE), National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR) Email:

The paper illustrates how one may assess our comprehensive uncertainty about the various relations in the entire chain from human activity to climate change. Using a modified version of the RICE model of the global economy and climate, we perform Monte Carlo simulations, where full sets of parameters in the model's most important equations are drawn randomly from pre-specified distributions, and present results in the forms of fan charts and histograms. Our results suggest that under a Business-As-Usual scenario, the median increase of global mean temperature in 2105 relative to 1900 will be around 4.5 °C. The 99 percent confidence interval ranges from 3.0 °C to 6.9 °C. Uncertainty about socio-economic drivers of climate change lie behind a non-trivial part of this uncertainty about global warming.


"Carbon, Trade Policy, and Carbon Free Trade Areas"

NBER Working Paper No. W14431

YAN DONG, Chinese Academy of Social Sciences (CASS)Email:
JOHN WHALLEY, University of Western Ontario - Department of Economics, National Bureau of Economic Research (NBER), CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Centre for International Governance and Innovation (CIGI)Email:

This paper discusses both the potential contribution that trade policy initiatives can make towards the achievement of significant global carbon emissions reduction and the potential impacts of proposals now circulating for carbon reduction motivated geographical trade arrangements, including carbon free trade areas. We first suggest that trade policy is likely to be a relatively minor consideration in climate change containment. The dominant influence on carbon emissions globally for next several decades will be growth more so than trade and its composition, and in turn, the size of trade seemingly matters more than its composition given differences in emission intensity between tradables and nontradables. We also note that differences in emissions intensity across countries are larger than across products or sectors and so issues of country discrimination in trade policy (and violations of MFN) arises.

We next discuss both unilateral and regional carbon motivated trade policy arrangements, including three potential variants of carbon emission reduction based free trade area arrangements. One is regional trade agreements with varying types of trade preferences towards low carbon intensive products, low carbon new technologies and inputs to low carbon processes. A second is the use of joint border measures against third parties to counteract anti-competitive effects from groups of countries taking on deeper emission reduction commitments. A third is third country trade barriers along with free trade or other regional trade agreements as penalty mechanisms to pressure other countries to join emission reducing environmental agreements. We differentiate among the objectives, forms and possible impacts of each variant. We also speculate as to how the world trading system may evolve in the next few decades as trade policy potentially becomes increasingly dominated by environmental concerns. We suggest that the future evolution of the trading system will likely be with environmentally motivated arrangements acting as an overlay on prevailing trade and financial arrangements in the WTO and IMF, and eventually movement to linked global trade and environmental policy bargaining.


"Linkage of Tradable Permit Systems in International Climate Policy Architecture"

NBER Working Paper No. W14432

JUDSON L. JAFFE, Analysis Group, Inc. Email:
ROBERT N. STAVINS, Harvard University - John F. Kennedy School of Government, Resources for the Future, National Bureau of Economic Research (NBER) Email:

Cap-and-trade systems have emerged as the preferred national and regional instrument for reducing emissions of greenhouse gases throughout the industrialized world, and the Clean Development Mechanism - an international emission-reduction-credit system - has developed a substantial constituency, despite some concerns about its performance. Because linkage between tradable permit systems can reduce compliance costs and improve market liquidity, there is great interest in linking cap-and-trade systems to each other, as well as to the CDM and other credit systems. We examine the benefits and concerns associated with various types of linkages, and analyze the near-term and long-term role that linkage may play in a future international climate policy architecture. In particular, we evaluate linkage in three potential roles: as an independent bottom-up architecture, as a step in the evolution of a top-down architecture, and as an ongoing element of a larger climate policy agreement. We also assess how the policy elements of climate negotiations can facilitate or impede linkages. Our analysis throughout is both positive and normative.


Another Green World Blog

A second blog link in a day. This time we highlight a great left field blog called "Another Green World" written by Derek Wall and colleagues.

I love the description. I need to get a catchier by-line. Any blog that describes its interests as anti-capitalism, direct action and Zen needs to be on a blog roll.

Another Green World

Derek Wall was the last Principal Male Speaker of the Green Party of England and Wales. "How to be green? Many people have asked us this important question. It's really very simple and requires no expert knowledge or complex skills. Here's the answer. Consume less. Share more. Enjoy life." Penny Kemp and Derek Wall This blog promotes anti-capitalism, green politics, direct action, practical lifestyle change, indigenous struggle, Venezuela/Cuba and a touch of Zen. Ecosocialism or muerte!


Lecturer in Environmental Economics at Queen's Belfast.

For any jobbing environmental economist, Queen's University Belfast have an interesting new post. It is reassuring to see a well respected University plough such considerable sums into "sustainable development" however defined.

To be based in a School of Biological Sciences would worry me a little though.

Lecturer in Environmental Economics
(Institute for a Sustainable World)
School of Biological Sciences

Ref: 08/100636

The Institute for a Sustainable World is a cross faculty interdisciplinary initiative with core members from across social sciences, engineering, sciences and humanities. The University is investing £6 million in the first phase of ISW including establishing an internationally recognised team of researchers in Environmental Economics.

The University is seeking a Lecturer in Environmental Economics to join four others in the Gibson Institute.

A second Professorial appointment will further enhance the research profile of the unit.

For informal discussion please contact: Dr Alberto Longo, Tel: + (0)2890976537 Email:

Anticipated interview date: Thursday 20 November 2008.

Salary scales: £30,912 - £45,397 per annum (including contribution points)

Closing date: 4.00 pm, Friday 31 October 2008.

Please visit our website for further information and to apply online - or alternatively contact the Personnel Department, Queen's University Belfast, BT7 1NN. Telephone (028) 90973044 or (028) 90973854 (answering machine). FAX: (028) 90971040 or e-mail on


Rethinking Globalisation Blog

Given the recent and ongoing financial crisis it is probably a good time to think carefully about how we got here and where we are likely to end up.

To this end, the inbox today informed me of a newly launched blog:

Rethinking Globalisation is a new blog from Global Trade Watch.

As you can see, they will be covering many of the same issues that I touch on in this blog but from more of a trade perspective.

It will be interesting to chart the blogs progress. Spelling "globalisation" with an "s" is a good start although this will cost them in terms of google hits.

This is a space for people to discuss issues and ideas about globalisation, global trade and global justice. To discuss and debate how the global economic system is affecting people and the environment. And to think about how more ecologically-sustainable, democratic and people-centred economic systems might be possible.

We’ll try to post new material every few days - please visit us regularly and please join the discussion by leaving your views in the comments section.

Finally, if you have any great ideas for this blog, please feel free to email us at


Wal-Mart and environmental spillovers

There is a recent literature to which I have contributed looking at the idea of "environmental spillovers". This is the idea that the environments of developing countries can benefit from foreign multinationals due to spillovers of knowledge and technology.

These include customer to supplier, supplier to customer or supplier to supplier.

Here is a link to our paper.

In Search of Environmental Spillovers

Facundo Albornoz
University of Birmingham
Matthew A. Cole
University of Birmingham - Department of Economics
Robert J.R. Elliott
University of Birmingham - Department of Economics
Marco Ercolani
University of Birmingham - Department of Economics


There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental spillovers from foreign firms. On the basis that foreign owned firms may encourage firms in their extended supply chain to improve their environment related management practices, evidence for the existence of environmental spillovers should be easier to find than productivity spillovers where firms naturally attempt to minimize intra-industry knowledge leakage. In this paper we show that first, foreign owned firms are more likely to implement environmental management systems (EMS) and second, that the presence of foreign owned firms in those sectors that a firm supplies can encourage good environmental practice. This is especially true if a firm is foreign, has high absorptive capacity, and operates in the presence of formal and informal networks.

Keywords: Multinationals, Environment, Firm Characteristics, Spillovers

JEL Classifications: D21, Q20, Q56
Working Paper Series

The anecdotal evidence has always been visible as this story about Wal-mart demonstrates. Finding whether such stories have any real economic impact is another ball game entirely. It is clear that suppliers to Wal-Mart to not like it - why would they if costs increase. The key is whether Wal-Mart are offering any help to improve such as advice or advisors.

Wal-Mart in China standards driven [FT]

Wal-Mart (NYSE:WMT) , the world's biggest retailer, on Wednesday told its Chinese suppliers to meet strict environmental and social standards or risk losing its business.

"Meeting social and environmental standards is not optional," Lee Scott, Wal-Mart's chief executive, told a gathering of more than 1,000 suppliers in Beijing.

"A company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts - will ultimately cheat on the quality of its products."

Wal-Mart has been pursuing a drive to improve its reputation on environmental and social issues over the past three years, in response to growing criticism in the US over issues including labour conditions in its supplier factories.

The directive, which will be codified in a Wal-Mart suppliers' agreement, comes at a difficult time for China-based manufacturers, caught between rising production costs and the effect of the global financial crisis on consumer demand in their largest overseas markets.

The requirements include a clear demonstration of compliance with Chinese environmental laws, a 20 per cent improvement in energy efficiency at the company's 200 largest China suppliers, and disclosure of the names and addresses of every factory involved in the production process. The company will require a 25 per cent rise in the efficiency of energy-intensive products, such as flat-screen TVs, by 2011.

Mr Scott said the retailer also wanted to move away from the short-term focus that has characterised its relationships with Asian suppliers.

"We have traditionally purchased in a very transactional manner," said Mr Scott. "We need deeper, longer-term relationships with suppliers so it is not based on the last penny."

Some suppliers grumbled about the conditions spelled out by Wal-Mart, which has a reputation for driving hard bargains. It is estimated that each year the company sells about $30bn-worth of China-made goods, giving it enormous negotiating power over suppliers. "It's going to make things a lot worse," said one manufacturer at the meeting, who asked not to be identified. Others were more relaxed. "If they don't like it, they are not going to be doing business with Wal-Mart," said one US-based Wal-Mart supplier who sources components from China.


Thursday, October 23, 2008

Stern on "green growth"

Following on from the last post we bring you more "Stern". This time he writes for the Guardian.

The sentiment expressed in this article is spot on and it is good to see that Stern is still prepared to bang the green drum even when politicians and the public have more immediate concerns such as paying the mortgage, putting food on the table and keeping warm with winter. The recently laid off bankers will also be worried about how to pay school fees and the mortgage on the third house.

It is good that Stern uses his political leverage and big name in this way and assuming that green technological advances are not starved of investment because of the credit crunch there is a chance that future growth will be cleaner and greener.

Green routes to growth [Guardian]

There are two crucial lessons we must learn from the financial turbulence the world has been facing. First, this crisis has been 20 years in the making and shows very clearly that the longer risk is ignored the bigger will be the consequences; second, we shall face an extended period of recession in the rich countries and low growth for the world as a whole. Let us learn the lessons and take the opportunity of the coincidence of the crisis and the deepening awareness of the great danger of unmanaged climate change: now is the time to lay the foundations for a world of low-carbon growth.

High-carbon growth - business as usual - will by mid-century have taken greenhouse gas concentrations to a point where a major climate disaster is very likely. We risk a transformation of the planet so radical that it would involve huge population movements and widespread conflict. Put simply, high-carbon growth will choke off growth. To manage the climate, we must cut world emissions by at least 50% by 2050, as recognised by the G8 earlier this year. Given that rich countries' emissions are far above the world average, their cuts should be at least 80%, acknowledged in Europe and the UK, with the adoption of that target last week.

In recent days, Bank of England governor Mervyn King and Gordon Brown have indicated that Britain is heading into recession. We do not know how long it will last, but it is unlikely to be short. The relevant policies are being put in place to avoid plunging the UK further into crisis and to start constructing a more robust financial system. But as banks rebuild balance sheets and look for higher capital ratios they will have to restrict lending. Monetary policy alone, important though it is, is unlikely to pull us out of the recession quickly: fiscal policy to expand demand must play a role. But increased government spending should be focused not just on boosting short-term demand. We must promote growth that can be sustained.

The coming period of growth can be firmly based in the low-carbon infrastructure and investments that will not only be profitable, with the right policies, but also allow for a safer, cleaner and quieter economy and society. And if, as we must, we halt deforestation - the source of 20% of greenhouse gas emissions - at the same time we can also protect and enhance our biodiversity and water systems.

The International Energy Agency estimates that world energy infrastructure investments are likely to average about $1 trillion a year over the next 20 years. If the majority of this is low-carbon, and some of it is brought forward, it will be an outstanding source of investment demand. So too will be the investments for energy efficiency, many of which can be labour-intensive and are available immediately.

It is surely clear that a programme can be put together which both boosts demand in the short term and prepares for efficient, strong and sustainable growth in the medium term. It must be structured carefully with the public and private sectors working together. It will be the private sector that makes most of the investments, but the public sector must shape the incentives and the investment climate that allows the investment to take place. That will mean working with the EU and the UN Framework Convention on Climate Change in Copenhagen to sustain a price for carbon, by use of carbon trading and taxation. It means regulation, for instance, on car emissions to give clear signals that allow economies of scale and reduce uncertainty.

It is not, however, just a matter of the right motivation for the private sector and the appropriate scale and structure of public spending. The investment climate must be right, too. There could be a clear limit on time for planning decisions and a national energy strategy that shapes decisions. We should have a very open-minded attitude to technology and let the markets decide which to choose, without putting obstacles in the way that might arise from an antipathy to a particular technology. Demonstration of carbon capture and storage for coal and gas on a commercial scale in electricity generation should be a special priority, given the likely prevalence of coal in the future growth of many countries. Reform of the grid structure will be necessary to allow decentralised and local decisions for generation such as wind, solar and combined heat and power. And the energy strategy must factor in energy security and peak-load supply. With sound policies all this is possible, consistent with low-carbon technologies.

The next few years present a great opportunity to lay the foundations of a new form of growth that can transform our economies and societies. Let us grow out of this recession in a way that both reduces risks for our planet and sparks off a wave of new investment which will create a more secure, cleaner and more attractive economy for all of us. And in so doing, we shall demonstrate for all, particularly the developing world, that low-carbon growth is not only possible, but that it can also be a productive and efficient route to overcome world poverty.


Wednesday, October 22, 2008

The great Carbon cash in

Some good Guardian reporting. There is something distasteful going on here given the current crisis. The fact that Stern has a financial involvement is also a little unnerving.

The carbon cash-in [Guardian]

Fresh from the devastation they have wrought on the global financial system, some of the world's leading investment banks meet in London today to discuss how they can "cash in" on carbon. But at least delegates and speakers at the Cashing in on Carbon conference are open about not trying to reduce emissions or helping the environment. Oh, no. This event is to see how "investment banks can profit today from an increasingly diverse range of carbon-related investment opportunities". Particularly reassuring is the emphasis on "hybrid and complex carbon credit structured products", and how to identify investor demand for them in the US; "derivative/synthetic carbon products"; and "sub-index arbitrage strategies". Also, we can refresh our knowledge of the basic options for "productising carbon" and of "access channels for producers ... speculators, proprietary traders and investors". Good to see that execs from Lord [Nicholas] Stern's company, IDEAcarbon, will be there, too.

Here is a link to IDEAcarbon.

IDEAcarbon is an independent and professional provider of ratings, research and strategic advice on carbon finance. Our services are designed to provide leading financial institutions, corporations, governments, traders and developers with unbiased intelligence and analysis of the factors that affect the pricing of carbon market assets.

The IDEAcarbon team are leading experts in the carbon and energy markets. We combine policy and financial intelligence with proprietary tools for the analysis of credit risk. Our techniques assist our clients to manage and mitigate risk in today's uncertain global carbon markets.

IDEAcarbon's market intelligence is analytically rigorous and politically astute. Working with the key decision makers who are shaping the future of the market enables us to accurately predict market trends and provide tailored strategic advice to clients. Sophisticated analytical tools enable us to deliver reliable credit ratings for carbon projects in any country of the world. This provides carbon market participants with the ability to optimize carbon portfolio construction and manage market volatility.

IDEAcarbon's mission is to improve the functioning and efficiency of the carbon markets. Our ratings and opinions are unencumbered and independent - we do not trade, buy, sell or originate carbon credits. IDEAcarbon has a strategic alliance with IDEAglobal, a world leader on market intelligence and analysis on global financial markets, with offices in London, New York and Singapore.

Our products include credit ratings and risk analysis, strategic advice, and market intelligence.

A picture of Stern himself.


Tuesday, October 21, 2008

Reducing Emissions from Deforestation

From the inbox:

International Workshop on Reducing Emissions from Deforestation
Organized by Fondazione Eni Enrico Mattei (FEEM, Italy) and the Environmental Defense Fund (EDF, USA)

“Reducing Emissions from Deforestation and Forest Degradation - REDD”

18 November 2008
Fondazione Eni Enrico Mattei
Corso Magenta 63, Milan - Italy

Today the massive process of deforestation and forest degradation in tropical regions results in the release into the atmosphere of approximately 20 percent of the world’s total anthropogenic emissions, which are held responsible for the progressive warming of the climate system. While the scientific community is exploring the potential of reducing and preventing world-wide deforestation as the policy option with the most immediate impact on the reduction of global CO2 emissions, a number of policy makers are still reluctant to introduce this option into post-Kyoto agreements, fearing that it might postpone abatement action in other sectors.

On the road to Copenhagen 2009, the Fondazione Eni Enrico Mattei and the Environmental Defense Fund organize an international workshop on "Reducing Emissions from Deforestation and Forest Degradation-REDD". The Conference will bring together key international scientists and civil society and government representatives to discuss the integration of "REDD" into post-Kyoto architectures.

Attendance is free, but registration is required. If you are interested, please confirm your participation by replying to not later than October 31, 2008. You will be notified by email of the status of your application shortly after we receive your reply.

All the conference documents will be available at:


Plants saved from humiliation and decapitation in Switzerland

Those far thinking Swiss have done it again with a new amended law that protects the dignity of vegetation.

Whilst clearly ahead of their time I fear that blogs and newspapers will simply report this story for its comedy value. Something here at Globalisation and the Environment that we do not condone.

Switzerland Places Ban on the Humiliation of Plants [PlanetSave]

A law protecting the dignity of plants? Laugh if you will. I’m down on my knees in respect and awe. At last the Western World is realizing the dire importance of taking other species into account.

Recently, the Swiss Parliament asked a panel of philosophers, lawyers, geneticists and theologians to determine the meaning of dignity when it pertains to plants.

Lo and Behold, the team published a treatise on “the moral consideration of plants for their own sake.” The treatise established that vegetation has innate value and that it is morally wrong to partake in activities such as the “decapitation of wildflowers at the roadside without rational reason.”

Over a decade ago, an amendment was added to the Swiss constitution in order to defend the dignity of all creatures — including vegetation — against unwanted repercussions of genetic engineering. The amendment was turned into law and is known as the Gene Technology Act. However the law itself didn’t say anything specific about plants, until recently, when the law was amended to include them.

One of the comments under this page has clearly got into the spirit of the new law. Is it really too late for vegetation everywhere?

There’s another term for the “humiliation” of plants: Wanton Destruction For No Good Reason is what the Swiss Parliament is talking about and trying to prohibit. The dignity of plants is part of - and inseparable from - the dignity of all life. Bringing about the pointless destruction of any species, including vegetation, just because one can, is arrant hubris. Humankind has gone much too far already toward self-extinction by fouling our own world until we cannot survive the poisons with which we’ve laced the environment. I actually think the Swiss law is too little… and too late.

There is nothing more to say.


Monday, October 20, 2008

Contingent Valuation Data from env-econ

The data set put up on Environmental Economics is a useful resource for students considering doing an MSc dissertation or extended essay with an interest in contingent valuation. Second years will study this next semester.

Clearly Haab and Whitehead have milked this data dry but that means it gives students an excellent opportunity to try to replicate their results and to try and work out why there are differences (if any).

This is a valuable resource for students, hence this blog post.

1995 Albemarle-Pamlico Sounds Economic Survey

Data Description

In General...

The data for this study is from a 1995 telephone survey conducted by the East Carolina University Survey Research Laboratory. The survey used a random digit dialing sampling scheme. The sample was purchased from Survey Sampling, Inc. and interviews were computer assisted. Of the households that were contacted, 1077 respondents provided data for an overall response rate of 75%.

The demographic profile of the sample is similar to that of Eastern North Carolina. The sample is 43% male, 54% married, 65% white, and 47% are employed full-time. The median age of the sample is 42 and the median education level is 13 years. Household income was elicited in categories. Twelve percent of households earned less than $10,000 and between $10,001 and $15,000, 11% of households earned between $15,001 and $20,000, 14% of households earned between $20,001 and $25,000, 10% earned between $25,001 and $30,000, 24% earned between $30,001 and $50,000, 12% earned between $50,001 and $75,000 and 5% earned above $75,001. With income levels coded at the midpoints of the income ranges (the upper range was coded as $85,000) the mean and median household income is $31,550 and $27,500. Except for race, none of the demographic variables are different between the P and A-P versions of the survey. The A-P sample has more white respondents than the P sample ( 2=3.94[1 df]).

The TRAVCOST variable was constructed as follows. For respondents living west of the Pamlico River, the distance was calculated as the distance from the respondent's county population center to Washington, NC on the Pamlico River. If the respondent lived North or South of the Pamlico River, the distance was calculated as distance from the county population center to the nearest boat ramp on the Sound. Distances were calculated using the Automap software package. The travel cost used is $.20 per mile, average miles per hour is 50, and the opportunity cost of travel time is valued at the wage rate (wage=INCOME/2080). We assume that all trips are day trips so the cost of on-site time is zero.

There are two main versions of the telephone survey. Version 1 contained a contingent market for the Pamlico Sound and Version 2 contained a contingent market for the Albemarle and Pamlico Sounds. The main difference in the two versions is the insertion of "Albemarle and" before Pamlico in all questions and the addition of the plural to Sound(s).

Without looking at the link try and work out why this data might be useful. What questions could be asked?


Friday, October 17, 2008

Stiglitz and Krugman on the Colbert Report

Stiglitz on the always great Colbert Report.

Same goes for the Krugman commentary on the Colbert Report

It is a shame ful episodes are no longer available in Britain. As it mentions on the webpage, it really is time to send in the redcoats.


"The Killing Fields": How the economy is killing planet earth

This headline will come as no surprise to regular blog readers but now the New Scientist wants in on the act and have published a "special report".

The figures they use on the front page and illuminating but poorly constructed and generally pretty useless.

Students on my environmental economics course will have heard all this before ;-)

Special report: How our economy is killing the Earth [New Scientist]

THE graphs climbing across these pages (see graph, right, or explore in more detail) are a stark reminder of the crisis facing our planet. Consumption of resources is rising rapidly, biodiversity is plummeting and just about every measure shows humans affecting Earth on a vast scale. Most of us accept the need for a more sustainable way to live, by reducing carbon emissions, developing renewable technology and increasing energy efficiency.

But are these efforts to save the planet doomed? A growing band of experts are looking at figures like these and arguing that personal carbon virtue and collective environmentalism are futile as long as our economic system is built on the assumption of growth. The science tells us that if we are serious about saving Earth, we must reshape our economy.

This, of course, is economic heresy. Growth to most economists is as essential as the air we breathe: it is, they claim, the only force capable of lifting the poor out of poverty, feeding the world's growing population, meeting the costs of rising public spending and stimulating technological development - not to mention funding increasingly expensive lifestyles. They see no limits to that growth, ever.
“Economists see no limits to growth - ever”

In recent weeks it has become clear just how terrified governments are of anything that threatens growth, as they pour billions of public money into a failing financial system. Amid the confusion, any challenge to the growth dogma needs to be looked at very carefully. This one is built on a long-standing question: how do we square Earth's finite resources with the fact that as the economy grows, the amount of natural resources needed to sustain that activity must grow too? It has taken all of human history for the economy to reach its current size. On current form it will take just two decades to double.

In my first lecture John Stuart Mill gets a run out. The New Scientist explain more:

It is a vision John Stuart Mill, one of the founders of classical economics, would have approved of. In his Principles of Political Economy, published in 1848, he predicted that once the work of economic growth was done, a "stationary" economy would emerge in which we could focus on human improvement: "There would be as much scope as ever for all kinds of mental culture, and moral and social progress... for improving the art of living and much more likelihood of it being improved, when minds cease to be engrossed by the art of getting on."

Today's economists dismiss such ideas as naive and utopian, but with financial markets crashing, food prices spiralling, the world warming and peak oil approaching (or passed), they are becoming harder than ever to ignore.

There are a number of good and excellent articles in this special report that are worth reading although they tend, not surprisingly, to give a "non-mainstream" perspective and thus, need to be read as such.

Some articles are free, others not. Clearly the New Scientist are not above making some cold hard capitalist cash out of the death throws of the planet.

Read more:

Why politicians dare not limit economic growth (FREE FEATURE)

Harvesting renewable energy will help us to avert climate change without big changes to our lifestyles, right? Not without cutting consumption, says Tim Jackson

Interview: The environmental activist

Why do we fail to live within the constraints that nature has set for us, and fool ourselves things have never been better, asks environmental activist David Suzuki

Economics blind spot is a disaster for the planet

If we can't find a way to switch to a sustainable economy, we're heading for the ultimate crash Herman Daly

Interview: Champion for green growth (FREE FEATURE)

Gus Speth has influenced US environmental policy from the Supreme Court to the White House. He tells Liz Else why green values stand no chance against market capitalism

The trickle-down myth: Does growth really help the poor?

The argument that economic growth helps fight poverty is disingenuous and misguided, says economist Andrew Simms

We must think big to fight environmental disaster

As the ecological and financial crises mount, Susan George says our only option is to scale up positive actions to transform our economies

What would life be like in a land without growth?

What would a sustainable society actually be like? How would we make a living? And what would happen to all those bankers? New Scientist imagines the progress of a "steady state" economy 10 years after its inception

Nothing to fear from curbing growth

Breaking our dependence on profits and growth would make our lives better, not worse, says philosopher Kate Soper


Wednesday, October 15, 2008

Is the financial crisis good or bad for deforestation? Lessons from history

The following is a guest post from Sjur Kasa (CICERO, OLSO).

This is a timely piece looking at the relationship between financial crises and the environment.

The crux of the argument is that a global recession has positive and negative effects on the environment. Clearly, slower growth means less resources (both renewable and non-renewable) but on the other hand, less resources will be given to "environmental groups" in the sense that the environment is perceived as a luxury.

Over to Sjur:

We are heading for hard times, what happens to deforestation? In this article I discuss the lessons from Brazil during the last financial crisis.

This is something to start thinking about: The supercycle of easy credit is over and the credit crunch is making things difficult for many developing countries. Recent reports suggest that several countries are on the brink of defaulting on their debt. This happens both because commodity markets are cooling down rapidly, and because credit is increasingly unavailable. What consequences could such a turn have for an environmental problem like deforestation?

Some lessons can be drawn from the last global financial crisis, the so-called Asia-Russia-Brazil crisis of 1997-1999. In a paper in Society and Natural Resources from 2005 (Society and Natural Resources 18(9)), Sjur Kasa and Lars Otto Naess from CICERO, an environmental research institute in Norway, looked at the consequences of the crisis that hit Brazil in 1998-99 for deforestation in the country's Amazon region. The relevance of this study may be seen now, when many developing countries are headed for financial problems again.

First, the negative effects of the crisis: The credit crunch in this period led to severe reductions in funding for the environmental agencies both at federal and state level. These agencies did indeed receive disproportional cuts, since they traditionally are less powerful in the budget infighting within the Brazilian government. The cutbacks also hit externally funded programmes like the PPG7 Pilot Programme due to absent Brazilian counterpart funding. This programme included several initiatives to curb deforestation and strengthen public and NGO efforts capacity in this respect. State and municipal programmes also most probably suffered because of harsh measures put in place to force them to produce surpluses that could be siphoned off to the federal state.

However, these negative effects should not be exaggerated. First, the environmental administration in Brazil, such as IBAMA, has been notoriously weak in controlling deforestation in Amazonia both due to organizational and financial problems. Second, in the Amazon, the crisis led to equally severe cutbacks of both public and private investments that would have actually enhanced deforestation. Plans to greatly expand infrastructure in the Amazon region adopted by the Cardoso government had to be temporarily halted alongside with private investment in agriculture due to skyrocketing interest rates and weakening domestic and international markets. nvironmental officials indeed called this "a breathing space" for the region, marking a welcome break in government efforts to "develop" the Amazon.

In addition to these effects, Brazil in this period also demonstrated the importance of a strong environmental movement. Alongside with the weakening of the public environmental administration, NGOs like Greenpeace, Friends of the Earth-Brazil and IPAM (Institute for the Study of Environment and Man in the Amazon) continued and expanded their activity on a series of innovative initiatives for curbing deforestation. Most interestingly, many of these initiatives were carried out in cooperation with still functioning parts of the environmental administration at state and federal level, often with external support. One example here is the satellite-assisted programme developed to control deforestation in Mato Grosso by the state's environmental authority FEMA in which local NGOs also played roles. Another
example was a number of forest certification initiatives supported by international NGOs that gained momentum just when the crisis picked up. In spite of the problems faced by the PPG7 assistance programme, the role of this as well as international donors like the World Bank and specific governments helped a lot by sustaining the activity of the NGOs and some environmental agencies.

Institutional stability and democracy also probably played a role in comparative terms. The Brazilian state continued to function as a shaky, but still conducive framework for the initiatives described above. Indonesia, where a political crisis led to the collapse of the Suharto regime, is an instructive contrast. Here, the destruction of the state made the activities of a much weaker environmental movement very difficult. On the Outer Island, where most of the valuable timber stands are located, local "resource mafias" moved in as the state lost control, contributing to very high levels of forest destruction in the period since.

Does this mean that financial crises are good for deforestation as long as you have strong NGOs, willing donors and a reasonably functioning democratic state? While this is one of the intriguing conclusions of our study, it does not come without important qualification. First, most developing countries do not have comparably affluent and willing donors and an environmental movement with the same sophistication as Brazil, meaning that the positive forces are probably much weaker in most cases. Second, the "breathing space" for the Amazon that we admit was provided by the credit crunch and the weakening global markets proved to be short-lived. Neither donors, NGOs nor public environmental authorities were able to prevent the rise of deforestation produced by the credit, soya and beef super-boom that emerged later in the 2000s. Again, this means that without expanding international cooperation on curbing deforestation and assisting environmental movements in developing countries in the coming years, any "breathing space" produced by the coming financial crisis in developing countries will prove short-lived.

Link to the full paper:


"The Eliasch report": Rich to pay to stop deforestation?

This is an old story with a new spin.

This is a post from 25th September this year:

Rich to pay the poor to preserve forests?

Now we get a new UK based report that effectively says the same thing. The economics of this idea, where rich countries pay poor countries not to chop down tries is logically consistent. The problem comes with enforcement and ensuring that the money does not fall into the wrong hands. When the country of Congo is likely to be one of the largest recipients of the money you can appreciate why this scheme is close to being dead in the water.

The only new element to this report is the suggestion that carbon markets are the source of the cash. This is all well and good but one also has to wonder whether this act of "transferring cash" in this way will make the citizens and indeed governments of developed countries less likely to make an effort domestically (insulation, recycling etc.) as their guilt is already being mitigated by the existence of these carbon trading transfers.

Rich Countries Must Pay for Rainforests - UK Report [Planet Ark]

Rich countries should pay tropical nations billions of dollars a year to save their forests, using donor money and global carbon markets to foot the bill, said a UK-commissioned report on Tuesday.

In the longer-term, by 2030, developing countries should also start paying to help create "carbon neutral" global forests through binding targets to slow deforestation and plant trees.


The report, "Climate Change: Financing Global Forests", firmly pinned hopes on the notion of carbon trading, where rich countries pay poor ones to cut carbon emissions, so that they can carry on polluting as normal.

"Deforestation will continue as long as cutting down and burning trees is more economic than preserving them," said Johan Eliasch, author of the report and Prime Minister Gordon Brown's special representative on deforestation.

There is no doubting the ambition of the report and the costings are useful.

Some critics said that the report's cost estimate of US$33 billion a year to halve deforestation by 2030 was too small.

Offsets would have to compensate farmers for not planting valuable crops such as palm oil.

That implied high prices, which made one expert doubt the report's claim that forestry offsets could halve costs for rich nations to fight climate change.


The Eliasch report skirted the problem of corruption and illegal logging, said Simon Counsell, executive director at the green group the Rainforest Foundation.

The report recommended that rich country donors spend US$4 billion over five years for research, to fund local bodies, and resolve local land disputes.

"It really fails to appreciate just how serious and long-term these problems of corruption and governance actually are," said Counsell, adding they would take 10 years to address.

"In DRC (Democratic Republic of Congo) there's fewer than 10 people in the forestry department managing an area of forest twice the size of France. That's the reality on the ground."


Monday, October 13, 2008

Mapping Poverty in Rural China: How Much Does the Environment Matter?

This is an interesting empirical approach I need to look at more closely. It is not entirely clear to me how closely environmental issues (rainfall, temperature etc.) are related to poverty levels.

This is an excellent paper with lots of colourful pictures.

Mapping Poverty in Rural China: How Much Does the Environment Matter?

Date: 2008-09-12
By: Susan Olivia (University of California, Davis)
John Gibson (University of Waikato)
Scott Rozelle (Stanford University)
Jikun Huang (Chinese Academy of Sciences)
Xiangzheng Deng (Chinese Academy of Sciences)


In this paper, we apply a recently developed small-area estimation technique to derive geographically detailed estimates of consumption-based poverty and inequality in rural Shaanxi, China. We also investigate whether using environmental variables derived mainly from satellite remote sensing improves upon traditional approaches that only use household survey and census data. According to our results, ignoring environmental variables in statistical analyses that predict small-area poverty rates leads to targeting errors. In other words, using environmental variables both helps more accurately identify poor areas (so they should be able to receive more transfers of poor area funds) and identify non-poor areas (which would allow policy makers to reduce poverty funds in these better off areas and redirect them to poor areas). Using area-based targeting may be an efficient way to reach the poor since many counties and townships in rural Shaanxi have low levels of inequality, even though, on average, there is more within-group than between-group inequality. Using information on locations that are, in fact, receiving poverty assistance, our analysis also produces evidence that official poverty policy in Shaanxi targets particular areas which in reality are no poorer than other areas that do not get targeted.
Keywords: China; environment; poverty; small area estimation
JEL: O15 O53 P36 Q56

Alaska's fishermen kicked in the Pollocks

Over fishing of Atlantic pollock will cause a run on fish fingers and imitation crab sticks (yum....) according to Greenpeace.

Given that we are currently witnessing the end of capitalism I particularly like the way that Greenpeace manage to weave in pollock stocks and the financial crisis. They don't miss a trick.

"Just as the financial institutions on Wall Street collapsed due to poor oversight and mismanagement, the pollock fishery is on the fast-track to collapse as well," Greenpeace said.

Fast food fish dishes are the staple of primary children everywhere and the McDonald's fish burger is even seen as a vaguely healthy option although this is lessened by the large coke and fries that often accompany said burger.

Alaska Pollock Fishery Near Collapse - Greenpeace [PlanetArk]

WASHINGTON - Stocks of Alaska pollock, a staple of the US fast food industry, have shrunk 50 percent from last year to record low levels and put the world's largest food fishery on the brink of collapse, environmental group Greenpeace said on Friday.

Taina Honkalehto, a research fishery biologist with the US National Marine Fisheries Service, said pollock biomass in US waters was down to 940,000 tons from 1.8 million tons last year.

Pollock is used in McDonald's fish sandwiches, frozen fish sticks, fish and chips and imitation crabmeat. It also helps feed fur seals, whales and the endangered Steller sea lions.

Pollock stocks have been unable to reproduce quickly enough to recover from yearly catch of 1 million tons, environmentalists say.

"Just as the financial institutions on Wall Street collapsed due to poor oversight and mismanagement, the pollock fishery is on the fast-track to collapse as well," Greenpeace said.

A collapse of the fishery would have hurt Alaska's commercial fishermen and coastal communities that depend on the sea for income.

"Economic pressures to keep on fishing at such high levels have overwhelmed common sense," said Jeremy Jackson, director of the Center for Marine Biodiversity and Conservation at the Scripps Institution of Oceanography, in a statement.

Jackson recommended a "far more precautionary, ecosystem-based approach" to fisheries management.

Greenpeace has called for the North Pacific Fishery Management Council to cut the catch in half for pollock when it meets in December to set limits for 2009.

The 2008 catch limit was set at 1 million tons last December, a 28 percent cut from the 2007 limit.

"We are on the cusp of one of the largest fishery collapses in history," said John Hocevar, Greenpeace's oceans campaign director. "It may still be possible to prevent disaster."

The group also advised that fishing on spawning populations be suspended and marine reserves be created to protect pollock habitats as the fishery has seen poor juvenile survival rates for several years. (Reporting by Jasmin Melvin; Editing by Marguerita Choy)


Sunday, October 12, 2008

Why do economists blog?

A good question and something that Dani Rodrik (Harvard) has previously looked at. This time environmental economics blog and 26econ have joined forces to present a few slides on blogging trends.

The results are interesting. I account for 2 of the observations which is a little worrying given the total number of observations.

Globalisation and the environment get a honourable mention in the presentation as we previously placed environmental economics as the number 1 environmental economics blog.

TOP ENVIRONMENTAL ECONOMICS BLOGS [Globalisation and the environment].

All students of environmental economics are encouraged to check these sites out.

Here is the PDF presentation of the Schiff and Whitehead presentation.

Some Economics of Economics Blogs[PDF]

It will be interesting to see if this ever gets published. I must say I am a little dubious about the quality of the data ;-)


Thursday, October 09, 2008

Disease and Global Warming - "the deadly dozen"

There is considerable debate about the effect of global warming on the spread of diseases. Try to remember that there is a close relationship between poverty and disease as well as between disease and climate.

That point aside it is always of interest to a dismal scientist to consider alternative ways that we can die. Here are the 12 deadliest.

The Deadly Dozen: 12 Diseases Global Warming Incubates [The Daily Green]

1. Avian influenza

Like human influenza, avian influenza viruses occur naturally in wild birds, though often with no dire consequences.

The virus is shed by infected birds via secretions and feces. Poultry may contract the virus from other domestic birds or wild birds. A highly pathogenic strain of the disease-H5N1-is currently a major concern for the world's governments and health organizations, specifically because it has proven deadly to domestic and wild birds, as well as humans, and has the potential to evolve into a strain that can spread from human to human. Current data indicate that the movement of H5N1 from region to region is largely driven by the trade in poultry, but changes in climate such as severe winter storms and droughts can disrupt normal movements of wild birds and can bring both wild and domestic bird populations into greater contact at remaining water sources.

2. Babesiosis

Babesia species are examples of tick-borne diseases that affect domestic animals and wildlife, and Babesiosis is an emerging disease in humans. In some instances, Babesia may not always cause severe problems by themselves but when infections are severe due to large numbers of ticks, the host becomes more susceptible to other infectious diseases. This has been seen in large die-offs of lions in East Africa due to canine distemper. Climate factors fostered heavy infestations of ticks on wild buffalo and subsequent spill-over infection of lions. The lions then became more susceptible to infections with the distemper virus. In Europe and North America, the disease is becoming more common in humans, also linked with tick distributions. Diseases that have previously been thought to have limited impact, such as babesiosis, must be watched closely in a changing climate to assess how environmental conditions may tip the scale and cause more significant impacts on ecosystems, animals, and people.

3. Cholera

Cholera is a water-borne diarrheal disease affecting humans mainly in the developing world. It is caused by a bacterium, Vibrio cholerae, which survives in small organisms in contaminated water sources and may also be present in raw shellfish such as oysters. Once contracted, cholera quickly becomes deadly. It is highly temperature dependent, and increases in water temperature are directly correlated with occurrence of the disease. Rising global temperatures due to climate change are expected to increase incidence of this disease.

4. Ebola

Ebola hemorrhagic fever virus and its closely related cousin-the Marburg fever virus-easily kill humans, gorillas, and chimpanzees, and there is currently no known cure. Scientists continue to work on finding the source of the disease and to develop vaccines for protection. There is significant evidence that outbreaks of both diseases are related to unusual variations in rainfall/dry season patterns. As climate change disrupts and exaggerates seasonal patterns, we may expect to see outbreaks of these deadly diseases occurring in new locations and with more frequency. WCS's work on Ebola in Central Africa has been supported by the US Fish and Wildlife Service.

5. Intestinal and external parasites

Parasites are widespread throughout terrestrial and aquatic environments. As temperatures and precipitation levels shift, survival of parasites in the environment will increase in many places, infecting an increasing number of humans and animals. Many species of parasites are zoonotic, spread between wildlife and humans. The nematode, Baylisascaris procyonis, is spread by the common raccoon and is deadly to many other species of wildlife and humans. A close relative, Baylisascaris schroederi, causes death in its natural host-the critically endangered giant panda. Monitoring of parasite species and loads in wildlife and livestock help us identify transmission of these infections between domestic and wild animals and humans.

6. Lyme disease

This disease is caused by a bacterium and is transmitted to humans through tick bites. Tick distributions will shift as a result of climate change, bringing Lyme disease into new regions to infect more animals and people. Although effects of the disease on wildlife have not been documented, human-induced changes in the environment and on population patterns of species such as white-tailed deer that can carry infective ticks greatly affect the distribution of this disease. Monitoring of tick distributions will be necessary to assess the impacts of climate change on this disease.

7. Plague

Plague, Yersinia pestis - one of the oldest infectious diseases known-still causes significant death rates in wildlife, domestic animals, and humans in certain locations. Plague is spread by rodents and their fleas. Alterations in temperatures and rainfall are expected to change the distribution of rodent populations around the globe, which would impact the range of rodent-born diseases such as plague.

8. "Red tides"

Harmful algal blooms off global coasts create toxins that are deadly to both humans and wildlife. These occurrences-commonly called "red tides" - cause mass fish kills, marine mammal strandings, penguin and seabird mortality, and human illness and death from brevetoxins, domoic acid, and saxitoxins (the cause of "paralytic shellfish poisoning"). Similar events in freshwater are caused by a species of Cyanobacteria and have resulted in animal die-offs in Africa. Altered temperatures or food-web dynamics resulting from climate change will have unpredictable impacts on the occurrences of this worldwide phenomenon. Effects of harmful algal blooms on sea life are often the first indicators that such an event is taking place.

9. Rift Valley Fever

Rift Valley fever virus (RVFV) is an emerging zoonotic disease of significant public health, food security, and overall economic importance, particularly in Africa and the Middle East. In infected livestock such as cattle, sheep, goats and camels, abortions and high death rates are common. In people (who can get the virus from butchering infected animals), the disease can be fatal. Given the role of mosquitoes in transmission of the virus, changes in climate continue to be associated with concerns over the spread of RVFV.

10. Sleeping sickness

Also known as trypanosomiasis, this disease affects people and animals. It is caused by the protozoa Trypanosoma brucei, and transmitted by the tsetse fly. The disease is endemic in certain regions of Sub-Saharan Africa, affecting 36 countries, with estimates of 300,000 new cases every year and more than 40,000 human deaths each year in eastern Africa. Domestic cattle are a major source of the disease, but wildlife can be infected and maintain the disease in an area. Direct and indirect effects (such as human land-use patterns) of climate change on tsetse fly distributions could play a role in the distribution of this deadly disease.

11. Tuberculosis

As humans have moved cattle around the world, bovine tuberculosis has also spread. It now has a global distribution and is especially problematic in Africa, where it was introduced by European livestock in the 1800s. The disease infects vital wildlife populations, such as buffalo and lions in Kruger National Park in South Africa, where tourism is an integral part of local economies. The disease also infects humans in southern Africa through the consumption of un-pasteurized milk. Human forms of tuberculosis can also infect wild animals. Climate change impacts on water availability due to drought are likely to increase the contact of wildlife and livestock at limited water sources, resulting in increased transmission of the disease between livestock and wildlife and livestock and humans.

12. Yellow fever

Found in the tropical regions of Africa and parts of Central and South America, this virus is carried by mosquitoes, which will spread into new areas as changes in temperatures and precipitation levels permit. One type of the virus-jungle yellow fever-can be spread from primates to humans and vice-versa via mosquitoes that feed on both hosts. Recent outbreaks in Brazil and Argentina have had devastating impacts on wild primate populations. In some countries in South America, monitoring of wild primates has resulted in early detection of disease activity and allowed vaccination programs to be rapidly implemented to protect humans.


Tuesday, October 07, 2008

"The stolen forests" - trade, the environment and corruption

A fine article from the New Yorker that combines trade, the environment, development and corruption - all favorite topics of mine. This is an excellent and lengthy 9 page article but is well worth the effort.

H/T Matt Kahn.

The Stolen Forests [New Yorker]

Chances are good that if an item sold in the United States was recently made in China using oak or ash, the wood was imported from Russia through Suifenhe. Because as much as half of the hardwood from Primorski Krai is harvested in violation of Russian law—either by large companies working with corrupt provincial officials or by gangs of men in remote villages—it is likely that any given piece of wood in the city has been logged illegally. This wide-scale theft empowers mafias, robs the Russian government of revenue, and assists in the destruction of one of the most precious ecosystems in the Northern Hemisphere. Lawmakers in the province have called for “emergency measures” to stem the flow of illegal wood, and Russia’s Minister of Natural Resources has said that in the region “there has emerged an entire criminal branch connected with the preparation, storage, transportation, and selling of stolen timber.


A fifth of the world’s wood comes from countries that have serious problems enforcing their timber laws, and most of those countries are also experiencing the fastest rates of deforestation. Until a decade ago, many governments were reluctant to acknowledge illegal logging, largely because it was made possible by the corruption of their own officials. As early as the nineteeneighties, the Philippines had lost the vast majority of its primary forests and billions of dollars to illegal loggers. Papua New Guinea, during roughly the same period, experienced such catastrophic forest loss that it commissioned independent auditors to assess why it was happening; they determined that logging companies were “roaming the countryside with the self-assurance of robber barons; bribing politicians and leaders, creating social disharmony and ignoring laws in order to gain access to, rip out, and export the last remnants of the province’s valuable timber.” In 1998, the Brazilian government announced that most of the country’s logging operations were being conducted beyond the ambit of the law.


Sun Laiyong’s references to organized crime pointed to one of the most disturbing aspects of the illegal timber trade: the violence that supports it. Last December, the body of a Russian banker with close ties to the timber industry was found at the bottom of his swimming pool, near Moscow. A bag had been pulled over his head, and his arms had been tied to his ankles. In a sloppy attempt at a coverup, a suicide note had been left at the scene, prompting a law-enforcement official to say, “He’s not Harry Houdini.” I heard of a similar “suicide” not far from Vladivostok earlier this year: an activist working with the World Wildlife Fund was found at a remote hunting cabin, fatally shot, an unconvincing note by his side. This type of violence can be found elsewhere. Earlier this year, in Peru, a community leader who tried to report a shipment of stolen timber was shot to death in a government office. Three years ago, in Brazil, a missionary and community organizer from Ohio, Sister Dorothy Stang, was murdered in the state of ParĂ¡, where a third of the Brazilian Amazon’s deforestation is occurring and where she had made enemies of loggers.


Thursday, October 02, 2008

Environmental Videos from VideoJug

From the inbox:

Videojug has an environmental video section. Here is the link:

VideoJug Environment


Econ211 Environmental Economics 2009

This week we start teaching Econ211A Environmental Economics. The course is for second year undergraduates and it is recommended that students have studied an introductory economics course in their first year.

The library will have copies of all these books. The only one we believe is worth buying is Perman et al. (2003). A new version of this text should be out next year. Second hand copies should be available.

The course will draw on material from most of the books listed below in the textbook section.

There are a number of older texts in our reading list and we still think that there is scope for a new text book that covers all the material in this course.

Any University of Birmingham student who buys a textbook/book from the links below should speak to me after a lecture.

The textbooks that we recommend are as follows:

Product Description

This text has been written primarily for the specialist market of second and third year undergraduate and post-graduate students of economics. The clear explanations and basic principles that underpin the text, however, make it readily accessible to non-economists coming to environmental economics from diverse programmes of study.
Natural Resource and Environmental Economics is among the leading textbooks in its field. Well written and rigorous in its approach, this third edition follows in the vein of previous editions and continues to provide a comprehensive and clear account of the application of economic analysis to environmental issues. This new edition has evolved with the times and been thoroughly updated to reflect recent developments in environmental issues and policies, such as forestry, biodiversity and pollution control. The early chapters explain the development and role of environmental economics before further chapters advance the student at a suitably challenging but achievable level.

Other books of interest:

See our Amazon bookshop (sidebar link) for other recommended reading HERE.


Wednesday, October 01, 2008

What is the value of water? The debate

From the inbox:

Given the increasing scarcity of water in certain regions I remain confident that this will lead to future armed conflict and indeed it could be argued that is already has done.

The Economist debate is therefore timely. I have voted "pro" at this early stage.

This house believes that water, as a scarce resource, should be priced according to its market value.”

September 30th The Economist will start a two-week long Oxford-style online debate on the value of water. The proposition is “This house believes that water, as a scarce resource, should be priced according to its market value.”

Some of the issues the debate will cover include: Would water supplies be better managed if it were treated as a commodity, and priced accordingly? Or is water a basic human right that governments should secure for their citizens? As both an industrial input and a prerequisite of life, water has become extremely scarce for roughly a billion people who do not have a constant supply of clean and safe water, so the issue is of extreme importance.

Debate Schedule
• September 30th. Opening statements and comments and voting open to the public
• October 1st. Guest Participant post by Dr. Michael W. Hanemann, chancellor's professor, Department of Agricultural & Resource Economics, University of California
• October 2nd. Guest Participant post by Anup Jacob, partner, Virgin Green Fund
• October 3rd. Rebuttal statements and Guest Participant post by Colin Chartres, director general, International Water Management Institute
• October 6th. Guest Participant post by Dr. Peter Gleick, president and co-founder, Pacific Institute
• October 7th. Guest Participant post by Peter L. Cook, executive director, National Association of Water Companies
• October 8th. Closing statements
• October 9th. Guest Participant post by Dr. Ashok Gadgil, senior scientist and deputy director, Environmental Energy Technologies Division, Lawrence Berkeley National Laboratory
• October 10th. Winner announced

Pro and Con Opening Statements

Pro Opening Statement
Stephen J. Hoffmann, Managing Director, WaterTech Capital & co-founder, Palisades Water Index Associates

The severe spatial and temporal imbalances in the supply of and demand for water—and safe drinking water in particular—dictate that water be priced at the true market value in order to resolve our global water challenges.

The notion of sustainability is gaining momentum with respect to the use of water and is likely to permeate virtually every aspect of water-resource management in the 21st century. While the hydrologic cycle is a closed biogeochemical process, the fact that the aggregate amount of water on Earth, in its various forms, is virtually constant on a human time scale does not mean that we do not face enormous challenges with respect to its spatial and temporal distribution.

Water is a critical factor in poverty, has a fundamental impact on human health, and is increasingly crucial in economic development. The World Health Organisation reports that 1.1 billion people worldwide lack access to safe drinking water and 2.7 billion people lack basic sanitation needs. Yet despite its stature as a prerequisite for life and for living, the price of water remains artificially low based on an institutional ideology that developed when accessible freshwater was relatively abundant and when contamination was mitigated by the ubiquity of the resource.

Sustainability is the mantra behind many emerging regulations, water-policy initiatives and technological advances. And nowhere is the market price of water more critical than in the concept of sustainability. Efficiency is critical in achieving sustainability and a market-driven price is paramount to the efficient allocation of water resources. The sustainability criterion suggests that, at a minimum, an allocation must leave future generations no worse off than current generations. Economics has much to say about the efficiency of the allocation.

The pricing of water must go beyond the mechanical and political aspects to the basic factors that affect the relationships between producers and consumers, and that are implicit in the rate structure. The principle of sustainability is critically dependent upon efficiency in water use. And efficiency cannot be achieved without the proper signals included in market prices. Market value is equivalent to water rates based on economic principles of water-resource pricing. In that regard, resource economics requires the convergence of two key principles: equimarginal value in use and marginal cost pricing.

Economic principles of resource allocation dictate that when costs are incurred in the acquisition, treatment and transport of water supplies to customers, the principle of equimarginal value in use should be combined with the principle of marginal cost pricing; that is, market value must govern. Additional units of water can always be made available by expending more resources to acquire and transport it, that is, at a given marginal cost.

The question of where to stop in increasing the supplies made available is then added to the question of how to arrange for the allocation of the supplies in store at any point in time. On efficiency grounds, additional units should be made available as long as any customers are willing to pay the incremental or marginal cots incurred. To meet the criterion of equimarginal value in use, however, the price should be made equal for all customers in a class.

It is precisely because of practical considerations such as alternative supplies, location, use patterns, types of service etc, that the marginal costs of serving all customers will not be the same. Pricing should be arranged, then, so that all customers within a class served under identical cost conditions pay the same amount equal to the marginal cost or market value. Between classes, however, prices should differ, and the difference should be the difference in marginal costs involved in serving the two. In general, the economic principles of resource allocation indicate that customers served under identical cost conditions should be charged equal prices and that the water should be supplied and priced in such a way that the price for each class of service equals the marginal cost of serving that class.

Water rates should be designed to fully recover the costs of providing water by charging customers in accordance with how they contribute to the costs. Schedules of water rates that charge customers in accordance with the cost of service would be efficient from the economic point of view, in that the price of a unit of water would be equal to the cost of the resources used to obtain and deliver that water. Further, they would be equitable in that no customer would be required to subsidise any other customer. To sum it up, the dictates of efficiency are clear: water should be allocated so that the marginal net benefit is equalised for all users. If marginal net benefits are not equalised, it is possible to increase net benefits by transferring water from those uses with low net marginal benefits to those with higher net marginal benefits. Again, the pricing of water at the ‘market’ value is the only way to make these determinations.

The amount of easily accessible freshwater is coming under increasing pressure as a result of global population growth, particularly in developing countries where urbanisation and industrialisation are underway, and the degradation of existing supplies. The amount of readily accessible freshwater is a minuscule percentage of the Earth’s total water budget. If per capita consumption of water continues to increase at its current rate, we will be using over 90% of all available freshwater with 20 years.

Scarcity, spatial and temporal, must be reflected in a pricing mechanism. Water is like any other economic good for which there is supply and demand and a pricing mechanism that seeks equilibrium between the two.

This is not a process-oriented enchantment with the free market that it may appear to be. While this might sound like so much economic rhetoric, the reality is that market pricing is central to enabling the forces that allow the efficient allocation of the resource. It is simply a recognition that market prices convey a great deal of information; information with respect to incentives, efficiency and allocational considerations. The pricing of water based on its true market value is also critical in resolving the issues associated with its allocation among competing beneficial uses.

Desalination is an example of where the market value of water plays an important role as a catalyst for problem resolution. In regions of the world where water is permanently scarce, desalination has emerged to meet demand. And it has done so only because there are few options. Granted, desalination is more attractive where energy is cheap, but it points to the reality that if water is simply unavailable, the market value argument is easy to acknowledge. It stands to reason that water priced at the market value (which includes scarcity, regulatory costs, treatment costs and resource management considerations) would be beneficial for the entire spectrum of conditions.

The signals and incentives contained in pricing water at its market value also enable the processes of recycling, reuse and conservation that are central to achieving sustainable water use. That water is not priced (valued) at its market value is the main reason why we are experiencing many of our severe water-quality and -quantity issues. Resource economics dictates the allocational efficiency of market-driven pricing.

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Con Opening Statement
Dr. Vandana Shiva, Director, Research Foundation for Science, Technology & Natural Resource Policy

Between last year and this the market value of Lehman Brothers dropped from $38.4 billion to $5 billion, Merrill Lynch from $71.9 billion to $33.1 billion, and Morgan Stanley from $70.2 to $43 billion. Since then Lehman Brothers has collapsed. There is clearly no reliable "market price" in a volatile world driven by greed and profits, with no social regulation. The idea that the management and distribution of and access to a scarce and vital resource like water can be left to the market—and that the market can assign a reliable price reflecting the real value of water—is both absurd and irresponsible.

All cultures have viewed water as the basis of life. Marketisation, however, allows water to be perceived as no different from any other commodity in the global market place–to be owned and bought and sold at arbitrary, unreliable prices.

The commodification of water shifts the focus from the water cycle on to water markets – diverse species, ecosystems and water systems adapted to millions of years of evolution are replaced by instantaneous relationships between “sellers” and “buyers” negotiating a commodity transaction which determines how water will be used, where it will flow, and where and to whom it will stop flowing. It is assumed that water will flow from “low value” to “high value” use. This increase in “value” (which refers to price) is supposed to magically overcome water scarcity and allocate water equitably.

We need to focus our thinking on water cycles rather than water markets, on human rights to water rather than profits to be made from commoditising a scarce resource. It is our relationship with the ecology of water that has the capacity to sustain water supplies for us and other species. Trade in water can help water markets grow in the short term, but unregulated markets will make our scarce and fast-disappearing water resources disappear ever faster. It is the discipline of ecology and hydrology that we need to guide our efforts at conservation, not the ecological indiscipline of markets.

The anarchy of the water market can be a good guide to profits – but it is a bad guide for the equitable, just and sustainable use of our precious water systems.

In the years ahead, the ecological and commercial paradigms will clash intensely as globalisation displaces cultures of water conservation and replaces them with a commercial monoculture of water as a commodity.

The commodification of water resources is being promoted by the World Bank and free-trade agreements like NAFTA and WTO. The World Bank is using Structural Adjustment programmes to privatise water resources. Free-trade agreements are defining water as an environmental service covered by rules of free trade in services. Privatisation and commodification are threatening to accelerate the processes that have led to the growing crisis of drought, desertification and water famines.

The market paradigm of water involves the assumptions that:

1. Increase in price is increase in value.

2. Increase in water trade is increase in water supply and hence free trade in water can overcome the water crisis.

The assumption that water markets will overcome the water crisis is, however, fallacious and malicious. Firstly, water markets cannot reduce water use and conserve water because commercial exploitation has created water scarcity by fuelling over-exploitation. In a world of inequality, higher prices do not tame consumption–they increase the luxury consumption by the rich and deprive the poor even of survival needs.

Secondly, water trade cannot increase water supplies. Water cannot be created by markets. It can be stored, diverted, polluted and also over-exploited, but its overall availability cannot be enhanced.

Water is defined by the water cycle and renewed if the water cycle is maintained. The ecological paradigm recognises that:

1. Water is the basis of all life on the planet including diverse species and all human communities.

2. Non-sustainable water use spurred by non-sustainable economies and technologies which violate the limits and the integrity of the water cycle are creating a water crisis.

3. The current water crisis can only be overcome by respecting the limits on water use that are enforced by the water cycle.

Markets driven by commercial values can neither recognise or respect the ecological limits set by the water cycle, nor give water its real value as the very basis of life. The real value of water is assigned by culture, which treats water as sacred; it is also assigned by rules of social equity and justice which recognise that everyone has a human right to water.

Water Markets Violate the Water Cycle

Water markets define “value” only as commercial and market value, and try and maximise this value as profits through commercial transactions and trade.

In nature’s economy, the primary value is sustainability and maintenance of nature’s essential ecological processes. Conservation is the imperative in nature’s economy for maximising ecological values.

In the sustenance economy, meeting people’s biological and livelihood needs for water are the primary objectives. Equity, justice and human rights are the primary values. Sharing of scarce water equitably is the imperative in the sustenance economy.

When water's social and ecological values are ignored and markets determine how water flows, it starts to move against the law of gravity. It moves upwards – to money – from the poor to the rich, from agriculture to industry, from the countryside to the city. In water markets, water moves from having a high ecological and social value, but a low market value, to having a low ecological and social value, but a high market value.

Water markets take water from where it is needed by nature’s economy, people’s economy and the countryside, to where there is purchasing power for water as a commodity—the urban areas, industry and industrial agriculture. Managing a scarce and precious resource like water requires conservation, equity and the recognition that as the basis of life, water is priceless.