Wednesday, May 13, 2009

Lobby groups killing the planet?

US politics is an ugly place. You have to wonder about the future of democracy and the planet when big oil and other lobby groups can have such an influence on the democratic decision making process.

This is a sad state of affairs.

Barack Obama's key climate bill hit by $45m PR campaign [Guardian]

America's oil, gas and coal industry has increased its lobbying budget by 50%, with key players spending $44.5m in the first three months of this year in an intense effort to cut off support for Barack Obama's plan to build a clean energy economy.

The spoiler campaign runs to hundreds of millions of dollars and involves industry front groups, lobbying firms, television, print and radio advertising, and donations to pivotal members of Congress. Its intention is to water down or kill off plans by the Democratic leadership to pass "cap and trade" legislation this year, which would place limits on greenhouse gas emissions.

A defeat for the bill would have global consequences. The international community is depending on America, as the world's biggest per capita polluter, to set out a firm plan for getting off dirty fuels in the months before crucial UN negotiations in Copenhagen in December.

Without such action, the chances of getting a deal that scientists say is vital to limiting dangerous climate change are much reduced.

Those high stakes have intensified the fight for control over America's energy future. "There are an awful lot of people who have an awful lot to gain and lose and they have been acting accordingly," said Evan Tracey, founder of the Campaign Media Analysis Group (CMAG), who has tracked the proliferation of climate change ads.

But it is an unequal contest. Liberal and environmental organisations, as well as the major corporations that support climate change legislation, say they are being vastly outspent by fossil fuel interests.

"These guys are spending a billion dollars this year convincing Americans that they are clean, green, cuddly and warm," said Bob Perkowitz, founder of the eco- America PR firm. Perkowitz is to brief the White House yesterday on a new environmental messaging strategy. "The enviros are getting their message out, but they are being outspent by 10 to one." he said.On advertising, the ratio is about three to one. The oil and coal industry spent $76.1m on ads from 1 January to 27 April, according to CMAG data seen by the Guardian. Environmental groups, led by Al Gore's Alliance for Climate Protection, the Environmental Defence Fund and the Sierra Club, spent $28.6m on ads in the same period, Tracey said.

Despite its global significance, the fate of the draft "cap and trade" bill now lies in the hands of just a dozen Democrats, who have yet to back Obama's energy transformation. The Democratic leadership cannot take their support for granted. Seven of those pivotal Democrats received campaign donations in excess of $100,000 from the oil and gas industry, coal producers, and electricity firms during last year's elections, according to an analysis provided to the Guardian by the Centre for Responsive Politics. Another two received more than $90,000 last year.

Environmentalists say those Democrats, who hold the balance of power on the committee, pose a far greater threat to the chances of passing climate change legislation than a full vote in the House of Representatives. "If they can get that bill through the subcommittee what is going to emerge is a piece of legislation," said Tony Kreindler of the Environmental Defence Fund. "So this is ground zero for the vote."


"Economic Instruments to Enhance the Conservation and Sustainable Use of Biodiversity"

Call for papers:

"Economic Instruments to Enhance the Conservation and Sustainable Use of Biodiversity"

The Fondazione Eni Enrico Mattei, in association with Conservation International, DEFRA, Department of Land Economy of Cambridge University and European Investment Bank, announces the Eleventh International BIOECON Conference on "Economic Instruments to Enhance the Conservation and Sustainable Use of Biodiversity". The Conference will be held at the Centro Culturale Don Orione Artigianelli, in Venice, Italy, on September 21st-22nd, 2009.

The Conference is targeted to researchers, environmental professionals, international organizations and policy makers who are interested in working in the management and conservation of biodiversity. The Conference is focused on identifying the most effective and efficient instruments for biodiversity conservation, such as auctions of biodiversity conservation contracts, payment-for-services contracts, taxes, tradable permits, voluntary mechanisms and straightforward command and control. Special emphasis will be given to policy reforms aimed at increasing the commercial rewards for conserving biodiversity, increasing the penalties for biodiversity loss and circulating information on the biodiversity performance requirements of firms. An increasing number of businesses, which were responsible for biodiversity loss in the past, are now supporters of biodiversity conservation. Markets for organic agriculture and sustainably-harvested timber are developing at double-digit rates, while rapid growth is observed in the demand for climate mitigation services, such as the protection of forests and wetlands to absorb carbon dioxide. Bio-prospecting, the search for new compounds, genes and organisms in the wild, is another biodiversity business on the rise.

Papers are specifically invited on the themes of:

* Assessment of the effectiveness and efficiency of biodiversity conservation instruments, taking into account spatial and governmental considerations;
* Development of new, incentive-compatible instruments to conserve biodiversity;
* Evaluation of the costs of conservation policies versus the costs of 'business-as-usual' within an existing policy framework (e.g. agriculture, fisheries, infrastructure, climate change, etc) that causes ongoing losses of ecosystems and biodiversity.
* Determination of the factors - including the choice of policy instruments - that increase or decrease a farmer's or public body's motivation to conserve biodiversity on their land;
* Application to strategies and projects of the ecosystem services approach for assessing and valuing environmental impacts;
* Benefit transfer methodologies to assess the socio-economic and monetary value of ecosystems services;
* Applications of economic instruments to enhance the conservation and sustainable use of biodiversity, with particular emphasis on case studies in biodiversity hotspots.

We are particularly interested in papers documenting practical applications and experiences on the above themes. Theoretical contributions are welcome (e.g., using computer artificial intelligence approaches), but also more applied work (e.g. how public bodies - managing for example flood risks - can innovatively deliver wider ecosystem benefits, or how private landowners can be encouraged to conserve biodiversity on their land). We are also interested in multi-disciplinary papers that combine scientific and economic assessments. However, we will also accept papers on a range of other issues related to renewable resources and biodiversity management.

The Conference will cover two days. Leading international environmental economists will present their latest research in two plenary sessions. The keynote speakers are: Professor Anil Markandya (University of Bath, UK and BC3, Spain) and Professor Edward Barbier (University of Wyoming, USA). Two special panel discussions are also scheduled. These are characterized by a round table and shall be focused on climate change, biodiversity management issues. One shall be co-organized with the European Investment Bank and the second by Conservation International, giving to the audience an interesting perspective that is the link between theory and practice.

Full/draft papers may be submitted for presentation and will be considered by the programme committee. Electronic copies (in WORD or PDF format) should be sent to Ughetta Molin Fop ( no later than May 20th, 2009. Acceptance of papers will be notified by email in June 2009.

The Conference will open with an evening reception at the Centro Culturale Don Orione Artigianelli on September 20th. Conference sessions will commence in the morning of September 21st and end in the afternoon of September 22nd. A Conference dinner will be organised on the evening of September 21st. Lunches and refreshments will also be provided. All the participants will be offered lunches and refreshments, the opening reception, the social dinner and the Conference package (program brochure with the book of abstracts, five hours of Internet connection, folder, bag, pen, badge, logistical information, Venice map). There is no registration fee.
Travel and accommodation expenses remain the responsibility of all the participants.

In order to register to the Conference and the your accommodation booking participants are invited to fill in the downloadable form at the BIOECON web-site and send it to the Conference Secretariat (Ughetta Molin Fop, e-mail, fax +39.041.2711461) by July 15th, 2009.

Further information about the Conference will be posted in the BIOECON web-site at

Monday, May 11, 2009

"Pollution and International Trade in Services"

Arik Levinson and his latest trade and the environment paper.

The bottom line is that services are relatively small polluters so Arik was never going to find much of real economic significance. Good to cover all bases though.

"Pollution and International Trade in Services"

NBER Working Paper No. w14936

ARIK LEVINSON, Georgetown University - Department of Economics, National Bureau of Economic Research (NBER)

Two central topics in recent rounds of international trade negotiations have been environmental concerns, and services trade. While each is undoubtedly important, they are unrelated. In this paper I show that the services-environment link is small, for two reasons. First, services account for only a small fraction of overall pollution. For none of five major air pollutants does the service sector account for even four percent of total emissions; for three of the five services account for less than one percent. Second, those service industries that do pollute are the least likely to be traded internationally. Those services for which the U.S. collects and publishes international trade data - presumably those services that are traded internationally - are less polluting than services for which trade data do not exist - presumably because the services are not traded. Even if we limit attention to the services that are traded across borders, the service industries most intensively traded are the ones that pollute the least. The bottom line is simple. International services trade bears little relation to the environment, because services in general contribute relatively little to overall pollution, and those industries that are traded internationally are among the least polluting.


The World According to Monsanto

I am on a "hammering big business roll" - first Chevron and now Monsanto.

Up the revolution.

The World According to Monsanto - Full Documentary [Twilight Earth]

The post above has the entire documentary for all to view.


Tuesday, May 05, 2009

Wind farms in Sicily made an offer they cannot refuse

You know that alternative energy has gone mainstream when the Cos Nostra get involved.

This is yet another unintended consequence of sky high EU subsidies for wind power. The question is whether the finely named "operation wind" will be a rip roaring success.

The idea that companies were given money to build wind farms that produce no electricity shows the distortionary effect of both the mafia and EU subsidies.

The FT reports as part of a special investigation.

Mafia link to Sicily wind farms probed [FT]

Anti-Mafia magistrates in Sicily have opened a sweeping investigation into the wind power sector where local officials, entrepreneurs and crime gangs are suspected of collusion in the construction of lucrative wind farms before their eventual sale to multinational companies.

Italian and EU subsidies for the building of wind farms and the world’s highest guaranteed rates, €180 ($240, £160) per kwh, for the electricity they produce have turned southern Italy into a highly attractive market exploited by organised crime.

Roberto Scarpinato, a veteran anti-Mafia prosecutor in the regional capital Palermo, told the Financial Times that his investigation, which began last week, was focused on the three large provinces of Palermo, Trapani and Agrigento.

An earlier investigation into a case near Trapani in western Sicily resulted in eight arrests in February, leading to accusations of a suspected nexus between a leading Mafia family that offered money and votes in exchange for permits to construct wind farms.

“Operation Wind” revealed Mafia promises to local officials in Mazara del Vallo of money and votes in exchange for help in approving wind farm projects.

The Mafia suspects were alleged to be linked to Matteo Messina “Diabolik” Denaro, a fugitive clan boss on ltaly’s most wanted list.

Prosecutors suspect the hand of the Mafia in fixing permits and building wind farms that are then sold on to Italian and eventually foreign companies.

In an effort to assert its control over the sector, the Mafia is suspected of destroying two wind towers that were in storage in the port of Trapani after their delivery by ship from northern Europe, local officials told the FT.

“It is a refined system of connections to business and politicians. A handful of people control the wind sector. Many companies exist but it is the same people behind them,” said Mr Scarpinato, whose investigations have focused on the evolution of the Mafia into a modern business organisation.

Sicily’s Cosa Nostrais evolving and finding new business opportunities, including the renewable energy sector, by exploiting its historic grip over territory, construction and ability to corrupt local officials.

Several wind farms built by companies suspected of being linked to the Mafia have not functioned for one or two years, in some cases because of shoddy construction. “This is the amazing thing, that developers got public money to build wind farms which did not produce electricity,” the prosecutor said.

The regional governments in Sicily, as well as Calabria and Basilicata on the mainland, have suspended the authorisation of new wind farms in part because of suspected criminal involvement and confusion over the real ownership of the ventures.

Most, if not all, of Sicily’s wind farms began as projects by local developers, some of whom speculated in a secondary market for permits. Once built, the majority were sold on through Italian intermediaries to multinationals. International Power of the UK is the largest wind power operator in Italy. Others include Italy’s Enel and Germany’s Eon through its purchase of part of Endesa of Spain in 2007. France’s EDF also has assets. While the international companies knew the identity of their Sicilian developers, there is no evidence they were aware of Mafia involvement.

Although Italy is lagging badly in meeting its EU 2020 emissions targets, the renewable energy sector is growing strongly and attracting considerable foreign investment. International Power became the single largest operator in 2007 with its purchase of the Maestrale portfolio of mostly Italian wind farms, including five in Sicily, for €1.8bn

Italy ranks fourth in Europe in terms of installed wind power capacity.


Sunday, May 03, 2009

Foreign Direct Investment and the Pollution Haven Hypothesis"

Having written extensively on the pollution haven hypothesis I need to keep up to speed. This looks like a promising approach but for a single sector (one that is most likely to result in a positive effect.

"Agglomeration Effects in Foreign Direct Investment and the Pollution Haven Hypothesis"

Environmental and Resource Economics, Forthcoming
Economic Research Initiatives at Duke (ERID) Research Paper No. 22

ULRICH J. WAGNER, Universidad Carlos III de Madrid - Department of Economics, London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)
CHRISTOPHER TIMMINS, Duke University - Department of Economics

Does environmental regulation impair international competitiveness of pollution-intensive industries to the extent that they relocate to countries with less stringent regulation, turning those countries into "pollution havens"? We test this hypothesis using panel data on outward foreign direct investment (FDI) flows of various industries in the German manufacturing sector and account for several econometric issues that have been ignored in previous studies. Most importantly, we demonstrate that externalities associated with FDI agglomeration can bias estimates away from finding a pollution haven effect if omitted from the analysis. We include the stock of inward FDI as a proxy for agglomeration and employ a GMM estimator to control for endogenous, time-varying determinants of FDI flows. Furthermore, we propose a difference estimator based on the least polluting industry to break the possible correlation between environmental regulatory stringency and unobservable attributes of FDI recipients in the cross-section. When accounting for these issues we find robust evidence of a pollution haven effect for the chemical industry.


"Discounting for Climate Change"

Discounting remains controversial.

David Anthoff, Tol, Richard and Gary Yohe provide a good summary of the problem.

The bottom line is that the social cost of carbon could be pretty much anything.

Discounting for Climate Change

Date: 2009
By: Anthoff, David
Tol, Richard S. J.
Yohe, Gary W.


It is well-known that the discount rate is crucially important for estimating the social cost of carbon, a standard indicator for the seriousness of climate change and desirable level of climate policy. The Ramsey equation for the discount rate has three components: the pure rate of time preference, a measure of relative risk aversion, and the rate of growth of per capita consumption. Much of the attention on the appropriate discount rate for long-term environmental problems has focussed on the role played by the pure rate of time preference in this formulation. We show that the other two elements are numerically just as important in considerations of anthropogenic climate change. The elasticity of the marginal utility with respect to consumption is particularly important because it assumes three roles: consumption smoothing over time, risk aversion, and inequity aversion. Given the large uncertainties about climate change and widely asymmetric impacts, the assumed rates of risk and inequity version can be expected to play significant roles. The consumption growth rate plays four roles. It is one of the determinants of the discount rate, and one of the drivers of emissions and hence climate change. We find that the impacts of climate change grow slower than income, so that the effective discount rate is higher than the real discount rate. The differential growth rate between rich and poor countries determines the time evolution of the size of the equity weights. As there are a number of crucial but uncertain parameters, it is no surprise that one can obtain almost any estimate of the social cost of carbon. We even show that, for a low pure rate of time preference, the estimate of the social cost of carbon is indeed arbitrary – as one can exclude neither large positive nor large negative impacts in the very long run. However, if we probabilistically constrain the parameters to values that are implied by observed behaviour, we find that the social cost of carbon, corrected for uncertainty and inequity, is 61 US dollar per metric tonne of carbon.

Keywords: Social cost of carbon, climate change, pure time preference, risk aversion, inequity aversion, income elasticity, time horizon, uncertainty
JEL: Q54

Saturday, May 02, 2009

"An Elaborated Global Climate Policy Architecture"

New paper from Jeffery Frankel. It is interesting to see how many mainstream economists are turning their hand to environmental issues.

This plan might have legs if taken seriously.

An Elaborated Global Climate Policy Architecture: Specific Formulas and Emission Targets for All Countries in All Decades"

NBER Working Paper No. w14876

JEFFREY A. FRANKEL, Harvard University - John F. Kennedy School of Government, National Bureau of Economic Research (NBER)

This paper analyzes a detailed plan to set quantitative national limits on emissions of greenhouse gases, following along the lines of the Kyoto Protocol. It is designed to fill in the most serious gaps: the absence of targets extending as far as 2100, the absence of participation by the United States and developing countries, and the absence of reason to think that countries will abide by commitments. The plan elaborates on the idea of a framework of formulas that can assign quantitative limits across countries, one budget period at a time. Unlike other century-long paths of emission targets that are based purely on science (concentration goals) or ethics (equal rights per capita) or economics (cost-benefit optimization), this plan is based partly on politics. Three political constraints are particularly important. (1) Developing countries are not asked to bear any cost in the early years. (2) Thereafter, they are not asked to make any sacrifice that is different in kind or degree than was made by those countries that went before them, with due allowance for differences in incomes. (3) No country is asked to accept an ex ante target that costs it more than, say, 1% of GDP in present value, or more than, say, 5% of GDP in any single budget period. They would not agree to ex ante targets that turned out to have such high costs, nor abide by them ex post. An announced target path that implies a future violation of these constraints will not be credible, and thus will not provide the necessary signals to firms today.

The idea is that (i) China and other developing countries are asked to accept targets at BAU in the coming budget period, the same in which the US first agrees to cuts below BAU; and (ii) all countries are asked to make further cuts in the future in accordance with a formula which sums up a Progressive Reductions Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. The paper tries out specific values for the parameters in the formulas (parameters that govern the extent of progressivity and equity, and the speed with which latecomers must eventually catch up). The resulting target paths for emissions are run through the WITCH model. It does turn out to be possible to achieve the carbon abatement goal (concentrations of 500 PPM in 2100) while simultaneously obeying the economic/political constraint (no country suffers a disproportionate loss in GDP). Preliminary efforts to achieve a target of 450 ppm have so far been unable to do so without violating the cost constraint.