Wednesday, December 23, 2009

A better world on its way?

Wise words.



Copenhagen was a predictable disaster. Being an economist has its benefits. I for one expected nothing less than a total and utter disaster and can take what small pleasure there is in being right (whilst the planet collapses around me).

More later.

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Monday, December 14, 2009

Have Countries with Lax Environmental Regulations a Comparative Advantage in Polluting Industries?

Another paper to read. How they handle endogeneity is the key to the paper.

Have Countries with Lax Environmental Regulations a Comparative Advantage in Polluting Industries?

Quiroga, Miguel
Sterner, Thomas
Persson, Martin

Abstract:

We aim to study whether lax environmental regulations induce comparative advantages, causing the least-regulated countries to specialize in polluting industries. The study is based on Trefler and Zhu... more’s (2005) definition of the factor content of trade. For the econometrical analysis, we use a cross-section of 71 countries in 2000 to examine the net exports in the most polluting industries. We try to overcome three weaknesses in the empirical literature: the measurement of environmental endowments or environmental stringency, the possible endogeneity of the explanatory variables, and the influence of the industrial level of aggregation. As a result, we do find some evidence in favor of the pollution-haven effect. The exogeneity of the environmental endowments was rejected in several industries, and we also find that industrial aggregation matters.


ISSN: 1403-2465

The U.S. proposed carbon tariffs, WTO scrutiny and China's reponses

As the Copenhagen jamboree grinds towards its inevitable conclusion of vague promises this blog continues to watch as the arguments covered in this blog and elsewhere over the last 3 years get rehashed and presented by different politicians to other politicians with the result that nothing will change.

More interesting to an economist is how the new proposed "carbon tariffs" will distort trade and how China will react. Here is an early attempt at looking at this issue.

As far as abstracts go, this one is a little on the lengthy side and a little longer than the usual 100 words.

The U.S. proposed carbon tariffs, wto scrutiny and China's responses

Zhang, ZhongXiang (2009)

Abstract

With countries from around the world set to meet in Copenhagen to try to hammer out a post-2012 climate change agreement, no one would disagree that a U.S. commitment to cut greenhouse gas emissions is essential to such a global pact. However, despite U.S. president Obama’s recent announcement that he will push for a commitment to cut U.S. greenhouse gas emissions by 17% by 2020, in reality it is questionable whether U.S. Congress will agree to specific emissions cuts, although are not ambitious at all from the perspectives of both the EU and developing countries, without imposing carbon tariffs on Chinese products to the U.S. market, even given China’s own recent announcement to voluntarily seek to reduce its carbon intensity by 40-45% over the same period.

This dilemma is partly attributed to flaws in current international climate negotiations, which have been focused on commitments on the two targeted dates of 2020 and 2050. However, if the international climate change negotiations continue their current course without extending the commitment period to 2030, which would really open the possibility for the U.S. and China to make the commitments that each wants from the other side, the inclusion of border carbon adjustment measures seems essential to secure passage of any U.S. legislation capping its greenhouse gas emissions. Moreover, the joint WTO-UNEP report indicates that border carbon adjustment measures might be allowed under the existing WTO rules, depending on specific design features.

Against this background, this paper argues that, on the U.S. side, there is a need to minimize the potential conflicts with WTO provisions in designing such border carbon adjustment measures. The U.S. also needs to explore with its trading partners cooperative sectoral approaches to advancing low-carbon technologies and/or concerted mitigation efforts in a given sector at an international level. Moreover, to increase the prospects for a successful WTO defence of the Waxman-Markey type of border adjustment provision, 1) there should be a period of good faith efforts to reach agreements among the countries concerned before imposing such trade measures; 2) WTO consistency also requires considering alternatives to trade provisions that could be reasonably expected to fulfill the same function but are not inconsistent or less inconsistent with the relevant WTO provisions; and 3) trade provisions should allow importers to submit equivalent emission reduction units that are recognized by international treaties to cover the carbon contents of imported products.

Being targeted by such border carbon adjustment measures, China needs to, at a right time, indicate a serious commitment to address climate change issues to challenge the legitimacy of the U.S. imposing the carbon tariffs by signaling well ahead that it will take on binding absolute emission caps around the year 2030, and needs the three transitional periods of increasing climate obligations before taking on absolute emissions caps. The paper argues that there is a clear need within a climate regime to define comparable efforts towards climate mitigation and adaptation to discipline the use of unilateral trade measures at the international level. As exemplified by export tariffs that China applied on its own during 2006-08, the paper shows that defining the comparability of climate efforts can be to China’s advantage. Furthermore, given the fact that, in volume terms, energy-intensive manufacturing in China values 7-8 times that of India, and thus carbon tariffs impact much more on China than on India, the paper questions whether China should hold the same stance on this issue as India as it does now, although the two largest developing countries should continue to take the same positions on other key issues in international climate change negotiations.


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Tuesday, December 08, 2009

The copenhagen editorial

I was bored by Copenhagen before it even began. This blog especially has been talking about the problems and obstracles to a deal for what seems like years so it depressing to only now see these arguments in the mainstream.

For the record here is the big "editorial". I will not be posting endless "Copenhagen updates" due to the pain of having to do so.

Copenhagen climate change conference: 'Fourteen days to seal history's judgment on this generation' [Guardian]

Today 56 newspapers in 45 countries take the unprecedented step of speaking with one voice through a common editorial. We do so because humanity faces a profound emergency.

Unless we combine to take decisive action, climate change will ravage our planet, and with it our prosperity and security. The dangers have been becoming apparent for a generation. Now the facts have started to speak: 11 of the past 14 years have been the warmest on record, the Arctic ice-cap is melting and last year's inflamed oil and food prices provide a foretaste of future havoc. In scientific journals the question is no longer whether humans are to blame, but how little time we have got left to limit the damage. Yet so far the world's response has been feeble and half-hearted.
• How the Copenhagen global leader came about
• Write your own editorial
• The papers that carried the Copenhagen editorial
• In pictures: How newspapers around the world ran the editorial

Climate change has been caused over centuries, has consequences that will endure for all time and our prospects of taming it will be determined in the next 14 days. We call on the representatives of the 192 countries gathered in Copenhagen not to hesitate, not to fall into dispute, not to blame each other but to seize opportunity from the greatest modern failure of politics. This should not be a fight between the rich world and the poor world, or between east and west. Climate change affects everyone, and must be solved by everyone.

The science is complex but the facts are clear. The world needs to take steps to limit temperature rises to 2C, an aim that will require global emissions to peak and begin falling within the next 5-10 years. A bigger rise of 3-4C — the smallest increase we can prudently expect to follow inaction — would parch continents, turning farmland into desert. Half of all species could become extinct, untold millions of people would be displaced, whole nations drowned by the sea. The controversy over emails by British researchers that suggest they tried to suppress inconvenient data has muddied the waters but failed to dent the mass of evidence on which these predictions are based.

Few believe that Copenhagen can any longer produce a fully polished treaty; real progress towards one could only begin with the arrival of President Obama in the White House and the reversal of years of US obstructionism. Even now the world finds itself at the mercy of American domestic politics, for the president cannot fully commit to the action required until the US Congress has done so.

But the politicians in Copenhagen can and must agree the essential elements of a fair and effective deal and, crucially, a firm timetable for turning it into a treaty. Next June's UN climate meeting in Bonn should be their deadline. As one negotiator put it: "We can go into extra time but we can't afford a replay."

At the deal's heart must be a settlement between the rich world and the developing world covering how the burden of fighting climate change will be divided — and how we will share a newly precious resource: the trillion or so tonnes of carbon that we can emit before the mercury rises to dangerous levels.

Rich nations like to point to the arithmetic truth that there can be no solution until developing giants such as China take more radical steps than they have so far. But the rich world is responsible for most of the accumulated carbon in the atmosphere – three-quarters of all carbon dioxide emitted since 1850. It must now take a lead, and every developed country must commit to deep cuts which will reduce their emissions within a decade to very substantially less than their 1990 level.

Developing countries can point out they did not cause the bulk of the problem, and also that the poorest regions of the world will be hardest hit. But they will increasingly contribute to warming, and must thus pledge meaningful and quantifiable action of their own. Though both fell short of what some had hoped for, the recent commitments to emissions targets by the world's biggest polluters, the United States and China, were important steps in the right direction.

Social justice demands that the industrialised world digs deep into its pockets and pledges cash to help poorer countries adapt to climate change, and clean technologies to enable them to grow economically without growing their emissions. The architecture of a future treaty must also be pinned down – with rigorous multilateral monitoring, fair rewards for protecting forests, and the credible assessment of "exported emissions" so that the burden can eventually be more equitably shared between those who produce polluting products and those who consume them. And fairness requires that the burden placed on individual developed countries should take into account their ability to bear it; for instance newer EU members, often much poorer than "old Europe", must not suffer more than their richer partners.

The transformation will be costly, but many times less than the bill for bailing out global finance — and far less costly than the consequences of doing nothing.

Many of us, particularly in the developed world, will have to change our lifestyles. The era of flights that cost less than the taxi ride to the airport is drawing to a close. We will have to shop, eat and travel more intelligently. We will have to pay more for our energy, and use less of it.

But the shift to a low-carbon society holds out the prospect of more opportunity than sacrifice. Already some countries have recognized that embracing the transformation can bring growth, jobs and better quality lives. The flow of capital tells its own story: last year for the first time more was invested in renewable forms of energy than producing electricity from fossil fuels.

Kicking our carbon habit within a few short decades will require a feat of engineering and innovation to match anything in our history. But whereas putting a man on the moon or splitting the atom were born of conflict and competition, the coming carbon race must be driven by a collaborative effort to achieve collective salvation.

Overcoming climate change will take a triumph of optimism over pessimism, of vision over short-sightedness, of what Abraham Lincoln called "the better angels of our nature".

It is in that spirit that 56 newspapers from around the world have united behind this editorial. If we, with such different national and political perspectives, can agree on what must be done then surely our leaders can too.

The politicians in Copenhagen have the power to shape history's judgment on this generation: one that saw a challenge and rose to it, or one so stupid that we saw calamity coming but did nothing to avert it. We implore them to make the right choice.

This editorial will be published tomorrow by 56 newspapers around the world in 20 languages including Chinese, Arabic and Russian. The text was drafted by a Guardian team during more than a month of consultations with editors from more than 20 of the papers involved. Like the Guardian most of the newspapers have taken the unusual step of featuring the editorial on their front page.


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Sunday, December 06, 2009

Debunking climategate

A good YouTube video that debunks the waste of time that is "climategate".

The truth behind the headlines.



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