Thursday, August 19, 2010

But a commentary in the Beijing Daily last week said that an increased frequency of disasters meant that "climate change presents a real threat to China's natural ecological systems and economic and social development."

Here is the academic research follow-up to the previous post.  The modelling of low probability of extreme events is a useful exercise (as the recent financial crisis also proves).

Yu-Fu Chen
University of Dundee - Department of Economic Studies

Michael Funke
University of Hamburg - Department of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

July 29, 2010

CESifo Working Paper Series No. 3139

The possibility of low-probability extreme events has reignited the debate over the optimal intensity and timing of climate policy. In this paper we therefore contribute to the literature by assessing the implications of low-probability extreme events on environmental policy in a continuous-time real options model with “tail risk”. In a nutshell, our results indicate the importance of tail risk and call for foresighted pre-emptive climate policies.
Keywords: climate policy, extreme events, real options, Levy process
JEL Classifications: D81, Q54, Q58
Working Paper Series


Extreme Weather - no help to climate talks

The deadlock over who pays for mitigating against the ravages of climate change is no closer to a solution.

I keep meaning to post my own slides on this topic and will do one day.

The standard newspaper reporting correctly paints a pretty hopeless scenario despite heatwaves in Russia and floods in Pakistan.

Even if the Russian president and the leaders in Islamabad are blaming their current woes on climate change there will be the usual cry from climate change sceptics that it is all a coincidence right. These are just the usual fluctuations in the weather that could have happened with or without 100 years of man made pollution.

So is Russia (the third largest emitter) going to do anything - not likely.

At least China is opening its eyes to the very real possibility that environmental degradation and climate change could impact growth in the future.

"But a commentary in the Beijing Daily last week said that an increased frequency of disasters meant that "climate change presents a real threat to China's natural ecological systems and economic and social development.""

They are correct although China is fully aware of its responsibilities but it cannot act alone. Without US cooperation there will be no deal.

Extreme Weather Unlikely To Help Climate Talks [Planet Ark]
Extreme weather in 2010 will spur more strident calls for action to combat global warming but is unlikely to break a deadlock at U.N. climate talks about sharing the burden between rich and poor.

Islamabad, for instance, has blamed mankind's emissions of greenhouse gases for devastating floods that have killed up to 1,600 people. And Russian President Dmitry Medvedev similarly directly linked the summer heat wave on global warming.

But there is no sign so far that major emitters -- Moscow is the number three greenhouse gas emitter behind China and the United States -- are offering to do more to combat climate change to overcome gridlock at U.N. talks.

One delegate at the last U.N. talks, in Bonn in early August, said there was a "huge sense of inertia" despite worries about extreme weather and U.N. projections that 2010 would be the warmest year since records began in the 1850s.

And there are risks that extreme weather will add to rather than resolve tensions between rich nations, historically most to blame for global warming, and poor countries most vulnerable to floods, droughts and cyclones.

Climate change might even supplant decades-old debate about the legacy of colonial rule as a cause of friction between rich and poor nations.

"Global warming could turn into the post-colonial argument, which could destroy much of the negotiating possibilities," said Johan Rockstrom, head of the Stockholm Resilience Center at Stockholm University.


"Climate change is becoming a much more firm reality on the ground for many countries," said Saleemul Huq, a senior fellow at the International Institute for Environment and Development in London.

He said that would bring a greater sense of urgency at the next annual U.N. climate talks of environment ministers in Mexico, from November 29-December 10, after the Copenhagen summit last December agreed only a non-binding deal to slow climate change.

Rich and poor nations are already split about how to share out needed curbs on greenhouse gas emissions. Developing nations say the rich must make far deeper cuts while the rich want poor nations to do more to limit their growing emissions.

Experts doubt major breakthroughs at the Cancun talks, partly because the United States has not joined other developed nations in capping emissions.

Russia and Pakistan have squarely linked extreme weather to global warming -- going beyond the views of most climate scientists that climate change merely loads the dice in favor of extreme weather but cannot be linked to individual events.

Pakistan's Environment Minister Hameed Ullah Jan Afridi said global warming was the "main cause" of floods and noted that Pakistan emits just 0.4 percent of world greenhouse gases. Up to 1,600 people have been killed and two million made homeless in Pakistan's worst floods in decades.

Medvedev said of wildfires and Russia's drought on August 4: "Unfortunately, what is happening now in our central regions is evidence of this global climate change, because we have never in our history faced such weather conditions in the past."

"That's a very good sign for the Russian public, which still has a lot of doubts about climate change," said Alexei Kokorin of the WWF conservation group in Russia. He said many Russians doubted that global warming was caused by mankind.

Arild Moe, an expert on Russian climate policy at the Fridtjof Nansen Institute in Oslo, said Medvedev had sometimes failed to carry out hints of tougher policies in the past.

"Medvedev has said many correct things on many issues, from corruption to the role of NGOs, but they have not got embedded in a legal process," Moe said.

And Moscow's goal for greenhouse gas emissions in 2020 foresees a rise from current levels. Russia's emissions tumbled after the 1991 collapse of the Soviet Union and were still 33 percent below 1990 levels in 2008.

China, the top greenhouse gas emitter ahead of the United States, has not directly blamed climate change for floods and landslides that have killed more than 2,000 people.

But a commentary in the Beijing Daily last week said that an increased frequency of disasters meant that "climate change presents a real threat to China's natural ecological systems and economic and social development."

China's Xie Zhenhua, head of the powerful National Development and Reform Commission, called in January for an "open attitude" to climate science, saying some believed change was caused by "a cyclical element of the nature itself."


A lighter side to CO2


Friday, August 13, 2010


Is this the future of academic research? It would be good to see this working. As a poor academic I cannot afford a iPhone but I am sure many of you out there can.

I link the idea although I remain sceptical about how useful this data will be from an environmental economics context.

From the inbox:

At the happiness & environment workshop in Stirling in April I spoke briefly about an upcoming project called 'mappiness'. It's a free iPhone app that rather simply implements the Experience Sampling Method, including use of GPS (linked to environmental data using GIS at the analysis stage).

mappiness is now live, with its own website:

First, I'd be very grateful for any feedback on the website, the app, and/or the broader methodology.

Second, since recruitment to the study is entirely opportunistic, I'd be thrilled if you'd pass on the details to any individuals, mailing lists, blogs, etc. which you think might be interested.


Friday, August 06, 2010

Climate Change and the Spread of Tropcial disease: a fuss about nothing?

There is considerable debate about the impact of climate change on the spread of tropical diseases.

Tropical diseases are typically a list of infectious diseases found in developing countries and includes such hard to spell words as "malaria, schistosomisasis, dengue, trypanosomiasis, leprosy, cholera and leishmaniasis".

Insects usually carry the can for spreading these diseases.

What do these diseases have in common? Whilst the disease itself is happy to spread in any climate the insects tend to like hot countries.

So, the planet warms up, insects can live in hitherto uninhabitable regions and the next thing you know those of us in colder countries (such as the UK) are coming down with some pretty nasty diseases.

The WTO estimate the diseases above cause about 250 million "acute illness" cases and 880,000 deaths a year.

So this is something to worry about right? An increase in the global temperature of 3 degrees will spell economic and social catastrophe right?

Not according to a new paper by Gollin and Zimmerman. Using a heterogeneous agent dynamic general equilibrium model they show there is really not much to be worried about.

I have a feeling some readers remain skeptical. In which case I suggest you read this free to download paper and see for yourself. I like this paper and there is some truth in the conclusion that there will only be modest GDP effects and that improvements in disease prophylaxis will have significant welfare effects.

Meaning, as soon as these diseases start threatening rich people the West will go out and find a cure (throwing lots of R&D money at the problem) thus having large knock on benefits for those in developing countries.

Global Climate Change and the Resurgence of Tropical Disease: An Economic Approach

Douglas Gollin
Yale University

Christian Zimmermann
University of Connecticut; Institute for the Study of Labor (IZA)

July 15, 2010

CESifo Working Paper Series No. 3122

We study the impact of global climate change on the prevalence of tropical diseases using a heterogeneous agent dynamic general equilibrium model. In our framework, households can take actions (e.g., purchasing bednets or other goods) that provide partial protection from disease. However, these actions are costly and households face borrowing constraints. Parameterizing the model, we explore the impact of a worldwide temperature increase of 3°C. We find that the impact on disease prevalence and especially output should be modest and can be mitigated by improvements in protection efficacy.

Keywords: DSGE models, climate change, tropical diseases, incomplete markets

JEL Classifications: E13, E21, I10, O11, Q54
Working Paper Series


Climate Change and Trade Policy: From Mutual Destruction to Mutual Support

The relationship between trade, development and the environment is increasingly important and incidently the subject of a recent presentation that I did at the University of Nottingham (a future blog post will include the slides).

This paper was not part of my literature review but appears to cover some of the same issues.

The success of the GATT and WTO rounds have a number of lessons for future climate change negotiations.

Climate Change and Trade Policy: From Mutual Destruction to Mutual Support

Patrick A. Messerlin
Groupe d'Economie Mondiale at Sciences Po (GEM Paris)

World Bank Policy Research Working Paper No. 5378

Contrary to what is still often believed, the climate and trade communities have a lot in common: a common problem (a global "public good"), common foes (vested interests using protection for slowing down climate change policies), and common friends (firms delivering goods, services, and equipment that are both cleaner and cheaper). They have thus many reasons to buttress each other. The climate community would enormously benefit from adopting the principle of "national treatment," which would legitimize and discipline the use of carbon border tax adjustment and the principle of "most-favored nation," which would ban carbon tariffs. The main effect of this would be to fuel a dual world economy of clean countries trading between themselves and dirty countries trading between themselves at a great cost for climate change. And the trade community would enormously benefit from a climate community capable of designing instruments that would support the adjustment efforts to be made by carbon-intensive firms much better than instruments such as antidumping or safeguards, which have proved to be ineffective and perverse. That said, implementing these principles will be difficult. The paper focuses on two key problems. First, the way carbon border taxes are defined has a huge impact on the joint outcome from climate change, trade, and development perspectives. Second, the multilateral climate change regime could easily become too complex to be manageable. Focusing on carbon-intensive sectors and building "clusters" of production processes considered as having "like carbon-intensity" are the two main ways for keeping the regime manageable. Developing them in a multilateral framework would make them more transparent and unbiased.

Keywords: Climate Change Mitigation and Green House Gases, Climate Change Economics, Emerging Markets, Carbon Policy and Trading, Debt Markets


China to introduce an "environmental tax"

While the rest of the world sit around and endlessly debates how to control emissions China just gets on and does it. There is no doubt that China is aware of its environmental obligations.

Actual implementation and enforcement of this tax will be the subject of a future post I am sure. It will not be easy.

China May Launch Environmental Tax Trial: Report

Three Chinese ministries will soon submit a proposal for an environmental tax on a trial basis, the China Business News reported on Thursday.

The tax would be tested in four largely rural provinces, Hubei, Hunan, Jiangxi and Gansu, the newspaper said. The finance ministry, environmental protection ministry and tax administration were set to make the proposal to the State Council, or cabinet, it added.

An environmental tax, likely to be levied on emissions of carbon dioxide and discharges of polluted water, would form part of Beijing's drive to make its economic growth cleaner.

China has pledged to cut its carbon intensity -- the amount of CO2 produced per unit of GDP -- by 40-45 percent by 2020. Beijing has already taken steps to crack down on highly polluting industries and many expect it to get progressively tougher in the coming years.

In the past month, a toxic gold mine discharge in China's southeast and an oil spill in its northeast have underscored how much work the government has ahead of it.