Jobs vrs environment: Steel workers protest

It was only a matter of time before the jobs versus environment stories started appearing in the press. When jobs are at stake the environment tends to get beaten with a big stick and this recession will be no different.

The problem is that jobs = votes and job losses = lost votes and politicians are only too aware of this risk of being seen to sacrifice jobs on the alter of climate change. There is no point in arguing that "green jobs" will be created to take the place of the lost blue collar jobs. For one you can be certain it will not be the same people moving jobs so there will be losers and the losers in this case have loud voices.

We will see many more such articles in the weeks to come and I have fairly confident that such protests will have an effect. It will take strong politicians to push through green policies in the face of growing "jobs protests".

Whilst the economic impact of green policy induced jobs losses will be exceedingly small (and could be no existent) such arguments will have little impact in the press when protests and job losses make such good headlines.

European metal workers protest EU's climate policy [China view]

BRUSSELS, Dec. 2 (Xinhua) -- About 11,000 workers from the steel industry in European countries gathered on Tuesday in Brussels to protest the European Union's climate change policy which they fear might make them lose their jobs.

The European Parliament and the French Presidency of the European Union agreed Monday on details of future targets on emissions from cars, setting the target for 2020 at 95 g CO2 per kilometer.

"We don't want to lose our job," one protester said, adding that the new regulations will possibly kill the steel industry in Europe. Several protesters held a coffin to indicate that the European steel industry will die when EU's climate change plan is implemented.

Under the new regulations, from 2012 to 2018 manufacturers exceeding the carbon dioxide targets set by the regulation will have to pay fines 5 euros for the first gram of CO2, 15 euros for the second gram of CO2 and 95 euros from the fourth gram of CO2.

From 2019, car manufacturers will have to pay 95 euro for each gram exceeding the target.

The protesters, most of who come from the car industry giant Germany, marched around the European Parliament building and other EU institutions.

The protest was organized by the European Metalworkers' Federation (EMF). The federation criticized the EU's plan to cut CO2 emissions, saying it endangers production and jobs in the steel and non-ferrous metal sectors.

In a statement, the EMF said that European producers "are confronted with increasing international competition from producers who do not meet European norms."

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Free EU permits for all. Why?

The FT today reports on the EU rethink over pollution permit allocation. In an attempt to prevent a "loss of competitiveness" the rules on permit allocation are being tweaked.

The term "carbon leakage" is an interesting new way of thinking about what would previously have been called the "pollution haven effect".


EU rethink on pollution permits [FT]

European industry appears poised to reap a more generous share of free pollution allowances than first expected after persuading policymakers that proposed legislation would impose steep costs on manufacturers and threaten jobs.

Germany led an effort to ensure that manufacturers - including those in chemicals, glass, steel and cement - receive free allocations if they are forced to compete against companies from non-European Union countries that are not subject to new regulations, according to people familiar with the talks.

Protecting such companies against the threat of so-called carbon leakage, where jobs and production leave Europe for less regulated countries, has emerged as one of the thorniest challenges for negotiators trying to agree an ambitious EU climate package before a summit of EU leaders on December 11.

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EPA to relax pollution rules?

According to the theory, the more developed a country becomes, the tighter its environmental regulations. That is at least the premise behind the shape of the environmental Kuznets curve.

So why would the US, one of the world's most highly developed countries (or is it....), introduce legislation to weaken environmental regulations?

This also represents the Colarado Independent's first appearance on this blog. To compare the EPA with "humpty-dumpty" and "Alice in Wonderland" marks an impressive debut. The article needs to be read in full for these insults to be even vaguely understood.

EPA moves to ease pollution rules [Colarado Independent]

The Environmental Protection Agency seems on the brink of issuing a new regulation that would make it easier for power plants to operate longer hours — and emit more pollution.

Under the proposed rule, power plants would be able to measure their rate of emissions on an hourly basis instead of their annual total output. As long as the hourly emissions stay at or below the plant’s established maximum, the plant would be treated as if it were operating cleanly — even if its total annual emissions increased as plant managers stepped up output.

Under the current policy, power plants that seek to operate longer must install pollution-control equipment. The proposed rule, expected to be finalized in the next two weeks, would increase the life span of older power plants without owners having to install costly new pollution-control equipment.

The rule, though, may be in conflict with a 2007 Supreme Court case, Environmental Defense v. Duke Energy Corp. In a 9-0 ruling, the justices decided that the Clean Air Act required Duke Energy to install pollution-control equipment if its annual pollution output increased. The court made clear that power plants must measure their pollution based on annual output, not an hourly rate.

The proposed power-plant rule marks a final attempt by the Bush administration to radically revise the way environmental laws are applied, especially the Clean Air Act. Throughout his presidency, George W. Bush has sought to weaken the traditional regulatory authority of many federal agencies — like the Food and Drug Admin. and Consumer Product Safety Commission — to make them more friendly to business. This anti-regulatory stand has had perhaps its most sweeping effect on the EPA.

But the administration’s drive to weaken environment safeguards has gotten it into legal trouble. Since Bush took office in 2001, the EPA has issued 27 air-pollution regulations. Seventeen were either partly or entirely thrown out by the D.C. circuit court, which oversees cases involving federal regulation. One, the Duke Energy case, was reversed by the Supreme Court.

In many of the rulings, judges used caustic language in striking down the administration’s position. They lectured EPA officials on elementary legal principles, like the importance of carefully reading the language of a law. The agency has been compared to Humpty Dumpty and the Queen of Hearts in “Alice in Wonderland.”

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Monbiot: "Bush and his pollutocrats wreak havoc"

George Monbiot is always good for a quote and an excellent headline. The use of the term "pollutocrat" is enough to justify an appearance on this blog. This article is also suitably doom-laden suggesting that there is no way back from the path of ultimate destruction that we appear to be running along.

Monbiot always goes over the top and this article is not exception but it at least sets the extreme position from which we can work back from. The policies of both Obama and Brown seem ambitious and yet:

The trajectory both Barack Obama and Gordon Brown have proposed - an 80% cut by 2050 - means reducing emissions by an average of 2% a year. This programme, the figures in the Tyndall paper suggest, is likely to commit the world to at least four or five degrees of warming, which means the likely collapse of human civilisation across much of the planet. Is this acceptable?

So even if we manage to make Brown's cuts human civilisation will still collapse - hmmm.

There is however a serious point. The Bush midnight regulations need to be looked at carefully. Obama should still be able to reverse anything too controversial under existing legislation but Bush is clearly putting as much through as possible hoping that at least some of it will stick.

The planet is now so vandalised that only total energy renewal can save us [Guardian]

George Bush is behaving like a furious defaulter whose home is about to be repossessed. Smashing the porcelain, ripping the doors off their hinges, he is determined that there will be nothing worth owning by the time the bastards kick him out. His midnight regulations, opening America's wilderness to logging and mining, trashing pollution controls, tearing up conservation laws, will do almost as much damage in the last 60 days of his presidency as he achieved in the foregoing 3,000.

His backers - among them the nastiest pollutocrats in America - are calling in their favours. But this last binge of vandalism is also the Bush presidency reduced to its essentials. Destruction is not an accidental product of its ideology. Destruction is the ideology. Neoconservatism is power expressed by showing that you can reduce any part of the world to rubble.

If it is too late to prevent runaway climate change, the Bush team must carry much of the blame. His wilful trashing of the Middle Climate - the interlude of benign temperatures which allowed human civilisation to flourish - makes the mass murder he engineered in Iraq only the second of his crimes against humanity. Bush has waged his war on science with the same obtuse determination with which he has waged his war on terror.

Is it too late? To say so is to make it true. To suggest there is nothing that can be done is to ensure that nothing is done. But even a resolute optimist like me finds hope ever harder to summon. A new summary of the science published since last year's Intergovernmental Panel report suggests that - almost a century ahead of schedule - the critical climate processes might have begun.

Just a year ago the Intergovernmental Panel warned that the Arctic's "late-summer sea ice is projected to disappear almost completely towards the end of the 21st century ... in some models." But, as the new report by the Public Interest Research Centre (Pirc) shows, climate scientists are now predicting the end of late-summer sea ice within three to seven years. The trajectory of current melting plummets through the graphs like a meteorite falling to earth.

Forget the sodding polar bears: this is about all of us. As the ice disappears, the region becomes darker, which means that it absorbs more heat. A recent paper published in Geophysical Research Letters shows that the extra warming caused by disappearing sea ice penetrates 1,000 miles inland, covering almost the entire region of continuous permafrost. Arctic permafrost contains twice as much carbon as the entire global atmosphere. It remains safe for as long as the ground stays frozen. But the melting has begun. Methane gushers are now gassing out of some places with such force that they keep the water open in Arctic lakes through the winter.

The effects of melting permafrost are not incorporated in any global climate models. Runaway warming in the Arctic alone could flip the entire planet into a new climatic state. The Middle Climate could collapse faster and sooner than the grimmest forecasts proposed.

Barack Obama's speech to the US climate summit last week was an astonishing development. It shows that, in this respect at least, there really is a prospect of profound political change in America. But while he described a workable plan for dealing with the problem perceived by the Earth Summit of 1992, the measures he proposes are hopelessly out of date. The science has moved on. The events the Earth Summit and the Kyoto process were supposed to have prevented are already beginning. Thanks to the wrecking tactics of Bush the elder, Clinton (and Gore) and Bush the younger, steady, sensible programmes of the kind that Obama proposes are now irrelevant. As the Pirc report suggests, the years of sabotage and procrastination have left us with only one remaining shot: a crash programme of total energy replacement.

A paper by the Tyndall Centre for Climate Change Research shows that if we are to give ourselves a roughly even chance of preventing more than two degrees of warming, global emissions from energy must peak by 2015 and decline by between 6% and 8% per year from 2020 to 2040, leading to a complete decarbonisation of the global economy soon after 2050. Even this programme would work only if some optimistic assumptions about the response of the biosphere hold true. Delivering a high chance of preventing two degrees of warming would mean cutting global emissions by more than 8% a year.

Is this possible? Is this acceptable? The Tyndall paper points out that annual emission cuts greater than 1% have "been associated only with economic recession or upheaval". When the Soviet Union collapsed, emissions fell by some 5% a year. But you can answer these questions only by considering the alternatives. The trajectory both Barack Obama and Gordon Brown have proposed - an 80% cut by 2050 - means reducing emissions by an average of 2% a year. This programme, the figures in the Tyndall paper suggest, is likely to commit the world to at least four or five degrees of warming, which means the likely collapse of human civilisation across much of the planet. Is this acceptable?

The costs of a total energy replacement and conservation plan would be astronomical, the speed improbable. But the governments of the rich nations have already deployed a scheme like this for another purpose. A survey by the broadcasting network CNBC suggests that the US federal government has now spent $4.2 trillion in response to the financial crisis, more than the total spending on the second world war when adjusted for inflation. Do we want to be remembered as the generation that saved the banks and let the biosphere collapse?

This approach is challenged by the American thinker Sharon Astyk. In an interesting new essay, she points out that replacing the world's energy infrastructure involves "an enormous front-load of fossil fuels", which are required to manufacture wind turbines, electric cars, new grid connections, insulation and all the rest. This could push us past the climate tipping point. Instead, she proposes, we must ask people "to make short term, radical sacrifices", cutting our energy consumption by 50%, with little technological assistance, in five years.

There are two problems: the first is that all previous attempts show that relying on voluntary abstinence does not work. The second is that a 10% annual cut in energy consumption while the infrastructure remains mostly unchanged means a 10% annual cut in total consumption: a deeper depression than the modern world has ever experienced. No political system - even an absolute monarchy - could survive an economic collapse on this scale.

She is right about the risks of a technological green new deal, but these are risks we have to take. Astyk's proposals travel far into the realm of wishful thinking. Even the technological new deal I favour inhabits the distant margins of possibility.

Can we do it? Search me. Reviewing the new evidence, I have to admit that we might have left it too late. But there is another question I can answer more easily. Can we afford not to try? No, we can't.

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Summary of National and International Climate Change Frameworks

As a reminder to myself as much as anything, here is a current update of the greenhouse gases regulatory framework both nationally and internationally courtesy of planetark.

Greenhouse Gas Curbs, From US To China [PlanetArk]

INTERNATIONAL TARGETS

THE KYOTO PROTOCOL - Binds industrialised nations except the United States to cut emissions on average by at least 5 percent below 1990 levels by 2008-12.

GROUP OF EIGHT - Leading industrial nations agreed at a G8 summit in Japan in July to a "vision" of cutting world emissions of greenhouse gases by 50 percent by 2050.

GLOBAL - About 190 nations agreed last year to work out a new treaty by the end of 2009 to succeed Kyoto, comprising deeper emissions cuts by rich nations and action by poor countries to slow their rising emissions.

NATIONAL GOALS

UNITED STATES - President-elect Barack Obama favours cutting US emissions to 1990 levels by 2020 and by 80 percent below 1990 by 2050. US emissions were 14 percent above 1990 levels in 2006. Obama says clean energy investments of up to $150 billion over 10 years could create 5 million new jobs.

EUROPEAN UNION - EU leaders agreed in 2007 to cut emissions by 20 percent below 1990 levels by 2020, and by 30 percent if other nations make similar cuts. A Dec. 11-12 EU summit will try to agree details. EU leaders want rich countries to aim to reduce emissions by 60 to 80 percent by 2050 from 1990 levels.

CHINA - A 2006-10 plan aims to reduce energy consumption per unit of gross domestic product by 20 percent, curbing the rise of greenhouse gas emissions. Beijing also plans to quadruple gross domestic product between 2001 and 2020 while only doubling energy use. Beijing said this month it would spend an extra 4 trillion yuan (US$586 billion) to help boost demand, including investments in green sectors.

INDIA - New Delhi says priority must go to economic growth to end poverty while shifting to clean energies led by solar power. A climate plan in June set no greenhouse caps but said per capita emissions will never exceed those of rich nations.

JAPAN - Tokyo plans to cut greenhouse gas emissions by 60-80 percent below 2005 levels by 2050, implying a cut of about 14 percent by 2020 from 2005. That would put emissions about 4 percent below 1990 levels by 2020.

CANADA - The government's "Turning the Corner" plan seeks to cut emissions by 20 percent below 2006 levels by 2020 and envisages cuts of 60 to 70 percent below 2006 by 2050. Applied to the usual Kyoto 1990 benchmark, a 20 percent cut from 2006 would put emissions 2.7 percent below 1990 levels by 2020.

SOUTH KOREA - The government plans next year to set a 2020 target to curb rising emissions.

AUSTRALIA - The centre-left government aims to cut emissions by 60 percent below 2000 levels by 2050. It plans to announce a 2020 target in coming days.

SOUTH AFRICA - The government aims to brake rising emissions and has outlined a scenario with emissions rising until 2020-25, staying flat for up to a decade and then falling. It will set mandatory energy efficiency targets and a shift away from coal.

NORWAY - Aims to cut emissions by 30 percent from 1990 levels by 2020 and to make the nation "carbon neutral", meaning that any emissions in one sector would be offset elsewhere, by 2030.

COSTA RICA - Aims to cut its net greenhouse gas emissions to zero by 2021, the 200th anniversary of independence.

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Designing the Post-Kyoto Climate Regime

The stalemate between developed and developing nations on who should do what and when in the battle against climate change only ever had one answer. The rich nations would have to cut CO2 emissions first. Developing countries would never back down from the arguments that (1) poverty reduction is the priority and (2) the rich nations caused the problem in the first place.

There can be only one solution. At least now academics at Harvard and around the world agree. The Harvard plan makes sense because it is the only logical solution. I suspect the timing of the "plan" is to give a broad hint to the incoming president. The key as always is the US. Europe is already planning and cutting.

Two excellent environmental economists, Jo Aldy and Robert Stavins are leading the project.

First is the PlanetArk report and then I provide the executive summary. It is interesting to compare and contrast.

The interim report is worth reading in full and contains papers from leading environmental economists including a series of papers discussing alternative international policy architectures from authors such as Ellerman, Frankel, Karp, Jaffe and others. Of most interest in the paper by Ellerman:

"EU Emission Trading Scheme: A Prototype Global System?"

Perhaps worth reading.

Harvard Project Proposes Rich Nations Cut CO2 First [PlanetArk]

LONDON - Rich nations should make the first cuts in greenhouse gases while developing countries carry on business as usual for the time being, according to a plan set out on Monday by a Harvard University project.

This is one of four proposals by the American university's Belfer Centre for Science and International Affairs to negotiators who meet for UN climate talks next week in Poland.

The current climate pact, the Kyoto Protocol, expires in 2012 and governments are scrambling to agree a new treaty by the end of next year.

"The new agreement should be scientifically sound, economically rational and politically pragmatic," Professor Robert Stavins of the Harvard Project on International Climate Agreements said.

The Harvard report calls on rich nations to lead in cutting emissions, while developing countries can "maintain their business-as-usual emissions in the first decades, but over the longer term agree to binding targets that ultimately reduce emissions below business as usual."

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"The agreement should be cost-effective and consistent with the recommendations of the Intergovernmental Panel on Climate Change," Stavins said, referring to the Nobel Peace Prize-winning scientific body.

Observers hope a new pact will include the US, which did not ratify the original agreement, and commit developing nations like China and India to binding emissions targets.

"We need an agreement that can be ratified in the US Senate and provide increasingly meaningful roles for developing countries. We see those as essential ingredients," Stavins said.

Last week President-elect Barack Obama said the US would "engage vigorously" in climate change talks when he takes office next year.

Obama wants to reduce US carbon emissions to their 1990 levels by 2020 and cut them by an additional 80 percent by 2050.


FAIR DEAL

The Harvard report proposes introducing national carbon taxes, linking emissions trading schemes or pursuing a series of simpler, possibly bilateral agreements that separately address the different gases and their sources as the other ways to fight warming.

"Countries will only participate in an international agreement if they believe they received a fair deal," the initiative said in a statement.

But the line dividing rich and poor nations set out in Kyoto may need to be redrawn, as the global economic landscape has altered in the past 10 years.

"If you look at the non-Annex I countries, 50 of them have higher per-capita income than the poorest Annex I countries," Stavins told Reuters.

The report said other key components of a new deal should promote clean energy technology transfer between rich and poor nations, reform Kyoto's emissions trading schemes and combat deforestation, something the original treaty failed to address.

It emphasized that any new deal must be compatible with global trade policy to prevent potential trade wars.

"Global efforts to address climate change may be on a 'collision course' with the World Trade Organization, as nations that have agreed to put a price on carbon look for ways to keep their companies competitive globally," the report said.

Citing the WTO as an example, the report suggests an independent international institution be set up to survey and review the policies, actions and outcomes of participating countries' climate change policies.

The report combines the work of 28 research teams from around the world, including China, India, the US and Europe.

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SUMMARY

An Interim Progress Report for the 14th Conference of the Parties, Framework Convention on Climate Change, Poznan, Poland, December 2008

From the Executive Summary:

A way forward is needed for the post-2012 period to address the threat of global climate change. The Harvard Project on International Climate Agreements is an international, multi-year, multi-disciplinary effort to help identify the key design elements of a scientifically sound, economically rational, and politically pragmatic post-2012 international policy architecture. Leading thinkers from academia, private industry, government, and non-governmental organizations around the world have contributed and will continue to contribute to this effort. The foundation for the Project is a book published in September 2007 by Cambridge University Press, Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World (Aldy and Stavins 2007). From that starting point, the Harvard Project on International Climate Agreements aims to help forge a broad-based consensus on a potential successor to the Kyoto Protocol. The Project includes 28 research teams operating in Europe, the United States, China, India, Japan, and Australia.

The work of the Project is being carried out in three stages. The first stage featured meetings with key domestic and international policy constituencies to discuss considerations regarding potential successors to Kyoto. The second stage focused on policy analysis and economic modeling to develop a small set of promising policy frameworks and key design elements. In the third stage, Project researchers are exploring key design principles and alternative international policy architectures with domestic and international audiences, including the new administration and Congress in the United States. This interim report identifies some of the key principles, promising policy architectures, and guidelines for essential design elements that have begun to emerge, building upon lessons learned from the 28 research initiatives.

Learning from Kyoto

Among the strengths of the Kyoto Protocol is its inclusion of provisions for market-based approaches — the three so-called flexibility mechanisms. A second feature of the Protocol is that it provides freedom for nations to meet their national targets and commitments in any way they want. Third, the agreement has the appearance of fairness in that it focuses on the wealthiest countries and those most responsible for the current stock of greenhouse gases in the atmosphere, consistent with the principle — first enunciated in the Framework Convention on Climate Change — of common but differentiated responsibilities and respective capabilities. Fourth, the fact that the Protocol was signed by more than 180 countries and subsequently ratified by a sufficient number of Annex I countries to come into force may be taken as an indicator of its political viability.

The weaknesses of the Kyoto Protocol also provide valuable lessons. First, some of the largest emitters are not constrained by Kyoto. The Protocol has not been ratified by the United States, and it does not include emissions targets for some of the largest and most rapidly growing economies in the developing world. Second, a relatively small number of countries are asked to take action, which has resulted in concerns about emissions leakage and competitiveness. Third, the nature of the Protocol's emissions trading elements has caused concern. The provision in Article 17 for international emissions trading among nation-states is unlikely to be effective, if it is utilized at all. And the Clean Development Mechanism (CDM) is plagued by criticisms that it is crediting projects that would have happened anyway (commonly known as the problem of "additionality"). Fourth, the Kyoto Protocol — with its five year time horizon (2008 to 2012) — represents a relatively short-term approach for what is fundamentally a long-term problem. Finally, the agreement may not provide sufficient incentives for compliance....

Click HERE for a PDF.


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Emissions Trading in China

The Wall Street Journal looks at China's attempt at carbon management through a cap and trade system.

Question: what is the actual difference between cap-and-trade and the ETS (in Europe).

China Expands Markets for Emissions Trading [Wall street Journal]

BEIJING -- After years of small-scale experiments in using so-called emissions trading to reduce pollution, China is taking steps to set up a nationwide system.

In recent months, three cities -- Shanghai, Beijing and Tianjin -- have begun creating emissions exchanges modeled after a system pioneered in the U.S. to reduce emissions that caused acid rain.

Known as cap-and-trade, this system sets an overall limit, or cap, on how much an industry can pollute. Individual companies get permits, which can then be traded. A company that invests in cutting its emissions can, for instance, sell its credits to a company that operates less cleanly. Traders can speculate on the future value of the credits. When more production means more pollution, the permits gain value.

A similar approach is being used with the carbon markets in Europe, where national limits on greenhouse gases have been set and companies can trade credits that have been approved through the United Nations's Kyoto Protocol mechanism.

Sale now on: UK carbon permits going cheap

What is the correct policy for reducing global carbon emissions? Is it taxation, quotas, cap-and-trade, permits? If permits then how are they allocated?

The UK has now started to sell off carbon permits via an auction. This also has the benefit of raising much needed revenues.

British Carbon Sale To Swell Government Revenues [PlanetArk]

LONDON - The British government will take hefty revenues from its first carbon emissions permit auction on Wednesday rather than earmark the money for consumers or the climate it aims to protect, analysts and lobby groups said.

The UK's Department of Energy and Climate Change (DECC) will auction 4 million permits out of a total 84 million from the second phase of the European Union's Emissions Trading Scheme (EU ETS), which runs from 2008-12.

It plans to auction a further 25 million of the credits, called EU Allowances (EUAs), next year.

Wednesday's sale, which could set a model for more in the coming months, will raise around 67 million euros ($84.58 million) for government coffers, based on Tuesday's EUA price of 16.8 euros per tonne.

Also commented on in:

UK Sells Carbon Emissions Permits In First Auction [PlanetArk]

LONDON - The British government sold 4 million permits in the country's first auction of European Union carbon emissions allowances but held that revenues would not necessarily be used to fight climate change.

The permits, called EU Allowances (EUAs), were sold on Wednesday to industry at 16.15 euros a tonne, raising 64.6 million euros ($81.55 million) for the British Treasury.

Under the EU's Emissions Trading Scheme, companies receive a set quota of permits to emit greenhouse gases which they can trade with other participants, thus putting a price on polluting.

This is the first EUA auction in the scheme's second phase, which runs from 2008-2012, and was open to participants globally.

"Today's first Phase 2 auction demonstrates continued UK leadership in reducing carbon emissions as part of the fight against dangerous climate change," the UK's Energy and Climate Change Minister of State Mike O'Brien said in a statement.

Britain's Department of Energy and Climate Change plans to auction a further 25 million EUAs next year.

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Lomborg: "The green pseudo-revolution"

Bjorn Lomborg the Danish statistican with a habit of upsetting environmentalists has written a Guardian opinion piece.

This article links to a number of previous posts I have made on the topic of "green jobs". Academic articles are also beginning to emerge. I think it is safe to say that green jobs are unlikely to compensate for jobs lost if "heavy industry" becomes uncompetitive although their may be a "first mover advantage" for certain countries in certain sectors.

Whilst I have some sympathy for Lomborg's argument I believe he is over simplifying the issue and missing a number of important elements of the story.

The green pseudo-revolution
"Whatever the enviro-lobbyists say, subsidising inefficient green industries is not the way to tackle climate change"

Many green pundits have, however, started saying that the financial crisis only makes the need for action on climate change greater. They urge America's president-elect Barack Obama to pursue a "green revolution" with big investments in renewable energy, arguing that this could create millions of new "green collar" jobs and open huge new markets. Such sentiments, no surprise, are strongly voiced by business leaders who live off such subsidies. But are such pleas smart investments for society?

The problem with the green revolution argument is that it doesn't trouble itself about efficiency. It is most often lauded for supplying new jobs. But billions of dollars in tax subsidies would create plenty of new jobs in almost any sector: the point is that many less capital-intensive sectors would create many more jobs for a given investment of taxpayers' money.

Similarly, green initiatives will open new markets only if other nations subsidise inefficient technologies bought abroad. Thus, the real game becomes which nations get to suck up other nations' tax-financed subsidies. Apart from the resulting global inefficiency, this also creates a whole new raft of industry players that will keep pushing inefficient legislation, simply because it fills their coffers.

Illegal fishing and stock depletion

In my recent lecture on the economics of fisheries I touched on the problem of enforcement of regulations and the prevalence of illegal fishing. Today, Brussels issued a statement regarding the extent of illegal fishing.

Any regulation has to be simple and easy to enforce. Two characteristics conspicuous by their absence in the current regulatory framework.

EU Proposes Penalties To Combat Illegal Fishing [PlanetArk]

BRUSSELS - Europe's fisheries chief proposed toughening EU rules on Friday to crack down on illegal fishing, largely blamed for depleting fish stocks, by using a penalty point system similar to that for driving offences.

European Union Fisheries Commissioner Joe Borg, who has often complained that existing controls are inadequate, proposed tightening up controls on inspections, monitoring and traceability requirements for the fishing industry.

Many species of fish in European waters, especially cod, haddock and hake, been severely depleted by years of overfishing and some are at risk of disappearing entirely.

Under the new points system, if a certain number of offences are racked up over three years -- for example, if trawlers use small-mesh nets to trap extra fish, or fish in closed seasons -- holders of fishing permits would lose their right to fish in EU waters, after suspension periods of six and then 12 months.

"Control and enforcement should be the cornerstone of the Common Fisheries Policy. Instead, it is our Achilles' heel," Borg told a news conference, adding that a 'collective failure' to implement the rules made a mockery of EU fishing controls.

The current system, dating back to 1993 and amended more than a dozen times, was inefficient, expensive and too complex, he said -- and it was now time to ensure that 'those who break the rules do not reap the profits of their illegal actions'.

Despite spending 400 million euros ($500 million) a year on fishing controls, the EU still has unreliable data on fish catches, the EU Commission says.

EU fisheries ministers will have to agree to the new measures before they can enter into force.

The points system would apply to the fishing vessel, and to the crew's master and officers. Offences would be collated in a points register in the ship's home country.

The new rules would apply to EU vessels even if they fish outside European waters. They would also cover non-EU vessels within the European Union. However, any existing bilateral arrangements would take precedence.

Borg also proposed making it compulsory for EU countries to inspect fish landings, processing, transport and marketing, as well as to monitor criteria such as a vessel's fishing capacity and its engine power.

If a country breaks the rules, its EU subsidies could be cut or suspended, annual catch quotas reduced and even fishing forbidden in its waters, Borg said.

Under Borg's proposal, EU inspectors could check vessels outside their national waters, and officials from one country could inspect the ships of another. Under current rules, each country may only inspect its own fishing fleet.

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Economics of Fisheries

With perfect timing, Earth Portal have published an article on the economics of fisheries. A topic we are now covering in Econ211 this week.

Economics of fisheries [Earth Portal]

Fishing in open seas is a typical illustration of a situation where the tragedy of the commons is likely to occur. All the conditions described by Hardin are met in this case: an unrestricted number of users, unfettered by any limits on their access, extract an increasing share of a resource until natural resources are severely depleted, sometimes to the point of no return. Fishers tend to have little incentive to practice conservation, for they know that if they do not catch the available fish, someone else probably will. Without limits in place, fishers try to catch as many fish as they possibly can.

The following graph from the article above shows clearly how catch size has shrunk as fleet size has grown. A greater tragedy of the commons is not hard to imagine unless a solution can be found.



The rest of the article goes on to describe the problem and various proposed solutions.

Citation
Harris, Jonathan and Anne-Marie Codur (Lead Authors); Global Development and Environment Institute (Content Partner); Tom Tietenberg (Topic Editor). 2008. "Economics of fisheries." In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). [First published in the Encyclopedia of Earth October 23, 2006; Last revised November 7, 2008; Retrieved November 9, 2008].

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European Trading Scheme - carbon crash!

As my students begin their ETS essay the more astute of them will bring their essays bang up to date with a mention of the current price of carbon. Those students reading this blog can consider themselves "astute" by proxy.

Note that now the whole premise behind the ETS is being questioned. In the essay I ask whether it has been a success. This article hints at part of the answer.

Carbon crash hits Europe's emission trading scheme [theautralian]

WHILE you were distracted by crashing banks and clashing US senators, you may have missed a small environmental earthquake.

The price of carbon has collapsed.

In only three months, life has become a lot cheaper for polluters. The financial cost of warming the planet has plummeted in Europe's emissions trading system (ETS) and the effectiveness of such a volatile market mechanism in curbing carbon is being questioned.

You may recall that the ETS is a mechanism to encourage businesses to reduce their carbon output. Europe's larger companies are allocated permits to emit CO2, and these allowances, called EUAs, can be traded on exchanges.

Companies that emit less CO2 than their allocation can sell EUAs for cash, but inefficient polluters must buy EUAs or face financial penalties.

The idea is that a shortfall in EUAs allocated by governments will cause the carbon price to rise, stimulating investment in carbon reduction.

It's a market solution to pollution, but this carbon market is showing a distressing tendency to behave like most financial markets -- hysterically. In July, the right to spew out one tonne of CO2 from a chimney would have cost a power generator E29.33, but yesterday it could be bought for only E18.25 ($34.14).

The sudden collapse of the carbon price mirrors the rout in the wider commodity markets. Carbon peaked in July, its price summit occurring within 10 days of the peak in the crude oil price.

Since then, everything from steel to potash has been tumbling and you might think it unsurprising that carbon has tracked the general retreat. Hedge funds and other financial investors dabbled in EUAs as they fiddled with palm oil and soya.

The rush to convert hedge fund investments into cash and US Treasury bills has resulted in rapid closure of positions on various carbon exchanges.

Obviously, the credit crunch has little to do with underlying demand for EUAs in a market artificially created by regulators in Brussels. However, economic downturn and recession will affect the carbon market.

Less industrial and transport activity implies fewer emissions, so the shortfall between actual emissions and allowances will shrink, reducing demand for EUAs, thereby causing the carbon price to fall.

Some analysts reckon the carbon price has fallen far enough, even allowing for a recession. IDEAcarbon, a rating agency, has halved its estimate of the allocation shortfall from 206 million tonnes of carbon to 98 million tonnes in 2008 and 83 million tonnes in 2009.

The point is that there will still be a shortfall. Societe Generale reckons EUAs will find a floor at E15 per tonne before rebounding next year into the low E20s per tonne.

Maybe so, but the ETS is making a mockery of Europe's stumbling attempts to lead the world with a market-based carbon strategy. It is causing irritation and frustration to the armies of advisers and investors who seek to cajole utilities into big investments in carbon reduction.

James Cameron, the director of Climate Change Capital, a financial adviser and fund manager, said: "The whole purpose of the ETS is to take carbon out. It's not there to benefit funds or to support trading."

It's those "speculators" again -- the ones that pushed the oil price up the hill to $US147 a barrel and then let it roll back to $US60.

It is a terrible irony that one aim of creating a carbon market was to provide a measure of certainty to the energy industry in estimating the future price of carbon for the purpose of planning investments in new power generators.

Estimates of the price at which carbon capture and storage technology might be economically viable vary between E40 and E60 a tonne. Suffice it to say we are nowhere near these levels.

More political action is needed, Cameron says, with smaller carbon allocations by governments to industry, which would entail a much bigger shortfall in EUAs and a much higher carbon price.

It is a moot point, however, whether there is political appetite in Europe for such a burden. The European Commission is already struggling to create a coalition of the willing to do battle with carbon emissions, and Italian Prime Minister Silvio Berlusconi has made clear his preference for a gentle regime.

It's a measure of the speed at which politics moves in response to market prices that the green agenda has almost vanished from media political chatter.

Carbon's falling price spells companies going bust, the loss of jobs and the shredding of political reputations. Over the next year, no politician with re-election hopes will back a policy that would triple the price of carbon for industry and raise consumers' energy costs. There is a wider question about the ETS that must be addressed, and that is whether it is a sensible mechanism to regulate carbon.

Price volatility, whether in oil, gas or coal, is a huge burden for the energy industry. Violent movements in price cause financial damage and promote short-termism -- the sort of thinking that is anathema to the climate change lobby.

If there is to be any prospect of a serious cut in carbon, there must be stability in carbon pricing. Although a financial market gives useful price signals, it cannot provide stability.

Only a stable regulatory regime can provide certainty, but that means carbon taxes and a policy leap that no one is yet willing to make.

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Pollution Haven Hypothesis: spatial aspects

Research into the existence or otherwise of a "pollution haven" effect continues to develop. This is due in part to the lack of conclusive evidence for or against such an effect.

Whilst the pollution haven hypothesis is intuitively attractive it is also fairly obvious (intuitively) why little evidence would be expected. This is how we argued the case in our 2003 JEEM paper which I still think some PHH papers are missing.

This paper argues that pollution intensive sectors may be subject to opposing sources of comparative advantage if we consider comparative advantage to be a function of a country’s endowment of capital, labor and pollution (the environment). On the one hand, the pure environmental regulation effect (ERE) would see the composition effect determined by the relative stringency of environmental regulations. The ERE implies that a country with a lower than average level of environmental regulations will have a comparative advantage in pollution intensive production. Since there is a high correlation between a country’s per capita income level and the stringency of its environmental regulations (see Dasgupta et al. 1995), the pure ERE implies that developing countries or regions (the South) will become pollution havens, whilst the developed world (the North) will specialize in clean production. In contrast, the pure capital-labor effect (KLE) would see the composition effect determined by relative capital and labor endowments. That the North is more capital-abundant than the South is well documented. What is less well understood is that there is also a high correlation between a sector’s capital intensity and its pollution intensity. Therefore, in the presence of trade liberalization, the KLE would result in the North increasing its specialization in capital intensive, and therefore pollution intensive, production whilst the South would specialize in relatively cleaner, labor-intensive production. This is the opposite effect to that stemming from the ERE.

It is good news that further methodological developments are taking place and I think the spatial aspects of this problem have been overlooked until recently. Here are two such papers:

The Pollution Haven Hypothesis: A Geographic Economy Model in a Comparative Study

Sonia Ben Kheder
Université Paris I Panthéon-Sorbonne
Natalia Zugravu
Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne

September 11, 2008

FEEM Working Paper No. 73.2008

Abstract:
Although based on theoretical foundations, the pollution haven hypothesis has never been clearly proven empirically. In this study, we re-examine this hypothesis by a fresh take on both its theoretical and empirical aspects. While applying a geographic economy model on French firm-level data, we confirm the hypothesis for the global sample. Through sensitivity analysis, we validate it for Central and Eastern European countries, emerging and high-income OECD countries, but not for the major part of the Commonwealth of Independent States countries. Finally, we show that the pollution haven hypothesis is confirmed in the strongest manner for emerging economies.

Keywords: FDI, Environmental Regulation, Economic Geography, Pollution Haven Hypothesis

JEL Classifications: F12, F18, Q28
Working Paper Series

and

Does Lax Environmental Regulation Attract FDI when accounting for "third-country" effects?[PDF]

Kukenova, Madina and Monteiro, Jose-Antonio (2008): Does Lax Environmental Regulation Attract FDI when accounting for "third-country" effects? Unpublished.

603Kb
Abstract

This paper investigates if differences in environmental regulations can influence FDI flows in a multi-country setting taking into account the so-called "third-country" effects. We examine bilateral FDI flows using a new extended OECD investment database which covers great number of host countries and a long sample period (1981-2005). The findings based on a spatial gravity-like model are largely plausible across specifications and confirm the existence of a negative relationship between FDI and environmental stringency, once we correct for endogeneity and spatial dependence. The evidence of a positive "third-country" effect for FDI suggests the prevalence of complex FDI from developed to developing countries. The spatial structure of the model allows also to underline the possible existence of competition in environmental standards between countries to attract FDI.


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Contests to allocate pollution rights

My Econ211 students are currently writing an essay on the European emissions trading scheme.

The allocation of pollution rights is controversial. This paper by Nick Hanley and others makes suggests an interesting new mechanism.

Using contests to allocate pollution rights

Using contests to allocate pollution rights
Author(s):
MacKenzie, Ian A
Hanley, Nick
Kornienko, Tatiana

Contact Email: imackenzie@ethz.ch

Citation: Stirling Economics Discussion Paper 2008-21

Keywords: Rank-order contests, pollution permits, initial allocation
JEL Code(s): D44 Q25
Issue Date: Oct-2008

Series/Report no.: Stirling Economics Discussion Paper 2008-21

Abstract: In this paper we advocate a new initial allocation mechanism for a tradable pollution permit market. We outline a Permit Allocation Contest (PAC) that distributes permits to firms based on their rank relative to other firms. This ranking is achieved by ordering firms based on an observable 'external action' where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradeable permit market. We argue that this mechanism has a number of benefits over auctioning and grandfathering. Using this mechanism efficiently distributes permits, allows for the attainment of a sec- ondary policy objective and has the potential to be more politically appealing than existing alternatives.

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China tells Western citizens to change their lifestyles

Having just returned from a week long visit to China (of which more later) it is fitting to mark my return with a China-centric post.

The premise of this press release is that rich nations should change their lifestyles to help fight climate change. This statement is fine by itself but there is a problem here.

After visiting China for a week it is clear that Chinese citizens are attempting to replicate the Western lifestyle as quickly as possible. The capitalist ethos in China is very strong and the learning curve is very steep. The view from the top of the Oriental Peal in Shanghai for example is a sea of neon lights to rival any in the world.

Conspicuous consumption is also rising rapidly. I have never seen "jewelry and gold shops" doing so much business in any Western city.

So whilst it is fine to ask western consumers to change their lifestyles this type of lifestyle emulation has to some how be seen as less attractive.

There is also no getting away from the large and growing income inequality in China. This is something that needs to be looked at carefully by researchers as I think the implications are potentially serious. There are some seemingly strange anomalies in the pricing of goods in China relative to wages that I find fascinating.

China Tells Rich Polluting Nations To Change Lifestyle [PlanetArk]

BEIJING - Chinese Premier Wen Jiabao said rich nations must abandon their "unsustainable lifestyle" to fight climate change and expand help to poor nations bearing the brunt of worsening droughts and rising sea levels.

Wen told the opening of a conference on Friday the financial crisis was no reason for rich nations to delay fighting global warming.

"As the global financial crisis spreads and worsens, and the world economy slows down apparently, the international community must not waver in its determination to tackle climate change," Xinhua news agency quoted him as saying.

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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.

TINCI HOLDINGS LTD
TRADING STATEMENT [ADVFN]

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."

------------------------------------------------------------------------- -----------
ABOUT TINCI HOLDINGS LTD
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.

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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.

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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.

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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.

PAPER 1

"Uncertainty, Climate Change and the Global Economy"

NBER Working Paper No. W14426

DAVID VON BELOW, Stockholm University - Institute for International Economic Studies (IIES)
Email: belowd@iies.su.se
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: torsten.persson@iies.su.se

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.


PAPER 2

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

NBER Working Paper No. W14431

YAN DONG, Chinese Academy of Social Sciences (CASS)Email: dongyan@cass.org.cn
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: jwhalley@uwo.ca

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.


PAPER 3

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

NBER Working Paper No. W14432

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

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.


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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!

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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: a.longo@qub.ac.uk

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 - www.qub.ac.uk/jobs 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 personnel@qub.ac.uk

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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 info@tradewatch.org.au

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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

15/4/2008

Abstract:
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.

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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.

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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.

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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 redd@feem.it 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:

http://www.feem.it/Feem/Pub/Conferences/CON2008-11-18.htm


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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.


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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?

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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.

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