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).

Global Warming and Extreme Events: Rethinking the Timing and Intensity of Environmental Policy

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

Abstract:     
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

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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.

MORE REAL

"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."

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A lighter side to CO2

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"Mappiness"

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: http://www.mappiness.org.uk/

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.

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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

Abstract:
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

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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

Abstract:

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

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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.

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Economics in everything: "School Shootings and Student Performance"

Occasionally an economics paper is written that transcends the limited remit of "globalisation and the environment". This paper appears to say alot about the thinking of economists - I make no further comment.

I can imagine many members of the general public up in arms shouting "how could they" and other similar phrases.

The results seem reasonable though. In a seminar I would be tempted to ask for the "policy implications" of these results. Given the relatively infrequent number of school shootings, knowing the impact on exam results may not be considered of the utmost importance.

Why would young men be affected more than young women?

"School Shootings and Student Performance"

CESifo Working Paper Series No. 3114
PANU POUTVAARA, University of Helsinki - Department of Economics, Helsinki Center of Economic Research (HECER), CESifo (Center for Economic Studies and Ifo Institute for Economic Research), Institute for the Study of Labor (IZA)

OLLI TAPANI ROPPONEN, University of Helsinki - Department of Economics

In this paper, we study how high school students reacted to the shocking news of a school shooting. The shooting coincided with national high-school matriculation exams. As there were exams both before and after the shooting, we can use a difference-in-differences analysis to uncover how the school shooting affected the test scores compared to previous years. We find that the average performance of young men declined due to the school shooting, whereas we do not observe a similar pattern for women.

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"The undeniables": Top Ten Climate Change Indicators

Top ten lists are always good for a "google hit or two" so here is a new one from the Bulletin of the American Meteorological Society who sound like they should know what they are talking about.

Ten Key Indicators Show Global Warming "Undeniable"[PlanetArk]

Melting glaciers, more humid air and eight other key indicators show that global warming is undeniable, scientists said on Wednesday, citing a new comprehensive review of the last decade of climate data.

Without addressing why this is happening, the researchers said there was no doubt that every decade on Earth since the 1980s has been hotter than the previous one, and that the planet has been warming for the last half-century.

This confirms the findings of the U.N. Intergovernmental Panel on Climate Change, which reported in 2007 with 90 percent certainty that climate change is occurring. The IPCC also said that human activities contribute to this phenomenon.

The new report was released after U.S. Senate Democrats delayed any possible legislation to curb climate change until September at the earliest. Prospects for U.S. climate change legislation this year are considered slim.

Released by the U.S. National Oceanic and Atmospheric Administration as "The 2009 State of the Climate Report," the new report draws on the work of 303 scientists from 48 countries, including data from last year.

The 10 key planet-wide indicators of a warming climate identified by the report are:

1. Higher temperatures over land

2. Higher temperatures over oceans

3. Higher ocean heat content

4. Higher near-surface air temperatures (temperatures in the troposphere, where Earth's weather occurs)

5. Higher humidity

6. Higher sea surface temperatures

7. Higher sea levels

8. Less sea ice

9. Less snow cover

10. Shrinking glaciers

The seven indicators expected to rise in a warming world rose over the last decade, the report said; the three indicators expected to decline did so over that same period.

With an almost daily flood of data on climate change, Peter Thorne of the Cooperative Institute for Climate and Satellites in Asheville, North Carolina, saw the need for a comprehensive look at the information to pick the most obvious signs of planetary warming.

"These are indicators from the top of the atmosphere to the bottom of the ocean that we would expect to be changing in a warming world," Thorne said at a telephone briefing for reporters.

"Each indicator is changing as we would expect if the world truly were warming," he said. "Not a single analysis disagrees that the global climate is changing. The bottom line conclusion that the world's been warming is simply undeniable."

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The demise of the Phytoplankton - the beginning of the end?

The Independent are renowned for their environmental front pages. Today they report on the recent Nature paper that shows that phytoplankton levels are down 40% and that this will ultimately lead to the collapse of fish stocks and eventually life on earth as we know it.

The dead sea: Global warming blamed for 40 per cent decline in the ocean's phytoplankton [Independent]

The microscopic plants that support all life in the oceans are dying off at a dramatic rate, according to a study that has documented for the first time a disturbing and unprecedented change at the base of the marine food web.

Scientists have discovered that the phytoplankton of the oceans has declined by about 40 per cent over the past century, with much of the loss occurring since the 1950s. They believe the change is linked with rising sea temperatures and global warming.

If the findings are confirmed by further studies it will represent the single biggest change to the global biosphere in modern times, even bigger than the destruction of the tropical rainforests and coral reefs, the scientists said yesterday.

Phytoplankton are microscopic marine organisms capable of photosynthesis, just like terrestrial plants. They float in the upper layers of the oceans, provide much of the oxygen we breathe and account for about half of the total organic matter on Earth. A 40 per cent decline would represent a massive change to the global biosphere.

"If this holds up, something really serious is underway and has been underway for decades. I've been trying to think of a biological change that's bigger than this and I can't think of one," said marine biologist Boris Worm of Canada's Dalhousie University in Halifax, Nova Scotia. He said: "If real, it means that the marine ecosystem today looks very different to what it was a few decades ago and a lot of this change is happening way out in the open, blue ocean where we cannot see it. I'm concerned about this finding."

The researchers studied phytoplankton records going back to 1899 when the measure of how much of the green chlorophyll pigment of phytoplankton was present in the upper ocean was monitored regularly. The scientists analysed about half a million measurements taken over the past century in 10 ocean regions, as well as measurements recorded by satellite.

They found that phytoplankton had declined significantly in all but two of the ocean regions at an average global rate of about 1 per cent per year, most of which since the mid 20th Century. They found that this decline correlated with a corresponding rise in sea-surface temperatures – although they cannot prove that warmer oceans caused the decline.

The study, published in the journal Nature, is the first analysis of its kind and deliberately used data gathered over such a long period of time to eliminate the sort of natural fluctuations in phytoplankton that are known to occur from one decade to the next due to normal oscillations in ocean temperatures, Dr Worm said. "Phytoplankton are a critical part of our planetary life support system. They produce half of the oxygen we breathe, draw down surface CO2 and ultimately support all of our fishes." he said.

But some scientists have warned that the Dalhousie University study may not present a realistic picture of the true state of marine plantlife given that phytoplankton is subject to wide, natural fluctuations.

"Its an important observation and it's consistent with other observations, but the overall trend can be overinterpreted because of the masking effect of natural variations," said Manuel Barange of the Plymouth Marine Laboratory and a phytoplankton expert.

However, the Dalhousie scientists behind the three-year study said they have taken the natural oscillations of ocean temperatures into account and the overall conclusion of a 40 per cent decline in phytoplankton over the past century still holds true.

"Phytoplankton are the basis of life in the oceans and are essential in maintaining the health of the oceans so we should be concerned about its decline.

"It's a very robust finding and we're very confident of it," said Daniel Boyce, the lead author of the study.

"Phytoplankton is the fuel on which marine ecosystems run. A decline of phytoplankton affects everything up the food chain, including humans," Dr Boyce said.

Phytoplankton is affected by the amount of nutrients the well up from the bottom of the oceans. In the North Atlantic phytoplankton "blooms" naturally in spring and autumn when ocean storms bring nutrients to the surface.

One effect of rising sea temperatures has been to make the water column of some regions nearer the equator more stratified, with warmer water sitting on colder layers of water, making it more difficult for nutrients to reach the phytoplankton at the sea surface.

Warmer seas in tropical regions are also known to have a direct effect on limiting the growth of phytoplankton.

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Floods and explosive chemicals in China

If floods were not bad enough (the current flood related death toll in China this year is around 1,000 and counting) the leaking of 1,000 barrels containing explosive chemicals into a major river is rather unfortunate.

It is reassuring that officials are testing the water quality which would strike me as a wise precaution.

China Floods Wash Explosive Chemicals Into River

Flooding in northeastern China has washed more than 1,000 barrels containing explosive chemicals into a major river, state media said on Wednesday, as the death toll from flooding nationally this year neared 1,000.

The incident happened along the flood-swollen Songhua River in Jilin city in Jilin province in the late morning, the official Xinhua news agency said.

Residents contacted by telephone said water supplies had been cut off for a time in parts of the city, but were starting to return to normal.

The containers, from a chemical plant, held more than 160,000 kg (352,700 lb) of explosive chemical fluids, Xinhua said, citing local officials.

"Emergency workers have been trying to recover the containers and local environmental protection authorities were closely monitoring the water quality of the river," the report said.

China periodically faces spills into rivers that result in water supplies being cut off, most seriously in 2005 when an explosion at an industrial plant sent toxic chemicals streaming into the Songhua River further upstream, in Harbin.

The incident forced the shut-down of water supplies to nearly 4 million people.

Rains so far this year across large swathes of central and southern China have killed 928 people and left 477 missing, causing around 176.5 billion yuan ($26.04 billion) in damage, Xinhua said.

A total of 875,000 homes have collapsed, 9.61 million people have been evacuated and 8.76 million hectares of crops ruined, it added.

Northeastern China has also been lashed by torrential rains over the past few days.

"Rat in the kitchen - unleash the foxes of war" - fur farm externalities

It is always good to read of a positive environmental externality related to an otherwise distasteful activity.

To quench the demand of rich people for real fox fur coats China has a number of silver fox farms. Instead of living a rather dull life before being murdered for their fur to drape over the shoulders of the elites the foxes have been sold on to actually do something useful - catching rats.

It is interesting to learn that close rat catching substitutes for foxes are chickens and ducks. The ducks I know do not strike me as the most efficient rat killers but perhaps these are especially trained ducks.

This story reminds me of the old woman and the fly. I fully expect to read in a year or so that China has unleashed a load of farmed tigers to kill off the plague of silver foxes.

China Trains Fur Farm Foxes To Combat Rat Plague

Authorities in China's far west have bred and trained "an army" of silver foxes bought from a fur farm to fight a plague of rats threatening a huge expanse of grasslands, state media said on Wednesday.

The Xinjiang government bought 20 foxes in 2004 and they have since increased to 284 and been released into the wild, the official Xinhua news agency said.

"Foxes are excellent natural predators of the rodent. One fox can catch about 20 rats per day. There has been a decline in the rat population in several counties where the measure has been adopted," it quoted official Ni Yifei as saying.

Rat numbers have exploded due to unusually dry conditions and threaten more than 5.5 million hectares of grasslands, the report said.

In one of the areas where the foxes have been released, rat numbers have dropped 70 percent, it added.

"The silver fox was chosen to be the rat fighter for its distinctive ability to run, hunt and live under the harsh living conditions on the prairie," Ni said.

Silver foxes are more normally bred in Xinjiang for their rich fur, used to make clothing.

Other parts of Xinjiang are using wolves, eagles and even chickens and ducks to control rat numbers, Xinhua said.

"It is a green way to tackle the rat problem," added another official, Lin Jun.

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"Resource Rents; When to Spend and How to Save"

Professor Tony Venables (Oxford) is a world renowned trade economist with previous papers and books that are scattered liberally throughout my PhD and trade papers. He led the "new economic geography" revolution alongside Paul Krugman back in the early 1990s.

He has now seen the "green" light and is working on environmental issues. His career therefore mirrors my own albeit at a much higher academic level :-(

I still object to the CEPR $5 a shot money making machine for working papers. Outdated and frustrating for those economists for whom the cost is prohibitive (PhD students, academics in developing countries etc.) Seems to me to be against the spirit of academia and dissemination of ideas and results.

"Resource Rents; When to Spend and How to Save"

CEPR Discussion Paper No. DP7875
ANTHONY J. VENABLES, University of Oxford - Department of Economics, Centre for Economic Policy Research (CEPR)

Countries with substantial revenues from renewable resources face a complex range of revenue management issues. What is the optimal time profile of consumption from the revenue, and how much should be saved? Should saving be invested in foreign funds or in the domestic economy? How does government policy influence the private sector, where sustainable growth in the domestic economy must ultimately be generated? This paper develops the issues in a simple two-period model, and argues that analysis must go well beyond the simple permanent income approach sometimes recommended. In developing countries resource revenues relax constraints on the supplies of capital and of government funds. The level of saving should be somewhat lower than under the permanent income hypothesis because of the low income of the current generation. The composition of investment should be tilted to the domestic economy rather than foreign assets. Government prudence can be undermined by private sector expectations, so high levels of spending on public infrastructure may be appropriate as a commitment to invest.

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WTO and natural resource cooperation

I could have called this post - "globalisation and the environment".

Next week I will be lecturing to Chevening scholars on "Climate Change, Trade and Development" that will consider the increasingly complex relationship between trade negotiations and environmental post 2012 negotiations.

How much overlap is there? Should there be any overlap?

The Doha round needs a considerable section on environmental compliance given the increasing use of environmental regulations that act as "secondary trade barriers". The WTO is central to progress in this area.

A forthcoming World Bank report by De Melo and Mathys will look at this issue is much more detail.

It is interesting therefore to see that WTO pushing forward on this issue.

WTO Seeks More Cooperation In Natural Resource Trade [PlanetArk]

The World Trade Organization called on Friday for countries to work together more closely in trade in natural resources -- an area often seen as exempt from many international commerce rules.

Governments must cooperate more intensively to deal with the challenges for both importing and exporting countries in trade in natural resources, such as export restrictions and import tariffs, it said in its annual World Trade Report.

"In a world where scarce natural resource endowments must be nurtured and managed with care, uncooperative trade policies could have a particularly damaging effect on global welfare," the report said.

The report defines natural resources as fuels, forestry, mining and fisheries -- goods that are found naturally and can be used with minimal processing. It excludes agriculture, where products are cultivated not extracted, and industrial goods employing minerals that require a high level of processing.

Trade in such goods in 2008 was $3.7 trillion in 2008, or nearly 24 percent of total world trade in merchandise goods, a share that has been rising by 20 percent a year for the last decade, reflecting rising commodity prices.

"I believe not only that there is room for mutually beneficial negotiating trade-offs that encompass natural resources trade, but also that a failure to address these issues could be a recipe for a growing tension in international trade relations," WTO Director-General Pascal Lamy said in a foreword to the report.

EXHAUSTIBLE RESOURCES

WTO rules allow countries to restrict exports of natural resources to preserve an exhaustible resource.

Zhao Hong, a diplomat at China's mission to the WTO, said at the launch of the report in Geneva that WTO members had inalienable rights to the resources on their territory, while WTO rules allowed them to pursue goals such as environmental protection or sustainable development.

The United States, European Union and Mexico have complained to the WTO about China's restrictions on raw materials, and the WTO itself has questioned whether these are effective.

Such restrictions, as well as measures by importing countries, are open to legal challenge, said Joost Pauwelyn, professor of international law at Geneva's Graduate Institute for International Studies.

It was an "urban myth" that natural resources are not covered by the WTO, he said at the launch.

For instance a country could not claim to use export restrictions to preserve resources if it did not restrict domestic consumption.

Similarly production restrictions by a country that exports almost its entire output of a natural resource could be challenged as an export restraint, while consumption taxes on a country that relies on imports for a product could be seen as tariff open to challenge.

Still, trade in natural resources is not the same as other products, as it raises environmental issues and competition is limited as production cannot be switched to other locations.

"Natural resources and energy are unevenly distributed between countries as well as fixed. BP will confirm this: you cannot move an oil well," Pauwelyn said.

Pauwelyn said he could envisage negotiations where exporters agreed to curb their export restraints in exchange for importers limiting carbon tariffs.

The report shows that non-WTO member Russia was the biggest exporter of natural resources in 2008, with a value of $341 billion, while the United States is the biggest importer, taking in $583 billion.

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Determining the value of the planet: But who is buying?

Economists can pretty much put a value on anything which is why economists tend to be universally disliked. People tend not to take too kindly to having a monetary figure placed on their or their families lives for example.

Now the planet is to be valued. It is sure to cost a pretty penny that is for sure. Whether anyone can afford it is another matter. Even Bill Gates would have to take out a mortgage.

So, to the big question. Do we need a UN body to hire some fresh PhDs to grind out some meaningless numbers that everyone will ignore (except for me who will put them into Environmental Economics 201).

Analysis: New U.N. Body To Put Value On Planet [PlanetArk]

The world relies on a range of services nature provides -- water filtration by forests, pollination by bees and a supply of wild plant genes for new food crops or medicines.

If nature charged for these, how much would it cost?

Most such values are excluded from measures of national economies and from prices and markets which would force businesses and governments to recognize them, and the result has been a bias toward development over conservation.

U.N. states have proposed a new body, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), to advise on valuing nature and conservation targets.

An early priority should be measurement, said Pavan Sukhdev, study leader for The Economics of Ecosystems and Biodiversity (TEEB) U.N. initiative, which published a business and biodiversity report this week.

"For a country to say 'let's increase biodiversity', it's quite difficult because it's not measuring biodiversity," Sukhdev said.

"That is a big challenge for the IPBES, to create a right set of metrics. The logical sequence is first establish what is biodiversity, what are you measuring, agree on it, so that countries are doing it pretty much the same way."

The U.N. General Assembly is expected officially to endorse IPBES later this year.

"It's bringing the world's best scientists together under an inter-governmental body, so governments can commission specific questions to that body, to provide them with guidance," said Achim Steiner, executive director of the United Nations Environment Program.

In a further political step, on the agenda at a U.N. meeting in October in Japan is an "access and benefit-sharing" regime for countries which are home to plants and other species valued by agriculture or the pharmaceutical industry.

The idea is to give such countries a share of profits from product development.

"It has major implications for the economic benefit of conserving biodiversity," said Steiner.

MARKETS

Damage to natural capital including forests, wetlands and grasslands is valued at $2-4.5 trillion annually, U.N. reports estimate, a figure excluded from measures of the global economy, or GDP.

Of 48,000 species assessed for extinction risk as of 2009, some 2 percent were already extinct or extinct in the wild, says the International Union for Conservation of Nature (IUCN).

Part of the difficulty in recognizing nature is the problem of assessing its various services using economic markets.

In the fight against climate change, a pure market approach has been devised to put a value on carbon-free air in the European Union's emissions trading scheme, by generating tradable carbon permits.

While some of nature's services could be similarly traded as commodities, such as proposed "rainforest bonds" which would pay for forests' wildlife, fresh water and carbon storage, most biodiversity cannot be valued or traded directly.

"We should probably be thinking about biodiversity less like the carbon market and more like a real estate market, these are very distinctive, unique assets, they can be graded and valued but they're not interchangeable," said Joshua Bishop, chief economist at the IUCN.

"It's not a commodity like carbon dioxide."

Less direct, private sector opportunities indirectly tied to conservation are booming, such as eco-tourism and organic food, UNEP argued this week in its business and biodiversity report.

And forest markets were still on track, said Sukhdev, pointing to a deal to raise about $4 billion to pay tropical forested countries not to chop their trees.

"It is complex but at the same time I think there is a huge willingness," said Sukhdev. "It will take time."

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The Shocking CO2 statistics (in picture form)

Nothing beats a good picture. The final line about happier cows is subject to the age old "is a none existent cow happier than a cow executed to feed our desire to eat the flesh of dead animals".

To see this poster in all it's glory please click on those clever "cheap flights" marketers over at fly.co.uk.

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4th World Congress papers

The following post is a list of the papers I attended at the World Congress. This post may be of limited interest to many readers but at least gives an insight into the papers that this humble blogger is interested in. A lot of trade, some catastrophes and a little valuation made up stuff.

I would hazard that this represents a way above average conference attendance record in case the powers that be are reading.

The overall quality of the papers was good to middling with the occassional paper of great quality and some papers that still required a little more polishing.

A book of abstracts can be found HERE.

The programme can be found HERE.

Tuesday June 29th 8.45-10.30

QUANTIFYING THE ECONOMIC DAMAGE DUE TO HURRICANE STRIKES: AN ANALYSIS FROM OUTER
SPACE FOR THE CARIBBEAN REGION
Presenter(s): Eric Strobl, Ecole Polytechnique
Co-author(s): Luisito Bertinelli

ECONOMIC VALUATION OF THE INFLUENCE OF INVASIVE ALIEN SPECIES ON THE ECONOMY OF THE
SEYCHELLES ISLANDS
Presenter(s): Paul Mwebaze, Australia National University
Discussant(s): Eric Strobl

TO TRADE OR NOT TO TRADE: FIRM-LEVEL ANALYSIS OF EMISSIONS TRADING IN SANTIAGO, CHILE
Presenter(s): Jessica Coria, University of Gothenburg
Co-author(s): Åsa Löfgren and Thomas Sterner

ISO 14001 ADOPTION IN MEXICO: DRIVERS AND IMPACTS
Presenter(s): Allen Blackman, Resources for the Future

KEYNOTE

THE ENVIRONMENT AND DIRECTED TECHNICAL CHANGE
Daron Acemoglu, Massachusetts Institute of Technology

14:00 - 15:45 Evaluating the Economic Impacts of Environmental
Regulation using Microdata (Special session)

LOCAL ENVIRONMENTAL REGULATION AND PLANT-LEVEL PRODUCTIVITY
Presenter(s): Randy Becker, U.S. Census Bureau

WHAT IS THE IMPACT OF EMISSIONS TRADING ON PRODUCTIVITY AND TECHNICAL CHANGE?
Presenter(s): Ronald Shadbegian, U.S. EPA - NCEE
Co-author(s): Cynthia Morgan and Carl Pasurka

THE EFFECTIVENESS OF QUASI-REGULATORY MECHANISMS ON POLLUTING BEHAVIOR: THE CASE OF
POLLUTION PREVENTION PROGRAMS AND TOXIC RELEASES
Presenter(s): Linda Bui, Brandeis University

ENERGY ABUNDANCE, TRADE AND INDUSTRY LOCATION
Presenter(s): Nicole Mathys, Swiss Federal Office of Energy and University of Neuchatel
Co-author(s): Reyer Gerlagh

16:15 - 18:00 Climate Change and Extreme Events: From Mere
Disasters to Mega-catastrophes (Special session)

RESPONDING TO THREATS OF CLIMATE CHANGE MEGA-CATASTROPHES
Presenter(s): Carolyn Kousky, Resources for the Future
Co-author(s): Olga Rostapshova, Mike Toman and Richard Zeckhauser

THE IMPACT OF CLIMATE CHANGE ON GLOBAL TROPICAL STORM DAMAGES
Presenter(s): Robert Mendelsohn, Yale University
Co-author(s): Shun Chonabayashi and Kerry Emanuel

CLIMATE TREATIES AND APPROACHING CATASTROPHES
Presenter(s): Scott Barrett, Columbia University

EXTREME WEATHER RISKS AND MIGRATION: TORNADOES
Presenter(s): Trudy Ann Cameron, University of Oregon
Co-author(s): Eric Duquette

GHG TARGETS AS INSURANCE AGAINST CATASTROPHIC CLIMATE DAMAGES
Presenter(s): Martin Weitzman, Harvard University

08:45 - 10:30 Environmental Valuation: Methodology II Room R-M140

TESTING THE THEORETICAL CONSISTENCY OF STATED PREFERENCES FOR TROPICAL WILDLIFE
CONSERVATION
Presenter(s): Ian Bateman, University of East Anglia and Silvia Ferrini, CSERGE, University of East Anglia
Co-author(s): Neil Burgess, Andreas Kontoleon, Sian Morse-Jones and R. Kerry Turner

WHEN ARE PREFERENCES CONSISTENT? A CLASSIFICATION OF CHOICE DOMAINS AND
EXPLORATION OF EMPIRICAL EVIDENCE
Presenter(s): Felix Schläpfer, ETH Zurich, Instiute for Environmental Decisions

KEYNOTE

EVALUATING POLICIES TO INCREASE THE USE OF RENEWABLE ENERGY
Richard Schmalensee, Massachusetts Institute of Technology

14:00 - 15:45 Demography and Environment Room R-M150

THE DEMOGRAPHIC TRANSITION AND THE ECOLOGICAL TRANSITION: ENRICHING THE
ENVIRONMENTAL KUZNETS CURVE HYPOTHESIS
Presenter(s): Marzio Galeotti, University of Milan, IEFE-Bocconi
Co-author(s): Alessandro Lanza

THE IMPACT OF LIFESTYLES ON CO2 EMISSIONS IN THE UK: AN INPUT-OUTPUT AND GEODEMOGRAPHIC
DATA APPROACH
Presenter(s): Giovanni Baiocchi, Durham University
Co-author(s): Klaus Hubacek and Jan Minx

IMPROVING EMPIRICAL ESTIMATION OF DEMOGRAPHIC DRIVERS: MALARIA ECOLOGY AND CHILD
MORTALITY
Presenter(s): Gordon McCord, Columbia University
Co-author(s): Dalton Conley and Jeffrey Sachs

LIFE EXPECTANCY AND THE ENVIRONMENT
Presenter(s): Agustín Pérez-Barahona, INRA & École Polytechnique
Co-author(s): Fabio Mariani and Natacha Raffin

16:15 - 18:00 Effectiveness of Voluntary Environmental Initiatives
for Pollution Reduction II (Special session)

RE-ASSESSMENT OF THE IMPACT OF EPA'S VOLUNTARY 33/50 PROGRAM ON TOXIC RELEASES
Presenter(s): Xiang Bi, University of Illinois
Co-author(s): Madhu Khanna

DOES SELF-REGULATION REDUCE POLLUTION? RESPONSIBLE CARE IN THE CHEMICALS INDUSTRY
Presenter(s): Shanti Gamper-Rabindran, University of Pittsburgh
Co-author(s): Stephen Finger

ECONOMIC AND INSTITUTIONAL FACTORS IN BUSINESS ENVIRONMENTAL MANAGEMENT
Presenter(s): David Ervin, Portland State University

DOES POLLUTION PREVENTION REDUCE TOXIC EMISSIONS? A DYNAMIC PANEL DATA MODEL
Presenter(s): Donna Harrington, University of Vermont
Co-author(s): George Deltas and Madhu Khanna

08:45 - 10:30 Special Session in Honour of Peter Bohm Room R-M510

THE TRUTH, THE WHOLE TRUTH AND NOTHING BUT THE TRUTH: A MULTI-COUNTRY TEST OF AN OATH SCRIPT
Presenter(s): Mitesh Kataria, U of Gothenburg
Co-author(s): Fredrik Carlsson, Susie Chung, Alan Krupnick, Elina Lampi, Asa Lofgren, Ping Qin and Thomas
Sterner

BUY COAL! DEPOSIT MARKETS PREVENT CARBON LEAKAGE
Presenter(s): Bard Harstad, Northwestern University

ECOLOGICAL INTUITION VERSUS ECONOMIC REASON
Presenter(s): Roger Guesnerie , College de France

KEYNOTE

LEARNING TO LIVE IN A GLOBAL COMMONS: SOCIOECONOMIC CHALLENGES FOR A SUSTAINABLE
ENVIRONMENT
Simon Levin, Princeton University

14:00 - 15:45 International Trade III Room DS-M220

HOW DOES INTRA-INDUSTRY TRADE AFFECT THE ENVIRONMENT?
Presenter(s): Sarma Aralas, Michigan State University
Co-author(s): John Hoehn

GLOBALIZATION OF THE CARBON MARKET: AN ECONOMIC EFFICIENCY AND INTERNATIONAL TRADE
ANALYSIS
Presenter(s): Victoria Alexeeva-Talebi, Centre for European Economic Research (ZEW), Mannheim
Co-author(s): Niels Anger

ENVIRONMENTAL REGULATIONS AND BILATERAL TRADE FLOWS
Presenter(s): Tetsuya Tsurumi, The University of Tokyo
Co-author(s): Akira Hibiki and Shunsuke Managi

DO NATIONAL BORDERS MATTER? INTRANATIONAL TRADE, INTERNATIONAL TRADE, AND THE
ENVIRONMENT
Presenter(s): Carol McAusland, University of British Columbia
Co-author(s): Daniel Millimet

16:15 - 18:00 Resource, Trade and Growth (Special session) Room DS-M220

FOREIGN DIRECT INVESTMENT AND NATURAL RESOURCES
Presenter(s): Frederick van der Ploeg, Oxford University
Co-author(s): Steven Poelhekke

RESOURCE WEALTH, INNOVATION AND GROWTH IN THE GLOBAL ECONOMY
Presenter(s): Pietro Peretto, Duke University
Co-author(s): Simone Valente

INTERNATIONAL TRADE, NATURAL RESOURCE ABUNDANCE AND ECONOMIC GROWTH
Presenter(s): Beatriz Gaitan, Dept. of Economics
Co-author(s): Terry Roe

ENDOGENOUS GROWTH, ASYMMETRIC TRADE AND RESOURCE DEPENDENCE
Presenter(s): Simone Valente, ETH Zurich
Co-author(s): Lucas Bretschger

08:45 ‐ 10:30 International Trade IV: Empirics Room DS‐M220

THE POLLUTION TERMS OF TRADE AND MANUFACTURING
Presenter(s): Joel Bruneau, University of Saskatchewan

POLLUTION HAVENS: EMPIRICAL EVIDENCE FOR GERMANY
Presenter(s): Wilhelm Althammer, HHL‐Leipzig Graduate School of Management
Co‐author(s): Christine Mutz

TRADE IN ‘VIRTUAL CARBON’: EMPIRICAL RESULTS AND IMPLICATIONS FOR POLICY
Presenter(s): Giovanni Ruta, LSE
Co‐author(s): Giles Atkinson, Kirk Hamilton and Dominique Van Der Mensbrugghe

UNRAVELING THE SIMULTANEITY OF ENVIRONMENT AND TRADE IN INDIA
Presenter(s): Badal Mukhopadhyay, The Energy Research Institute (TERI)
Co‐author(s): Kanupriya Gupta

KEYNOTE

CLIMATE POLICY: TOWARD A NEW INTERNATIONAL INFRASTRUCTURE?
Jean Tirole, Toulouse School of Economics

14:00 ‐ 15:45 International Trade V Room DS‐M220

SUBGLOBAL CLIMATE AGREEMENTS AND THE COPPER MINING INDUSTRY
Presenter(s): Bruno Lanz, ETH Zurich and MIT
Co‐author(s): Thomas Rutherford and John E. Tilton

TRADE, ENVIRONMENTAL REGULATIONS AND INDUSTRIAL MOBILITY: AN INDUSTRY‐LEVEL STUDY FORJAPAN
Presenter(s): Robert Elliott, University of Birmingham
Co‐author(s): Matthew Cole and Toshi Okubo

CAN CARBON BASED IMPORT TARIFFS EFFECTIVELY REDUCE CARBON EMISSIONS?
Presenter(s): Michael Huebler, Potsdam Institute for Climate Impact Research

THE TRADE BIAS OF TAX REBATES FOR HYBRID VEHICLES
Presenter(s): Sumeet Gulati, University of British Columbia
Co‐author(s): Nisha Malhotra and Carol McAusland

Note the graveyard shift for my paper although there was a good turn out and some excellent environmental economists in the audience.

More reports later.

Back in Action

After a long lay off due to travels to China and the the World Congress in Montreal I am back blogging. One can lose the blogging habbit quite quickly I have discovered and bogging is also highly negatively correlated with the amount of real work one has to do.

We return with an interesting picture of the Gulf Oil spill superimposed onto London. Wow - it looks quite big now.

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IPCC panel of "experts" to be audited

It will be very interesting to read the results of the IPCC review by none other than Economist Harold Shapiro who is a youthful 74 years of age.

I have often wondered how the IPCC was set up given the inclusion of a rather motley crue of academics.

Clearly there were too few economists (hint hint to Harold).

Former Princeton Head To Review U.N. Climate Panel [PlanetArk]

A former president of Princeton University will lead a review of the U.N. panel of climate scientists after errors in a 2007 report used as a guide for fighting global warming, science academies said on Monday.

Economist Harold Shapiro, 74, will chair the 12-member committee that is due to report by August 30 on the United Nations' Intergovernmental Panel on Climate Change (IPCC).

The IPCC shared the 2007 Nobel Peace Prize with former U.S. Vice President Al Gore.

"We approach this review with an open mind," Shapiro said in a statement of the committee appointed by the Amsterdam-based InterAcademy Council (IAC), which groups national science academies.

Canadian-born Shapiro is a former president both of Princeton and the University of Michigan. Other committee members include Mario Molina, a Nobel Chemistry Prize winner and Maureen Cropper, a former lead economist at the World Bank.

In January, the IPCC acknowledged that its latest report in 2007 exaggerated the pace of melt of Himalayan glaciers by saying they might all disappear by 2035. In February, it said it also over-stated how much of the Netherlands was below sea level.

U.N. Secretary General Ban Ki-moon announced the review in March after controversy around the IPCC mistakes eroded trust. People who doubt human activities are warming the planet say the reports are biased to exclude alternative views.

Ban has reaffirmed key IPCC conclusions that it is at least 90 percent certain that human activities are the main cause of climate change in recent decades that is set to bring more heatwaves, floods, droughts and rising sea levels.

The review committee will have its first meeting in Amsterdam on May 14-15. Roseanne Diab, executive officer of the Academy of Science of South Africa, will serve as vice chair. Other members will be from countries including China, India, Brazil, Germany, Britain, the Netherlands and Malaysia.

Issues to be reviewed include "data quality assurance and control; the type of literature that may be cited in IPCC reports; expert and government review of IPCC materials; handling of the full range of scientific views; and the correction of errors," it said.

The committee would also review "other processes, including management functions and communication strategies."

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Carbon induced trade wars

A story right up Globalisation and the environment's street. Trade wars are always ugly and often fiendishly complicated.

It is fine for the EU to rant about imposing tariffs on imports from polluting countries but one must ask who exactly is producing these products. Often it will be EU multinationals so the EU is taxing its own companies (who will lobby hard against such a policy).

Moreover, these imports are consumed by EU citizens. It is our quest for greater and greater material consumption that is causing part of the pollution in the first place.

I can say now categorically that this scheme will not work and should be abandoned as soon as possible. There are other solutions.

Carbon Tariffs On Imports Risk Trade War: EU Study [PlanetArk]

The European Union is considering border tariffs on imports from more polluting countries, but an initial assessment shows such levies could spark trade wars, draft reports show.

Two European Commission reports do not explicitly reject a push for border tariffs by France and Italy, but say they would be fiendishly complex to calculate, create a huge administrative burden and risk trade conflict.

"Border measures risk clashing with the obligations under the WTO (World Trade Organization)," said one study looking at the cost of increasing EU curbs on climate-warming emissions.

France and Italy are worried that their industries, which pay for EU permits to emit carbon dioxide, will lose out to cheaper imports from countries that impose no such charges.

The Commission said it would continue to look at how imports might be included in the Emissions Trading Scheme, the EU's carbon market and its main tool against climate-warming emissions. But the prospect of such measures looks dim.

"The introduction of border measures may also trigger retaliatory measures and even hinder international negotiations," added the document, seen by Reuters. "The system could at best only be envisaged for a very limited number of standardized commodities, such as steel or cement."

Sanjeev Kumar at environmental think-tank E3G said: "This is pretty much the death of the border-tax adjustment discussions in Europe. We've known for a long time it would put the whole European economy at risk."

ECO-IMPERIALISM

Border tariffs on countries that do not play their part in fighting climate change are a hot topic in the United States, where legislators are weighing up their own climate laws.

"Similar proposals are also being discussed in the U.S., and obviously any further political and operational steps taken in this direction should be taken together," said a related EU draft.

Folker Franz, of industry group BusinessEurope, said: "In a theoretical world where Japan, the U.S. and Europe could move together, then it might work. But if Europe imposed tariffs alone it would not."

Germany, as one of the EU's biggest exporters, is worried about retaliation. Berlin last year criticized the idea of carbon tariffs as "eco-imperialism.

French President Nicolas Sarkozy and Italian Prime Minister Silvio Berlusconi wrote to the European Commission two weeks ago calling for trade levies, but said they should respect WTO rules.

The Commission draft says that although levies could be made WTO-compliant, in theory, it would be almost impossible to tailor them to individual imports without knowing the carbon emissions up and down the manufacturing process -- and monitoring those emissions "may be unfeasible."

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