Population boom - are we still doomed?

Again, any title that includes the word "doomed" perks my interest.

The "population bomb" was written 40 years ago and has had a lot of attention for its neo-Malthusian stance. It is interesting that the authors think that:

"perhaps the most serious flaw in The [Population] Bomb was that it was much too optimistic about the future".

Not looking good is it? Read on because the optimists then join in the debate. Do they have a point?

Interestingly, 1968 was also the year that saw the publication of "tragedy of the commons" and look where that got us - 4 hours of lectures a year on Econ211.

THE POPULATION BOOM FOUR DECADES ON - ARE WILL STILL DOOMED? [International Policy Network] [PDF of paper]

The Population Bomb is one of the founding texts of the modern environmental movement. It popularised neo-Malthusian concerns that current rates population growth would lead to human and environmental disaster, a fear revived every year on the UN's World Population Day (Saturday July 11).

Since its release, The Population Bomb has received aplomb and approbation in more or less equal measure. But writing in the new issue of the Electronic Journal of Sustainable Development, its authors Paul R. Ehrlich and Anne H. Ehrlich (unnamed co-author of the original book) have few regrets: indeed, they argue that "perhaps the most serious flaw in The [Population] Bomb was that it was much too optimistic about the future".

From global warming and ozone depletion to collapsing fisheries and industrial agriculture, the Ehrlichs say that "the environmental and resource impacts of past and future population growth will haunt humanity for a long time."

But another paper in the new issue of the EJSD suggests that the Ehrlich's doom-and-gloom scenarios are unwarranted. Indur Goklany - co-editor of the EJSD - argues that "despite unprecedented growth in population, affluence, consumption and technological change, human well-being has never been higher."

Reduced hunger and malnutrition, improved access to clean water and sanitation, higher literacy and schooling - all of these things mean that we now live longer and better lives than we did forty years ago - a stark contrast to the scenario painted in the Population Bomb.

Goklany concedes that the record is mixed for the environment - but argues that this justifies more, not less, wealth and technology: "Initially, in the rich countries, affluence and technology worsened environmental quality, but eventually they provided the methods and means for cleaning up the environment... After decades of deterioration, their environment has improved substantially."

The main worry for Goklany and others is that the "policy preferences of some environmentalists and Neo-Malthusians, founded on their skepticism of affluence and technology, would only make progress toward a better quality of life and a more sustainable environment harder. Their fears could become self-fulfilling prophecies."

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Use Energy, Get Rich and Save the Planet (OR DIE TRYING)

Good to see the much maligned Kuznets curve getting its annual airing on earth day from none other than the New York Times.

Use Energy, Get Rich and Save the Planet [New York Times]

When the first Earth Day took place in 1970, American environmentalists had good reason to feel guilty. The nation's affluence and advanced technology seemed so obviously bad for the planet that they were featured in a famous equation developed by the ecologist Paul Ehrlich and the physicist John P. Holdren, who is now President Obama's science adviser.

Their equation was I=PAT, which means that environmental impact is equal to population multiplied by affluence multiplied by technology. Protecting the planet seemed to require fewer people, less wealth and simpler technology - the same sort of social transformation and energy revolution that will be advocated at many Earth Day rallies on Wednesday.

But among researchers who analyze environmental data, a lot has changed since the 1970s. With the benefit of their hindsight and improved equations, I'll make a couple of predictions:

1. There will be no green revolution in energy or anything else. No leader or law or treaty will radically change the energy sources for people and industries in the United States or other countries. No recession or depression will make a lasting change in consumers' passions to use energy, make money and buy new technology - and that, believe it or not, is good news, because...

2. The richer everyone gets, the greener the planet will be in the long run.

I realize this second prediction seems hard to believe when you consider the carbon being dumped into the atmosphere today by Americans, and the projections for increasing emissions from India and China as they get richer.

Those projections make it easy to assume that affluence and technology inflict more harm on the environment. But while pollution can increase when a country starts industrializing, as people get wealthier they can afford cleaner water and air. They start using sources of energy that are less carbon-intensive - and not just because they're worried about global warming. The process of "decarbonization" started long before Al Gore was born.

The old wealth-is-bad IPAT theory may have made intuitive sense, but it didn't jibe with the data that has been analyzed since that first Earth Day. By the 1990s, researchers realized that graphs of environmental impact didn't produce a simple upward-sloping line as countries got richer. The line more often rose, flattened out and then reversed so that it sloped downward, forming the shape of a dome or an inverted U - what's called a Kuznets curve. (See nytimes.com/tierneylab for an example.)

In dozens of studies, researchers identified Kuznets curves for a variety of environmental problems. There are exceptions to the trend, especially in countries with inept governments and poor systems of property rights, but in general, richer is eventually greener. As incomes go up, people often focus first on cleaning up their drinking water, and then later on air pollutants like sulfur dioxide.

As their wealth grows, people consume more energy, but they move to more efficient and cleaner sources - from wood to coal and oil, and then to natural gas and nuclear power, progressively emitting less carbon per unit of energy. This global decarbonization trend has been proceeding at a remarkably steady rate since 1850, according to Jesse Ausubel of Rockefeller University and Paul Waggoner of the Connecticut Agricultural Experiment Station.

"Once you have lots of high-rises filled with computers operating all the time, the energy delivered has to be very clean and compact," said Mr. Ausubel, the director of the Program for the Human Environment at Rockefeller. "The long-term trend is toward natural gas and nuclear power, or conceivably solar power. If the energy system is left to its own devices, most of the carbon will be out of it by 2060 or 2070."

But what about all the carbon dioxide being spewed out today by Americans commuting to McMansions? Well, it's true that American suburbanites do emit more greenhouse gases than most other people in the world (although New Yorkers aren't much different from other affluent urbanites).

But the United States and other Western countries seem to be near the top of a Kuznets curve for carbon emissions and ready to start the happy downward slope. The amount of carbon emitted by the average American has remained fairly flat for the past couple of decades, and per capita carbon emissions have started declining in some countries, like France. Some researchers estimate that the turning point might come when a country's per capita income reaches $30,000, but it can vary widely, depending on what fuels are available. Meanwhile, more carbon is being taken out of the atmosphere by the expanding forests in America and other affluent countries.

Deforestation follows a Kuznets curve, too. In poor countries, forests are cleared to provide fuel and farmland, but as people gain wealth and better agricultural technology, the farm fields start reverting to forestland.
Of course, even if rich countries' greenhouse impact declines, there will still be an increase in carbon emissions from China, India and other countries ascending the Kuznets curve. While that prospect has environmentalists lobbying for global restrictions on greenhouse gases, some economists fear that a global treaty could ultimately hurt the atmosphere by slowing economic growth, thereby lengthening the time it takes for poor countries to reach the turning point on the curve.

But then, is there much reason to think that countries at different stages of the Kuznets curve could even agree to enforce tough restrictions? The Kyoto treaty didn't transform Europe's industries or consumers. While some American environmentalists hope that the combination of the economic crisis and a new president can start an era of energy austerity and green power, Mr. Ausubel says they're hoping against history.

Over the past century, he says, nothing has drastically altered the long-term trends in the way Americans produce or use energy - not the Great Depression, not the world wars, not the energy crisis of the 1970s or the grand programs to produce alternative energy.

"Energy systems evolve with a particular logic, gradually, and they don't suddenly morph into something different," Mr. Ausubel says. That doesn't make for a rousing speech on Earth Day. But in the long run, a Kuznets curve is more reliable than a revolution.

Further Reading

"Environmental Kuznets Curves." B. Yandle, M. Bhattarai, M. Vijayaraghavan. PERC, 2004.

"Dematerialization." J.H. Ausubel, P.E. Waggoner, PNAS, 2008

"Economic Growth and the Environment." A.B. Krueger, G. Grossman. Quarterly Journal of Economics, 1995.

"Governance, Institutions and the Environment-Income Relationship." K. Dutt. Environment, Development and Sustainability, 2008.

"The Jack Rabbit of Depression, or Do economic slumps benefit environment?" (pdf). J. Ausubel, P.E. Waggoner. Working paper, 2009.

"The IPAT Equation and Its Variants." (pdf) M.R. Chertow. Journal of Industrial Ecology, 2001.

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USA: Growth more important than the environment

Not surprisingly, following the onslaught of the recession people soon forget about the planet and care just about their own well being.

I suspect that it is not just Americans who feel this way. Most of Europe, if not the world would probably report similar figures.

The recent gallop results are no surprise but still make for interesting reading. Clean air has always been a luxury good. The link gives you the nice graphs.

Americans: Economy Takes Precedence Over Environment [gallop]

PRINCETON, NJ -- For the first time in Gallup's 25-year history of asking Americans about the trade-off between environmental protection and economic growth, a majority of Americans say economic growth should be given the priority, even if the environment suffers to some extent.

Gallup first asked Americans about this trade-off in 1984, at which time over 60% chose the environmental option. Support for the environment was particularly high in 1990-1991, and in the late 1990s and 2000, when the dot-com boom perhaps made economic growth more of a foregone conclusion.

The percentage of Americans choosing the environment slipped below 50% in 2003 and 2004, but was still higher than the percentage choosing the economy. Sentiments have moved up and down over the last several years, but this year, the percentage of Americans choosing the environment fell all the way to 42%, while the percentage choosing the economy jumped to 51%.

The reason for this shift in priorities almost certainly has to do with the current economic recession. The findings reflect many recent Gallup results showing how primary the economy is in Americans' minds, and help document the fact of life that in times of economic stress, the public can be persuaded to put off or ignore environmental concerns if need be in order to rejuvenate the economy.

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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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Death of Globalisation consensus: Rodik

After my environmental related post on the death of globalisation it appears that the economist Dani Rodik is weighing in suggesting that mainstream economists everywhere have seen the light (or dark) when it comes to globalisation.

My bold.

The death of the globalization consensus [Dani Rodik blog]

There was a time when global elites could comfort themselves with the thought that opposition to the world trading regime consisted of violent anarchists, self-serving protectionists, trade unionists, and ignorant, if idealistic youth. Meanwhile, they regarded themselves as the true progressives, because they understood that safeguarding and advancing globalization was the best remedy against poverty and insecurity.

But that self-assured attitude has all but disappeared, replaced by doubts, questions, and scepticism. Gone also are the violent street protests and mass movements against globalisation. What makes news nowadays is the growing list of mainstream economists who are questioning globalisation's supposedly unmitigated virtues.

My only point, or the only one I have the will to write, is that even the most fervent globalisation supporter never considered the virtues to be "unmitigated". Far from it.

This issue however gets to the heart of the why this blog was born. Is globalisation good or bad for the environment? The jury is still out.

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On the "tyranny of environmentalism"

Interesting little guardian piece on why greens are evil by Bernard O'Neil. Hopelessly over the top but useful as a benchmark.

Take this quote:

But perhaps the main way that environmentalism undermines the culture of freedom is by its ceaseless promotion of guilt

Is a little bit of guilt about polluting so bad?

or

And what of those individuals who say "to hell with environmentalism" and continue living the way they want to? Apparently, in the words of the Ecologist, they have a disordered "psychology"; they are victims of "self-deception and mass denial".

You know who you are .... are you self deceiving?

An interesting article and worth reading in full.


Greens are the enemies of liberty [Guardian]

Imagine a society where simply speaking out of turn or saying the "wrong thing" was openly discussed as a crime against humanity, and where sceptics or deniers of the truth were publicly labelled "criminals", hauled before the press and accused of endangering humanity with their grotesque untruths.

Imagine a society where even some liberals demanded severe restrictions on freedom of movement; where people campaigned for travelling overseas to be made prohibitively expensive in order to force people to stay at home; and where immigration was frowned upon as "toxic" and "destructive".

Imagine a society so illiberal that columnists felt no qualms about demanding government legislation to force us to change our behaviour; where the public was continually implored to feel guilty about everything from driving to shopping – and where those who refused to feel guilty were said to be suffering from a "psychological" disorder or some other species of mental illness".

Surely no one would put up with such a society? Yet today, all of the above things are happening – under what we might call the tyranny of environmentalism – and people are putting up with it.

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But perhaps the main way that environmentalism undermines the culture of freedom is by its ceaseless promotion of guilt. In the environmentalist era, we are no longer really free citizens, so much as potential polluters. We are continually told – by government, by commentators, by radical activists – that everything we do, from wearing disposable nappies to using deodorant to allowing ourselves to be cremated, is harmful to our surroundings.

French in Green Tax Plan

It is not just Gordon Brown who likes his green taxes and using incentives to encourage road users to use less fuel intensive automobiles. The FT reports. It will be interesting to see whether the French politicians also back down in the face of weaker poll results and the powerful automobile lobby. After all, most voters drive a car.

The bottom line is that cash incentives via the tax system are pretty much the only way to change behaviour. Appealing to the better nature of individuals is doomed.

French car tax to spur green upheaval [FT]

France is to slap an annual green tax on high-emission cars, such as sports utility vehicles, and extend punitive taxes to more environmentally damaging products in an attempt to revolutionise consumer behaviour and combat climate change.

Jean-Louis Borloo, ecology minister, said on Tuesday that the government’s carrot-and-stick “bonus-malus” tax system was proving successful and would be accelerated. The aim is to cut taxes further on environmentally friendly products while raising them on the most harmful products. “This will be a revolution. We must impose a fair ecological price,” he said in an interview with Le Parisien newspaper.

From the start of the year, the government has introduced bonuses for consumers who buy environmentally friendly vehicles and turn in cars more than 15 years old. These bonuses range from €200 ($316, £158) for cars that emit 121g to 130g of carbon dioxide per kilometre to €5,000 for electric cars.

But the government also penalises those who buy heavily polluting cars, charging as much as €2,600 for the largest SUVs. The new annual tax, which the government suggests could amount to about 10 per cent of the original charge, will apply to the most heavily polluting new cars sold from the beginning of next year. The government estimates it will affect about 1 per cent of French cars.

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Climate Change Economics brought to Heal

Geoffrey Heal is a respected commentator on the economics of climate change usually from a corporate perspective. He has recently published a NBER working paper that is part meta-analysis and part suggestions for future research.

In addition I have recently been sent Heal's new book "When Principles Pay: Corporate Social Responsibility and the Bottom Line". This is my current academic/leisure reading given its accessible and equation free text.

When Principles Pay: Corporate Social Responsibility and the Bottom Line

In the NBER paper a great deal of time is spent looking at the crucial issues of discount rates, uncertainty and risk aversion. The costs of action and inaction are then carefully spelt out. An excellent overview article.

I agree with the very final sentence of the paper:

It is very clear that most of the models analyzed to date are so aggregated as to miss many important issues.

The NBER pitch is as follows:

CLIMATE ECONOMICS: A META-REVIEW AND SOME SUGGESTIONS [NBER]

http://www.nber.org/papers/w13927

ABSTRACT
What have we learned from the outpouring of literature as a result of the Stern Review of the Economics of Climate Change? A lot. We have explored the model space and the parameter space much more thoroughly, though there are still unexplored regions. While there are aspects of the Stern Review's analysis with which we can disagree, it seems fair to say that it has catalyzed a fundamental rethinking of the economic case for action on climate change. We are now in a position to give some conditions that are sufficient to provide a case for strong action on climate change, but need more work before we have a fully satisfactory account of the relevant economics. In particular we need to understand better how climate change affects natural capital - the natural environment and the ecosystems comprising it - and how these affect human welfare.

Returning again to the book, the content is particularly interesting from a globalisation perspective and motivates a considerable of amount of the research that myself and co-authors are currently investigating.

Stories of predatory lending practices and the reckless destruction of the environment by greedy corporations dominate the news, suggesting that, in business, ethics and profit are incompatible pursuits. Yet some of the worst lenders are now bankrupt, and Toyota has enjoyed phenomenal success by positioning itself as the green car company par excellence. These trends suggest that antisocial corporate behavior has its costs, especially in terms of the stock market, which penalizes companies that have poor environmental track records and rewards more socially conscious brands.

Recommended reading.

For an interview with Geoffrey Heal see:

Interview.


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"Agflation" and the rice trade

Good little educational piece from Reuters on food price inflation with emphasis on global rice production.

Rice risks becoming a luxury in the face of soaring prices - threatening pinched budgets in the West but starvation in developing countries.

Riots have flared like a trail of gunpowder through West Africa as some of the world's poorest people struggle to cope with soaring inflation that's seen the prices of basic foods more than double in a year. The U.S. benchmark rice price -- at the Chicago Board of Trade -- has risen to over $24 per 100 pounds of rough rice, while the world benchmark for Thai rice has surged to more than a $1,000 per tonne of milled rice.

For other graphics see:

Agflation The real costs of rising food prices [Reuters]

Farmers can't keep up with rising demand. The world is in a food crisis that's already boiled over in some places. Track the impact with the stories and map below.

Food price "massacre" of the poor

Any story with "massacre" in the headline is worth blogging about in my opinion.

Hugo Chavez is also a man worth reading about. He is seen as a hero and anti-hero probably in equal measure.

With food prices soaring and the on going financial and sub-prime crisis it would be easy to argue that capitalism is the cause of the misery for millions. The bailing out of the UK banks by the UK taxpayer is a disgrace. Whilst the government had little option and is in effect making the most of a bad situation it leaves a bad taste in the mouth to know that the "big swinging ****s" in the city are being bailed out for their excessive macho risk taking.

Food Prices ‘Massacre’ Of World's Poor - Chavez [PlanetArk]

Soaring food prices are a "massacre" of the world's poor and are creating a global nutritional crisis, Venezuelan President Hugo Chavez said on Tuesday, calling it a sign that capitalism is in decline.

His comments came only hours after the United Nations' World Food Program called more expensive food a "silent tsunami" that threatens to plunge more than 100 million people on every continent into hunger.

"It is a true massacre what is happening in the world," Chavez said in a televised speech, citing UN statistics about deaths caused by hunger and malnourishment.

"The sun never sets": Empire and Trade

A globalisation post that seeks to at least illustrate that globalisation is not a recent phenomenon. Famously, writer John Wilson once said of the British empire:

"His Majesty's dominions, on which the sun never sets,"

which was then simplified to ""the sun never sets on the British Empire."

All of which brings us back to the effect of empire on trade. In once sense the answer is obviously yes and probably to a significant extent. The reasons are also intuitively obvious - reduced transaction costs, common language, no trade barriers and of course, and relevant to today's Euro debate, a common currency.

This new NBER paper uses a standard gravity approach to examine this issue.

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Trade and Empire

KRIS JAMES MITCHENER
Santa Clara University - Department of Economics; National Bureau of Economic Research (NBER)
MARC WEIDENMIER
Claremont McKenna College; National Bureau of Economic Research (NBER) January 2008

NBER Working Paper No. W13765


Abstract:
Although many modern studies find large and significant effects of prior colonial status on bilateral trade, there is very little empirical research that has focused on the contemporaneous impact of empire on trade. We employ a new database of over 21,000 bilateral trade observations during the Age of High Imperialism, 1870-1913, to quantitatively assess the effect of empire on trade. Our augmented gravity model shows that belonging to an empire roughly doubled trade relative to those countries that were not part of an empire. The positive impact that empire exerts on trade does not appear to be sensitive to whether the metropole was Britain, France, Germany, Spain, or the United States or to the inclusion of other institutional factors such as being on the gold standard. In addition, we examine some of the channels through which colonial status impacted bilateral trade flows. The empirical analysis suggests that empires increased trade by lowering transactions costs and by establishing trade policies that promoted trade within empires. In particular, the use of a common language, the establishment of currency unions, the monetizing of recently acquired colonies, preferential trade arrangements, and customs unions help to account for the observed increase in trade associated with empire.

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Megabubbles and the collapse of the West

Peak Oil is a great website for off beat and doom filled stories that will often appeal to dismal scientists.

This one caught my eye.

I must say this is one "new economic theory" story that is more off beat that most.

You Vote: What Megabubble Will Be The Next To Bring Us Down

Hollywood tag lines fit Exxon Mobil's $40 billion profit as well as the movies: "There will be Blood. There will be Greed. There will be Vengeance."

Our "war of civilizations" is not of theologies but a primal battle to control basic resources essential to survival. Yes, there is blood ... and oil ... and greed ... and vengeance ... and wars for survival.

At the highest level, this war's being waged in the elite towers of Wall Street and London and Dubai and Singapore: Quants in Turnbull & Asher shirts trading commodity derivatives, gunning for megabonuses, soaring high, like stealth bombers detached from the bloody fighting 40,000 feet below.

That's also how Eric Janszen's radar reads the world in Harpers Magazine's "The Next Bubble." Inside a thought-bubble common on Wall Street, he invents a new economic theory from the simple observation "that the Internet and the housing hyperinflations transpired within a period of 10 years."

Get it? Two bubbles, 10 years apart: An anomaly, yet suddenly we have a bizarre new economic theory: "There will and must be many more such booms, for without them the United States can no longer function. The bubble cycle has replaced the business cycle."

We're told the "next bubble" is already here: "Alternative energy," says Janszen. In his new "perpetual bubble-blowing machine" theory this means that biofuels, solar, wind, nuclear, hydroelectric and geothermal energies are the new bubble, until it peaks and "creatively destructs" around 2013.

2013? Yes, then Wall Street will replace it with a new bubble. Bubble after bubble, accelerating, increasing in size and frequency ad infinitum. And each time, "we will be left to mop up after yet another devastated industry," while Wall Street "will already be engineering its next opportunity." Unfortunately, the only thing perpetual is greed.

Small wonder Janszen dismisses my challenge on his iTulip.com Web site, claiming I have "no idea how the economy actually works." And yet, since my days at Morgan Stanley, I've seen many other theories that undercut this bizarre idea of a "perpetual bubble-blowing machine" which is predicated on a weak assumption: That the planet has an inexhaustible supply of oil and other natural resources. Unfortunately, that assumption is faith-based wishful thinking, much like Greenspan, Bernanke and Paulson's assumptions that the subprime problems were "contained."

The main alternative is "Peak Oil" theory, which the world's Exxon-Mobils hate. "Peak Oil" forecasts a different end game. Janszen's theory simply predicts America's economy will "creatively self-destruct" in 2013 while Wall Street is busy creating a newer, bigger bubble. In marked contrast, "Peak Oil" forecasts:

A "not-so-creative destruction" of the oil industry The end of Wall Street's "bubble-blowing machine" A steady decline of the oil-dependent global economy Widespread resources wars intensifying through the 21st century

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"Green Economics"

When a news article includes the term "green economics" it has to be blogged.

If it is true that we are on the cusp of an age of "green economics" this should mean that environmental economists should be in higher demand. Certainly numbers are up on our MSc in Environmental and Resource Economics not least because of the increase in "green jobs".

Age of 'Green Economics' is Upon Us - UN's Ban [PlanetArk]

CHICAGO - UN Secretary-General Ban Ki-moon said on Thursday the world is on the cusp of "the age of green economics" and called on nations to cooperate to fight global warming and promote the transformation.

"With the right financial incentives and a global framework, we can steer economic growth in a low-carbon direction," Ban said in remarks prepared for delivery to a Chicago business group.

Ban, who has made the environment a centerpiece of his year-long leadership of the UN, urged the United States and other countries to partner with the "world's only truly global institution" to combat such scourges as climate change, terrorism and infectious diseases.

"No nation, alone, can deal with such problems," Ban said. "Operating effectively in today's world requires partnership. It requires co-operation, engagement and dialogue -- as well as global rules."

Three-quarters of Americans in surveys believe the United Nations should play a larger role in the world, he said, and a similar proportion say US foreign policy should be coordinated with the international body.

The United States is the biggest single funder of the United Nations though the body has been an object of frequent criticism, particularly from Republicans, for how it is run and for the perception it impedes US goals.

Ban said global investment in green energy is projected to hit $1.9 trillion by 2020, an indication of an economic shift that will rival the industrial revolution and the technology revolution of the past two centuries.

"We're now on the threshold of another (transformation) -- the age of green economics," Ban said.

"Businesspeople in so many parts of the world are demanding clear and consistent policies on climate change -- global policies for a global problem," he said.

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US to lead the "clean" world

The US have always insisted that the solution to climate change is not regulations and protocols named after various cities but the application of US brains and business acumen.

When the need is great enough (and the profits large enough) the idea is that US firms and Universities will step up to the plate (even got baseball in this post) and deliver.

This post is really a criticism of Europe's ability to turn invention into profit. It is the US money men that are running the show and not the Universities. However, as long as it happens should it matter where the money comes from?

Perhaps Bush was right all along?

US threatens to take Europe’s ‘clean’ lead[FT]

A US investment boom in alternative energy and other new “clean” technologies is threatening to put Europe in the shade in a field it has traditionally dominated.

The wave of money could hand the US a lead in environmentally important technologies, as some of Silicon Valley’s leading venture capitalists scour European universities and research institutions for the next big ideas in fields from solar power to waste management.

“Europe is like a rich vein of unmined stuff that hasn’t been put into the world, even given the emphasis on ‘green’ in Europe,” said Bill Joy, a founder of Sun Microsystems and now a partner at Kleiner Perkins Caufield & Byers, which has led the charge by US tech financiers into the area.

European investment in clean technology companies last year was only a third of the $3.7bn ploughed into the field in the US, according to Cleantech Group, a specialist US research firm. That is a big swing from two years before, when Europe mustered nearly two-thirds as much investment as the US.

Clean technology spans a range of industries including alternative energy, energy storage, recycling and waste management and advanced new “clean” materials.

Europe laid the groundwork for many of these technologies thanks to government policies supporting investment and still has a strong scientific presence. But “the financial engine has swung back heavily over the past couple of years” to the US, said John Balbach, a partner at Cleantech.

The US push reflects a stampede by venture capitalists centred on both San Francisco and Boston, who are seeking to apply an approach to building up new technology industries that was honed in the PC and internet businesses.

Clean technology “re­quires the kind of innovation that we have seen in [Silicon] Valley,” said Mr Joy. “That’s the perfect place for venture investment behind scientific discovery.”

The US financing boom has already started to attract specialists from other countries. They include Ausra, the solar power company, which was based on technology developed at Sydney University but moved to California after raising money from Kleiner Perkins and Khosla Ventures.

However, the rush of venture capital money is already prompting warnings of a coming bubble in the US, particularly in the field of solar energy. Nearly $1bn was poured into alternative energy ventures in California alone last year, according to Cleantech, as investors raced to harness technologies from the chip industry to try to find the next breakthroughs in photovoltaic cells.

“There are lots of methods, but none of them [has] been proven,” warned Ray Rothrock, a partner at venture capital firm Venrock.

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Climate Change and Economic and Econometric Theory

In a recent post we looked at the 19 skeptical economists who are part of the now legendary Inhofe 400.

The big question is whether any economists should be included in a climate science listing. After all what can social scientists tell us about whether the climate change we are witnessing is man made or not. Sure we can tell you the costs that might be incurred if we do this or don't do that but not why temperatures have increased.

The issue is the role of econometrics and whether the statistical techniques developed by econometric theorists are as advanced as anything in the sciences. It appears they are.

However, maybe economists are fighting back. The European Science Foundation recently put out this press release.

Economists help climate scientists to improve global warming forecasts

Climate scientists are collaborating with experts in economic theory to improve their forecasting models and assess more accurately the impact of rising atmospheric carbon dioxide levels. Although there is broad consensus that there will be a significant rise in average global temperature, there is great uncertainty over the extent of the change, and the implications for different regions. Greater accuracy is urgently needed to provide a sound basis for major policy decisions and to ensure that politicians and the public remain convinced that significant changes in consumption patterns and energy production are essential to stave off serious consequences in the coming decades and centuries.

The climate modelling community has become increasingly aware that some of the statistical tools that could improve their modelling of climate change may already have been developed for econometric problems, which have some of the same features. The European Science Foundation (ESF) brought these two communities together for the first time in a recent workshop, sowing the seeds for future collaboration.

“We achieved our goal of bringing together people from two very distant but equally valuable fields,” said the workshop’s co-convenor Peter Thejll. “It was designed as a one-way session whereby econometricians were supposed to convey knowledge of econometric methods to the climate researchers.”

This has already proved highly valuable because economic and climate models require similar kinds of statistical analysis, both for example involving serial correlation where the aim is to predict the future value of a variable based upon a starting value at an earlier point in time. In economics such a variable might be the price of a commodity, while in climatology it might be temperature or atmospheric pressure. In both cases the variables change randomly during successive time intervals subject to varying constraints within a closely defined zone, and therefore can be analysed using similar “random walk” techniques.

“To solve important climate problems related to climate change and change attribution with statistics, these methods have to be used and understood by climate researchers,” said Thejll. “We brought together people who understand these problems and had a great, and informative, time.”

Thejll is confident the new found cooperation with the econometric community will improve climate modelling and forecasting, but first there is a need to digest some of the new tools and ideas. The aim is to introduce greater statistical sophistication into climate analysis, partly by understanding better the correlation between different aspects of change, for example how one region impacts another. “We first need to see the spread of econometric methods so that we no longer read climate research papers that ignore important statistical problems,” said Thejll wryly.

This will lead to an important first step towards better climate change predictions models – understanding the limitations of existing models. “One improvement that can follow from the use of econometric methods in climate research is a better understanding of the level of ignorance we have,” said Thejll.

One problem at present is that uncertainties are commonly underestimated, and this makes it very difficult to predict with much confidence even the broad climatic consequences or rising atmospheric carbon dioxide levels. But Thejll hopes and expects that by incorporating the key tools of econometric modelling, climate prediction will become much more accurate and valuable.

The ESF workshop, Econometric Time Series Analysis applied to climate research, was held in Frascati, Italy, in September 2007.

For more information please go to http://www.esf.org/fileadmin/be_user/ew_docs/06-047_Programme.pdf

Ranking of Top Environmental Economics Journals

Environmental Economics have posted a ranking of environmental economics academic journals. I seem to recall filling in a questionnaire about this from some guys in Holland that may or may not be related to these findings (edit: it is by the way so I think I count as one vote in there somewhere). I seem to recall posting on this a month or so ago but here it is again just in case.

Environmental economics is a difficult field in which to rank journals. Ecological Economics tends to cause the most difficulty. John Whitehead provides an explanation which is that EE has a high impact factor because papers in EE cite other papers in EE. I think that is only part of the answer. EE papers are also more interdisciplinary and are thus read more widely and cited more widely. EE remains a bit of a mystery to me as a journal and its different rankings shows that this view is shared.

The other mystery is that ERE should be ranked higher and does make a creditable 4th in the economists ranking (a lot higher than its current 8 in the impact factor race). This is due as JW states to the number of issues per year but also related to its historic concentration on theory papers that traditionally get lower citations per paper.

These rankings touch on one problem with publishing in environmental economics. If a paper is submitted to JEEM (the undoubted leader by a mile) and is rejected (the most likely outcome) then it is a loooooonnng way down to the next journal especially if the paper is not related to agriculture.

Only the top 5-7 journals can creditably considered TOP 100 ECONOMICS JOURNALS at a push. The rest languish in the lower reaches of academia.

In the UK where journal quality is of great concern to the powers that rate economics departments this can make specialising in environmental economics a risky business. As this ranking then determines how much money a department receives for the next 8 years you can imagine that "publish well or perish" is a well known phrase.

Of course there are many general interest journals that publish environmental related papers such as the AER and Restat among the big boys as well as many of the international general journals.

I think the 3rd World Congress ranking is about right and am not sure any of JW's extra journals deserve to break into the top 11 except perhaps Energy Economics.

Apologies for blatant stealing but these lists will need to be accessed for years to come especially when advising PhD students where to submit.

Top journals in environmental economics [Env-econ]

Here are the rankings according to 2006 Impact Factors:

1. Journal of Environmental Economics and Management (JEEM)
2. Ecological Economics (EE)
3. American Journal of Agricultural Economics (AJAE)
4. Resource and Energy Economics (REE)
5. Energy Journal (EJ)
6. Australian Journal of Agricultural and Resource Economics (AJARE)
7. Land Economics (Land)
8. Environmental and Resource Economics (ERE)
9. Environment and Development Economics (EDE)
10. Journal of Agricultural and Resource Economics (JARE)
11. Natural Resources Journal (NRJ)

Here are the rankings according to a survey of attendees of the 3rd World Congress:

1. JEEM
2. AJAE
3. LAND
4. ERE
5. REE
6. EE
7. EDE
8. EJ
9. JARE
10. NRJ
11. AJARE

JW's missing journals for the record are:

* Energy Economics
* Natural Resource Modeling
* Marine Resource Economics
* Energy Policy
* Journal of Environmental Management
* Journal of Agricultural and Applied Economics
* Water Resources Research
* Agricultural and Resource Economics Review

A couple of these I have never heard of so it gives me something to check out.


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Wind Farms to supply 50% of UK power

The UK is taking its "green leadership" position very seriously. I believe this is an excellent strategy both economically and politically. For labour it should help shore up the green vote, it takes the green card away from the liberals and the conservatives and it helps the UK's reputation abroad.

Economically, it will put UK firms and UK technology at the forefront of what can only be a booming economic sector. By taking a first mover advantage UK plc will be well positioned.

Whether this particular scheme makes economic sense is another question entirely. Could the investment be better made elsewhere? How to the costs compare to the alternatives (nuclear)? Id the technology up to it? Have the negative "eye sore" effects been correctly costed by environmental economists? Will the "NIMBY" protests be too great and create too much bad publicity for the government?

Giant offshore wind farms to supply half of UK power [Times Online]

Britain is to launch a huge expansion of offshore wind-power with plans for thousands of turbines in the North Sea, Irish Sea and around the coast of Scotland.

John Hutton, the energy secretary, will this week announce plans to build enough turbines to generate nearly half Britain’s current electricity consumption. He will open the whole of Britain’s continental shelf to development, apart from areas vital for shipping and fishing.

The scheme could see turbines so large that they would reach 850ft into the sky, nearly 100ft taller than Canary Wharf. Each would be capable of powering up to 8,000 homes.

Britain’s current range of coal, gas, nuclear and other power stations are capable of generating 75 gigawatts (GW) of electricity, but less than 0.5GW comes from wind. Planning consents have been granted for a further 3GW and the government had already made clear it wanted this raised to 8GW.

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Econ101 in 1 minute

In case anyone missed it.

First year economics in 1 minute. Excellent.



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Krugman, Rodrik and Johnson blogs

I have eventually got round to adding 3 (relatively) new blogs to the blogroll of "globalisation and the environment".

Dani Rodrik's blog

Unconventional thoughts on economic development and globalization

Paul Krugman's blog

and finally,

Simon Johnson's blog

Simon Johnson's blog offers comments about economic research and the global economy around the time of the IMF's Annual Meetings, and provides an informal discussion forum around those subjects.

All three blogs look more generally at issues related to globalisation although Krugman tends to comment more widely these days.

Krugman's early work on international trade and increasing returns is cited all over my late 1990's PhD thesis while Rodrik's work appears to be cropping up all over my recent China research.

Incidently, if anyone is in Nottingham, UK, TODAY then pop in to see Dani Rodrik give a the World Economy annual lecture (apologies for the short notice).

Thursday October 18

Public Lecture
The World Economy Lecture on 'Saving Globalisation from its Cheerleaders'
Room A48, Sir Clive Granger Building
5pm
Professor Dani Rodrik, Professor of International Political Economy (Harvard University)
For further details please contact:
Julie Freer
T: 0115 9514763
julie.freer@nottingham.ac.uk
www.gep.org.uk

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Environmental Tax on Polluters in China

In tomorrow undergraduate Environmental Economics lecture we will cover pollution taxes.

It is timely therefore that China are now considering the implementation of a pollution tax on polluters.

The question is how do they know at what rate set the tax - what in other words is the "optimal tax" level?

China Considers Environmental Tax on Polluters [Planet Ark]

BEIJING - China is considering an environmental tax on polluters to cut emissions, a senior government official said on Monday.

"We are actively promoting this idea. But we have to consult with relevant ministries," Pan Yue, deputy head of the State Environmental Protection Administration, told reporters on the sidelines of the ruling Communist Party's five-yearly Congress.

Beijing has put environmental protection at the centre stage of its macro policies guiding the world's fourth-largest economy to achieve sustainable growth, though analysts are skeptical when it comes to implementing the well-intented rules.

Pan did not give details on the scope of the tax levy or a timeframe when such a new policy would come into effect.

President Hu Jintao, speaking earlier on Monday to delegates at the 17th Party Congress, said China's economic growth has come at "an excessively high cost of resources and the environment." He vowed to improve the pricing mechanism for scarce resources to account for environmental costs, among other market factors.

Already the world's top emitter of sulphur dioxide, which causes acid rain, China will overtake the United States as the biggest producer of greenhouse gas carbon dioxide this year or next.

China said last month that it would take environmental costs into account in electricity pricing, to encourage power generation using clean and renewable resources.

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