Climate change has been good - so far - but its getting worse

So says Richard Tol in this new research paper that uses the FUND3.6 model to examine the impact of climate change in the 20th century.

So what is the punchline - overall climate change has been good for the world (on average).


The Economic Impact of Climate Change in the 20th Century

Date: 2011-02

By: Tol, Richard S. J.

URL: http://d.repec.org/n?u=RePEc:esr:wpaper:wp376&r=env

The national version of FUND3.6 is used to infrapolate the impacts of climate change to the 20th century. Carbon dioxide fertilization of crops and reduced energy demand for heating are the main positive impacts. Climate change had a negative effect on water resources and, in most years, human health. Most countries benefitted from climate change until 1980, but after that the trend is negative for poor countries and positive for rich countries. The global average impact was positive.

Keywords: Climate change/impacts/Impacts of climate change/Human health

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Communicating Climate Change

Climate sceptics remain "sceptical". The "significant" chance of "catastrophic environmental, social and economic consequences" during the next 100 years barely registers on the public's list of concerns.

Kevin Parton and Mark Mossison investigate.

This is an interesting topic of debate.


Communicating Climate Change: A Literature Review
Date: 2011
Parton, Kevin
Morrison, Mark
URL: http://d.repec.org/n?u=RePEc:ags:aare11:100693&r=env

For climate scientists, climate change is a problem that has a significant chance of having catastrophic environmental, social and economic consequences during the course of this century. In contrast, public opinion seems to regard with scepticism the pronouncements on climate change that emanate from the scientific community. Why the difference? This is what our research project was designed to examine. Or to put it another way: Assuming that the scientific information is correct, and that without a dramatic change in technology (and policy to promote such a change) there would be a significant risk of man-made, global catastrophe, what must be done to communicate this urgent issue to the public? We have approached the analysis of this problem by reviewing the literature on communicating climate change. By organising the literature according to the role of the major groups of participants in the information transfer process, useful insights can be gleaned. These groups include scientists, business, the government, the media and the general public. This analysis leads to an overall model of the information transfer process that highlights various issues including the role that the media plays as a lens through which the public observes scientific results.

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Is "degrowth" the future?

The "strategy of “degrowth” has appeared as an alternative to the paradigm of economic growth."

That makes logical sense but if a government were to pursue an active policy of "degrowth" we had better nail down exactly what it means.

Luckily the latest issue of Ecological Economics (a post-normal science journal) has the answer.

It appears to be that "a-growth" is better than degrowth. Now I need to find out exactly how to define "a-growth".

Environment versus growth — A criticism of “degrowth” and a plea for “a-growth”

Jeroen C.J.M. van den Berghlow

Abstract

In recent debates on environmental problems and policies, the strategy of “degrowth” has appeared as an alternative to the paradigm of economic growth. This new notion is critically evaluated by considering five common interpretations of it. One conclusion is that these multiple interpretations make it an ambiguous and rather confusing concept. Another is that degrowth may not be an effective, let alone an efficient strategy to reduce environmental pressure. It is subsequently argued that “a-growth,” i.e. being indifferent about growth, is a more logical social aim to substitute for the current goal of economic growth, given that GDP (per capita) is a very imperfect indicator of social welfare. In addition, focusing ex ante on public policy is considered to be a strategy which ultimately is more likely to obtain the necessary democratic–political support than an ex ante, explicit degrowth strategy. In line with this, a policy package is proposed which consists of six elements, some of which relate to concerns raised by degrowth supporters.

In defence of "degrowth" we have the following paper which makes it clear that degrowth is a "a radical political project that offers a new story and a rallying slogan for a social coalition built around the aspiration to construct a society that lives better with less."

Sounds great. Count me in.

In defence of degrowth

Giorgos Kallis

Abstract

This article defends the proposal of sustainable degrowth. A starting premise is that resource and CO2 limits render further growth of the economy unsustainable. If degrowth is inevitable, the question is how it can become socially sustainable, i.e. a prosperous and stable, rather than a catastrophic, descent. Pricing mechanisms alone are unlikely to secure smooth adaptation; a full ensemble of environmental and redistributive policies is required, including – among others – policies for a basic income, reduction of working hours, environmental and consumption taxes and controls on advertising. Policies like these, that threaten to “harm” the economy, are less and less likely to be implemented within existing market economies, whose basic institutions (financial, property, political, and redistributive) depend on and mandate continuous economic growth. An intertwined cultural and political change is needed that will embrace degrowth as a positive social development and reform those institutions that make growth an imperative. Sustainable degrowth is therefore not just a structuring concept; it is a radical political project that offers a new story and a rallying slogan for a social coalition built around the aspiration to construct a society that lives better with less.

Is ecological economics becoming a "post-normal" science

Some paper titles cannot be ignored especially when I am not entirely clear what it means. The title suggests that ecological economics is (1) a science and (2) normal.

So far so good. Ecological economics is a normal science (not a social science?).

However, now we have to worry that it is becoming post-normal or perhaps that is a good thing. It appears to hinge on the empirical content of the paper. A regression in a paper appears to be post-normal.

In that case, all my EE papers have contributed to this big push into post-normality and now I feel a little guilty. In fact my et al. from the previous post is an EE paper.

Time to investigate further.

A bibliometric account of the evolution of EE in the last two decades: Is ecological economics (becoming) a post-normal science?

Manuela Castro e Silvaa and Aurora A.C. Teixeira

Abstract

In ecological economics the debate on formalism and formalization has been addressed in the context of a lively discussion on ecological economics as a ‘post-normal’ (versus ‘normal’) science. Using ecological economics (EE) as a ‘seed’ journal and applying bibliometric techniques to all (2533) the articles published in EE from January 1989 to December 2009, we analyze the evolution of the field of ecological economics aiming to shed light on this debate. We observe the predominance (and increased relevance) of certain research topics: ‘Methodological issues’, ‘Policies, governance and institutions’ and ‘Valuation’. Moreover, ‘Collective action’, ‘Technical change and the environment’ and ‘Values’ stand as emergent themes of research. Finally, we note that ecological economics experienced an ‘empirical turn’ reflected in a shift away from exclusively formalized papers towards exclusively empirical and, to a larger extent, ‘formal and empirical’ ones. The combination of the prominent and emergent topics and the ‘empirical turn’ mirrors the increasing awareness among researchers in the field of the need to address a key specificity of ecological economics — the interdependence of the economic, biophysical and social spheres. On this basis, we argue that at least through the lens of EE, ecological economics has evolved towards a post-normal science.

Keywords: Ecological economics; Bibliometrics; Research trends; Methodology; Post-normal science

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"Environmental Substance Abuse"

A truly astonishing piece of work in which the author Mark Atlas proceeds to do a pretty convincing hatchet job on a very large number of applied "environmental economics" papers (550) including one of mine :-( (I am part of an et al).

It is hard to argue with much in the 715 pages (and over 4,000 footnotes) from what I have read so far.

Anyone doing applied environmental economics has to at least attempt to read some of this report.

Thanks to Aquanomics (a very fine new "...nomics" to add to my collection) for the hat tip.

The Aquanomics article on this topic is certainly worth a read for its "academic bun fight" report.

It is very impressive that Atlas went to the lengths he has gone to in this paper (and his post reported in Aquanomics). This paper deserves to be read by anyone purporting to be an environmental economist.

Back to the report......where does something like this get published? A little long for JEEM unfortunately.

My papers will never be the same again...

Environmental Substance Abuse: The Substantive Competence of Social Science Empirical Environmental Policy Research[LARGE PDF]

Mark K. Atlas
affiliation not provided to SSRN
December 22, 2010

Abstract:
In a 2002 article, social science scholars criticized legal scholars for violating empirical analysis principles in law review articles. Their review of hundreds of empirical law review articles led to a pervasively grim assessment of these articles and their authors, concluding that empirical legal scholarship was deeply flawed, with serious problems of inference and methodology everywhere. In essence, the 2002 article argued that although legal scholars’ articles might be substantively competent (i.e., knowledgeable about the law and facts), they were, at best, methodologically incompetent.

This Report reverses the 2002 article’s focus, assessing the substantive competence of social science empirical research articles, ignoring their methodological competence. This Report focuses on about 550 social science articles from peer-reviewed journals since the 1960’s that used quantitative research to study United States domestic environmental policies and practices. The 2002 article examined aspects of law review articles at which legal researchers might be deficient but at which social science researchers should be competent. This Report does the opposite by focusing on what legal researchers should be most expert – determining the relevant laws, government policies, and facts. Consequently, just as the 2002 article evaluated whether law review articles violated empirical research rules, this Report evaluates whether social science environmental policy articles were incorrect or incomplete about the relevant laws, government policies, or facts.

Although the 2002 article concluded that every empirical law review article was fatally flawed methodologically, this Report does not conclude that every social science environmental policy article was fatally flawed substantively. However, the overwhelming majority of those articles were substantively uninformed, amateurish, shoddy, and/or deceptive. Anyone with a basic understanding of the environmental laws, policies, facts, and/or data relevant to any particular article would conclude after only a brief review that the article was seriously flawed. Unfortunately, social science journals publishing environmental policy articles have been like runaway trains of invalid research that keep picking up new passengers. This Report explains in detail the substantive problems with each of these articles.

JEL Classifications: K23, K32, K41, K42, Q25, Q28
Working Paper Series

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Health effects of climate change

When writing an environmental economics paper one always needs to provide motivation and there is nothing better than some scary numbers on the health and mortality impacts of climate change.

These numbers are real and it is important that as economists we try to relate economics to the real world. I have used the WTO quote before and will probably do so again.

This new working paper by Grasso, Maera, Chiabai and Markandya provides a good survey of the literature.

The Health Effects of Climate Change: A Survey of Recent Quantitative Research [PDF]

In recent years there has been a large scientific and public debate on climate change and its direct as well as indirect effects on human health. According to World Health Organization (WHO, 2006), some 2.5 million people die every year from non-infectious diseases directly attributable to environmental factors such as air pollution, stressful conditions in the workplace, exposure to chemicals such as lead, and exposure to environmental tobacco smoke. Changes in climatic conditions and climate variability can also affect human health both directly and indirectly, via changes in biological and ecological processes that influence the transmission of several infectious diseases (WHO, 2003). In the past fifteen years a large amount of research on the effects of climate changes on human health has addressed two fundamental questions (WHO, 2003). First, can historical data be of some help in revealing how short-run or long-run climate variations affect the occurrence of infectious diseases? Second, is it possible to build more accurate statistical models which are capable of predicting the future effects of different climate conditions on the transmissibility of particularly dangerous infectious diseases? The primary goal of this paper is to review the most relevant contributions which have directly tackled those questions, both with respect to the effects of climate changes on the diffusion of non-infectious and infectious diseases. Specific attention will be drawn on the methodological aspects of each study, which will be classified according to the type of statistical model considered. Additional aspects such as characteristics of the dependent and independent variables, number and type of countries investigated, data frequency, temporal period spanned by the analysis, and robustness of the empirical findings are examined.

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"Economists, time to team up with the ecologists!"

A very fine title for a paper and this one is newly published in Ecological Economics.

The abstract seems to be blaming economists for a lack of interdisciplinary work. Economists get accused of this from virtually every discipline from what I can make out.

I am all for such joint work. Apparently ... "the easiest candidates for interdisciplinary teamwork in bioeconomics are therefore researchers who acknowledge ethical relativism."

I am not sure if I qualify or not but it sounds like I should acknowledge it.

For those less familiar with what ethical relativism actually is Answers.com and dictionary.com write as follows:

Ethical Relativism is operating in a system of situational ethics. Thou shalt not steal, unless you get a chance to steal from a big corporation, the government or someone you don't like. You are faithful to your wife, except on business trips, when everybody cheats, right? Basically, it means being comfortable with shifting your ethics to meet the situation. I try to maintain my ethics in all situations, however though I believe in thou shalt not kill, ants, flies and roaches die if I find them in my house and if you break into my home and come up the stairs, you are a direct threat to my family's safety and I will blow you away with little to no warning. But since I know these are my ethics, family before thief, I do not consider that a case of situational ethics.
Also see "moral relativism".

or

In ethics, the belief that nothing is objectively right or wrong and that the definition of right or wrong depends on the prevailing view of a particular individual, culture, or historical period.

Do economists as a general rule reject ethical relativism? My guess is that we would be all for it. Sounds good to me.


Economists, time to team up with the ecologists!

Hilde Karine Wam

Department of Ecology and Natural Resource Management, Norwegian University of Life Sciences, Box 5003, 1432 Ås, Norway

Abstract

Bioeconomic modeling is an increasingly relevant meeting arena for economists and ecologists. A majority of the growing literature, however, is written by economists alone and not with ecologists in true interdisciplinary teamwork. Physical distance between research institutions is no longer a reasonable justification, and I argue that, in practice, neither do the more fundamental philosophical oppositions present any real hindrance to teamwork. I summarize these oppositions in order of increasing magnitude as: 1) the axiom, held by many ecologists, of ‘irreducible complexity of ecosystem functioning’, which is avoided simply because the ecological ‘whole’ (as opposed to its ‘parts’) is not an element of most realistic modeling scenarios; 2) the axiom, also held by many ecologists, of ‘the precautionary principle’, which mainly surfaces at the applied end of natural resource management, and thereby should not prevent economists and ecologists from jointly building the models necessary for the final decision making; and 3) the economists' axiom of ‘the tradability principle’, which is harder to overcome as it demands value-based practical compromises from both parties. Even this may be solved, however, provided the economists accept non-marketable components in the model (e.g. by using restriction terms based on ecology), and the ecologists accept a final model output measured in terms of monetary value. The easiest candidates for interdisciplinary teamwork in bioeconomics are therefore researchers who acknowledge ethical relativism. As bioeconomics presently functions mainly as an arena for economists, I say the responsibility for initiating interdisciplinary teamwork rests most heavily on their shoulders.

Keywords: Ecological economics; Intrinsic; Nature; Management; Philosophy; Wildlife

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"Reality used to be a friend of mine"

I have often thought that the relationship between academic economics and reality can appear tenuous not least when I am in sitting through another hard core theoretical economics seminar and the 23rd slide of complicated looking equations appears on the screen.

On a more trivial level I have always wanted to use "reality used to be a friend of mine" as a blog post title although I forget where this quote comes from now.

Harald Uhlig (Chicago) takes a look at this relationship in a non-technical way (phew). He looks at important issues not least whether economics is a "science" or an "art".

Economics and Reality

Harald Uhlig
University of Chicago - Department of Economics

September 2010

NBER Working Paper No. w16416

Abstract:
This paper is a non-technical and somewhat philosophical essay, that seeks to investigate the relationship between economics and reality. More precisely, it asks how reality in the form empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play? What is the current state of affairs, what are the successes and failures, what are the challenges? I shall tackle these questions moving from general to specific. For the general perspective, I examine the following four points of view. First, economics is a science. Second, economics is an art. Third, economics is a competition. Forth, economics politics. I then examine four specific cases for illustration and debate. First, is there a Phillips curve? Second, are prices sticky? Third, does contractionary monetary policy lead to a contraction in output? Forth, what causes business cycles? The general points as well as the specific cases each have their own implication for the central question at hand. Armed with this list of implications, I shall then attempt to draw a summary conclusion and provide an overall answer.

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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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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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"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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Trade, Biolfuels and the environment

Within the globalisation and the environment family comes the introduction of biofuels into a Hecksher-Ohlin framework.

This is a potentially useful addition to the trade literature.

The Economics of Trade, Biofuel, and the Environment

Hochman, Gal, University of California, Berkeley and Ben Gurion University, Isreal;
Sexton, Steven, University of California, Berkeley;
Zilberman, David D., University of California, Berkeley and Giannini Foundation

Abstract
The introduction of renewable biofuels was associated with global food crisis and unintended environmental consequences. This paper incorporates energy environment and agricultural sector to the classic Hecksher-Ohlin model to address these issues. A household production function model was introduced to model consumer energy choices and concern about externalities related to climate change and open space. The conceptual model links energy and food markets and derives guidelines for the development of climate change and land-use policies. The results suggest that globalization and capital flows increase demand for energy, leading to decline in food production, increase in food prices, and loss of environmental land. Globally optimal outcomes may require introducing an emission tax and a land-use tax. The introduction of these policies may undermine the factor price equalization theorem. Policies that allow enhancing either agriculture productivity (e.g., agriculture biotechnology) or biofuel productivity (e.g., second-generation biofuels), are shown to lessen the resource constraint associated with the cost of introducing renewable energy.

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Migration and climate change

One of the main "negatives" associated with climate change are the potential costs from mass migration as thousands or millions of people move to avoid the worst ravages of changes in the climate and sea level rises.

The following World Bank policy paper might be of interest to get an academic perspective. I am not sure I believe that the risk of violent conflict is minimal although the fact that the majority of forced migration will occur in developing countries is self evident.

Accommodating Migration to Promote Adaptation to Climate Change [PDF]

Jon R. Barnett

Michael Webber

World Bank Policy Research Working Paper No. 5270

Abstract:
This paper explains how climate change may increase future migration, and which risks are associated with such migration. It also examines how some of this migration may enhance the capacity of communities to adapt to climate change. Climate change is likely to result in some increase above baseline rates of migration in the next 40 years. Most of this migration will occur within developing countries. There is little reason to think that such migration will increase the risk of violent conflict. Not all movements in response to climate change will have negative outcomes for the people that move, or the places they come from and go to. Migration, a proven development strategy, can increase the capacity of communities to adapt to climate change. The fewer choices people have about moving, however, the less likely it is that the outcomes of that movement will be positive. Involuntary resettlement should be a last resort. Many of the most dire risks arising from climate-motivated migration can be avoided through careful policy. Policy responses to minimize the risks associated with migration in response to climate change, and to maximize migration's contribution to adaptive capacity include: ensuring that migrants have the same rights and opportunities as host communities; reducing the costs of moving money and people between areas of origin and destination; facilitating mutual understanding among migrants and host communities; clarifying property rights where they are contested; ensuring that efforts to assist migrants include host communities; and strengthening regional and international emergency response systems.

Keywords: Population Policies, Climate Change Mitigation and Green House Gases, Health Monitoring & Evaluation, Climate Change Economics, Voluntary and Involuntary Resettlement

4th World Congress of Environmental and Resource Economists - G&E are in the house

Good news from the inbox. I have not been to Canada before - I don't expect that Montreal has any good "tar sands" to look round while I am there.

Happy to meet up in Montreal with any readers/bloggers that are left given my shoddy posting frequency rate of late.

Hopefully the Icelandic volcano that has grounded planes in the UK today will have blown itself out by then (and mitigated climate change at the same time).

Dear Dr Robert Elliott:

We are happy to inform you that your paper, TRADE, ENVIRONMENTAL REGULATIONS AND INDUSTRIAL MOBILITY: AN INDUSTRY-LEVEL STUDY FOR JAPAN (Reference No: 37), has been accepted for presentation at the 4th World Congress of Environmental and Resource Economists that will be held at the Université du Québec à Montréal, June 28-July 2nd, 2010. We received more than 1700 submissions and the selection process has been highly competitive. Congratulations.

Presenters have to be registered by April 30th, 2010, in order for this decision to become effective and their paper to be included in the program. April 30th is also the deadline for early (lower fee) registration.

My current research with Toshi Okubo (Kobe) and Matt Cole (Birmingham) uses firm level data for Japan - so far, so good for the results.

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The Green Paradox II - too much oil?

Today is "Green Paradox" day.

Following on from Rick Van der Ploeg comes a new paper from Reyer Gerlagh (Tilborg). Incidently, both presented papers at the University of Birmingham last year (although not these papers).

Both papers suggest the green paradox could be an illusion or more accurately not a paradox at all. As I rule I am a fan of paradoxes so it is a shame to see another one bite the dust.

Too Much Oil

Reyer Gerlagh
Tilburg University - Center and Faculty of Economics and Business Administration


February 25, 2010

FEEM Working Paper No. 14.2009

Abstract:
Fear for oil exhaustion and its consequences on economic growth has been a driver of a rich literature on exhaustible resources from the 1970s onwards. But our view on oil has remarkably changed and we now worry how we should constrain climate change damages associated with oil and other fossil fuel use. In this climate change debate, economists have pointed to a green paradox: when policy makers stimulate the development of non-carbon energy sources to (partly) replace fossil fuels in the future, oil markets may anticipate a future reduction in demand and increase current supply. The availability of ‘green’ technologies may increase damages. The insight comes from the basic exhaustible resource model. We reproduce the green paradox and to facilitate discussion differentiate between a weak and a strong version, related to short-term and long-term effects, respectively. Then we analyze the green paradox in 2 standard modifications of the exhaustible resource model. We find that increasing fossil fuel extraction costs counteracts the strong green paradox, while with imperfect energy substitutes both the weak and strong green paradox may vanish.

Keywords: Green Paradox, Climate Change, Exhaustible Resources, Fossil Fuels

JEL Classifications: Q31, Q54
Working Paper Series


I am experimenting with the all new Amazon links which are now worth doing (as the hassle factor has been reduced considerably).

You have to love Peak Oil and it's partner in crime "Hubbert's Peak".



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Is There Really a Green Paradox?

Rick Van der Ploeg (Oxford) is working on a number of interesting areas.

The green paradox is important and often over looked.

"The Green Paradox states that, in the absence of a tax on CO2 emissions, subsidizing a renewable backstop such as solar or wind energy brings forward the date at which fossil fuels become exhausted and consequently global warming is aggravated."

Seems obvious - is there a solution?

Is There Really a Green Paradox?

Rick Van der Ploeg
University of Oxford; European University Institute - Economics Department (ECO); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR)

Cees Withagen
Free University of Amsterdam; Tilburg University

February 2010

CESifo Working Paper Series No. 2963

Abstract:
The Green Paradox states that, in the absence of a tax on CO2 emissions, subsidizing a renewable backstop such as solar or wind energy brings forward the date at which fossil fuels become exhausted and consequently global warming is aggravated. We shed light on this issue by solving a model of depletion of non-renewable fossil fuels followed by a switch to a renewable backstop, paying attention to timing of the switch and the amount of fossil fuels remaining unexploited. We show that the Green Paradox occurs for relatively expensive but clean backstops (such as solar or wind), but does not occur if the backstop is sufficiently cheap relative to marginal global warming damages (e.g., nuclear energy) as then it is attractive to leave fossil fuels unexploited and thus limit CO2 emissions. We show that, without a CO2 tax, subsidizing the backstop might enhance welfare. If the backstop is relatively dirty and cheap (e.g., coal), there might be a period with simultaneous use of the non-renewable and renewable fuels. If the backstop is very dirty compared to oil or gas (e.g., tar sands), there is no simultaneous use. The optimum policy requires an initially rising CO2 tax followed by a gradually declining CO2 tax once the dirty backstop has been introduced. We also discuss the potential for limit pricing when the non-renewable resource is owned by a monopolist.

Keywords: Green Paradox, Hotelling rule, non-renewable resource, renewable backstop, global warming, carbon tax, limit pricing

JEL Classifications: Q30, Q42, Q54
Working Paper Series

ØDEGÅRD - sustainable business strategy

Now the Department of Economics in the University of Birmingham is now part of the Birmingham Business School following a recent strategic merger I need to start thinking "sustainable business strategy".

This new blog will form part of my research.

The blog has a lot of pictures. I guess this is what I would have expected from a more business orientated blog.

This is something that this and the daddy of environmental economics blogs "Env-econ" are still sadly short of and I suspect this has something to do with them being written by economists although I note that each Env-Econ post now has a picture of the actual economist in colour after each post. This is a little scary.

I fear I cannot subject globalisation and environment readers to such an assault on their senses.

ØDEGÅRD

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The economic value of "TEETH"

Glancing at the previous work of Matthew Neidell (see previous post) I noticed he had published the paper called "The Economic Value of Teeth".

Matthew sounds like my kinda academic. One of the best paper titles I have seen for a while. How I missed this back in 2008 I don't know.

The result - good teeth influences earnings. This is a US study where I expect the teeth quality variation is fairly low. In the UK on the other hand the average teeth quality must be much lower and hence there should be a much higher variance.

The Economic Value of Teeth

Sherry Glied
Columbia University - Mailman School of Public Health; National Bureau of Economic Research (NBER)

Matthew Neidell
Columbia University; University of Chicago - Department of Economics and CISES

March 2008

NBER Working Paper No. W13879

Abstract:
Healthy teeth are a vital and visible component of general well-being, but there is little systematic evidence to demonstrate their economic value. In this paper, we examine one element of that value, the effect of oral health on labor market outcomes, by exploiting variation in access to fluoridated water during childhood. The politics surrounding the adoption of water fluoridation by local water districts suggests exposure to fluoride during childhood is exogenous to other factors affecting earnings. We find that women who resided in communities with fluoridated water during childhood earn approximately 4% more than women who did not, but we find no effect of fluoridation for men. Furthermore, the effect is almost exclusively concentrated amongst women from families of low socioeconomic status. We find little evidence to support occupational sorting, statistical discrimination, and productivity as potential channels of these effects, suggesting consumer and employer discrimination are the likely driving factors whereby oral health affects earnings.

JEL Classifications: I12, I18
Working Paper Series

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Temperature and the Allocation of Time: Implications for Climate Change

It is all about getting the right instrument these days.

This looks like an interesting paper (having not read it yet).

I am not yet convinced that working patterns will change with temperature changes especially where every company has air conditioning.

Even the quote from the abstract I find a little odd. It must relate to the definition of "climate". Are we all not exposed to climate all the time? How can one have a low exposure to climate?

"We find large reductions in U.S. labor supply in industries with high exposure to climate and similarly large decreases in time allocated to outdoor leisure."

I guess I need to read the paper to find out.


Temperature and the Allocation of Time: Implications for Climate Change

Joshua Graff Zivin
University of California, San Diego - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Matthew Neidell
Columbia University; University of Chicago - Department of Economics and CISES


February 2010

NBER Working Paper No. w15717

Abstract:
In this paper we estimate the impacts of climate change on the allocation of time using econometric models that exploit plausibly exogenous variation in daily temperature over time within counties. We find large reductions in U.S. labor supply in industries with high exposure to climate and similarly large decreases in time allocated to outdoor leisure. We also find suggestive evidence of short-run adaptation through temporal substitutions and acclimatization. Given the industrial composition of the US, the net impacts on total employment are likely to be small, but significant changes in leisure time as well as large scale redistributions of income may be consequential. In developing countries, where the industrial base is more typically concentrated in climate-exposed industries and baseline temperatures are already warmer, employment impacts may be considerably larger.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

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Trade In"Virtual Carbon"

An interesting new paper on virtual carbon (although when I see the world GTAP it depresses me).

One of the authors, Kirk Hamilton, will be visiting the University of Birmingham on Monday next week. He will be making a presentation at 5pm in Lecture Theatre G06 in the Business School entitled:

“Development and Climate Change: Main Messages and Selected Economic Insights from the World Development Report 2010”.

Everyone is welcome to attend. So any blog readers in the Birmingham area please pop along and way hello if you can recognise me.

Here is the paper:

Trade In'Virtual Carbon': Empirical Results and Implications for Policy

Giles Atkinson
London School of Economics and Political Science (LSE) - Department of Geography and Environment

Kirk Hamilton
World Bank

Giovanni Ruta
World Bank - Environment and Natural Resources Division

Dominique Van der Mensbrugghe
World Bank

World Bank Policy Research Working Paper No. 5194

Abstract:
The fact that developing countries do not have carbon emission caps under the Kyoto Protocol has led to the current interest in high-income countries in border taxes on the"virtual"carbon content of imports. The authors use Global Trade Analysis Project data and input-output analysis to estimate the flows of virtual carbon implicit in domestic production technologies and the pattern of international trade. The results present striking evidence on the wide variation in the carbon-intensiveness of trade across countries, with major developing countries being large net exporters of virtual carbon. The analysis suggests that tax rates of $50 per ton of virtual carbon could lead to very substantial effective tariff rates on the exports of the most carbon-intensive developing nations.

Keywords: Climate Change Mitigation and Green House Gases, Environmental Economics & Policies, Climate Change Economics, Economic Theory & Research, Environment and Energy Efficiency

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