Irreversible environmental damage or the Kuznets turning point?

It seems that China has polluted so much that the Yangtze river has had damage that is irreversibility, according to the BBC.

It seems that around 14bn tons of waste are believed to be dumped into the river each year. Furthermore, the river’s aquatic life had been seriously affected, with the annual harvest of aquatic products falling from 427,000 tons in the 1950s to 100,000 tons in the 1990s, the report found. According to the article, the impact of human activities on the Yangtze water ecology is largely irreversible.

While this might seem to be irreversible, it might, just might, be the start of a process of environmental degradation that affects human well-being might actually be reduced. This, in theory, is similar to the Kuznets curve theory. However, this environmental degradation might not necessarily affect human well-being initially.  

As mentioned by Globalisation and the Environment, with continued global warming, things may not improve any time soon. Tunnelling through the environmental Kuznets curve will be much harder than many people actually think although this is a priority.

Emissions, security, dilemmas and tourism

- Carbon dioxide emissions from large UK generators seem to be increasing much more than expected.  

- The effect that climate change might have on future security threats is being discussed in an upcoming international conference, and of course by David Miliband. 

- An environmentalist’s dilemma: organic, local or fair trade? The trade-offs are endless!  

While this is all doom and gloom, a recent working paper suggests that developing countries can tunnel through the environmental kuznets curve and not have to go through the same emissions profile as the developed world.  

And finally, from a Richard Tol working paper:

climate change may result in many origin countries (i.e. the UK) having a climate closer to their optimal temperature, which combined with a preference, ceteris paribus, for domestic tourism, would result in a reduction in international tourism. Moreover, as a warmer climate becomes the norm, the tourists may also become more particular about their holiday destination climates.

I’ll have to buy a house on the south coast as land prices will obviously increase in the future!

Carbon targets

Well they have finally arrived after much wrangling. The UK is to bring in carbon targets which the government must achieve every 5 years. These targets are to be set by an international panel of experts.  

The set-up is very much like an independent central bank, whereas the government is now the one who has to achieve the target not an ‘environmental policy committee’. However, if the government reneges on their target (that is, goes over the target), then they will be taken to court. “Hmm, so what” one might say. The government might lose some reputation in going over the target but would that be enough incentive not to renege – probably not. 

Furthermore, there will be complications as to the correct target level. Inflation is very different carbon, in that we know much less about the latter than the former. So choosing the correct carbon target would be tricky. I suppose this brings in many of the aspects from the Stern debate regarding discounting and how long is the long-term. 

I suppose these issues will crop up again in the future but I just do not think the government realises how big a problem it will be to set the correct level of the target. Furthermore, this format might not incentivise the government to reduce carbon below the target. This is because punishment for reneging must hurt and must be feasible, as it is in the monetary policy case. However, for these targets, punishment cannot be binding, hard hitting and therefore feasible in practice.   

See here for more.

Update: Apparently, the government can go over their target by 50% just as long as they buy back the carbon from other (probably developing) countries, which could be a cheaper option. This is a bit like carbon offesetting at the international level but with the possibility of not letting developing countries to emit. Hmm, this scheme is not really binding at all and potential moral issues here too on equity of emissions.

Want to see environmental economists interrogated on the economics of climate change?

And I mean Lomborg, Tol, Helm, Grubb, etc, well check out these minutes from the House of Lords select committee on economic affairs. 

You can find out everything about from the Integrated Assessment Models of PAGE, FUND, and the IPCC’s model, to whether a life in the developed world should be valued the same as one in the developing world.  

It really is a good read, quite fascinating in some aspects – although it is a very long document. Lomborg and Tol start at around page 63.  

There are some great quotes, such as Lomborg arguing that Kyoto is inefficient, so that: 

it would make much more sense, instead of trying to get countries to do what is essentially not in their own private interests, to get them to invest in research and development, especially of renewables, to make sure that renewables get cheaper a little sooner, so that by 2050 renewables actually will be cheaper.  

He goes on:  

It seems to me a little that investment in renewables—although it is very hard to show with economic models—will be much more efficient than, for instance, doing Kyoto. Just if we could move forward a few years to the time when we shift over to renewables around mid-century, it would have a greater impact on the climate than if we all did Kyoto.

What a great research question - would £1bn investment in renewables be more efficient than the Kyoto agreement?

A new ‘Institute for Climate Change’

Imperial College London has launched a new climate change research centre after a £12million grant from the Grantham Foundation. 

This is the largest private funding given to climate change in the UK and will contribute to the world’s response to climate change by stimulating a research drive to develop mitigation techniques, and by impacting directly on public and private policy. 

It is hoped that the Grantham Institute for Climate Change will add to the ranks of universities putting research efforts into climate change - including Oxford University’s Environmental Change Institute and the Climatic Research Institute at the University of East Anglia. 

I just hope that part of the recruitment agenda will be to employ some good economists working in the economics of climate change and environmental economics more generally. 

Story here and here.

Environmental economics conference

UKNEE, the UK Network of Environmental Economists, is holding its 2007 conference at the Royal Society in London on the 23^rd of March. This conference aims to bring together environmental economists from academia, consultancy and public and private sectors to foster closer relationships, follow recent developments and share experience.  

There are some great papers lined up this year with contributions from Hugh Metcalf - Estimating a Value of a Life Year from Air Pollution Reduction; and Ian Bateman - Preference learning versus coherent arbitrariness: Contrasting NOAA guidelines with a Learning Design Contingent Valuation (LDCV). 

Click here to register for this day long conference.

“Rationality” is the London tube map

A new economics blog by the BBC economics editor Evan Davies has an interesting post about the re-released book Irrationality by Stuart Sutherland:

The assumption of rationality in economics is like the map of the London Underground: it strips out the complexity of the system, to illuminate the essence of it.

Of course, in practice we err, but it’s still useful to know what we would do if we were rational.  

And then we can read books like Stuart Sutherland’s to understand some of the ways life is in truth more complicated. Just we look at proper street maps once we’ve navigated our way round the Tube system.

A nice little example to show what rationality is supposed to represent in economics. However, it is always more complicated than that as many environmental economists would know, e.g. the anomalies from eliciting monetary values for non-market goods.

Adair Turner on the Stern report

On the 7^th February, Adair Turner gave a lecture on “The Economics of Climate Change”. This was organised by the Sustainable Development Commission at the Savoy Place in  London. Adair is the current Pensions Commissioner, but he has a known interest in climate change and the long-run growth of economies.   

Click here for the audio files for the lecture.

Fancy some February green reading?

If yes, then Friends of the Earth would like to hear from you.  They’ve recently launched a new online bookshop and would like feedback from the green community.

If you answer their very short 10 questions, you get the chance to win over £150 worth of environmental books.  Click here http://www.foe.co.uk/shop

Back to the future to increase well-being and decrease environmental degradation

A new ‘Energy Saving (Daylight) Bill’ (pdf) is to be put forward in the House of Commons, which would advance the clocks in England by one hour for an experimental period of three years. So in the winter, England will be GMT+1 hours and in the winter, GMT+2 hours (same as Continental Europe – a change in legislation has also happened in the U.S.). 

The reason for this bill is to reduce crime and pollution, boost tourism, improve health and reduce accidents. The evidence for the latter comes from an experiment in 1968-1971 where the UK retained summer time (GMT+1) throughout the year. This resulted in fewer road traffic accidents. There is supposed to be around at least 100 lives saved each year by increasing the clocks one hour forward.

If we take this alone, and say that the value of a statistical life is around £1.4 million (taken from the Health and Safety Executive), this bill could at least provide benefits of £100.4 million per annum. That is quite a lot and would probably cover the transaction costs and the costs from sleep problems alone. If we include the benefits from reduced crime and CO₂ emissions, this proposal would probably pass a cost-benefit test, in that the benefits outweigh the costs.

However, the only problem is that the evidence on deaths comes from around 40 years ago. There have been dramatic changes in lifestyle and commerce since that last experiment that raise serious questions about extrapolating conclusions from then into today’s world. 

Furthermore, this decision is to be devloved to the Welsh, Scottish and Northern Irish goverenments, which might not actually implement this policy - especially with the current debate as to whether Scotland should be granted independence from Westminster altogether. Therefore, we could end up with the result that England will always be ahead of these regions in terms of time. I guess this is one of the main problems with devolution, in that policies which are implemented to reduce environmental degradation are not consistent across the regions and therefore could possibly hinder the effect that the UK as a whole has on reducing its negative impact on the environment.   

Nevertheless, this is an interesting example of governments trying to increase human well-being (through the increased health and leisure time, and reduced crime and deaths) at the same time to produce beneficial environmental outcomes.