Inflation in China

As a follow up to my post on consumer price inflation in the US here are trends in the last couple of years in China:



Credit: CEIC.

Whereas the US chart showed the levels of price indices this chart shows the rate of inflation. Inflation is China is currently at 4.9%. The fastest rising category is food, which has a much bigger budget share than the in the US, as is typical of developing economies. In contrast to the US, the cost of housing is rising quite strongly too. Inflation in China is not much of a surprise given the policy of undervaluing the RMB (relative to market equilibrium). This tends to be inflationary. One way of understanding things is that what matters is the real exchange rate not the nominal one. Though the nominal exchange isn't adjusting to make prices more equal in China and its trading partners the real exchange rate is adjusting through higher inflation in China than in the developed economies.

For more commentary on China, inflation, exchange rates etc see Michael Pettis' blog.

Synthesizing Diesel Fuel Using Cyanobacteria

A US firm called Joule has bioengineered cyanobacteria to secrete diesel or ethanol. The picture above is from the Washington Post version of the story and shows panels containing the organisms. But as is the case with other recent inventions the economics are not yet clear. The company claims they could produce fuel at $30 per barrel - a third of the current price of crude oil. They also claim that they can produce 128 tonnes of fuel per hectare. Yields of grain crops are usually measured in single digits of tonnes per hectare... Even so, I computed that it would take the area of California, Japan, or Sweden to supply the world with the current level of oil consumption.

Consumer Price Inflation in the USA

The graph shows the increase in consumer prices over the last decade for the eight subcategories in the consumer price index (CPI) in the US and energy. Energy isn't a separate subcategory in the CPI but is included in the transport and housing categories. As you can see, energy prices are very volatile but have increased by more than other spending categories over this decade. The graph gives the impression that prices are still rising but yet the headline inflation figure for the US is very low. This is because housing has a more than 40% weight in the CPI and the cost of housing has been declining since 2008.

Visit the article I took the graph from for more charts and information including a stunning chart of college tuition and fees...

IAmScientist Again

I finally added a profile to IAmScientist, which I mentioned a long time ago in what turned out to be my most popular post.

I was impressed by how it found links to my publications on the web. The site then generates an abstract for each publication. But it doesn't generate links to those publications on the web. You have to upload a copy to IAmScientist.

Also its communication and friending features seem much more limited than those of Academia.com and I couldn't add html code to my page linking to my website. So it is a way to create a quick academic website but it is a bit limited beyond that.

2011 Ecological Economics Reviews is Published

The 2011 edition Ecological Economics Reviews has been published. Ecological Economics Reviews is an annual special issue of the Annals of the New York Academy of Sciences - a special issues only journal. This edition includes my paper "The Role of Energy in Economic Growth".

There are 12 articles in total and there are a lot of Australian authors!

Peter Wood (ANU): Climate change and game theory

Clem Tisdell (UQ): Core issues in the economics of biodiversity conservation

Natalie Stoeckl (JCU) et al.: The economic value of ecosystem services in the Great Barrier Reef: our state of knowledge

David Stern (ANU): The role of energy in economic growth

Barry Shelley (Brandeis): What should we call instruments commonly known as payments for environmental services? A review of the literature and a proposal

Colin Richardson (Imperial C., London) Jerry Courvisanos (U. Ballarat) and John W. Crawford (U. Sydney): Toward a synthetic economic systems modeling tool for sustainable exploitation of ecosystems

David Murphy (SUNY, Syracuse) and Charles Hall (SUNY, Syracuse): Energy return on investment, peak oil, and the end of economic growth

Elisabetta Magnani (UNSW): Environmental protection, inequality, and institutional change

Philip Lawn (Flinders U.) Is steady-state capitalism viable? A review of the issues and an answer in the affirmative

Lisi Krall (SUNY, Cortland) and Kent Klitgaard (Wells C.): Ecological economics and institutional change

Paul Epstein (Harvard) et al.: Full cost accounting for the life cycle of coal

Bhim Adhikari (UNU, Hamilton, Ontario) and Karthik Nadella (McMaster U.): Ecological economics of soil erosion: a review of the current state of knowledge

Clearly a key theme is institutional change that might be needed for sustainable development, which is addressed by the papers by Magnani, Law and Krall and Klitgaard. Institutions are of course also prominent in the paper by Wood on game theory and climate change. In particular, Magnani looks at labor market institutions, which were also the focus of the recent book by Tim Jackson.

Submitted Comments to the ERA Public Consultation

I submitted some comments to the consultation. Of course, I recommended JEEM and the Energy Journal both be ranked A* and that the Energy Journal actually be included in economics (as it is published by IAEE). I also recommended that History of Political Economy be downgraded from A* to B, that International Journal of Urban and Regional Research not be included in economics, and Journal of Economic Issues be upgraded from C to B.

Any other things that should be commented on?

Public Consultation on 2012 ERA Journal List Now Open

The Australian Research Council (ARC) has opened public consultation on the list of journals for the 2012 ERA exercise. A lot of people were concerned with the anomalies in the 2010 list. So now is your opportunity to make your contribution to improving the next list.

Why "Jevons Paradox" is an Argument for Stronger Action on Climate Change not Weaker

The 19th century economist William Jevons suggested that improvements in the efficiency of energy use devices could increase energy use rather than reduce it. The more efficient machines etc. would reduce the cost of production thereby increasing the amount demanded and sold and, therefore, the energy used to produce the products. The rebound effect is a modern statement of this idea: "Efficiency improvements will reduce energy use by less than the efficiency improvement". In the case of consumers, the rationale is that efficiency improvements are equivalent to reductions in the price of "energy services" such as heating, lighting, air-conditioning etc. The law of demand tells us that this will increase the demand for these services and, therefore, for the energy used to produce the services. The size of this rebound effect is an empirical question.

There have been some articles in the popular media about Jevons' paradox recently. The Economist argued that we would be better off without lighting efficiency improvements because they will result in increased energy use and hence pollution. Roger Pielke argues that Jevons paradox tells us that we both need to increase energy efficiency and energy supply in the future. On the other hand, the Climate Progress blog tries to debunk the Jevons' paradox while admitting that the rebound effect is real.

Instead, I argue that the rebound/Jevons' effect tells us that the results of direct action on climate change are likely to be disappointing. Efficiency improvements would need to be bigger than the desired savings in energy use. But, by contrast, a cap on carbon use would eliminate the "carbon rebound effect" due to efficiency improvements. We really do need improvements in energy efficiency as part of the solution to climate change and they make us better off. But a carbon price can be part of a more effective policy.

Atmospheric CO2 Concentrations During Ancient Greenhouse Climates were Similar to those Predicted for A.D. 2100

That's the title of a paper published last year by Breecker et al. in the Proceedings of the National Academy of Sciences (Also see the commentary on the article). The key figure is this:



The yellow band are previous estimates of atmospheric CO2 concentrations based on calcium carbonate in ancient soils. The revised estimates from this paper are marked in red and are more in agreement with estimates from other sources. There is still a lot of uncertainty in these estimates as indicated by the one standard deviation band.

Because these estimates are lower they suggest that given estimated past temperatures the climate sensitivity to increased greenhouse gas concentrations is higher than would be the case given the yellow data. These new data suggest that the climate sensitivity for doubling carbon dioxide is greater than 3°C. This is what I found in my own time series analysis of data from the last two centuries (See this or this and this). Other research also increasingly seems to support long-run climate sensitivities above the often referenced 3°C.

Australia's 2010 Emissions Projection Released

The Department of Climate Change and Energy Efficiency has released projections of Australian GHG emissions till 2020-30. They project that emissions will increase by 1.8% p.a. from 2010 to 2020. This is much faster growth than from 1990 to 2010. The reason is that reductions in land-clearing offset strong growth in other emissions in the latter period. And now there isn't much ability to reduce land-clearing further in the upcoming period.



The underlying assumption is that GDP will grow at 3.0% p.a. over the 2010-20 period, which implies that emissions intensity will decline at 1.2% p.a. In the 1971-2007 period I examined in my Environmental Economics Research Hub project, energy intensity declined by 1.0% p.a. in Australia. So this number does look plausible as a BAU figure.

ARC Decision Process

This looks to be good advice about how the ARC (Australian Research Council) decision process works. It's a couple of years old but I don't think there have been major changes in this time frame.

CCEP Working Papers in January 2011

We had a fairly disappointing number of abstract views/downloads this month. But we didn't put up any new papers and it is the middle of the summer here in Australia.

Researcher ID to be More Integrated into Web of Knowledge

Researcher ID allows researchers to "claim" their articles on the Web of Knowledge. Though you can view a researcher's profile if you know their ID number or they provide you with a link, this feature hasn't been integrated with the citation index.

Thomson-Reuters plan to change this. The integration is pretty superficial at this stage. Only when you go to an article's full details will you see links to the Researcher IDs of authors. And to search for an author's publications you'll need to know there Researcher ID. It would make a lot more sense to be able to enter "stern d" and get back a list of Researcher IDs with that name or when authors claim an article for the Researcher ID to be hyperlinked to their name on all methods of displaying the article as RePEc does.

ERA Report Released

The ARC (Australian Research Council) has released the ERA report (Excellence in Research for Australia). I've blogged before about this process. The Australian newspaper provides a graphic of the ranking of universities:



ANU comes top and Melbourne second which isn't a surprise. UQ is third though which is higher than many may have expected. Melbourne is top ranked in economics though. That isn't what RePEc says. Melbourne got a 5 for economics which means "well above the world average" while ANU got a 4 "above world average". Economics in Australia as a whole got 2.2 which is "below world average". Here is the full ranking for economics:



The biggest surprise for me here is the low ranking of Wollongong and to some degree Curtin.