Carlos Lopez

I just heard from Carlos Lopez, who recently got his PhD from Rensselaer in economics. I was his advisor for a year when he started at RPI, before I left for Australia. He is now working at the Instituto Nacional de Ecologia in Mexico doing research on integrated management of water basins. He also runs a blog in Spanish with some friends, which covers issues in environment and economics among other topics. I'm adding to the list of blogs here.

Add Papers to Your academia.edu Profile

Academia.edu is still I think a somewhat experimental social media website. It hasn't got a lot of momentum with faculty members yet - most of the participants are grad students. This is true at Crawford School too. 27 Crawford people are on academia.edu but there are only four faculty members and two post-docs among them. This is because I think the website is most useful for people who don't have an official university or personal website. They can create a profile and add their CV, papers etc. I hadn't bothered adding anything beyond a CV and a link to my own personal website.

Recently, I got an e-mail from academia.edu saying that they found some of my papers on the web and would I like to add them to my profile? I added them and since then have found a massive increase in the number of Google hits my profile on academia.edu is getting. So I think it is definitely worth adding papers to your profile.

ISEE 2012 Call for Papers

Abstracts are due by 15th November. At this point, I'm not planning on attending. The last ISEE meeting I went to was in Montreal in 2004. But that was far to travel. I have enough international travel to do anyway and it is during time when I'll possibly be needing to be teaching. But if you haven't been to one, it could be worth it. The first one I went to was Stockholm in 1992, the second conference I went to and I was on the organizing committee in Boston in 1996 and in Canberra 2000 when I was the main organizer. I also went to Sousse, Tunisia in 2002.

Shadow Reserve Bank Board

CAMA is running a pilot project where a panel of Australian economists pick the Reserve Bank interest rate that they think is appropriate a few days before each RBA interest rate setting board meeting. It's not meant to be a prediction of what the RBA will do, but an indication of what they should do. Each economist can give a range of interest rates with different probabilities. August's chart is here:



So if this group constituted the RBA board they would leave interest rates unchanged at 4.75%. The most recent inflation report was above the RBA's band for desired inflation but partly driven by shocks from things like banana prices. The non-mining economy really seems to be very weak at the moment as the exchange rate hits a post-float record against the USD above $US1.10. My guess is that they will remain on hold.

Ecological Economics Chapter

I've put up a complete draft of my article on ecological economics for the Encyclopedia of Environmetrics. Previously, I posted three sections of the article as blogposts. It's hard to cover everything relevant in the small number of words allocated. I've focused on controversy regarding what ecological economics is (transdisciplinary field, economics paradigm etc.) and on agreement on core principles among those who think ecological economics is something more than a sub-field within environmental economics. So there are lots of topics which people might think are core principles of ecological economics like "post-normal science", which I don't cover because there isn't much agreement on them.

Energy Economics Course

My proposal for a course titled "Energy Economics" was approved by the College of Asia and the Pacific education committee. The course will have the number CRWF8017 and we plan to offer it for the first time in the second semester of 2012. CRWF courses are graduate courses offered by the Crawford School that have no additional prerequisites beyond those required for admission to study in one of our masters degrees. So though this course is an economics based course, it won't assume much or any background in economics. I will though have high expectations for what students will be able to learn in the duration of the course. I currently plan to cover the following topics in the course:

1. Introduction – Energy trends and history
2. Energy and the economy including: Physical principles, energy quality, indirect energy costs etc., role of energy in growth
3. Evaluation tools for energy projects, technologies, and policies (CBA, energy analysis etc.)
4. Fossil fuels – in depth analysis of oil, gas, and coal resources. Covering geology, discovery, development, production, refining etc as well as world distribution of resources and reserves.
5. Non-renewable resource scarcity (Hotelling, Hubbert etc.), fossil fuel markets, market structure, and pricing.
6. Innovation, learning curve etc. needed to analyse alternative energy technologies
7. Renewable energy and nuclear
8. Energy efficiency and conservation
9. Energy, environment, and climate change
10. Energy and economic development
11. Energy policy and regulation with an emphasis on Australian policy
12. Future energy scenarios

The course will be available to all Crawford students and also feed into the planned Master of Energy Change program and other ANU graduate programs.

Why is Australia Trying to Control Greenhouse Gas Emissions?

There is a lot of misinformation floating around the blogosphere on the intentions behind Australia's recently announced climate change policy. A week ago, Stephen King listed a bunch of reasons for the policy, which does not include the true reason. And today there is a similar article on the Conversation from Paul Frijters. The real reason the government is acting is that following the Copenhagen conference in 2009 they pledged to cut emissions by 5% unconditionally. Of course, they are proposing a much more ambitious program than the opposition is because the Greens have forced them to do so. But the opposition also has a policy because they must do so to meet Australia's international obligations.

Frijter's article misinterprets what happened at Copenhagen, in my opinion, and as a result then criticizes the government's efforts to meet Australia's obligations. Though no comprehensive agreement was reached at Copenhagen, following the conference most countries in the world made pledges of what they would do to address climate change. Most developed countries including Australia made pledges to make absolute cuts in emissions. Australia promised a 5-25% reduction by 2020. The 5% reduction was unconditional on any action by other governments. So now the Australian government is trying to do what it pledged to do. The United States pledged a 17% reduction. The Obama administration is trying to address that (through EPA regulation) despite the obstruction of the Republican Party. China and India made pledges in terms of reductions in emissions intensity of GDP. India's goal was a 20-25% reduction and China's a 40-45% reduction. India's goal probably isn't much different to business as usual but China's is a real cut relative to BAU. Other developing economies made pledges to reduce emissions relative to what they would otherwise be under BAU. So it is completely wrong to assert that Australia is the only country taking action and that other countries including India will laugh at Australia.

Whether the government will meet its goal through this policy is another question. But the key thing is that after the initial 3 year period of a fixed carbon price there is planned to be a cap on carbon emissions. If the Liberals come to power under Abbott this will likely be dropped, I suppose, and even Labor may chicken out of it. But in theory this would have an impact even though not all emissions sources (but more than just electricity generation) are included.

Elasticities of Substitution and Complementarity

Finally, my article in the Journal of Productivity Analysis has received page numbers. The full citation is:

Stern D. I. (2011) Elasticities of substitution and complementarity, Journal of Productivity Analysis 36(1): 79-89.

The article is mainly a review/survey article that organizes the literature on elasticities of substitution. It also proposes a couple of innovations along the way and gives estimates of all the various elasticities for the famous Berndt and Wood data set. Hopefully, it will be another step towards people using the appropriate elasticity of substitution for the question at hand and not using Allen elasticities of substitution when there are more than two inputs. In the latter case, they are not very meaningful beyond their signs.

Google Scholar Citations

Google is launching a new service: Google Scholar Citations. Like Google+ the service is only available to a select invited few at the moment. It will allow users to update and correct their profiles much like the Author Search service in Scopus but it seems in a more user-friendly fashion. This will include merging multiple entries into a single article, a function provided by Publish or Perish. But of course, in Google's version this will make permanent changes to Google's database. This will help improve the quality of Google Scholar, which is still a very noisy bibliometric source.

This is Where I've Been Recently

I can't tell you anything about the IPCC meeting in Changwon City and so thought I'd post this instead. I did a day long tour from Seoul to various places near and in the DMZ including the above. I also gave a presentation at Korea Energy Economics Institute where my former student Sung Kim works since March. I talked about our study of energy and long-run growth in Sweden.

Institutions and History of Ecological Economics

Though modern ecological economics dates to the late 1980s, as a school of thought ecological economics has deep roots in thinkers who developed various forms of “biophysical economics”: Daly, Odum, Georgescu-Roegen etc. The book “Ecological Economics” by Juan Martinez-Alier documents this history [also Røpke, 1994].

The International Society for Ecological Economics (ISEE) was founded in 1988 following a meeting in Barcelona and discussions between ecologists and economists in the US and Europe – many in Sweden. In 2011 ISEE has 3049 members worldwide. There have been booms and busts in membership of ISEE over time. There are now local “chapters” of the international society in most regions of the world: Africa, Argentina and Uruguay, Australia-New Zealand, Brazil, Canada, Europe, India, Meso-America, Russia, USA. Their main role is to hold local conferences in the odd years. Europe is the largest chapter in terms of members, followed by the US and India.

The first president of the society was Bob Costanza, followed by Dick Norgaard, John Proops, Charles Perrings and Joan Martinez-Alier, Peter May, and Bina Agarwal.
The international society holds meetings every even year. These have been held in: Washington DC (1990), Stockholm (1992), San Jose, Costa Rica (1994), Boston MA (1996), Santiago de Chile (1998), Canberra (2000), Sousse, Tunisia (2002), Montreal (2004), New Delhi (2006), Nairobi (2008), Bremen-Oldenburg (2010).

The society’s journal, Ecological Economics, was founded in 1989 and has had three editors: Bob Costanza, Cutler Cleveland, and Rich Howarth. It is published by Elsevier. It is very successful and now receives hundreds of submissions each year, while publishing 273 articles in 2009. It is also increasingly cited - about matching the longer established JEEM – though the latter publishes fewer papers [Ma and Stern, 2006]. Edward Elgar and Island Press are probably the two largest publishers of ecological economics books. The journal Environmental Policy and Governance is now associated with ESEE.

Ecological economists have a stronger policy influence in regions outside the US and possibly have the greatest influence in Europe. Membership in the societies varies across regions. In the US most members are academics, students, and non-profits/NGOs. In Australia and New Zealand public service representation is strong.

There are numerous programs at universities all over the world, though not all are explicitly called ecological economics programs. RPI’s is perhaps the only one that is both titled “ecological economics” and is in an economics department.

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This is just a bunch of facts at the moment. Not sure what to do with this and how to incorporate it.

New Income Tax Rates

The tax free threshold is going up and so are 15 and 30% tax rates:



I can see why the higher marginal rates aren't being emphasized anywhere... The Henry Review argued for a $25,000 tax free threshold and two tax brackets - 35% and 45% with the top rate coming in at $180,000 per year income. So this goes quite a long way there. The low income tax offset will be reduced. Why didn't they just get rid of it and make things simpler.

You can download the complete climate policy here.

For more analysis of the changes in tax rates.

First Thoughts on the Australian Government's Climate Package

For those of you outside Australia, the federal government is announcing its planned climate change package today. They have the numbers in parliament to pass the legislation so we can expect this to actually happen this time. One surprise is the increase in the 2050 emissions reduction target from 60% to 80%. The carbon price will initially be $23 before a switch to carbon trading in 2015. After trading starts there will be a floor price of $15 for the first three years.

Some initial thoughts:

1. The tax free threshold for income tax is being raised to $18,200 from $6,000. That is massive. $2,000 less tax for every taxpayer who earns more than $18,000 a year. This shift to a higher tax free threshold was one of the things proposed by the Henry Review. But in effect the tax cut is much smaller due to a reduction in the low income tax offset and increases in tax rates. See my next post for more details.

2. Petrol won't be included in the scheme. Given the structure of the scheme which regulates emissions from the 500 largest emitting companies it's logical to exclude petrol. In the short-run this likely raises the costs of the scheme by focusing the reductions on a smaller group of emissions sources. In the long-run it probably doesn't matter as long as other countries drive innovation to develop alternative energy cars. Australia won't manufacture or use petrol driven cars if no-one else in the world does. This is similar to the fact that once major players had adopted lead free petrol other countries had to follow.

3. This package includes more complementary measures than Kevin Rudd's CPRS in terms of funding for renewable energy innovation and biodiversity funding and other things which balances the focus on just the 500 biggest emitters instead of the top 1000 under the CPRS.

4. Because of the structure of the Australian economy, a large share of energy use and carbon emissions is accounted for by the largest 500 emitters. This includes the electricity generation sector, airlines, and of course most heavy industry from BHP and Rio Tinto on down.

Musings on Ecological vs. Environmental Economics

One way of distinguishing between environmental and ecological economics is that environmental economics has a focus on price while ecological economics has a focus on quantity. Environmental economics focuses on market failures as the main determinant of environmental problems. Seen in terms of externalities, the problem is incorrect prices and the solution is implementing the right prices. In many cases these prices must be determined through research, hence the huge emphasis on valuation. Ecological economics sees environmental problems as being primarily problems of scale – that the scale of exploitation of natural resources and the production of wastes are both too large relative to the Earth’s carrying capacity. Therefore, ecological economists are more likely to analyze economic-ecologic systems in terms of quantities of flows of materials and energy. Tools of analysis include energy return on investment and the ecological footprint – both quantity rather than price indicators. Ecological economics focuses primarily on sustainability – equitable distribution of resources over time, while environmental economics focuses on efficiency – ensuring that marginal costs and benefits of activities are equal.

How much overlap is there between ecological economics as actually practiced and the mainstream economic field of environmental and resource economics? Ma and Stern (2006) addressed this issue by analyzing the content and citation patterns of the leading journals in each field – Ecological Economics and the Journal of Environmental Economics and Management (JEEM). They found that there is a significant overlap between the two fields at the journal level — the two journals cite similar journals. The main differences are that ecological economics tends to cite (but not be cited by) general natural science journals more often than environmental economics does, environmental economics cites more heavily from journals rather than other publications, and citations in environmental economics are more concentrated on particular journals and individual publications. However, there is much less similarity at the level of individual articles. Nonmarket valuation articles dominate the articles cited in papers published in JEEM while green accounting, sustainability, and the environmental Kuznets curve are all prominent topics in Ecological Economics. Michael Hanemann was the most cited author in JEEM, while Robert Costanza was the most cited author in Ecological Economics.

Over time, however, there has been a convergence between mainstream environmental and resource economics and ecological economics. This can be seen in the trends over time in topics covered in journal articles with a greater number of mainstream valuation articles published in Ecological Economics [Castro e Silva and Teixeira] and mainstream papers increasingly include more realistic biophysical features.

Postdoctoral Position with the International Forestry Resources and Institutions (IFRI) network

The International Forestry Resources and Institutions (IFRI) Network, located at the University of Michigan's School of Natural Resources and Environment, seeks a postdoctoral fellow for a one-year appointment beginning Fall 2011. The Postdoctoral Fellow will work under the direct supervision of Professor Arun Agrawal who coordinates the IFRI network.

The Fellow will conduct and support research for several existing projects on institutional and social dimensions of forest outcomes and climate adaptation, community forest governance, and land cover change. As necessary, the Fellow will also assist with the preparation of new grant proposals, coordination of IFRI field research, and organization of research workshops in national and international contexts. A combination of scholarly imagination and rigorous interdisciplinary empirical and analytical skills will provide applicants a competitive edge. Strong statistical training, experience working with complex social-ecological datasets, and some spatial analysis skills (GIS and Remote Sensing) are especially desirable. Qualified applicants may come from a range of fields, including Political Science, Public Policy, Geography, Sociology, Economics, Ecology, and Environment programs.

To apply, please send a 1-page cover letter, names of two recommendation letter writers, and a copy of a recent publication (all as a single file with your full name in the filename) to Joan Wolf. The initial appointment will be for a year, with the possibility of renewal for a second year contingent on satisfactory performance and final approval of funds.

We will begin reviewing applications August 15, and will accept applications until Sept. 1, or until the position is filled.

For more information on the IFRI research program.

EPA Modifies the US Sulfur Trading Program

From Richard Woodward posting on ResEcon:

"Some of you may have noticed in the news today mention of new regulations by the USEPA on SO2 and NOx emissions. The title of the articles could have been, "The SO2 trading program is dead. Long live the SO2 trading programs!"

Since many of us use the SO2 program as the epitome of what a trading program should look like and teach about it in our classes, I thought you might be interested in a quick overview of what led up to yesterday´s announcement and what it means for trading in the future. I am not an expert in this area, but have been watching these developments for some time.

Quick background:

2004. EPA determines that 28 states and DC contributed significantly to non-attainment in downwind states. This violates the Clean Air Act.

2005. EPA issues the Clean Air Interstate Rule (CAIR) with regional caps and a reduced aggregate cap. Trading continued under these rules.

2008. CAIR was challenged on a number of grounds (North Carolina v. EPA). Judge rules it does not comply with the Clean Air Act, which "requires states to limit emissions from sources that "contribute significantly" to non-attainment ... in downwind states."

July 2010. EPA issues the Transport Rule, a temporary fix to the problem. Trading of SO2 allowances appears to have stopped in May 2010.

July 7, 2011. EPA announces the final Cross-State Air Pollution Rule (CSAPR). From what I've read, CSAPR might be challenged, further delaying implementation of future trading. But if it goes ahead as planned, here's what we'll see.

CSAPR sets up four trading programs in place of the national SO2 trading program and the regional NOx programs. There are limits on the trading so that aggregate emissions from each state are capped, but I'm not entirely sure how this is ensured within the trading system.

Needless to say, there are a wide range of economic issues that deserve further analysis; I'm sure that the program will yield plenty of papers and dissertations. One aspect that I find interesting is that there is no phase in to this regulation -- SO2 allowances held by firms are retired without compensation.

You can access the complete document at EPA's web site."

Membership of the International Society for Ecological Economics

Doing some more work on my article on ecological economics. I was actually surprised to find that ISEE membership is at the strongest point I've seen it with 3049 members worldwide. There have been booms and busts in membership over time with particularly successful international conferences raising membership for a while and lots of changes of membership structure and location of the society organization. For example, in 2006 I only found 797 members listed, worldwide. Today, there are almost that many just in Europe. Europe does have the largest number of members. Back in 2004 the Brazilian chapter was biggest. Here is a chart organized by the regional "chapters":



"Other" are "at large" members who live in countries without a regional chapter. For example, Japan and China. A couple of things to note:

• There are very few members in Russia now, once a quite large chapter.
• Australia-NZ, Canada, and Argentina-Uruguay all have quite a lot of members - 202, 169, and 188 - relative to their population.

Portland State University Report Reveals Uncertain Costs, Risks of Mekong River dams

(Portland, Ore.) July 7, 2011 – The ultimate price tag of building 11 hydropower dams on the lower Mekong River potentially far exceeds the benefits to the region, according to a report released today from Portland State University and funded by the U.S. Agency for International Development (USAID).

View the full report and video presentation

The study accounts for gains through power generation, but also for the predicted loss of fish as a food source, reduced flood protection by wetlands and disruptions in many other natural services where the lower Mekong flows through Laos, Thailand, Cambodia and Vietnam, an area rich in biological diversity.

“There is a huge range of uncertainty in constructing these dams, and any future plans need to account for that,” said Robert Costanza, one of the authors of the report and Director of the Institute for Sustainable Solutions at Portland State University. “Plans also need to look at who would bear any negative costs. Is it developers, or the local cultures and communities?”

The net present value of constructing 11 dams was estimated to range vastly from a loss of $274 billion to a gain of $33 billion.

The report also suggests that aquiculture may not adequately replace loss to the natural fishery, a primary source of dietary protein for 60 million people that live in the region.

“Our aim is to contribute to the planning process to inform future work by the Mekong River Commission, an advisory body that coordinates the management of the Mekong’s resources. We hope that better, more integrated and participatory planning will improve the sustainable well-being of the Lower Mekong Basin and its people,” Costanza said.

Plans date back to the 1950s to build dams on the lower Mekong River, but none have come to fruition. Currently, proposals exist for at least 11 hydroelectric dams on the mainstream lower Mekong in Laos and Cambodia.

Two Post-Doc Positions Available to Work with Simon Hay/MAP at Oxford

My coauthor Simon Hay is looking to hire two post-docs to join their team at Oxford for up to four years. One post-doc will work on "Defining the population at risk and burden of disease of Plasmodium vivax malaria" and the other on "Global dengue occurrence – present and future". The positions are funded by the Wellcome Trust.

CCEP Paper Published in PNAS

Just a few days ago I was talking about Robert Kaufmann's paper in PNAS and now we have a paper there is another paper in the journal deserving of a mention on this blog. Alessandro Tavoni, Astrid Dannenberg, Giorgos Kallis, and CCEP research associate Andreas Löschel have a paper on experimental economics and climate change. An earlier version appeared as a CCEP Working Paper.

SD Card Speeds Up with More Data on it?

I recently bought an SD card to use to move data between my computers at home and on campus. I was a bit dissapointed at the speed of reading and writing to the memory. It took hours to upload all my data onto the card the first time around. But now I noticed that files seem to copy MUCH faster. I put this down to the data on the card now being organized and, therefore may be more of the faster "sequential" reading and writing was happening. I retested the card now and found it is faster on all functions than it was initially:



Strange, but good news.

h(5,2) - the Best Citation Metric for Economics?

Glenn Ellison has written a paper titled: "How Does the Market Use Citation Data? The Hirsch Index in Economics" on the use of Hirsch type citation metrics in economics. An author's Hirsch index is equal to h if they have published at least h papers cited at least h times.

Ellison argues that generally economists write fewer papers than natural scientists such as physicists so that some top economists have relatively low h-indices not because they aren't cited a lot but simply because they don't have a lot of papers that could be cited. So he thinks we should focus on a narrower set of highly cited papers. Ellison introduces h(a,b) indices where an author's index is h if they have at least h papers with a*(h^b) citations.

Ellison uses a sample of 166 relatively young economists from the top 25 U.S. departments using Google Scholar data. The average h-index in the sample is 18, the average h(5,2) index is 4.5, and the average h(10,1) index is 7. Ellison finds that the h(5,2) index predicts best what NRC ranked department an economist will be at though really there don't appear to be big differences in how well the indices fit the data and the h(10,1) index (Wu index) is about as good . This is in effect estimating the utility function of hiring decisions in top U.S. economics departments.

Using Google Scholar, as Ellison does, my h(5,2) index is 5 - 5 papers with at least 125 citations each. My Wu index is 10 and my regular h-index is 27. But I'm not a very typical economist...

CCEP Working Papers in June 2011

We continue to get a decent rate of hits this month. Frank Jotzo and Steve Hatfield-Dodd's paper "Price Floors in Emissions Trading to Reduce Policy Related Investment Risks: an Australian View" was added right at the start of the month and proved the most popular for the month.

Reconciling anthropogenic climate change with observed temperature 1998–2008

My colleague Robert Kaufmann (one of my PhD advisors and coauthor on several papers) has published a paper in the Proceedings of the National Academy of Sciences about the slowdown in global temperature increase between 1998 and 2008. The Guardian has pretty balanced coverage but all the bloggers I read seemed to be upset about it both people who support mainstream science and the climate change sceptics/deniers. Maybe that's a sign of doing something right? :) I talked for half an hour on Friday evening with a reporter from Science News about the paper though I don't get quoted in the report.

Joe Romm criticizes the authors for saying there was a period of flat temperatures when other data sources now show an increase for the period in question. There is more than one temperature series available and it is a fair point that they could have considered more than one data source. But the main point of the paper is that given the evolution of climate forcings over the period and inherent uncertainty the temperature series they look at is within the range of what you would expect to see. Actually, it tracks the model prediction quite well though temperatures were still colder than the expected value but within the confidence interval. So the sceptics claims that a halt in warming of this duration proves that anthropogenic climate change is rubbish is wrong.

Judith Curry who appears to be a climate skeptic also doesn't like it on the grounds that sulfur emissions didn't increase again from the their post-1980s decline until 2004 and that she thinks the authors aren't qualified. Based on the Smith et al. data, sulfur emissions hit a minimum in 2002 and increased by 9% by 2005. Actually, Robert has a pretty good background on climate change and James Stock is a leading econometrician.

The strangest claims are on WattsUpWithThis. They argue that either the paper is wrong (e.g. "it is out of date" because it only uses data up till 1998 to estimate the model!) or it proves them right that global warming is crap. In the comments people seem to be really confused about who even wrote this paper as well as the usual comments about government funding. The authors do thank the NSF but that is for a fellowship that presumably funded grad student Michael Mann. Kaufmann and Stock did the work as part of their jobs at private universities.

P.S.
Then there is this Fox News headline (via Climate Progress).