A Meta-analysis Investigation of the Direction of the Energy–GDP Causal Relationship: Implications for the Growth-Degrowth Dialogue

A new paper by Kalimeris et al. is the third meta-analysis of the energy GDP causality literature. The previous two studies are Chen et al. and, of course, our own paper in press at the Energy Journal. This paper covers more studies in fact than either of the previous two papers, 158, but the number of individual tests analyzed is not much greater than in our study. Like Chen et al. the authors only classify results according to the direction of causality and not the magnitude or significance of the test statistics.

The authors attempted to use "Rough Set Data Analysis", which attempts to find decision rules in poorly defined data sets. The results show that there are no well supported conclusions about causal directions in the meta-sample. The main method used in the paper is like Chen et al. a multinomial logit regression analysis. Using this approach, Kalimeris et al. find, as we did too, that the cointegration techniques are more likely to find causality in some direction than are other techniques. This makes sense as there must be Granger causality in at least one direction in order to find cointegration between the variables. But they could not come to any general conclusions about the direction of causality.

Cost Concepts for Climate Mitigation

A new paper in Climate Change Economics by Paltsev and Capros lays out the different metrics one can use to assess the costs of climate change mitigation. The main content of the paper has been around for a while in working papers and a book chapter, which I have cited previously. The paper makes the following points inter alia:

• Total costs of abatement depend on both the marginal cost and the amount of emissions abated, as we discussed in our paper linked above.
• In a second best world where there are existing distorting taxes, the costs of abating emissions are greater than simply integrating the area under a marginal abatement cost curve.
• Terms of trade effects are very important at the macro-economic level. For example, as we are finding in our current research using the G-Cubed model, the loss of GDP in OPEC countries under a climate mitigation policy would come more from the reduction in demand for oil then from domestic abatement efforts.

My Year in Review 2013

This was a year of further consolidation and was less eventful academically than 2012, which I also reported was more of a following through on things planned in 2011. It certainly wasn't boring though! And there is plenty to report.

This was my second and final year as research director at Crawford. Renée McKibbin will be taking over from me in 2014. One success this year was getting Megan Poore hired on a continuing contract as HDR (higher degree by research = PhD) academic skills adviser. She continues to do an amazing job working with PhD students in the School. Also our annual PhD Conference was the biggest and best ever, with more than 200 registrations. Megan guides the PhD students in organizing the conference. Coinciding with the end of my term as research director, Robyn Walter, our HDR administrator, will be retiring. As I also wrote last year, Robyn has done a fantastic job of keeping everything running smoothly in this space at the Crawford School (we have about 120 PhD students), dealing with all aspects of student applications, scholarships, milestones etc. I really appreciated having such an experienced staff member to help me through these two years in my role, which made my life so much easier than it might have been.

Canberra in Google Earth 3D Building View

I formally published two journal articles this year. One was the paper on standard errors for journal impact factors published in the Journal of Economic Literature. The other was the paper on Granger causality in the long-run energy GDP dataset for Sweden coauthored with Kerstin Enflo and published in Energy Economics. I also published a very short book chapter. I do also have a paper published already in a 2014 issue of Climatic Change and we have another paper in press at the Energy Journal. We also have a couple of papers under review. So, already there is a good chance of publishing more papers in 2014 than in 2013. And of course the Working Group 3 contribution to the IPCC 5th Assessment Report will be out in 2014 and there will a couple more book chapter style pieces.

Work continued on the research funded by the ARC grant we were awarded in 2011. We hired Yingying Lu as a postdoc to work on CGE modelling with the G-Cubed model. Following Astrid Kander's visit to Canberra last year, in September I visited Lund for two weeks. As this grant will end in early 2015, it's now time to apply to the ARC for another grant. Zsuzsanna Csereklyei will be visiting Canberra in January and February and working with me on developing a proposal focusing on energy efficiency. We've also been working on a paper that hopefully we can soon put out as a working paper.

I gave presentations at two conferences - one was the First International Workshop on Econometric Applications in Climatology in Guelph. The other was the ANZSEE meeting here in Canberra. Actually here in the Crawford Building, which is why I didn't write that I went to two conferences :) Besides those, the only non-teaching presentation I gave was to a visiting delegation from the Ho Chi Minh National Academy of Politics and Public Administration about research assessment.

I attended my last IPCC meeting of this assessment cycle, this time in Addis Ababa, Ethiopia. This was my first trip to Africa south of the Sahara. I also visited Kenya after the meeting in Ethiopia. Spain and Israel also featured in the trip and there were plane changes in Germany, Turkey, and Abu Dhabi as well...

On the teaching front, I taught the Energy Economics course for the second time - in the second semester. Chris Short, Hugh Saddler, and Paul Burke were again guest lecturers. I also again taught an introductory microeconomics course - Economic Way of Thinking I and I again gave a series of three lectures in our flagship CRWF 8000 course in the first semester.

My most popular blogpost that I wrote this year was one on my paper on uncertainty in journal impact factors. Of course, that was near the beginning of the year and so has had plenty of time to accumulate hits...

Some things lined up for 2014, which I haven't already mentioned above, include:

• Both Yingying and I and many other of our colleagues will be at the AARES meeting in Port Macquarie in early February. Yingying will present a paper on the first results from our CGE research. I am supposed to talk about "Rethinking the Emissions-Income Relationship in Terms of Growth Rates".
• There will be another research trip to Sweden as required by the terms of our grant.
• Astrid Kander will be visiting Sydney in February to collaborate with researchers at UNSW on embodied emissions in trade. This work emerged from discussion at the seminar she gave when she visited ANU in 2012. Jack Pezzey and I plan to meet with her there to work on our next paper in preparation for a presentation he will give at the Economic History Society meeting in the UK.
• Then there are a bunch of conferences in mid-year that we plan to submit abstracts to. The biggest is the World Congress of Environmental Economics in Istanbul. In 2013 I didn't get out of the airport in Istanbul, so 2014 will hopefully present progress on that front :)
• The deadline for the special issue of Energies on "Energy Transitions and Economic Change" will be in July and we hope to get the first articles online during 2014.
• I should be more involved with the ANU Energy Change Institute this year. I will be serving on the executive committee and assisting in convening the Masters of Energy Change from the social science side.
• I'm also hoping to increase my pace of research after completing my term as research director and maybe even write more posts on this blog than this year.

 

Granada, Spain (and me)

Data from Stern and Kaufmann (2014) Climatic Change Posted on My Website

As I've already had a couple of requests for the data, I have posted the data from our forthcoming paper in Climatic Change on my website.

Cuts to ARC Funding, Strategic Research Priorities

In yesterday's mid-year budget update, the Australian government announced cuts to ARC funding. $103 million will be cut over a 4 year period and diverted instead to medical research. This actually amounts to about 3% per year of the ARC budget. So, it's not as bad as one might think at first.

Back in June the government announced new Strategic Research Priorities to replace the previous National Research Priorities. I heard that these may be undergoing some revision. We'll only get new funding rules and instructions for all schemes in January. But I think we should assume that we will need to address these new priorities in ARC proposals to be submitted in the upcoming rounds at the beginning of 2014.

11/12/13

Americans won't appreciate this, but I just realised while signing my name that today is the last day this century where the date can be written as three numbers one apart in order. For countries which list the year first it's 13/12/11. For Americans December, 13, 2014, will be the last such day this century.

Researchers Work Times Vary Around the World

If downloading papers from Springer = working then this paper by Wang et al has fascinating evidence on when researchers are working around the world. They got several days data on downloads of academic articles from Springer by location and time of day and composed download curves across the day for both weekdays and the weekend. Most of the cultural stereotypes hold up - late lunch in Spain and almost no lunch break in the US and UK. Australians tend to have a more defined workday than other English speakers. Americans, Chinese, and British work particularly hard at the weekend compared to other countries.

Blunt Instruments

"Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth" by Samuel Bazzi and Michael Clemens is an interesting read. I have long thought that it is hard to find valid instrumental variables in macroeconomics, this paper provides lots of evidence for this.

So-called "endogeneity" of explanatory variables in regression analysis is mainly due to the following:

• Reverse causality - Feedback from the dependent variable to the explanatory variable.
• Omitted variables bias - When variables that are correlated with the included variables and the dependent variable are excluded from the regression, the included variables are attributed as explaining too much or too little of the variance in the dependent variable.
• Measurement error - When there is error in measuring the explanatory variables their regression coefficients tend to be biased towards zero.

All of these lead to correlation between the explanatory variables and the true underlying error term (but by design not to the actual estimated regression residuals). One approach to dealing with these issues is instrumental variables regression where variables that are correlated with the explanatory variables but supposedly not with the true residuals are introduced. The instrumental variable estimates effectively only use the part of the explanatory variables associated with the variation in the instrument in estimating the regression coefficient. Bazzi and Clemens point out that there are many pairs of econometric studies that claim to have found the same strong and valid instruments for different explanatory variables but don't include the explanatory variables included in the other studies in their models. If a study finds an instrumental variable is strongly correlated with an explanatory variable and it is used as an instrument in another study that doesn't include the explanatory variable in question then the instrument must be invalid as it will be correlated with the error term. Bazzi and Clemens show that many studies published in top journals suffer from these problems.

Of course, there is much more in the paper, but I think that is the key point.