Tuesday, December 30, 2014

My Year in Review 2014

I've been doing these annual reviews since 2011, they're mainly an exercise for me to see what I accomplished and what I didn't in the previous year. It is now a full year since I ended my term as research director at the Crawford School. As a result, it has been a really productive year research-wise :)

I published five articles in the following journals: PLOS ONE, Biomass and Bioenergy, Energy Economics, The Energy Journal, and Climatic Change, and we have a paper in press at The Energy Journal. We also released three working papers that aren't yet published: "Modeling the Emissions-Income Relationship Using Long-run Growth Rates", "Substitutability and the Cost of Climate Mitigation Policy", "Global Energy Use: Decoupling or Convergence". There are four more papers that we have sent for review but have not yet posted as working papers.

We also published our edited book of classic papers on the economics of climate change with Edward Elgar. There is also Chapter 5 of the IPCC Report on trends and drivers of emissions and a small piece on the environmental Kuznets curve and there is an updated review of the EKC, which will be published in the Elsevier Online Resources.

The release of the IPCC 5th assessment report in April was of course a big event and I appeared on TV and radio several times - first on the release day and then in some follow-up coverage on the supposed cover up in the Summary for Policymakers.

ABC News24

This was the final year of our ARC grant (actually, March 2015 is formally the end of the project). Astrid Kander visited Sydney in February to work with researchers at UNSW and Jack Pezzey and I went to meet up with her and work on our project. She rented a house for her and two other Swedish researchers close to Coogee Beach (and to UNSW), so it was a very nice research trip :) The weather wasn't quite as good when I visited Lund in November for a week!

Coogee Beach, Sydney

I also visited England and Germany on my October-November trip giving seminars at LSE, Lund, and University of Kassel. That was my third international trip of the year. In June-July I did a round the world trip including the IAEE conference in New York City, the Atlantic Workshop in A Toxa, and the World Congress of Environmental and Resource Economics in Istanbul. In September I attended the IAEE Asia meeting in Beijing as well as a workshop at Tsinghua University. The AARES Conference in Port Macquarie, NSW rounds off the conference list and I also gave a couple of seminars in Canberra in the first half of the year.

 Hagia Sophia, Istanbul

Two researchers visited me to collaborate - Zsuzsanna Csereklyei in January and February and Chunbo Ma in April. I wrote an ARC Discovery proposal with Zsuzsanna, which wasn't funded but we were in the top 10% of the unfunded proposals and so we'll give it another go. Chunbo came to work on the current ARC grant. We have now submitted a paper on substitution elasticities in China, which I presented at the Tsinghua workshop in September.

The special issue of Energies on "Energy Transitions and Economic Change", which I guest edited is now completed with fourteen papers are already published including the final paper by Astrid Kander and colleagues.

It was my last time teaching the introductory micro-economics class The Economic Way of Thinking 1. This course was great for the positive feedback I got from some of the students on the course. All the students are from developing countries and many are a bit "scared" of math and economics. After going through this course a lot of students feel much more confident dealing with this kind of material. In the coming year I will be teaching quantitative methods to environmental studies students instead. I also taught my energy economics course again and will continue to teach it in the future. It is being rebranded next year as an economics course, IDEC8029, instead of a general Crawford School course (CRWF8017).

It's hard to believe, but I posted more than 100 blogposts this year. The most popular was this one, a close runner-up is the post on the animated gif of energy use and growth, which we produced at James Hamilton's suggestion. I met Hamilton at the IAEE meeting in New York. I also got much more involved with Twitter this year. Mostly, I tweet my blogposts, but also tweet short items, which don't really need comment or analysis, that in the past I might have blogged about.

Energy and Growth: The Animated GIF

As always, it is possible to predict some of the things that will be happening in the coming year. I expect a couple more papers will get completed over the summer. Also, we are going to resubmit the ARC proposal, hopefully this time successfully. There will also be a couple of book chapters surveying the energy and growth topic. One for Palgrave. I've submitted abstracts to a bunch of conferences in Rotorua (AARES), Perth (at Curtin U), Leeds (ESEE), and Antalya (IAEE) and will likely submit to the EAERE conference in Helsinki. Not sure how many of these I can actually go to. Maybe my coauthors will present at some of them. Hopefully Donglan Zha will get funding to visit Crawford from the middle of next year.

Wednesday, December 24, 2014

Energies Special Issue Update

There are now thirteen articles in the special issue, which I edited. The latest two are by Peter O'Connor and Cutler Cleveland and Juliana Subtil Lacerda and Jeroen van den Bergh. There is only one paper still to be published, which is by Astrid Kander and coauthors. P.S. Astrid's paper was published two days after I posted this!

Wednesday, December 17, 2014

Global Energy Use: Decoupling or Convergence?

I have another new working paper coauthored with Zsuzsanna Csereklyei out titled: "Global Energy Use: Decoupling or Convergence?". This paper follows up on our paper on the the stylized facts of energy and growth using the methods from our paper on modeling the emissions-income relationship using long-run growth rates.
In particular, we focus on the stylized facts that there is a stable relationship between energy use and GDP per capita over time and that there has been convergence in energy intensity over time.

The following graph shows the relationship between the long-run growth rates of energy use and GDP per capita from 1971 to 2010:
As we saw in our previous paper, higher economic growth rates are associated with higher rates of growth in energy use, though there is quite a lot of variation in individual countries. As the intercept of the regression line is zero, on average there is no time effect that is reducing energy use across all countries in the absence of economic growth. On the other hand, many developed countries like the UK, Sweden, or even the United States have seen declines or little increase in energy use per capita in recent decades. So, what can explain that?

Our model adds additional explanatory variables to the regression illustrated above. To test whether there is decoupling, so that growth has less effect or even a negative effect on energy use at higher income levels we include an interaction term between the growth rate and level of income per capita. This is the same idea as the test for the environmental Kuznets curve in the Anjum et al. paper. We find that the regression coefficient for this interaction term is actually positive! So, actually growth has larger rather than smaller effects on energy use in higher income countries. However, we find that the level of income has a negative effect on the growth rate of energy use. This means that at higher income levels there is an improving energy efficiency effect so that energy use declines over time ceteris paribus. We call this "weak decoupling". The following graph shows the contribution of these and other effects to the growth in energy use in different groups of countries:
Though, as shown by the black dots, the growth rate of energy use  per capita is highest in upper middle income countries, the contribution of economic growth is greater in high income countries. But this positive effect of growth is offset by "weak decoupling" and other effects.

The most important of these other effects globally is convergence. Countries that had high energy intensities at the beginning of the period saw declines in energy intensity, ceteris paribus. But, this effect was most important in the low income countries, some of which were the most energy intensive in our sample in 1971. In the high income countries, convergence raised energy use on average. But in the US and Canada it contributed -1.0% and -0.9% p.a., respectively, to reducing energy use. So, there is a lot of variation across countries.

Projections and forecasts of future energy use should not, therefore, assume that economic growth will be associated with decreased energy use in the future. Instead, the scale effect seems to be alive and well. On the other hand, there appear to be improvements in energy efficiency across high income countries irrespective of their growth rates or their initial level of energy intensity. These would tend to moderate the growth in energy use as countries get richer at the upper end of the income continuum. At the lower end of the income continuum the same effects serve to raise energy intensity. But, some of the major reductions in energy intensity in countries, such as in the United States and China, have probably been the result of convergence towards the global mean, and so are unlikely to be reproduced in the future.

On the more technical side there are a couple of innovations in this paper too. We extend the method we used in the growth rates paper to allow for a spatially correlated error term. If there are omitted variables which are spatially correlated and the explanatory variables are also spatially correlated then it is likely that the two are correlated and regression coefficient estimates will be inconsistently estimated. To deal with this problem we use an approach called spatial filtering. This removes the spatial autocorrelation by adding additional variables to the regression which model the spatial process. These are in fact the eigenvectors of a transformation of the spatial weighting matrix. With 93 countries there are 93 eigenvectors, so the tricky part is deciding which of these eigenvectors to include in the regression. Tiefelsdorf and Griffith (2007) developed a procedure to do this, which we use.

Another issue is that if we want to give our model a causal interpretation, then we have to assume that GDP growth causes growth in energy use and not vice versa. Obviously changes in energy use might also cause GDP. We argue though that the latter effect is probably quite small compared to the effect of GDP on energy and so the estimated effect of GDP on energy is only biased upwards by a relatively small amount. The income elasticity of energy is likely to be close to unity whereas the elasticity of GDP w.r.t. to energy might be only 0.05. This is possibly one reason why it has been so hard for researchers to find robust signs of Granger causality from energy use to GDP. On other hand, this is maybe why a simple naive regression of GDP on energy use appears to find a very large effect of energy on GDP. The estimated regression coefficient is biased upwards by the effect of income on energy demand.

Tuesday, December 16, 2014

New Research Shows that Release of Carbon in PETM was More Gradual

Following up on my post last year on research that the PETM was probably caused by an impact. Latest research, published in Nature Geoscience, shows that, no, the release was much more gradual. I wonder how these two pieces of research can be reconciled?