Direct Action vs. Carbon Pricing

There was an op-ed in yesterday's Australian Financial Review by Danny Price criticising the 59 economists including me who agreed to sign a statement in favour of carbon pricing and praising direct action. First, a clarification. By signing that statement we were not endorsing the previous Labor government's Emissions Trading Scheme. We were simply endorsing some pricing mechanism on carbon. Price criticises carbon pricing because of the "cost to the broader economy of any tax". Here he seems to be referring to the tax interaction effect. Where there are existing distorting taxes,  a new tax interacts with these and increases the costs of the new tax beyond the amount of the direct costs involved with abating pollution. The advantage of a carbon tax is that the revenue from the tax can allow the government to cut existing distorting taxes and reduce of offset this effect. This is known as a "green tax reform" and was much discussed in the so-called "double dividend debate". But imposing a regulatory cap on emissions (and issuing free tradeable permits) results in the same increased costs in the presence of existing distortionary taxes. So, this is why economists generally recommend auctioning emissions trading permits rather than giving them away.* This raises revenue allowing other distortionary taxes to be cut. Direct action is effectively a cap on emissions where the government subsidizes firms reducing emissions through a reverse auction. But this uses government revenue and doesn't allow the cutting of other taxes unless the government budget is cut drastically, which doesn't look like happening. If other spending isn't cut at all then the government will have to increase the existing distortionary taxes. So, direct action is worse than a carbon tax or traded permits on this basis. However, Price says that under direct action the government only imposes one dollar of costs on the economy for every dollar spent. This seems to be incorrect.

On top of that are the problems of the incentives for firms to inflate the baseline from which they claim they will reduce emissions.

So, I'm still in favor of carbon pricing of some sort though I think there are also important problems with emissions trading schemes that only provide a very volatile short-term price signal. The article by Ottmar Edenhofer in the latest issue of Nature Climate Change discusses some of these issues.

* I've argued that the Australian scheme failed because due to objections by the Greens, not enough free permits were given away allowing the scheme to be characterised as a "huge tax". The Australian scheme was less generous than the European scheme. But any such giveaway should be a transitory policy that would be replaced by more auctioning of permits over time.

Environmental and Resource Economics Journals

There aren't that many field journals in environmental, resource, and energy economics in the Journal Citation Reports:

REEP and JEEM are clearly the top journals in terms of article influence scores but Ecological Economics dominates the field as measured by Eigenfactor Score or total citations because it is a much bigger journal. JEEM is also ranked 48th among economics journals by Article Influence, so this whole field is not that highly ranked.

2013 JCR Released

The 2013 edition of Journal Citation Reports has been released. I don't like the new interface that was recently introduced and it wasn't obvious how to download data easily but then I discovered there was a button at top right to download everything you had results on at that point without selecting journals individually. So, now I figured that there will be more analysis coming. Anyway, here is the report for PLoS ONE, which is the journal visitors to my blog seem most interested in :)

Yes, the journal lost ground again on all impact metrics as has been expected. It still does fairly well for a journal that publishes so many papers. I have an article under review with submission number 40332 submitted on 16th July. So, using those numbers and last year's number of published articles we get an acceptance rate of 42%, which is likely to be an underestimate if the number of articles published is still rising.

Ed Prescott to Speak at ANU

Ed Prescott (Nobel Laureate in Economics) will give the Trevor Swan Distinguished Lecture at ANU on 13th August. The lecture will be titled: Neoclassical Growth Theory: From Swan to Now. The blurb says:

"The Swan 1956 growth model is the cornerstone of secular growth theory. To broaden the model to encompass aggregate business cycle fluctuations Kydland and Prescott added an aggregate household to explain investment- savings and labor-leisure decisions. With this addition, neoclassical growth theory came into existence. Extensions of this theory have proven successful in the study of stock markets, growth miracles, prosperities and depressions, alternative tax policies, and differences in aggregate labor supply across countries and time. Deviations from the predictions of this theory are puzzles to be resolved and their resolutions have advanced neoclassical growth theory."

Unfortunately, I have to teach at that time, but I am hoping it will be recorded and some people will ask some good questions. Some of Prescott's work on growth is pretty fundamental to our current research on economic growth and economic history.

Future of Solar

At the workshop in A Toxa I attended in late June, Richard Schmalensee presented findings of a yet to be released MIT report on the "Future of Solar". This will be part of their series on the future of energy. He was skeptical of how much of a role solar can play any time soon in addressing the climate issue. It's not clear that the costs of solar can come down a lot more when most of the costs are now in the non-silicon components. There is also the issue of rare materials needed for alternatives to silicon. Then there is the intermittency / storage issue. Yes, we keep hearing about storage breakthroughs, but they aren't yet commercial products. And even when they will be they will add further huge costs to the cost of solar. There is a need for new transmission infrastructure to the renewable locations. Electricity markets may need to be reformed again to handle the intermittent new renewables effectively.  Back in April, I noted that Ottmar Edenhofer stated that there was an increasing realisation of the difficulties of integrating renewable energy on a large scale into electricity supply systems. These are some of the issues alluded to and the reason that CCS and other alternatives are getting renewed consideration.

Essential Concepts of Global Environmental Governance Now Available

This book, which I contributed an entry on the EKC to, is now available from Routledge. There are some nice blurbs from well-known people:

"This volume provides an essential glossary of critical terms and concepts in the field of international environmental politics for diplomats, analysts and students. The interdisciplinary array of expert authors provide terse and authoritative overview of the key concepts and debates that have defined the field of international environmental governance over the years. The entries carefully survey the intellectual ecosystem of the concepts applied to understanding and managing our global environmental crisis." –Peter M. Haas, Professor of Political Science, University of Massachusetts Amherst, USA

"In a truly unique way, this book helps to connect the dots and navigate between the concepts, ideas and schools of thought in global environmental policy today. As environmental issues climb higher on the global agenda, I would highly recommend this book to all who wish to better understand the insights of sustainable global governance." –Connie Hedegaard, European Union Commissioner for Climate Action

"The global community is at a crossroads in respect to addressing climate change. A solid understanding of global environmental governance empowers people to better shape positive democracy that determines a safer future. This book makes a valuable contribution to societal understanding and societal change. Those who care about the world we leave to our children should take inspiration from its many and varied contributors drawn from so many disparate but interlocking disciplines." –Christiana Figueres, Executive Secretary, United Nations Framework Convention on Climate Change 

Henriques PhD Dissertation on the Energy History of Portugal Now Available on the Web

Sofia has posted her dissertation to Academia.edu. It includes the data. She studied in Lund with Astrid Kander and is now at the University of Southern Denmark.

Latest Journal Metrics Released

Elsevier have released the latest edition of their journal metrics - SNIP and SJR. There is also a new metric - Impact per Publication (IPP), which is just a simple three year impact factor. This time the Energy Journal has an SJR (1.533) but still no SNIP. That makes it the 120th ranked journal in economics. Energy Economics ranks 89th with an SJR of 2.025, and Resources and Energy Economics at 151st with an SJR of 1.274. There are 890 economics journals. Ecological Economics is 98th (SJR=1.91). The QJE is the top ranked economics journal (SJR=25.2), Econometrica is second (18.9), and Journal of Political Economy is third (18.5).

A Toxa Meeting Website

The website with links to recordings of all the presentations at the 6th Atlantic Workshop in A Toxa is now up. I presented our paper on modelling the emissions-income relationship using long-run growth rates. There are also a few pictures. I'm somewhere in the back row in this one:

Call for Papers: 2015 IAEE International Conference in Antalya

The call for papers has been released for the 38th International Conference of the IAEE in Antalya, Turkey in May 2015 (25th-27th). The conference will be held at a golf resort. Deadline for abstract submissions is 19th December.

Global Growth Rate of GDP and Energy Use

Another slide from Wednesday's opening lecture. It shows the tight correlation between the annual global economic growth rate and the growth rate of energy use. In all but one year, energy use grew more slowly than GDP implying a decline in energy intensity. That year was 2010 - the year of strong rebound growth in the global economy and energy use following the Great Recession in the US and Europe. We analysed these movements in our short 2012 paper in Nature Climate Change.

Top Twenty Carbon Emitters, Coal Consumers, and Coal Producers

Some slides from my upcoming introductory lecture for my Energy Economics course:

This slide uses CDIAC data on the top twenty countries by emission of carbon dioxide globally in 2010. Carbon dioxide emissions here include only those from fossil fuel combustion and cement production. I also have summed up the emissions from the European Union and added it as if it was a single country (as the EU negotiates as a bloc) in addition to including all its member countries in the ranking. The three big emitters stand out clearly from all the rest. Emissions are measured by mass of carbon. To get carbon dioxide multiply by 3.66.

 

Of course, coal use is a big driver of CO2. This chart shows how China consumers so much more coal than any other country and after the US and India, the rest look pretty inconsequential.

 

On the whole, coal is consumed where it is produced with two important exceptions - Indonesia and Australia - the two biggest coal exporters. China produces the overwhelming majority of the coal it uses despite large imports. The majority of Australian exports are coal for iron smelting, so-called "metalurgical coal".

Malthusian Trap

Some interesting blogposts from Nick Szabo on the Malthusian trap and the breakout to economic growth. Follow the link in the post back to previous blogposts.

Big in Japan

I don't think our book will be big in Japan even, but it's nice to see a flyer for it in Japanese :)

 

I am now back in Canberra finally and catching up with teaching prep and looking at the books that Elgar sent us as payment :P An interesting one is The Art and Practice of Economic Research, which Shuang selected for me from Elgar's catalogue. Twenty five leading economists were asked almost exactly the same questions about various aspects of their career and worklife. It's reassuring to read that many top researchers confess to bad time management and feeling overwhelmed, for example: "What I am doing is not even feasible let alone optimal".

In other news, we have quite a few new CCEP working papers on RePEc. I hope to do a bit more blogging in the near future if only based on material from revising my energy economics lectures.

Economists Statement on Carbon Pricing

My name is included in the list of economists supporting a statement on carbon pricing released by WWF Australia. The statement is a little vague I think to maximize the number of people who would be willing to sign up. I think a price on carbon is a very useful part of a climate change policy. It can provide an incentive for finding cost-effective solutions, which otherwise might not be found. I favor a carbon tax now over emissions trading but the statement leaves that open. This seems to be where mainstream opinion is now heading.

Help Fund a Cool Research Project

Pun intended :) A bit off the beaten path for this blog, but I did warn you it would be a random walk. Faruk Kececi is an online friend who unfortunately wasn't in Istanbul the week we visited. You can contribute money on Kickstarter.

Citation Prediction Story

We have put out a news story on my paper about predicting future citations.

World Congress of Environmental and Resource Economics

I am, like almost 1200 other participants, at the WCERE in Istanbul. Yesterday there was an interesting panel session on climate change with Jeffrey Sachs, Ottmar Edenhofer (who is apparently meeting the Pope today), Marianne Fay from the World Bank,  Laurence Tubiana - the new French climate change ambassador - and Carlo Carraro as chair. All the participants agreed that the new framework for climate change policy that will be established at Paris next year must make a break from previous agreements and pledges in consisting primarily of designing long-term transformation pathways rather than primarily short-term targets. Obviously, short-term steps will still be needed. The thinking behind this was best expressed by Marianne Fay. She showed a slide with a picture of the Freedom Tower in New York and a small cottage side by side. She asked: "If you wanted to build this tower, would the house on the left be a reasonable first step?" Similarly, we could ask whether shifting to natural gas is a reasonable first step to decarbonizing the economy. A long-term perspective is needed. Jeffrey Sachs made a point that spot carbon markets aren't an appropriate tool for long-term climate policy. The short-term price keeps fluctuating and there is no long-term futures market. Instead a predictably rising carbon tax is needed. Technology policies are also needed to complement the carbon price. The consensus is that this is where we should head.

Canberra is the Best Place to Live in the World According to the OECD

Australia is the best country and the ACT is the best region in Australia. I checked the OECD website, and giving equal weight to each of the criteria the OECD ranks, the ACT is the highest scoring region in the world. Of course, that is not how most Australians see it. I met an Australian woman at JFK airport last week while waiting to take the train and she asked me where I lived. When I answered: "Canberra", she said: "Why would you do that to yourself?"

Follow Up on "Energy and Economic Growth: The Stylized Facts" at Econbrowser

James Hamilton has a new post on Econbrowser based partly on our paper Energy and Economic Growth: The Stylized Facts which I recently presented at the IAEE meeting in New York. I'd add that oil use has been flat in recent years but that was compensated for by increases in the use of natural gas, coal, and renewables. So, recent data don't substantially deviate from our stylized fact.

Today, I arrived at A Toxa, an island in Galicia, in the northwest of Spain. It is really beautiful here. Tomorrow the 6th Atlantic Workshop on Energy and Environmental Economics
starts here. I am giving a presentation in the final session tomorrow on our paper on modeling the emissions-income relationship using long-run growth rates.

High-Ranked Social Science Journal Articles Can Be Identified from Early Citation Information

I have posted a new bibliometric working paper , which investigates how well we can predict future cumulative citations from the first citations received by a paper in the disciplines of economics and political science.

It is usually assumed that citations accumulate too slowly in social sciences apart from psychology to be useful for short-term research assessment. For this reason, the Australian Government’s Excellence in Research for Australia (ERA) exercise, which attempts to assess the research quality of universities in the previous 5 years, uses peer review in social science disciplines apart from psychology for this reason but uses citation analysis for psychology and all natural sciences. This peer review process seems to me to be a wasteful duplication of effort to review research outputs that have already passed through a peer review process once.

I show that, surprisingly, citations received by journal articles in the social sciences in the first one to two years after publication are strongly predictive for citations received in future years. By contrast, I show that journal impact factors are mostly useful in the year of publication and their contribution to predicting citations declines rapidly thereafter.

If it is actually possible to predict citations fairly reliably in social science disciplines, then it should also be easy to predict them in the natural sciences. This means that it should be possible to expand bibliometric analysis in research evaluation exercises to all disciplines apart from the humanities and arts. It also means that we should pay attention to the early citations received by papers when we evaluate individual academics for hiring and promotion. Impact factors are reflective of journal selectivity, which we frequently do not have easily available data on. But they only explain about 16-17% of the variation in rankings of papers six years later conditional on the citations already received in the year of publication. The latter explain 13-14% of the variation. But at the end of the year following publication, accumulated citations explain 52-53% of the variation in cumulative citations after 6 years and 73% at the end of the second year after publication.

These models could be improved by adding information on the characteristics of the articles themselves and their authors, but that was much too time consuming to do for the almost 12,000 articles in my sample.

I have submitted a copy of my paper to the HEFCE inquiry on the use of metrics in research assessment.

Energy and Economic Growth: The Animated GIF

It seems that everyone loves the animation of energy use per capita and GDP per capita that I am showing as part of my presentations on Energy and Economic Growth: The Stylized Facts. So, at James Hamilton's suggestion and with Zsuzsanna's help I have made an animated GIF of this slide sequence:

The graph is for the 99 countries that have data in both the Penn World Table (7.0) and the IEA Energy Balances. The line is the best fit log-log regression computed by Excel. As you can see the relationship between these two variables has been very stable over the last forty years globally.

World Energy Use Increased 2.3% in 2013

The annual BP Statistical Review was just released. It shows that world energy use increased by 2.3% in 2013. According to the IMF, the world economy grew 3% in 2013. World population is growing at about 1.1% p.a. Therefore, there was a 1.2% increase in per capita energy use for a 1.9% increase in GDP per capita - a ratio of 0.63 - which is a little below our stylized fact that energy use tends to increase by 0.7% for a 1% increase in GDP.

Environment and Development Economics is 20 Years Old

And there is a special issue to celebrate. You can find the introductory article from the editors here. One of my tasks as a post-doc at University of York was helping my boss, Charles Perrings, with the administrative tasks for the new journal like sending invitation letters to the editorial board members. It's also 20 years since I got my PhD - my defence was in April 1994 - I started the post-doc at York as an "ABD" in September 1993. Time flies!

Right now I'm at the IAEE meeting in New York City, will be going on to the Atlantic Workshop in Spain next week and the World Congresss of Environmental and Resource Economics in Istanbul the following week. Not surprisingly, the main talk here is about shale oil and gas and their implications. Flying over Pennsylvania on Sunday I saw quite a few drilling sites...

The New York Times Spends 36 Hours in:

Canberra! There are a couple of places on the list I hadn't heard of, like Hippo Co...