China and Japan Dominate Alternative Energy Innovation

This chart from a Thomson-Reuters report on patenting activity in alternative energy compares 1997-1999 with 2006-2008. EP is patents submitted to the European Patent Office. The most obvious trends are the amazing growth in Chinese activity (and to a lesser extent American, Korean, and British interest) and a swing towards wind energy innovation. The report also splits patenting among origins in large companies, small companies and the academic-government sector. Chinese and Japanese universities completely dominate the latter sector. And almost all of the activity is very recent.

A second report reviews patenting for related technologies:



Here Japan is the leader and has greatly increased its activity. China has also dramatically stepped up R&D but remains in 3rd place. Chinese universities again have a plurality of the academic-government R&D but are less dominant than for in the solar-wind-marine energy nexus:

China Update 2009

Today I attended the 2009 China Update at ANU. It's a day of presentations by researchers from Australia, China, and the US on the latest economic situation in China. We received a book edited by Ross Garnaut, Ligang Song, and Wing Thye Woo containing most of the papers presented. However, the best two presentations of the day, in my opinion - the first and last presentations of the day, aren't in the book.

The first one was by Wayne Swan, the Australian Treasurer (Federal Finance Minister). Maybe it wasn't that good, but after sitting through various boring such presentations by other politicians in the past I thought this was the best I'd seen. Most politicians go through endless lists of legislation and spending decisions relevant to the conference topic that they have been involved with and then take no questions. Swan talked at a higher level about the goals of government policy and then took ten minutes of questions which he answered extremely well with none of the usual political evasions.

The final presentation was by Li Cheng of the Brookings Institution. He presented an analysis of the two major factions in the Chinese Communist Party and the role of the "fifth generation". The presentation was entertaining and interesting and filled out my picture of political issues in China. He also expressed the opinion that the CCP will collapse peacefully within 10-15 years as "none of the children of the current leaders are involved in politics".

Presentation: Monday 13th July

I'm giving a presentation at the School of Economics, University of Queensland, tomorrow - Monday 13th July at 11:00am, Room 114 Colin Clark Building. The slides are here.

Vaclav Smil

I'm having a look at a recent book by Vaclav Smil: Global Catastrophes and Trends: The Next Fifty Years . I'm very surprised to find that there is no Wikipedia article on Smil. I'm also a bit shocked by his criticism of other authors. On Jared Diamond's Collapse, he writes: "a derivative, unpersuasive, and simplistically deterministic book". Almost at in the same class as Taleb. The book is a lot more reasonable than George Friedman's efforts. Generally, I agree with most of Smil's assessments of current and future trends - for example peak oil is probably less imminent and less serious a problem than the doom and gloomers think - though I find myself somewhat less pessimistic - for example on the relative decline of the United States.

Presentation Slides

As promised, here are the slides for my presentation on Monday from the image above. It's not as long as it seems because several of the slides are duplicated to allow me to put bullet points one after the other onto the screen. But it still seems too long for my time (40 minutes + questions) so I may yet make some changes.

Economics Search Engine

Maybe a bit anti-interdisciplinary, but here is an economics search engine.

Posting this reminded me of koogle - the ultraorthodox Jewish search portal (whose English search engine doesn't seem to work). But it certainly could be useful if you don't want to read about the NBA Commissioner :)

Job Talk Abstract

Here is the abstract for my upcoming presentation:

Modelling Global Trends in Emissions and Energy Efficiency

Abstract
The environmental Kuznets curve has been a popular simple model of the relationship between economic growth and environmental quality. It is plagued, however, by significant econometric issues and explains relatively little about the differences in emissions between countries. In this presentation I will: 1) present an improved version of the EKC that overcomes the econometric issues, 2) present an alternative approach based on production frontiers including results for sulfur emissions in the OECD, 3) discuss modelling the factors that affect a country’s choice of energy or environmental efficiency.

Roger Pielke Jr.

I'd never heard of either Roger Pielke Sr or Roger Pielke Jr until I read very critical commentary on both of them on the Climate Progress blog. I've looked through a lot of Pielke Junior's blogposts, his paper in nature with Wigley, and slides from a recent presentation he gave. Most of what I read seemed entirely non-controversial from my perspective. In no way is the guy a "climate denier". Rather, he seems concerned that:

1. Proposed policy is too ineffective and instead more measures should be taken to directly encourage innovation.

2. Scientific results are used incorrectly by many climate policy advocates. This reduces the credibility of science in the eyes of the public when they realise "they've been had".

So I don't see what all the fuss is about.

BTW on the question of the jokes Romm uses I get both the references though I've never seen Dr Strangelove (I was born the year it was released - 1964 in London) and never read the novel about Ripley (I've only heard the catchphrase due to the movie of it which I haven't seen either). I'm pretty sure my wife (born 1975 in Tianjin) wouldn't get either reference :) Literary allusions are hard to pull off in this internet age...

Another Climate Policy Poll

John Whitehead ran a survey on RESECON asking:

"Considering two economic incentive-based environmental policies that could
be used address climate change, which do you prefer?"

Not so surprisingly, unlike the general public, the majority of respondents preferred a carbon tax:



Dale Jorgenson also prefers a carbon tax:
.

Designing a Job Talk

I just heard this afternoon that I have a job interview on Monday. The deadline was just last Friday! I've never seen an academic job search move this fast. Anyway, I now need to prepare a presentation for Monday. I'm somewhat dissatisified with the last two presentations I did as bases for this one. This post will be something of a stream of consciousness thing...

One I did in March was on elasticities of substitution and covered material from at least two working papers - one on different definitions of elasticities of substitution and the other on meta-analysis of interfuel elasticities of substitution. The latter part of the presentation would need a lot of revision anyway as I substantially rewrote that paper between getting rejected by The Energy Journal and submitting to Energy Economics. I didn't get that job and I feel that the topic of that presentation may have seemed a bit too esoteric.

The second one was more recent in my current department where I provided an overview of my planned research under the Environmental Economics Research Hub. The problem with that one is that I mainly presented old results and plans for future research. I think it went across OK in the context of introducing myself to my department but I think this new presentation should be more about recent results. I do have some preliminary results from my Hub research but they aren't on the core things I plan on doing yet. Instead they are results of applying an estimator - the between estimator - that my meta-analysis research persuaded me is most appropriate for estimating essentially dynamic models in panel data - to the standard environmental Kuznets curve.

I thought of combining parts of the two together but I couldn't come up with a good title. That was a warning sign to me that there would be an issue for the audience in trying to follow what I was doing! I then went on the web and read a bunch of articles about preparing a "Job Talk". This reminded me that I need to put things into a broader context of both the field and my future research and that I need to appeal to a wider audience than might come to a conference presentation. I knew these I guess but it's nice to be reminded. Given this, I'm going to revise the second presentation, which should be less work too. I'll post my slides when I'm done.

Sensitivity Analysis of Climate Policy

Dale Jorgenson et al. did do a sensitivity analysis of their climate policy CGE model in 2000. They found that imposing zero substitutability between inputs had a big impact on the estimated costs of emissions reduction policies compared to their base case model. The impact depended on what they assumed the government did with the revenue from a carbon tax.

When they assumed that the revenue from a carbon tax was "recycled" by paying equal lump sums to all individuals, the price of carbon permits was four times higher over the 2000-2060 policy period and the decline in GDP was twice as much under no substitutability as under the base case.

When they assumed that the carbon tax revenue is recycled by reducing marginal income tax rates their model yields a "double dividend"* - GDP increases in the base case when a climate policy is imposed. And it increases four times more when no substitutability is allowed than when it is!

* The double dividend refers to climate policies that not only improve the environment but also increase GDP by cutting existing distorting (inefficient) taxes (like the income tax) using the revenue from a carbon tax. This has been a very controversial issue as things are not this simple.** My impression is that the consensus is that there is no double dividend in practice but that a revenue neutral carbon tax or auctioned emission permits accompanied by cuts in income taxes is superior to the government giving away permits for free (and therefore being unable to cut other taxes) or using the carbon tax to pay out dividends like the Alaska Permanent Fund as suggested by James Hansen.

** This is one of the papers I set my students at RPI on the topic

What Do the Mitigation Policy Models Assume about Interfuel Substitution? And is it Important?

In my previous blogpost I commented that the elasticity of substitutions between fuels and between energy and capital were likely to be very important in estimates of the costs of emissions reduction policies. I've been trying to find support for, or evidence against, this hypothesis.

Bhattacharya (1996) writes: "It is generally agreed that the elasticity values are the single most important parameters that affect the results. In the economic literature, there is little consensus about different elaticities for energy products." (p159) He notes that some modelers have used sensitivity analysis. It would be nice if he noted which ones :)

Pezzey and Lambie (2001) reviewed a number of Australian CGE models used in climate policy research. Though they differ in the specifics most have low degrees of substitutability between fuels. The GTEM model developed by ABARE and used by Treasury in their advice to government has less substitutability than G-Cubed (Treasury used GTEM, G-Cubed, and MMRF in their research).

Anyway, it looks like I should add sensitivity analysis of climate change policy modeling to my research agenda.

Interfuel Substitution and the Costs of Climate Change Policy

A meta-analysis is an analysis of existing empirical studies rather than another original primary study. The aim of a meta-analysis is to find out what is the average size of some parameter or effect in the existing literature - for example the average estimated damage from climate change or the elasticity of demand for gasoline - and what are the factors that cause there to be differences between the various studies.

The interfuel elasticity of substitution indicates how hard it is to replace one fuel with another when, for example, the price of one fuel goes up.* My meta-analysis of 46 empirical studies of this issue finds that at the level of individual industries it is probably not so hard to substitute between fuels (the elasticity of substitution is greater than one). At least some of the models, for example the G-Cubed model, used to assess the costs of climate change policy assume that it is a lot harder than this.

As far as I understand, this should mean that they overestimate the costs of climate change policy. The harder it is to replace fossil fuels with electricity or coal with natural gas the costlier it should be to adjust to a carbon tax or cap and trade scheme. But how sensitive are their results to the values of parameters such as the interfuel elasticity of substitution? Is there any research on this out there? (Yes, please point me to it!) Or is this a topic I should include in my research agenda? In fact I've been surprised in the past (back when Mick Common and I were debating ABARE in the run up to Kyoto) that the estimated costs of climate change policy aren't higher given the low substitutability assumptions built into these models.

* It's more complicated than that of course :)

Wordle

Wordle is a fun website which allows you to convert text into "word clouds". I used Wordle to create this graphic by pasting my entire PhD dissertation into the applet :)

The Public Prefers More Economic Pain

Of course they don't see it this way. A large majority of the US public support regulation of greenhouse gas emissions. Fewer support a cap and trade scheme and I'm sure even less support a carbon tax. A carbon tax with few exceptions and recycling of revenue by cutting existing distorting taxes is under the uncertainty of the real world the most economically efficient way to reduce carbon emissions (and with support for innovation in energy efficiency and carbon sequestration research maybe even better). Regulation is the worst. Yes, a real world carbon tax will probably have as many holes in it as Waxman-Markey or the Australian CPRS...

But a carbon tax is the most in your face and regulation the least regarding the costs. People prefer the nasties they don't see. Of course, there's nothing novel in this "political acceptability" is accepted as a key factor in explaining existing environmental policies and designing new ones.

Climate Change Lunch

We met today for the monthly "Climate Change Lunch" that we hold at ANU - if you are in Canberra and interested in meeting to discuss climate change policy and economics please contact Jack Pezzey. Among the topics we discussed was my poll. In particular, we wondered why the distribution is bimodal. There are positive responses and negative responses, but no-one chose the class "0-25%". The one person who chose "no change" was me :) The mean response is -1%. We didn't come to any firm ideas about the clustering of responses. If you have any idea post it in the comments here. You can still vote in the poll too.

We did discuss the possibility of a collapse in human population driving lower emissions. I said that the only way I saw that happening in the next 40 years was from some new pandemic disease. Jack Pezzey pointed out that those most likely to die from any climate stress related population decline are probably fairly small per capita emitters in the poorest developing countries so that this wouldn't have a big effect on emissions.

Does the Grant System Discourage Innovation?

Many of those interviewed for this New York Times article think so. I believe the same applies in many or most scientific fields. The majority of the comments also support that view. Even the supporters of the current U.S. process seem to be agreeing with Winston Churchill's comments on democracy. An alternative often mentioned in the comments is to support strong individuals rather than strong proposals. My impression is that the ARC (Australian Research Council) leans much more in this direction than the U.S. funding institutions do through Future Fellowships, Federation Fellowships, and other fellowships in the Discovery Program. Another interesting proposal was to give applications an initial screening for completely bad proposals and then award the money among the acceptable proposals by lottery. Nobody cited any academic research on the grants process but I am sure there must be plenty?

Delays for Clean Coal

Interesting article by Gregg Easterbrook on delays in implementing more energy and carbon efficient approaches to electricity generation from coal. It sounds like perverse regulation is getting in the way of what the market is willing to do...

Energy Spiral

Cool energy spiral chart compares different energy quantities.

How Optimistic Are You about Reductions in Greenhouse Gas Emissions?

I've added a poll at the upper righthand side of the blog asking: "What Will Be the Global Level of Greenhouse Gas Emissions in 2050 Compared to Today?" I'm interested in total world emissions (not per capita) and this is emissions not concentrations. Please go ahead and vote!

eigenfactor.org

Eigenfactor.com is a relatively new website that provides ratings for academic journals. It's main competitor is the venerable Journal Citation Reports from ISI and in the field of economics impact factors computed by RePEc from the information in their database. Eigenfactor actually derives its data from ISI. It uses the record of citations in a given year to articles published in the previous five years. Journal Citation Reports is now also giving five year impact factors in addition to its traditional two year impact factors as well as eignefactor.org's results. The two year impact factor (e.g. average number of citations in 2008 to articles published in 2006 and 2007) has always been very inadequate in a field like economics where there are long publication delays and articles also tend to stand the test of time relatively well.

Eigenfactor.org appears to use a recursive impact index (citations in more highly cited journals count for more than citations in low prestige journals) in a similar way to RePEc with some adjustment for differences in citation rates across disciplines. They ignore self-citation by journals. The Eigenfactor score is based on total citations for the journal while the Article Influence Score is a per article measure that is closer to traditional impact factors. You can learn much more about the methods at their website.

To compare the different indicators I made a table for three of the top journals in each of energy and environmental economics:



I used the 2008 Article Influence Scores available from Journal Citation Reports. The most recent scores available for free on the eigenfactor.org website are for 2006. JEEM is clearly the top environmental economics journal - it doesn't matter which indicator you use. When you limit citations to only those in the economics literature as RePEc does, Ecological Economics appears much weaker than when all possible citations are included. This confirms our findings that Ecological Economics tended to be cited more in interdisciplinary outlets. Energy Policy too is weak in the economics sphere and generally appears to be cited in less prestigious journals than the Energy Journal does.

I've also noticed that the relative rank of the Energy Journal has declined over time while that of Energy Economics has risen. Energy Economics' Article Influence Score was only 0.51 in 2006 while the Energy Journal's was 0.957.

New Global Ranking of Economics Research Institutions

RePEc has developed a new global ranking of economics research institutions. The new ranking agglomerates economists at different departments within an institution. Previous RePEc rankings of institutions have treated each department as a separate entity. Universities like Australian National University have suffered because they have four main economics departments (!) as well as a few economists scattered around other units at the university. In the new ranking, ANU is the top economics institution in Australia, ranked 52nd globally (between the two top Israeli institutions - from one of which I got my undergrad degree). University of Melbourne is second in Australia at 70th globally. ANU ranks higher in most general rankings of universities. Economics is a relatively weak discipline in Australia.

In the usual rankings, Melbourne is the top economics department in Australia followed by the economics division of the Research School of the Social Sciences at ANU.

On the other hand, agglomerating all London "colleges" into a single number for "University of London" doesn't make much sense to me. LSE, Imperial, Kings, UCL etc. might as well be separate universities (I got my masters degree from one of them).

Conspicuous Blogging

An interesting article about changes in the ways people are signalling status - a switch from conspicuous consumption of material goods to online signalling through the number of Facebook friends say. I'm not sure quite how important this is as a trend in quantitative terms but there is certainly something in it. It fits in with similar news from Japan. Of course those of us in academia have long signalled our status through publication, citation, winning research grants etc. and the same has been true of other professions such as art or music. Conspicuous production rather than consumption. I commented in my 1997 paper in Ecological Economics that apart from basic needs the goods and services that consumers use are to some degree arbitrary and historically contingent and that other perhaps less environmentally destructive goods and services might satisfy the same wants.

Another Review of Taleb

I wrote a very short review of "The Black Swan" a little while ago. Here is a good but very long review of Nicholas Nassim Taleb. A summary would be: "Taleb is unoriginal when right, otherwise wrong (especially about option pricing), and a dilettante/crank".

Most Expensive U.S. Suburbs by State

Business Week has a list of the most expensive U.S. suburbs in each state. What's stunning from an Australian perspective is that in many states the most expensive suburbs are far cheaper than the median prices in all major Australian metropolitan areas.